SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 7, 1996
PHC. Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 0-23524 04-2601571
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
200 Lake Street Suite 102. Peabody, MA 01960
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (508) 536-2777
<PAGE>
Item 5. Other Events.
On October 7, 1996, PHC, Inc., (the "Company") issued $3,125,000 principal
amount of its 7% Convertible Debentures (the "Debentures") for a purchase price
of $2,500,000 to two accredited nvestors. A Consulting Fee of $100,000 was paid
by the Company to Alpine Capital, Inc. in connection with the transaction. The
shares were sold under the exemption from registration afforded by Section 4(2)
under the Securities Act of 1933 in reliance on investment representations and
other representations made by the Purchasers in connection with the sale. On
October 7, 1996, the closing price of the Company's Class A Common Stock as
reported in the Wall Street Journal was $6.75 per share.
The principal amount of the Debentures bear interest at the rate of 7% per
year and is payable on September 30, 1998. The Debentures are convertible into
Class A Common Stock of the Company at a conversion rate equal to the lesser of
$8.50 (subject to adjustment in the case of certain dilutive issuances) and the
average closing bid price of the Company's Common Stock as reported on Nasdaq
for the five trading days immediately preceding the date of conversion. The
Purchasers may convert up to 50% of the Debentures commencing on the 60th day
following the date of issuance provided that a Registration Statement covering
the sale of the Class A Common Stock into which the Debentures are convertible
has been declared effective by the Securities and Exchange Commission, and up to
100% of the Debentures commencing on the 90th day following the date of issue.
The Purchasers are entitled to request on one occasion prior to April 7, 1997
that the Class A Common Stock issued on conversion of the Debentures be
registered on Form S-8, and if so requested, the Company is obligated to file a
registration statement covering such shares within 45 days after the date of
request. The Purchasers made such a request on October 7, 1996. In the event
that (i) the Company fails to issue Class A Common Stock promptly after a
requested conversion or (ii) the Registration Statement described above is not
declared effective within certain stated periods after the issuance of the
Debentures, the Company is obligated to pay certain cash damages to the
Purchasers. In addition, the Purchasers have a right of first refusal to
purchase certain newly issued securities of the Company for a period of 180 days
following issuance of the Debentures.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
4.7 Regulation D Securities Subscription Agreement among PHC, Inc. and
Infinity Investors Ltd. and Seacrest Capital Limited dated October 7,
1996
4.8 7% Convertible Debenture issued to Infinity Investors Ltd. in the
principal amount of $1,875,000 4.9 7% Convertible Debenture issued
to Seacrest Capital Limited in the principal amount of $1,250,000
4.10 Book Entry Transfer Agent Agreement among PHC, Inc., Infinity
Investors Ltd., Seacrest Capital Limited and American Stock Transfer
& Trust Company dated October 7, 1996
4.11 Registration Rights Agreement among PHC, Inc., Infinity Investors Ltd.
and Seacrest Capital Limited dated October 7, 1996
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHC, INC.
Date: October ______ 1996 BY: ______________________________
Bruce A. Shear
President
<PAGE>
EXHIBIT INDEX
Exhibit Document
4.7 Regulation D Securities Subscription Agreement among PHC, Inc. and
Infinity Investors Ltd. and Seacrest Capital Limited dated October 7,
1996
4.8 7% Convertible Debenture issued to Infinity Investors Ltd. in the
Principal amount of $1,975,000
4.9 7% Convertible Debenture issued to Seacrest Capital Limited in the
principal amount of $1,250,000
4.10 Book Entry Transfer Agent Agreement among PHC, Inc., Infinity
Investors Ltd., Seacrest Capital Limited and American Stock Transfer &
Trust Company dated October 7,
1996
4.11 Registration Rights Agreement among PHC, Inc., Infinity Investers Ltd.
and Seacrest Capital Limited dated October 7, 1996 99
<PAGE>
EXHIBIT 4.9
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES
LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
"REGULATION D" ("REGULATION D") PROMULGATED UNDER THE ACT. THE SECURITIES MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS,
SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
$1,250,000
PHC, INC.
7% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 1998
THIS DEBENTURE, issued this 7th day of October, 1996, is one of a duly
authorized issue of Debentures of PHC, Inc., a corporation duly organized and
existing under the laws of the State of Massachusetts (the "Company"),
designated as its 7% Convertible Debentures Due September 30, 1998, in an
aggregate original principal amount not exceeding $3,125,000 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Seacrest Capital
Limited, a Nevis West Indies corporation, the registered holder hereof (the
"Holder"), the principal sum of One Million Two Hundred Fifty Thousand Dollars
($1,250,000), on or prior to September 30, 1998 (the "Maturity Date"), and to
pay interest on the principal sum outstanding from time to time on the last day
of each March, June, September and December (each an "Interest Payment Date"),
commencing December 31, 1996, up to and including the Maturity Date, at the rate
of seven percent (7%) per annum, calculated based upon the actual number of days
elapsed during any interest period in a year comprised of 360 days. Accrual of
interest on this Debenture shall commence on the date of this Debenture and
shall continue to accrue until the next Interest Payment Date. The interest so
payable will be paid on each Interest Payment Date to the person in whose name
this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register") on the first business day prior to such Interest
Payment Date. All accrued and unpaid interest shall bear interest at the rate of
7% per annum from the date hereof until the date of payment. At the option of
the Company, interest may be paid in cash or in kind. If the Company determines
to pay interest in kind, the same shall be added to the principal balance hereof
on the Interest Payment Date on which such interest is payable as provided
herein ("PIK Interest"). All references to the principal balance or principal
sum of this Debenture shall include any PIK Interest so added to the principal
balance thereof. The principal of, and interest on, this Debenture are payable
in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts pursuant to the
terms of the Transfer Agent Agreement (as hereafter defined). The Debenture
Register shall represent the record of ownership and right to receive principal
and interest on this Debenture. Interest and principal shall be payable only to
the registered Holder as reflected in the Debenture Register. The right to
receive principal and interest under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein. The
forwarding of such payment pursuant to the Transfer Agent Agreement shall
constitute a payment of interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of the sum
represented by such payment.
This Debenture is subject to the following additional provisions:
<PAGE>
1. TRANSFER AGENT AGREEMENT. The Debenture shall be held by American
Stock Transfer & Trust Company (the "Transfer Agent") for the benefit of the
Holder, pursuant to the terms of a Book Entry Transfer Agent Agreement (the
"Transfer Agent Agreement") between the Company, the Holder and the Transfer
Agent dated the date hereof. All payments of principal and interest hereunder
shall be made to the Transfer Agent, for the benefit of the Holder, as
contemplated by the Transfer Agent Agreement. The Transfer Agent shall maintain
the Debenture Register for the Company, and record all transfers of the
Debenture pursuant to the terms hereof and thereof.
2. WITHHOLDING. The Company shall be entitled to withhold from all
payments of principal of, and interest on, this Debenture any amounts required
to be withheld under the applicable provisions of the United States income tax
laws or other applicable laws at the time of such payments. The Holder shall pay
any other taxes, charges, or levies in connection with the issuance or transfer
thereof.
3. TRANSFER. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"). Any Holder of this Debenture, by acceptance hereof, agrees to the
representations, warranties and covenants herein. Prior to due presentment to
the Company for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered on
the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
4. CONVERSION. The record Holders of this Debenture shall have conversion
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. The record Holder of this Debenture shall be
entitled, at the option of the Holder, to convert any or all of the aggregate
principal amount of Debentures held by such Holder as follows: (i) up to 50% of
the principal balance of this Debenture may be so converted commencing on the
60th day following the date of this Debenture; provided the Registration
Statement (as hereafter defined) has been declared effective by the Securities
and Exchange Commission (the "Commission"), and (ii) up to 100% of the principal
balance of this Debenture may be so converted commencing on the 90th day
following the date of this Debenture (whether or not the Registration Statement
has been declared effective by the Commission), in each case into that number of
fully-paid and non-assessable shares of Class A Common Stock of the Company (the
"Common Stock") calculated in accordance with the following formula: Number of
shares issued upon conversion = Principal/Conversion Price, where
o Principal = The principal amount of the Debenture(s) to be converted
(including any interest added thereto as provided in this Debenture.
o Conversion Price = the lesser of (x) the Fixed Conversion Price (as defined
below), or (y) the average Closing Bid Price (as defined below) of the Company's
Common Stock for the five (5) trading days immediately preceding the Date of
Conversion, as defined below (the "Floating Conversion Price"). For purposes
hereof, the term "Closing Bid Price" shall mean the closing bid price of the
Company's Common Stock as reported by NASDAQ (or, if not reported by NASDAQ, as
reported by such other exchange or market where traded) For purposes hereof, the
term "Fixed Conversion Price" shall equal Eight Dollars and Fifty Cents ($8.50)
per share, subject to adjustment pursuant to subsection (g) below. As used
herein, "Registration Statement" means a registration statement filed with the
Commission under the Act authorizing the resale without restriction of the
Common Stock issuable upon conversion of this Debenture.
(b) MECHANICS OF CONVERSION. No fractional shares of Common Stock shall
be issued upon conversion of this Debenture. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company shall pay cash to such
Holder in an amount equal to such fraction multiplied by the Conversion Price
then in effect. The Company shall also pay in cash to the Holder through the
date of conversion all accrued and unpaid interest, unless the Company has
previously determined to pay PIK Interest for such sum. In order to convert all
or a portion of this Debenture into shares of Common Stock, the Holder shall
give written notice to the Transfer Agent of the portion of this Debenture it
elects to so convert and a calculation of the number of shares of Common Stock
to be issued upon conversion. Notwithstanding the foregoing, the conversion
right of the Holder set forth herein shall be limited, solely to the extent
required, from time to time, such that in no instance shall the maximum number
of shares of Common Stock into which the Holder may convert this Debenture
exceed, at any one time, an amount equal to the remainder of (i) 4.99% of the
then issued and outstanding shares of Common Stock of the Company following such
conversion, MINUS (ii) the number of shares of Common Stock of the Company then
held by the Holder.
The Company shall use its best efforts to cause the Transfer Agent to
issue and deliver within five (5) business days after delivery to the Transfer
Agent of a Notice of Conversion of the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid. The date on which Notice of
Conversion is given, including notice by facsimile signature, shall be deemed to
be the "Date of Conversion". The person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
Date of Conversion. If the shares of Common Stock issuable upon such conversion
are not received by the Holder within five (5) business days after the Date of
Conversion, the Notice of Conversion shall become, at the option of the Holder,
null and void.
Following conversion of a Debenture, or a portion thereof, the principal
and, upon payment thereof in cash (unless the Company determines to pay PIK
Interest), the interest owed on that Debenture or portion of the Debenture so
converted will be deemed paid in full and satisfied, and such Debenture or
portion thereof will no longer be outstanding.
(c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Debentures, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all then outstanding Debentures; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
Debentures, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(d) ADJUSTMENT TO CONVERSION PRICE.
(i) If, prior to the conversion of all of the Debentures, (x) the
number of outstanding shares of Common Stock is increased by a stock split,
stock dividend or other similar event, or, (y) if the Company issues shares of
Common Stock (or securities convertible into or exchangeable or exercisable for
shares of Common Stock), other than in an Excluded Transaction (as hereafter
defined), at a conversion, exchange or exercise price below the Fixed Conversion
Price then in effect, then the Fixed Conversion Price shall be adjusted so as to
be equal to an amount determined by multiplying the Fixed Conversion Price then
in effect by a faction:
(a) the numerator of which shall be (i) the number of shares of all
classes of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock (or securities convertible into or
exchangeable or exercisable for shares of Common Stock) plus (ii) the
number of shares of Common Stock which the net aggregate consideration,
if any, to be received by the Company for the total number of such
additional shares of Common Stock (or securities convertible into or
exchangeable or exercisable for shares of Common Stock) so issued
(including any such consideration that would be payable on the subsequent
issuance of Common Stock if such issuance is of securities convertible
into or exchangeable or exercisable for shares of Common Stock) would
purchase at the Fixed Conversion Price in effect immediately prior to
such issuance, and
(b) the denominator of which shall be (i) the number of shares of all
classes of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock (or securities convertible into or
exchangeable or exercisable for shares of Common Stock) plus (ii) the
number of such additional shares of Common Stock (including on the
conversion, exchange or exercise of securities convertible into or
exchangeable or exercisable for shares of Common Stock) to be so issued.
An Excluded Transaction means any issuance of shares of Common Stock (or
securities convertible into or exchangeable or exercisable for shares of Common
Stock) pursuant to the acquisition by the Company of operating assets or stock
of entities to be owned and operated by the Company or a subsidiary of the
Company following such acquisition. If, prior to the conversion of all the
Debentures, the number of outstanding shares of Common Stock is decreased by a
combination or reclassification of shares, or other similar event, the Fixed
Conversion Price shall be appropriately increased.
(ii) If, prior to the conversion of all of the Debentures at a time
when conversion would be at the Floating Conversion Price, there is a stock
split, stock dividend or other similar event which occurs during the five-day
period utilized to compute the Conversion Price, then the Closing Bid Price used
to compute the Conversion Price shall be appropriately adjusted to reflect, as
deemed equitable and appropriate by the Company, such stock split, stock
dividend or other similar event.
(iii) If, prior to the conversion of all Debentures, there shall be
any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
same or another class or classes of stock or securities of the Company or
another entity, then the Holders of Debentures shall thereafter have the right
to purchase and receive upon conversion of Debentures, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore issuable upon conversion, such shares of stock
and/or securities as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Debentures held by such Holders had such
merger, consolidation, exchange of shares, recapitalization or reorganization
not taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders of the Debentures to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Fixed Conversion Price and of the number of shares issuable
upon conversion of the Debentures) shall thereafter be applicable, as nearly as
may be practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Company shall not effect any
transaction described in this subsection 4(e) unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Holders of the Debentures such shares of stock
and/or securities as, in accordance with the foregoing provisions, the Holders
of the Debentures may be entitled to purchase.
(iv) No adjustment need be made if it would result in a change of
less than 1% of the Conversion Price (whether the Fixed Conversion Price or the
Floating Conversion Price). Any adjustments required to be made by this
subsection shall be rounded up to the right to acquire the nearest whole number
of shares of Common Stock.
5. NO PREPAYMENT. The Company shall have no right to prepay this Debenture,
in whole or in part, prior to the Maturity Date.
6. NO IMPAIRMENT. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.
7. PROTECTIVE PROVISIONS. This Debenture may not be amended without the
prior written consent of the Holder hereof. 8. COSTS AND EXPENSES. The Company
agrees to pay all costs and expenses, including reasonable attorneys' fees,
which may be incurred by the Holder in collecting any amount due under this
Debenture. 9. EVENTS OF DEFAULT; REMEDIES. If one or more of the following
described "Events of Default" shall occur: (a) The Company shall default in the
payment of principal or interest on these Debentures: or
(b) Any of the representations or warranties made by the Company herein,
in the Regulation D Securities Subscription Agreement, dated as of the date
hereof relating to these Debentures (the "Subscription Agreement") or in any
certificate or financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the execution and
delivery of this Debenture or the Subscription Agreement shall be false or
misleading in any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant term, provision, condition, agreement or obligation
of the Company under this Debenture and such failure shall continue uncured for
a period of five (5) days after notice from Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
liability to pay its debts generally as they mature; (3) make an assignment for
the benefit of creditors or commence proceedings for its dissolution; or (4)
apply for or consent to the appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or business; (5) adopt a plan of
liquidation or dissolution; or (6) sell all or substantially all of its assets;
or
(e) A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within thirty (30 days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall
not be dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar process
in excess of Five Hundred Thousand ($500,000) Dollars in the aggregate shall be
entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen
(15) days or in any event lather than five (5) days prior to the date of any
proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company shall not be dismissed within thirty (30) days after such
instruction or if the Company shall by any action or answer approve of, consent
to, or acquiesce in any such proceedings or admit the material allegations of,
or default in answering a petition filed in any such proceeding; or
(i) The Common Stock shall be delisted from an exchange or over-the
counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand protest or
notice of any kind, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding, and
the Holder may immediately, and with expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law.
10. MERGERS, CONSOLIDATIONS, ETC. The Company shall not consolidate or
merge into, or transfer all or substantially all of its assets to, any person,
unless such person assumes the obligations of the Company under this Debenture
and immediately after such transaction no Event of Default exists. Any reference
of the Company shall refer to such surviving or transfered corporation and the
obligations of the Company shall terminate upon such assumption. If the Company
merges or consolidates with another corporation or sells or transfers all or
substantially all of its assets to another person and the holders of the Common
Shares are entitled to receive stock, securities or property in respect of or in
exchange for Common Shares, then as a condition of such merger, consolidation,
sale or transfer, either (i) consistent with Section 4(d)(iii), the Company and
any such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock, securities or
property receivable upon such merger, consolidation, sale or transfer by a
holder of the number of shares of Common Stock into which this Debenture might
have been converted immediately before such merger, consolidation, sale or
transfer, or (ii) if the Company is not the surviving entity in such merger,
consolidation, sale or transfer, the Company shall give the Holder at least 30
days prior written notice of the expected closing date of such transaction, and
if any portion of this Debenture has not been converted into Common Stock at the
election of the Holder prior to such closing, then the remaining principal
amount of this Debenture may, at the option of the Purchaser, be converted into
shares of Common Stock at the closing of such transaction. The Conversion Price
shall be the same as the applicable Conversion Price defined in Section 4 above.
11. NO DIVIDENDS. For so long as the Debentures remain outstanding, the
Company will not, without the prior consent of a majority of the Holders, make
any distribution, either in stock or cash, to its holders of Common Stock.
12. LOST OR DESTROYED DEBENTURE. If this Debenture shall be mutilated,
lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. Any Holder of this
Debenture, by acceptance hereof, agrees that such Holder will not offer, sell or
otherwise dispose of this Debenture or the shares of Common Stock issuable upon
exercise thereof except under circumstances which will not result in a violation
of the Act.
14. GOVERNING LAW. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws. Any action brought to enforce, or otherwise
arising out of this Debenture shall be heard and determined in either a federal
or state court sitting in the State of Massachusetts.
15. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the State
of Massachusetts, USA and excluding any Saturday and Sunday. 16. NOTICES. Any
notice, demand or request required or permitted to be given by either the
Company or the Subscriber pursuant to the terms of this Agreement shall be in
writing and shall be deemed given when delivered personally, or by facsimile
(with a hard copy to follow by overnight courier), addressed to the Company at
200 Lake Street, Suite 102, Peabody, Massachusetts 01960, Facsimile:
508/536-2677, Attn: Bruce A. Shear, or to the Subscriber at 27 Wellington Road,
Cork, Ireland, Facsimile: 011-44-71-355-4975, Attn: James Loughran, with a copy
to HW Finance LLC, 4000 Thanksgiving Tower, 1601 Elm Street, Dallas, Texas
75201, Facsimile: (214) 720-1662, Attn: Barrett Wissman, or such other addresses
as a party may request by notifying the other in writing.
17. WAIVER. Any waiver by the Company or the Holder hereof of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder hereof to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
18. UNENFORCEABLE PROVISIONS. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by an officer thereof duly authorized.
PHC, INC.
By: _______________________
Name: _____________________
Title: _____________________
46533.2H
<PAGE>
EXHIBIT 4.8
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER "REGULATION D" ("REGULATION D") PROMULGATED UNDER THE ACT.
THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THE ACT AND THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
$1,875,000
PHC, INC.
7% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 1998
THIS DEBENTURE, issued this 7th day of October, 1996, is one of a duly
authorized issue of Debentures of PHC, Inc., a corporation duly organized and
existing under the laws of the State of Massachusetts (the "Company"),
designated as its 7% Convertible Debentures Due September 30, 1998, in an
aggregate original principal amount not exceeding $3,125,000 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Infinity Investors
Ltd., a Nevis West Indies corporation, the registered holder hereof (the
"Holder"), the principal sum of One Million Eight Hundred Seventy Five Thousand
Dollars ($1,875,000), on or prior to September 30, 1998 (the "Maturity Date"),
and to pay interest on the principal sum outstanding from time to time on the
last day of each March, June, September and December (each an "Interest Payment
Date"), commencing December 31, 1996, up to and including the Maturity Date, at
the rate of seven percent (7%) per annum, calculated based upon the actual
number of days elapsed during any interest period in a year comprised of 360
days. Accrual of interest on this Debenture shall commence on the date of this
Debenture and shall continue to accrue until the next Interest Payment Date. The
interest so payable will be paid on each Interest Payment Date to the person in
whose name this Debenture (or one or more predecessor Debentures) is registered
on the records of the Company regarding registration and transfers of the
Debentures (the "Debenture Register") on the first business day prior to such
Interest Payment Date. All accrued and unpaid interest shall bear interest at
the rate of 7% per annum from the date hereof until the date of payment. At the
option of the Company, interest may be paid in cash or in kind. If the Company
determines to pay interest in kind, the same shall be added to the principal
balance hereof on the Interest Payment Date on which such interest is payable as
provided herein ("PIK Interest"). All references to the principal balance or
principal sum of this Debenture shall include any PIK Interest so added to the
principal balance thereof. The principal of, and interest on, this Debenture are
payable in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts pursuant to
the terms of the Transfer Agent Agreement (as hereafter defined). The Debenture
Register shall represent the record of ownership and right to receive principal
and interest on this Debenture. Interest and principal shall be payable only to
the registered Holder as reflected in the Debenture Register. The right to
receive principal and interest under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein. The
<PAGE>
forwarding of such payment pursuant to the Transfer Agent Agreement shall
constitute a payment of interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of the sum
represented by such payment.
This Debenture is subject to the following additional provisions:
1. TRANSFER AGENT AGREEMENT. The Debenture shall be held by American Stock
Transfer & Trust Company (the "Transfer Agent") for the benefit of the Holder,
pursuant to the terms of a Book Entry Transfer Agent Agreement (the "Transfer
Agent Agreement") between the Company, the Holder and the Transfer Agent dated
the date hereof. All payments of principal and interest hereunder shall be made
to the Transfer Agent, for the benefit of the Holder, as contemplated by the
Transfer Agent Agreement. The Transfer Agent shall maintain the Debenture
Register for the Company, and record all transfers of the Debenture pursuant to
the terms hereof and thereof.
2. WITHHOLDING. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments. The Holder shall pay any
other taxes, charges, or levies in connection with the issuance or transfer
thereof.
3. TRANSFER. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"). Any Holder of this Debenture, by acceptance hereof, agrees to the
representations, warranties and covenants herein. Prior to due presentment to
the Company for transfer of this Debenture, the Company and any agent of the
Company may treat the person in whose name this Debenture is duly registered on
the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
4. CONVERSION. The record Holders of this Debenture shall have conversion
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. The record Holder of this Debenture shall be
entitled, at the option of the Holder, to convert any or all of the aggregate
principal amount of Debentures held by such Holder as follows: (i) up to 50% of
the principal balance of this Debenture may be so converted commencing on the
60th day following the date of this Debenture; provided the Registration
Statement (as hereafter defined) has been declared effective by the Securities
and Exchange Commission (the "Commission"), and (ii) up to 100% of the principal
balance of this Debenture may be so converted commencing on the 90th day
following the date of this Debenture (whether or not the Registration Statement
has been declared effective by the Commission), in each case into that number of
fully-paid and non-assessable shares of Class A Common Stock of the Company (the
"Common Stock") calculated in accordance with the following formula: Number of
shares issued upon conversion = Principal/Conversion Price, where
o Principal = The principal amount of the Debenture(s) to be converted
(including any interest added thereto as provided in this Debenture.
o Conversion Price = the lesser of (x) the Fixed Conversion Price (as defined
below), or (y) the average Closing Bid Price (as defined below) of the Company's
Common Stock for the five (5) trading days immediately preceding the Date of
Conversion, as defined below (the "Floating Conversion Price"). For purposes
hereof, the term "Closing Bid Price" shall mean the closing bid price of the
Company's Common Stock as reported by NASDAQ (or, if not reported by NASDAQ, as
reported by such other exchange or market where traded) For purposes hereof, the
term "Fixed Conversion Price" shall equal Eight Dollars and Fifty Cents ($8.50)
per share, subject to adjustment pursuant to subsection (g) below. As used
<PAGE>
herein, "Registration Statement" means a registration statement filed with the
Commission under the Act authorizing the resale without restriction of the
Common Stock issuable upon conversion of this Debenture.
(b) MECHANICS OF CONVERSION. No fractional shares of Common Stock shall
be issued upon conversion of this Debenture. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company shall pay cash to such
Holder in an amount equal to such fraction multiplied by the Conversion Price
then in effect. The Company shall also pay in cash to the Holder through the
date of conversion all accrued and unpaid interest, unless the Company has
previously determined to pay PIK Interest for such sum. In order to convert all
or a portion of this Debenture into shares of Common Stock, the Holder shall
give written notice to the Transfer Agent of the portion of this Debenture it
elects to so convert and a calculation of the number of shares of Common Stock
to be issued upon conversion. Notwithstanding the foregoing, the conversion
right of the Holder set forth herein shall be limited, solely to the extent
required, from time to time, such that in no instance shall the maximum number
of shares of Common Stock into which the Holder may convert this Debenture
exceed, at any one time, an amount equal to the remainder of (i) 4.99% of the
then issued and outstanding shares of Common Stock of the Company following such
conversion, MINUS (ii) the number of shares of Common Stock of the Company then
held by the Holder.
The Company shall use its best efforts to cause the Transfer Agent to
issue and deliver within five (5) business days after delivery to the Transfer
Agent of a Notice of Conversion of the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid. The date on which Notice of
Conversion is given, including notice by facsimile signature, shall be deemed to
be the "Date of Conversion". The person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
Date of Conversion. If the shares of Common Stock issuable upon such conversion
are not received by the Holder within five (5) business days after the Date of
Conversion, the Notice of Conversion shall become, at the option of the Holder,
null and void.
Following conversion of a Debenture, or a portion thereof, the principal
and, upon payment thereof in cash (unless the Company determines to pay PIK
Interest), the interest owed on that Debenture or portion of the Debenture so
converted will be deemed paid in full and satisfied, and such Debenture or
portion thereof will no longer be outstanding.
(c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Debentures, such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all then outstanding Debentures; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding
Debentures, the Company will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(d) ADJUSTMENT TO CONVERSION PRICE.
(i) If, prior to the conversion of all of the Debentures, (x) the
number of outstanding shares of Common Stock is increased by a stock split,
stock dividend or other similar event, or, (y) if the Company issues shares of
Common Stock (or securities convertible into or exchangeable or exercisable for
shares of Common Stock), other than in an Excluded Transaction (as hereafter
defined), at a conversion, exchange or exercise price below the Fixed Conversion
Price then in effect, then the Fixed Conversion Price shall be adjusted so as to
be equal to an amount determined by multiplying the Fixed Conversion Price then
in effect by a faction:
(a) the numerator of which shall be (i) the number of shares of all
classes of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock (or securities convertible into or
<PAGE>
exchangeable or exercisable for shares of Common Stock) plus (ii) the
number of shares of Common Stock which the net aggregate consideration,
if any, tob e received by the Company for the total number of such
additional shares of Common Stock (or securities convertible into or
exchangeable or exercisable or shares of Common Stock) so issued
(including any such consideration that would be payable on the subsequent
issuance of Common Stock if such issuance is of securities convertible
into or exchangeable or exercisable for shares of Common Stock) would
purchase at the Fixed Conversion Price in effect immediately prior to
such issuance, and
(b) the denominator of which shall be (i) the number of shares of all
classes of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock (or securities convertible into or
exchangeable or exercisable for shares of Common Stock) plus (ii) the
number of such additional shares of Common Stock (including on the
conversion, exchange or exercise of securities convertible into or
exchangeable or exercisable for shares of Common Stock) to be so issued.
An Excluded Transaction means any issuance of shares of Common Stock (or
securities convertible into or exchangeable or exercisable for shares of Common
Stock) pursuant to the acquisition by the Company of operating assets or stock
of entities to be owned and operated by the Company or a subsidiary of the
Company following such acquisition. If, prior to the conversion of all the
Debentures, the number of outstanding shares of Common Stock is decreased by a
combination or reclassification of shares, or other similar event, the Fixed
Conversion Price shall be appropriately increased.
(ii) If, prior to the conversion of all of the Debentures at a time
when conversion would be at the Floating Conversion Price, there is a stock
split, stock dividend or other similar event which occurs during the five-day
period utilized to compute the Conversion Price, then the Closing Bid Price used
to compute the Conversion Price shall be appropriately adjusted to reflect, as
deemed equitable and appropriate by the Company, such stock split, stock
dividend or other similar event.
(iii) If, prior to the conversion of all Debentures, there shall be
any merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
same or another class or classes of stock or securities of the Company or
another entity, then the Holders of Debentures shall thereafter have the right
to purchase and receive upon conversion of Debentures, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore issuable upon conversion, such shares of stock
and/or securities as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock immediately theretofore purchasable and
receivable upon the conversion of Debentures held by such Holders had such
merger, consolidation, exchange of shares, recapitalization or reorganization
not taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the Holders of the Debentures to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Fixed Conversion Price and of the number of shares issuable
upon conversion of the Debentures) shall thereafter be applicable, as nearly as
may be practicable in relation to any shares of stock or securities thereafter
deliverable upon the exercise hereof. The Company shall not effect any
transaction described in this subsection 4(e) unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Holders of the Debentures such shares of stock
and/or securities as, in accordance with the foregoing provisions, the Holders
of the Debentures may be entitled to purchase.
(iv) No adjustment need be made if it would result in a change of
less than 1% of the Conversion Price (whether the Fixed Conversion Price or the
Floating Conversion Price). Any adjustments required to be made by this
subsection shall be rounded up to the right to acquire the nearest whole number
of shares of Common Stock.
5. NO PREPAYMENT. The Company shall have no right to prepay this
Debenture, in whole or in part, prior to the Maturity Date.
<PAGE>
6. NO IMPAIRMENT. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.
7. PROTECTIVE PROVISIONS. This Debenture may not be amended without the
prior written consent of the Holder hereof.
8. COSTS AND EXPENSES. The Company agrees to pay all costs and
expenses, including reasonable attorneys' fees, which may be incurred by
the Holder in collecting any amount due under this Debenture.
9. EVENTS OF DEFAULT; REMEDIES. If one or more of the following
described "Events of Default" shall occur:
(a) The Company shall default in the payment of principal or interest
on these Debentures: or
(b) Any of the representations or warranties made by the Company
herein, in the Regulation D Securities Subscription Agreement, dated as of
the date hereof relating to these Debentures (the "Subscription Agreement") or
in any certificate or financial or other written statements heretofore or
hereafter furnished by or on behalf of the Company in connection with the
execution and delivery of this Debenture or the Subscription Agreement shall be
false or misleading in any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant term, provision, condition, agreement or obligation
of the Company under this Debenture and such failure shall continue uncured for
a period of five (5) days after notice from Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing its
liability to pay its debts generally as they mature; (3) make an assignment for
the benefit of creditors or commence proceedings for its dissolution; or (4)
apply for or consent to the appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or business; (5) adopt a plan of
liquidation or dissolution; or (6) sell all or substantially all of its assets;
or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within thirty (30 days after such
appointment; or
f) Any governmental agency or any court of competent jurisdiction a
the instance of any governmental agency shall assume custody or control of
the whole or any substantial portion of the properties or assets of the Company
and shall not be dismissed within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process in excess of Five Hundred Thousand ($500,000) Dollars in the
aggregate shall be entered or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a
period of fifteen (15) days or in any event lather than five (5) days prior to
the date of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company shall not be dismissed within thirty (30) days
after such instruction or if the Company shall by any action or answer approve
of, consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding;
or
(i) The Common Stock shall be delisted from an exchange or over-the
counter market.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
<PAGE>
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Debenture immediately due and payable, without presentment, demand protest or
notice of any kind, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding, and
the Holder may immediately, and with expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other
rights or remedies afforded by law.
10. MERGERS, CONSOLIDATIONS, ETC. The Company shall not consolidate or
merge into, or transfer all or substantially all of its assets to, any
person, unless such person assumes the obligations of the Company under this
Debenture and immediately after such transaction no Event of Default exists. Any
reference of the Company shall refer to such surviving or transferee corporation
and the obligations of the Company shall terminate upon such assumption. If the
Company merges or consolidates with another corporation or sells or transfers
all or substantially all of its assets to another person and the holders of the
Common Shares are entitled to receive stock, securities or property in respect
of or in exchange for Common Shares, then as a condition of such merger,
consolidation, sale or transfer, either (i) consistent with Section 4(d)(iii),
the Company and any such successor, purchaser or transferee shall amend this
Debenture to provide that it may thereafter be converted on the terms and
subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, or (ii) if the Company is not the surviving
entity in such merger, consolidation, sale or transfer, the Company shall give
the Holder at least 30 days prior written notice of the expected closing date of
such transaction, and if any portion of this Debenture has not been converted
into Common Stock at the election of the Holder prior to such closing, then the
remaining principal amount of this Debenture may, at the option of the
Purchaser, be converted into shares of Common Stock at the closing of such
transaction. The Conversion Price shall be the same as the applicable Conversion
Price defined in Section 4 above.
11. NO DIVIDENDS. For so long as the Debentures remain outstanding, the
Company will not, without the prior consent of a majority of the Holders, make
any distribution, either in stock or cash, to its holders of Common Stock.
12. LOST OR D ESTROYED DEBENTURE. If this Debenture shall be mutilated,
lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Debenture, or in lieu
of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership thereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. Any Holder of this Debenture,
by acceptance hereof, agrees that such Holder will not offer, sell or otherwise
dispose of this Debenture or the shares of Common Stock issuable upon exercise
thereof except under circumstances which will not result in a violation
of the Act.
14. GOVERNING LAW. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect
to the principles of conflicts of laws. Any action brought to enforce, or
otherwise arising out of this Debenture shall be heard and determined in either
a federal or state court sitting in the State of Massachusetts.
15. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the State
of Massachusetts, USA and excluding any Saturday and Sunday.
16. NOTICES. Any notice, demand or request required or permitted to be
given by either the Company or the Subscriber pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile (with a hard copy to follow by overnight courier),
<PAGE>
addressed to the Company at 200 Lake Street, Suite 102, Peabody, Massachusetts
01960, Facsimile: 508/536-2677, Attn: Bruce A. Shear, or to the Subscriber at 27
Wellington Road, Cork, Ireland, Facsimile: 011-44-71-355-4975, Attn: James
Loughran, with a copy to HW Finance LLC, 4000 Thanksgiving Tower, 1601 Elm
Street, Dallas, Texas 75201, Facsimile: (214) 720-1662, Attn: Barrett Wissman,
or such other addresses as a party may request by notifying the other in
writing.
17. WAIVER. Any waiver by the Company or the Holder hereof of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder hereof to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
18. UNENFORCEABLE PROVISIONS.If any provision of this Debenture is invalid
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by an officer thereof duly authorized.
PHC, INC.
By: ____________________________
Name: ____________________________
Title: ____________________________
45627.3H
<PAGE>
EXHIBIT E
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $________________ of
the principal balance of the Debenture into ______ shares of Class A Common
Stock, par value $.01 per share (the "Common Stock"), of PHC, Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates, opinions, and signature guarantees as
reasonably requested by the Company or its Transfer Agent. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any.
Conversion calculations:
______________________________________________
Date of Conversion
______________________________________________
Applicable Conversion Price
______________________________________________
Signature
______________________________________________
Name
Address:
_______________________________________________
_______________________________________________
45667.2H
<PAGE>
EXHIBIT 4.7
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT
BY AND BETWEEN
PHC, INC.
AND
INFINITY INVESTORS LTD.
AND
SEACREST CAPITAL LIMITED
AS SUBSCRIBERS
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER "REGULATION D" ("REGULATION D") PROMULGATED UNDER THE ACT.
THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR
SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
<PAGE>
REGULATION D SECURITIES SUBSCRIPTION AGREEMENT - PAGE 4 (PHC, INC.)
THIS REGULATION D SECURITIES SUBSCRIPTION AGREEMENT (the "Agreement" or
the "Subscription Agreement") is executed by each of the undersigned (each a
"Subscriber" and collectively, the "Subscribers") in connection with the
subscription by the Subscribers for Convertible Debentures of PHC, INC., a
Massachusetts corporation (the "Company").
WHEREAS, the Company is offering for sale pursuant to "Regulation D"
("Regulation D") promulgated under the United States Securities Act of 1933, as
amended (the "Act"), an aggregate principal amount of $3,125,000 of Convertible
Debentures, at an aggregate purchase price of $2,500,000, in the form attached
hereto as EXHIBIT A (the "Convertible Debentures"); and
WHEREAS, each Subscriber wishes to subscribe for the Convertible
Debentures set forth opposite such Subscriber's name on Schedule 1.1 hereto, in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto hereby agree as follows:
1. SUBSCRIPTION AND CLOSING; ESCROW
1. Subscription. Subject to the terms and conditions of this
Agreement, each Subscriber hereby subscribes for, and the Company hereby agrees
to issue and sell to each such Subscriber, the number of Convertible Debentures
in the principal amount, and at the aggregate price, set forth opposite each
Subscriber's name as indicated on Schedule 1.1 to this Agreement.
2. Closing. Contemporaneous herewith, each Subscriber, the Company,
and American Stock Transfer & Trust Company, serving as the transfer agent for
the Company (the "Transfer Agent") shall enter into that certain Book Entry
Transfer Agent Agreement in the form attached hereto as EXHIBIT B (the "Transfer
Agent Agreement"). As contemplated therein, the Transfer Agent shall serve as an
escrow agent to facilitate the closing of the subscription referred to above
(the "Closing"), and, thereafter, shall perform the "paying agent" and "book
entry" functions contemplated therein.
3. Payment of Purchase Oruce and Delivery of Convertible Debentures
Payment of the purchase price for the Convertible Debentures by the Subscribers,
and delivery of the Convertible Debentures by the Company, shall be effected
pursuant to the procedures established in the Transfer Agent Agreement.
4. Multiple Subscribers. This Agreement may be executed by one or
more Subscribers. In the event that this Agreement pertains to a subscription by
a single Subscriber only, all references to the "Subscribers" or "each
Subscriber" shall be deemed to refer to such single Subscriber.
2.Representations, Warranties and Covenants of Company
The Company represents and warrants to and covenants with the
Subscribers as follows:
1. Organization, Good Standing, and Qualification, The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Massachusetts and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole.
2. Authorization. All corporate action on the part of the Company
its officers, directors and shareholders necessary for the authorization,
<PAGE>
execution and delivery of this Agreement, and the performance of all obligations
of the Company hereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Convertible Debentures and the shares of the Class
A Common Stock, par value $.01 per share (the "Common Stock") of the Company
issuable upon conversion of the Convertible Debentures have been taken (such
shares of Common Stock are hereinafter referred to as the "Common Shares", and
the Convertible Debentures and Common Shares are hereinafter referred to as the
"Securities").
3. Agreement. This Agreement has been duly executed and delivered by
the Company and, assuming due authorization, execution and delivery of this
Agreement by each Subscriber, is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4. Capital Stock. The Company has an authorized capitalization as
set forth on Schedule 2.4. All outstanding shares of capital stock of the
Company have been duly authorized and are fully paid and non-assessable. Other
than as set forth on Schedule 2.4 or as disclosed in the SEC Reports (as such
term is defined in Section 2.6 below), there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of capital stock of the Company.
5. Valid Issuance of Securities. When issued and delivered in
accordance with the terms of this Agreement, the Convertible Debentures will
constitute legal, valid and binding obligations of the Company, enforceable by
the Company in accordance with their terms, and will have been issued in
compliance with all applicable U.S. federal and state securities law. The Common
Shares, when issued upon conversion in accordance with the terms of the
Convertible Debentures, shall be duly and validly issued and outstanding, fully
paid and nonassessable, free and clear of any claims or pre-emptive rights, and
will have been issued in compliance with all applicable U.S. federal and state
securities laws.
6. SEC Reports; Financial Statements. The Company has timely filed,
or has filed pursuant to extensions of filing dates approved by the Securities
and Exchange Commission (the "Commission") all forms, reports and documents with
the Commission since January 1, 1995, required to be filed by it under the
Securities Exchange Act of 1934, as amended (the "1934 Act") through the date
hereof (collectively, the "SEC Reports"). Such SEC Reports, at the time filed,
complied as to form in all material respects with the requirements of the 1934
Act. None of the SEC Reports, including without limitation any financial
statements or schedules included therein, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. There have been no material adverse changes in the Company's
business, properties, results of operations, condition (financial or otherwise)
or prospects since the date of the Company's most recent Annual Report on Form
10-KSB for the fiscal year ended June 30, 1996, which have not been disclosed to
the Subscribers in writing (either directly by the Company or by delivery by the
Company to the Subscribers). The audited and unaudited consolidated balance
sheets of the Company and its subsidiaries contained in the SEC Reports, and the
related consolidated statements of income, changes in stockholders' equity and
changes in cash flows for the periods then ended (the consolidated balance sheet
of the Company and its subsidiaries as of June 30, 1996 is hereinafter referred
to as the "Balance Sheet"), including the footnotes thereto, except as indicated
therein, have been prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods indicated, except that
the unaudited financial statements do not contain notes and may be subject to
normal audit adjustments and normal annual adjustments. The Balance Sheet fairly
presents the financial condition of the Company and its subsidiaries at the date
thereof and, except as indicated therein, reflects all claims against and all
debts and liabilities of the Company and its subsidiaries, fixed or contingent,
as at the date thereof and the related statements of income, stockholders'
equity and changes in cash flows fairly present the results of the operations of
the Company and its subsidiaries and the changes in their financial position for
the period indicated. Since June 30, 1996, except as disclosed in the SEC
Reports, there has been (x) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in the
results of operations or prospects, of the Company and its subsidiaries, whether
as a result of any legislative or regulatory change, revocation of any license
or rights to do business, fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, act of God, public force or otherwise
<PAGE>
and (y) no change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations or prospects, of the
Company and its subsidiaries except in the ordinary course of business; and no
fact or condition exists or is contemplated or threatened which might cause such
a change in the future.
7. Current Public Information. The Company's Common Stock is
registered under Section 12(b) or 12(g) of the 1934 Act. The Company has
delivered to the Subscribers copies of the Company's Form 10-KSB Annual Report
for the fiscal year ended June 30, 1996, most recent proxy statement for its
Annual Meeting of Shareholders, and each interim report on Form 8-K filed by the
Company since the date of its most recent Annual Report on Form 10-KSB.
8. No Conflicts. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby does not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under, the Certificate of Incorporation
or bylaws of the Company, or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by which it or any of
its properties or assets are bound, or any existing applicable decree, judgment
or order of any court, Federal or State regulatory body, administrative agency
or other governmental body having jurisdiction over the Company or any of its
properties or assets.
9. Compliance with Laws. As of the date hereof, the conduct of the
business of the Company complies in all material respects with all statutes,
laws, regulations, ordinances, rules, judgments, orders or decrees applicable
thereto, except for non compliance which would not have a material adverse
effect on the business, properties, condition (financial or otherwise), results
of operations or prospects of the Company (a "Material Adverse Effect"). The
Company has not received notice of any alleged violation of any statute, law,
regulation, ordinance, rule, judgement, order or decree from any governmental
authority, which would have a Material Adverse Effect.
10. Litigation. Except as disclosed in the SEC Reports, there is no
action, suit or proceeding before or by any court or governmental agency or
body, domestic or foreign, now pending or, to the knowledge of the Company,
threatened, against or affecting the Company, or any of its properties, which
could reasonably be expected to result in any material adverse change in the
business, properties, results of operations, condition (financial or otherwise),
or prospects of the Company, or which could reasonably be expected to materially
and adversely affect the properties or assets of the Company or which could
reasonably be expected to interfere with the Company's ability to consummate the
transactions contemplated by this Agreement.
11. Diclosures. There is no fact known to the Company (other than
general economic conditions known to the public generally) that has not been
disclosed in writing to the Subscribers that (a) could reasonably be expected to
have a Material Adverse Effect or (b) could reasonably be expected to materially
and adversely affect the ability of the Company to perform its obligations
pursuant to this Agreement and the issuance of the Securities hereunder.
12. Prior Private Placements.Except as set forth in the SEC Reports,
the Company has not issued any shares of its Common Stock (or securities
convertible into or exercisable for shares of Common Stock).
13. Commissions. Except for a fee which is payable by the Company as
contemplated in the Transfer Agent Agreement to Alpine Capital for services
rendered to the Company not to exceed four percent (4%) of the aggregate
purchase price of the Convertible Debentures, no other person, firm or
corporation will be entitled to receive any brokerage fee, commission or other
similar payment from the Company in connection with the consummation of the
transactions contemplated hereby and the Company shall not make any such payment
to any other person, firm or corporation.
3. Representations and Warranties of Subscriber; Access to
Information; Independent. Information, Independent Investigation
Each Subscriber represents and warrants to the Company as follows:
<PAGE>
1. Independent Investigation. Each Subscriber, in offering to
subscribe for the Securities hereunder, has, prior to the date hereof, been
given access to and the opportunity to examine all books and records of the
Company, and all material contracts and documents of the Company; provided, that
such investigation shall not affect any Subscriber's ability to rely on the
accuracy of the representations and warranties of the Company set forth herein.
In making its investment decision to purchase the Securities, no Subscriber is
relying on any oral or written representations or assurances from the Company or
any other person or any representation of the Company or any other person other
than as set forth in this Agreement, the SEC Reports or in a document executed
by a duly authorized representative of the Company making reference to this
Agreement. Each Subscriber has such experience in business and financial matters
that it is capable of evaluating the risk of its investment and determining the
suitability of its investment. Each Subscriber is a sophisticated investor, as
defined in Rule 506(b)(2)(ii) of Regulation D under the Act, and an "accredited
investor" as defined in Rule 501 of Regulation D under the Act, a copy of which
definition is attached hereto as Exhibit C.
2. Economic Risk. Each Subscriber understands and acknowledges
that an investment in the Securities involves a high degree of risk, including a
possible total loss of investment. Each Subscriber represents that it is able to
bear the economic risk of an investment in the Securities.
3. No Government Recommendation or Approval. Each Subscriber
understands that no United States federal or state agency or similar agency of
any other country has passed upon or made any recommendation or endorsement of
the Company, this transaction or the subscription of the Securities.
4. No Registration . Each Subscriber understands that the Securities
have not been registered under the Act and are being offered and sold pursuant
to an exemption from registration contained in the Act based in part upon the
representations of such Subscriber contained herein. The Common Shares do,
however, carry certain registration rights as set forth in the Registration
Rights Agreement executed by the parties hereto in the form attached hereto as
Exhibit D (the "Registration Rights Agreement").
5. No Public Solicitation. Without conducting any independent
investigation, no Subscriber knows of any public solicitation or advertisement
of an offer in connection with the proposed issuance and sale of the Securities.
6. Investment Intent. Each Subscriber is acquiring the Securities
for such Subscriber's own account, for investment and not with a view to the
distribution thereof. Each Subscriber understands that except as set forth in
the Registration Rights Agreement, the Company has no present intention of
registering any such sale of the Securities. Each Subscriber represents and
warrants to the Company that it has no present plan or intention of selling the
Convertible Debentures, and has made no predetermined arrangements to sell the
Securities (other than the registration provisions contained in the Registration
Rights Agreement, which pertain only to a potential method of disposing of the
Common Shares).
7. Incorporation and Authority. Each Subscriber has the full power
and authority to execute, deliver and perform this Agreement and to perform its
obligations hereunder. This Agreement has been duly approved by all necessary
action of each Subscriber, including any necessary shareholder approval, has
been executed by persons duly authorized by each Subscriber, and constitutes a
valid and legally binding obligation of each Subscriber, enforceable in
accordance with its terms.
8. No Reliance n Tax Advice. Each Subscriber has reviewed with his,
her or its own tax advisors the foreign, federal, state and local tax
consequences of this investment, where applicable, and the transactions
contemplated by this Agreement. Each Subscriber is relying solely on such
advisors and not on any statements or representations of the Company or any of
its agents and understands that such Subscriber (and not the Company) shall be
responsible for the Subscriber's own income tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.
<PAGE>
9. Independent Legal Advice. Each Subscriber acknowledges that it
has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his, her or its own legal counsel. Each
Subscriber is relying solely on such counsel and not on any statements or
representations of the Company or any of its agents for legal advice with
respect to this investment or the transactions contemplated by this Agreement,
except for the representations, warranties and covenants set forth herein and on
the opinion provided for in Section 5.7 hereof.
4. Legendsm Conversion Notice
1. Legends. The Convertible Debentures shall bear a legend substantially
as set forth on the cover page of this Agreement and any other legend, if such
legend or legends are reasonably required to comply with state, federal or
foreign law.
2. Conversion Notice. Upon election by a Subscriber to convert all or a
portion of the Convertible Debentures into Common Shares in accordance with the
terms of the Convertible Debentures, such Subscriber shall deliver to the
Transfer Agent a duly completed Notice of Conversion substantially in the form
attached hereto as EXHIBIT E (a "Notice of Conversion"), as contemplated by the
Transfer Agent Agreement.
5.Covenants of the Company
1. Accounts. For as long as any Convertible Debentures remain outstanding,
the Company shall, until at least the second anniversary of the date of the
Closing (the "Closing Date"), maintain as its independent auditors an accounting
firm that is authorized to practice before the SEC.
2. Corporate Existence and Taxes. For as long as any Convertible
Debentures remain outstanding, the Company shall maintain its corporate
existence in good standing, and shall pay all its taxes when due except for
taxes which the Company disputes in good faith and for which adequate reserves
are established on the Company's books and records.
3. Reserved Shares and Listings. For so long as any Convertible Debentures
remain outstanding:
a. the Company will reserve from its authorized but unissued shares of
Common Stock a sufficient number of Common Shares to permit the conversion
in full of the then outstanding Convertible Debentures; and
b. the Company will maintain the listing of its Common Stock on the
NASDAQ Small Cap System; and
c. until such time as all o f the Convertible Debentures have been
converted into Common Shares, the Company will not repurchase or otherwise
enter into any other transaction (including stock split, recapitalization or
other transaction) which would cause a decrease in the number of its shares
of Common Stock issued and outstanding (other than transactions that
similarly decrease the number of shares of Common Stock into which the
Convertible Debentures are convertible); and
d. the Company will (I) retain the Transfer Agent as the stock transfer
agent of the Company, and (II) if the Transfer Agent voluntarily or
involuntarily fails to so serve, select an independent, unaffiliated
replacement stock transfer agent willing to perform the duties of the
Transfer Agent under the Transfer Agent Agreement.
4. Issuance of Common Stock. Upon conversion of the Convertible Debentures
in accordance with their terms, consistent with the Transfer Agent Agreement,
the Company will, and will use its best lawful efforts to cause the
<PAGE>
Transfer Agent to, issue one or more certificates representing Common Shares in
such name or names and in such denominations specified by a Subscriber in a
Notice of Conversion.
5. Copies of Information. The Company undertakes to furnish each Subscriber
with copies of such other information as may be reasonably requested by such
Subscriber prior to consummation of this Offering. The Company will provide the
Subscribers with copies of all future filings under the 1934 Act for so long as
any Convertible Debentures are outstanding.
6. Compliance with Laws. The Company shall comply with all applicable
Federal and state securities laws with respect to the sale of the Securities,
including but not limited to the filing of all reports required to be filed in
connection therewith with the SEC or any stock exchange or the NASDAQ Small Cap
Market or any other regulatory authority.
7. Opinion of Counsel. Each Subscriber shall, prior to the Closing, receive
an opinion letter from counsel to the Company, to the effect that (i) the
Company is duly incorporated and validly existing; (ii) this Agreement, the
issuance of the Convertible Debentures, and the issuance of the Common Shares
upon conversion of the Convertible Debentures have been duly approved by all
required corporate action, and that both the Convertible Debentures and the
Common Shares, upon due issuance, shall be validly issued and outstanding, fully
paid and nonassessable; (iii) this Agreement and the Registration Rights
Agreement are each valid and binding obligations of the Company, enforceable in
accordance with their terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of laws governing
specific performance and other equitable remedies; and (iv) based upon the
representations and warranties of the Company and each Subscriber herein, the
offer and sale of the Convertible Debentures is exempt from the registration
requirements of the Act; except that with respect to the foregoing opinions
counsel may add such qualifications as are consistent with firm practice. The
Company further covenants that it will arrange for issuance of any legal
opinions required by the Company's Transfer Agent in order to ensure that, upon
the effectiveness of a registration statement described therein, the Common
Shares are issued without restrictive legend upon receipt of a Notice of
Conversion.
8. Consultation with Legal Counsel. The Company shall consult with its legal
counsel regarding its 1934 Act filing requirements including, but not limited
to, the possible obligation of the Company to file Forms 10-C and 8-K in
connection with the Offering, and will timely make any and all such filings
deemed necessary by such counsel.
9. Registration Rights. The Company will grant the Subscribers the
registration rights covering the Common Shares issuable on conversion of the
Convertible Debentures on the terms of the Registration Rights Agreement. In the
event the Registration Statement contemplated by the Registration Rights
Agreement is not declared effective by the Commission within 75 days of the
closing contemplated herein, and such effectiveness is not maintained for a
consecutive 180 day period, the Company shall pay to the Subscribers, as
liquidated damages and not as a penalty, an amount equal to 1% of the aggregate
outstanding principal amount of the Convertible Debentures. A further liquidated
damage payment of 3% of the aggregate outstanding principal amount of the
Convertible Debentures shall be payable as liquidated damages in the event that
such Registration Statement is not declared effective by the Commission within
120 days of the closing contemplated herein, and such effectiveness is not
maintained for a consecutive 180 day period. Such liquidated damages shall be
paid in cash by the Company to the Subscribers by wire transfer of immediately
available funds on the last day of each calendar month following the event
requiring its payment.
6. Covenants of the Subscribers.
1. No Sale in Violation of the Act. Each Subscriber covenants that it
will not make any sale, transfer or other disposition of the Securities in
violation of the Act or the rules and regulations of the Commission promulgated
thereunder. Each Subscriber acknowledges and agrees that the Securities may and
will only be resold (a) pursuant to a Registration Statement under the Act; or
(b) pursuant to an exemption from registration under the Act.
<PAGE>
7.Issuance of Further Securities
Right of First Refusal. The Company hereby grants to the Subscribers the
right of first refusal to purchase all (or any part) of New Securities (as
defined in this Section) that the Company may, from time to time, propose to
sell and issue. "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options or warrants to purchase said
capital stock, and debt or equity securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that the
term "New Securities" does not include securities issued in Excluded Financings.
"Excluded Financings" mean (i) non-convertible debt or non-convertible preferred
stock financings of any type, (ii) public offerings at the market price of the
Common Stock, (iii) private financings at a price, including conversion price,
at least equal to the then-current market price of the Common Stock (determined
as set forth in the Convertible Debentures), (iv) project financings, (v)bank
financings, (vi) the issuance, sale, exercise or conversion or grant of options
to purchase, shares of Common Stock pursuant to any of the Company's employee
stock option, compensation, bonus or incentive plans or otherwise, concerning
existing options and warrants, and (vii) the issuance or sale of any equity or
debt securities used for acquisition by the Company of operating assets or stock
of entities to be owned and operated by the Company or a subsidiary of the
Company. In the event that the Company proposes to undertake an issuance of New
Securities, it shall give the Subscribers written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Subscriber shall have ten
(10) days from the date of receipt of any such notice to agree to purchase all
or less than all of the New Securities for the price and upon the general terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased. If any such Subscriber
fails to exercise in full the right of first refusal within such ten (10) day
period, then the Company shall have sixty (60) days thereafter to sell the New
Securities respecting which the Subscribers' rights were not exercised, at a
price and upon general terms no more favorable to the purchasers thereof than
specified in the Company's notice. In the event that the Company has not sold
the New Securities within such sixty (60) day period, the Company shall not
thereafter issue or sell any New Securities without first offering such
securities to the Subscribers in the manner provided above. The right of first
refusal granted under this Section shall terminate upon the earlier of: (i) 180
days following the Closing Date; or (ii) the date upon which the Subscribers
cease to own at least one-third of the Convertible Debentures or the Common
Shares issuable upon conversion thereof.
8. Liquidated Damages for Late Conversion.
A. Liquidated Damages. As set forth in the Certificate of
Designation, the Company shall use its best efforts to issue and deliver, within
five (5) New York Stock Exchange trading days after a Subscriber has fulfilled
all conditions and submitted a Notice of Conversion duly executed and in proper
form required for conversion as contemplated by the Transfer Agent Agreement
(the "Deadline"), to such Subscriber or any party receiving the Convertible
Debentures by transfer from such Subscriber in compliance with the Act (together
with such Subscriber, a "Holder"), at the address of the Holder set forth in the
Notice of Conversion and in the absence thereof at such address as set forth in
the Transfer Agent Agreement, a certificate or certificates for the number of
Common Shares to which the Holder shall be entitled. The Company understands
that a delay in the issuance of the Common Shares after the Deadline could
result in economic loss to the Holder. If for any reason the Company fails to
issue the Common Shares, as compensation to the Holder for such loss, and not as
a penalty, the Company agrees to pay liquidated damages to the Holder for late
issuance of Common Shares upon conversion in accordance with the following
schedule (where "No. Business Days Late" is defined as the number of business
days after the Deadline):
Aggregate
NO. BUSINESS DAYS LATE LIQUIDATED DAMAGES
(per each $100,000 Principal
Amount of Convertible Debenture)
1 $ 100
<PAGE>
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
>10 $1,000 + an additional
$2,000
for each Business Day Late
beyond 10 days
The Company shall pay the Holder any liquidated damages incurred under this
Section by wire transfer of immediately available funds to an account designated
by Holder upon the earlier to occur of (i) issuance of the Common Shares to the
Holder of the required Common Shares that were not issued, or (ii) each monthly
anniversary of the receipt by the Company of such Holder's Notice of Conversion.
Nothing herein shall waive the Company's obligations to deliver Common Shares
upon a conversion of the Convertible Debentures or limit any Subscriber's right
to pursue actual damages for the Company's failure to issue and deliver Common
Shares to such Subscriber in accordance with the terms of the Convertible
Debentures.
2. Conversion Notice. The Company agrees that, in addition to any other
remedies which may be available to the Subscribers, including, but not limited
to the remedies available under Section 8.1, in the event the Company fails for
any reason to effect delivery to a Subscriber of certificates representing
Common Shares on or prior to the Deadline, such Subscriber will be entitled to
revoke the Notice of Conversion by delivering a notice to such effect to the
Company whereupon the Company and the Subscriber shall each be restored to their
respective positions immediately prior to delivery of such Notice of Conversion.
9. Conditions to Closing; Deliveries at Closing.
1. Conditions to Subscribers' Obligations to Close. The obligations of the
Subscribers to purchase the Convertible Debentures offered hereunder are
conditioned on the fulfillment or waiver of the following:
(a). the execution and delivery of this Agreement, the Registration
Rights Agreement and the Transfer Agent Agreement by the Company;
(b). the execution and delivery of the Transfer Agent Agreement by
the Transfer Agent;
(c). all the representations and warranties of the Company in thi
Agreement as of the date hereof shall be true and correct at the Closing as if
made on such date, and the Company shall have performed all actions required
hereunder; and
(d). receipt of the opinion of legal counsel to the Company to the
effect set forth in Section 5.7.
2. Conditions to the Company's Obligation to Close. The obligation of the
Company to sell the Convertible Debentures offered hereunder are conditioned on
the fulfillment or waiver of the following:
(a). the execution and delivery of this Agreement, the Registration
Rights Agreement and the Transfer Agent Agreement by the Subscribers;
(b). the execution and delivery of the Transfer Agent Agreement by the
Transfer Agent; and
<PAGE>
(c). all the representations and warranties of each Subscriber made
in this Agreement as of the date hereof shall be true and correct at the Closing
as if made on such date, and each Subscriber shall have performed all actions
required hereunder.
10.Governing Law
This Agreement shall be governed by and construed in accordance ith the
laws of the State of New York, applicable to agreements made in and wholly to be
performed in that jurisdiction without regards to the choice of law rules of
such state, except for matters arising under the Act or the 1934 Act which
matters shall be construed and interpreted in accordance with such laws. Any
action brought to enforce, or otherwise arising out of, this Agreement shall be
heard and determined in either a Federal or state court sitting in the State of
Massachusetts.
11.Entire Agreement; Amendment
This Agreement, the Registration Rights Agreement, the Transfer Agent
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, 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. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
12.Notices, Etc.
Any notice, demand or request required or permitted to be given by either
the Company or any Subscriber pursuant to the terms of this Agreement shall be
in writing and shall be deemed given when delivered personally or by facsimile,
with a hard copy to follow by two day courier addressed to the parties at the
addresses of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing.
13. Confidentiality.
The Subscribers will keep confidential all non-public information
regarding the Company that they receive from the Company unless disclosure of
such information is compelled by a court or other administrative body or
otherwise necessary, in the opinion of Subscribers' counsel, to comply with
applicable law. Neither party shall disclose any information regarding any of
the transactions contemplated hereby without the prior consent of the other
party, unless such disclosure is required in filings made with the Commission.
14. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument. A
facsimile transmission of a signature hereto shall be valid as if an original
and binding on all parties.
15. Severability
In the event that any provision of this Agreement becomes or is declared
by a court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
16. Titles and Subtitles
<PAGE>
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.
17. Parties in Interest Cited
This Agreement may not be transferred, assigned, pledged or hypothecated
by any party hereto, other than by operation of law. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
All representations, warranties, covenants and agreements of each party hereto
shall survive the closing contemplated herein.
[SIGNATURE PAGES FOLLOW]
<PAGE>
The undersigned Subscribers acknowledge that this subscription shall not
be effective unless accepted by the Company as indicated below.
Dated this __ day of October, 1996.
INFINITY INVESTORS LTD. SEACREST CAPITAL LIMITED
27 Wellington Road 27 Wellington Road
Cork, Ireland Cork, Ireland
___________________________ ____________________________
Signature Signature
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ___ DAY OF OCTOBER,
1996.
PHC, INC.
200 Lake Street, Ste. 102
Peabody, Massachusetts 01960
By: ______________________________
Print Name: _______________________
Title: _____________________________
45593.2H
<PAGE>
REGISTRATION RIGHTS AGREEMENT - PAGE 2 (PHC, INC.)
SCHEDULE 1.1
SUBSCRIBERS
================================================================================
NAME ADDRESS Principal Aggregate
Balance of PURCHASE PRICE
Convertible
DEBENTURES
================================================================================
Seacrest Capital 27 Wellington Road $1,250,000 $1,000,000
Limited Cork, Ireland
================================================================================
Infinity Investors 27 Wellington Road $1,875,000 $1,500,000
Ltd. Cork, Ireland
================================================================================
TOTALS $3,125,000 $2,500,000
================================================================================
45593.2H
<PAGE>
EXHIBIT 4.11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
October 7, 1996, by and among PHC, INC., a Massachusetts corporation (the
"Company"), and INFINITY INVESTORS LTD., a Nevis West Indies corporation
("Infinity") and SEACREST CAPITAL LIMITED, a Nevis West Indies corporation
("Seacrest") (Infinity and Seacrest being singularly referred to as an
"Investor" and collectively as the "Investors").
R E C I T A L S:
WHEREAS, pursuant to a Subscription Agreement (the "Subscription
Agreement"), by and between the Company and the Investors, the Company have
agreed to sell and the Investors has agreed to purchase an aggregate principal
amount of $3,125,000 of Convertible Debentures of the Company (the "Convertible
Debentures") convertible into shares of the Company's Class A Common Stock, par
value $.01 per share (the "Common Stock"); and
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investors' agreement to enter into the Subscription Agreement, the Company has
agreed to provide the Investors with certain registration rights with respect to
the shares of Common Stock into which the Convertible Debentures may be
converted from time to time (the "Shares");
NOW THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Agreement and this
Registration Rights Agreement, the Company and the Investors agree as follows:
AGREEMENT:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, par value $.01 per
share.
"Initiating Holders" shall mean holders of more than 50% of the
outstanding shares of Convertible Debentures.
"Other Registrable Shares" shall mean those shares of Common Stock
heretofore or hereafter issued pursuant to one or more agreements granting the
purchasers of such securities the right to have the Company register such
securities or include such securities in any other registration of the Company's
equity securities.
"Registrable Shares" shall mean (i) the Shares, and (ii) any Common Stock
of the Company issued or issuable in respect of the Shares or upon any stock
split, stock dividend, recapitalization or similar event; PROVIDED, HOWEVER,
that Registrable Shares or other securities shall no longer be treated as
Registrable Shares if (A) they have been sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, (B)
they have been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon consummation of
such sale, or (C) the Shares are available for sale under the Securities Act
(including Rule 144), in the opinion of counsel to the Company, without
compliance with the registration and prospectus delivery requirements of the
Securities Act so that all transfer restrictions and restrictive legends with
respect thereto may be removed upon the consummation of such sale.
<PAGE>
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 2 hereof, including, without limitation all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, reasonable fees and disbursements (not to
exceed $10,000) of one counsel for all the selling holders of Registrable Shares
for a limited "due diligence" examination of the Company incident to such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company, and excluding all
underwriting discounts and selling commissions applicable to the sale of the
Registrable Shares).
"Securities Act" shall mean 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 time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Shares and all fees and
disbursements of one counsel for the selling holders of Registrable Shares
(other than the fees and disbursements of such counsel included in Registration
Expenses).
REQUESTED REGISTRATION.
(a) Request for Registration. If the Company shall receive from
Initiating Holders, at any time prior to thirty-six (36) months following
the final closing of the sale of the Convertible Debentures pursuant to the
Agreement, a written request that the Company effect a registration with
respect to all, but not less than all, of the Registrable Shares held by
such Initiating Holders (which notice shall specify the intended method of
disposition), the Company shall:
(i) promptly Give Written Notice Of T he Proposed
Registration To All Other Holders Of Registrable Shares; And
(ii) as soon as practicable (A) cause to be filed a
Registration Statement on Form S-3 under the Securities Act (or such other
form as is then appropriate for use by the Company under the Securities Act)
and (B) use its best efforts to cause such registration statement to be
declared effective by the Commission (including, without limitation,
undertaking the actions described in Section 4), all as may be so requested
by the Initiating Holders so as to permit or facilitate the sale and
distribution of all or such portion of such Registrable Shares as are
specified in such request, together with all or such portion of the
Registrable Shares of any holder or holders of Registrable Shares joining in
such request as are specified in a written request given within fifteen (15)
days after receipt of such written notice from the Company; provided that
the Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 2:
(A) after the Company has effected one (1) such
registration pursuant to this Section 2(a) and such registration has
been declared or ordered effective by the Commission and remained
effective for a continuous period of 180 days, provided, however,
the Initiating Holders shall be entitled to a second demand if during
such continuous 180 day period the Initiating Holders are prevented
from exercising in full their conversion rights under the Convertible
Debentures and receiving the Shares in exchange therefor solely as a
result of the breach by the Company of any of its covenants under
this Agreement, the Subscription Agreement or the Convertible
Debentures; or
<PAGE>
(B) within the period starting with the date sixty (60)
days prior to the Company's good faith estimated date of filing of,
and ending ninety (90) days following the effective date of, any
registered public offering of the Company's securities.
Execution of this Agreement shall onstitute a written demand by the Initiating
Holders, as contemplated in this Section 2(a).
Subject to the foregoing limitations in clauses (A) and (B) above,
the Company shall file a registration statement covering the Registrable
Shares so requested to be registered as soon as practicable after receipt
of the request or requests of the Initiating Holders, but no later than
forty-five (45) days following receipt of such request or requests, except
in the event audited financial statements not previously prepared are
required to be prepared prior to the filing of such registration
statement, in which case such registration statement must be filed as soon
as practicable, but in any event within ninety (90) days following receipt
of such request or requests.
The registration statement filed pursuant to the request of the
Initiating Holders (the "Registration Statement") may, subject to the
provisions of Section 2(b) below, include Other Registrable Shares, other
securities of the Company which are held by officers or directors of the
Company or which are held by other holders of registration rights, and may
include securities of the Company being sold for the account of the
Company.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Shares covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant
to Section 2 and the Company shall include such information In the
written notice referred to in Section 2(a)(i) above. The right of
any holder of Registrable Shares to registration pursuant to Section
2 shall be conditioned upon such holder's participation in such
underwriting and the inclusion of such holder's Registrable Shares in such
underwriting (unless otherwise mutually agreed by a majority in interest
of the Initiating Holders and such holder with respect to such
participation and inclusion) to the extent provided herein. A holder of
Registrable Shares may elect to include in such underwriting all or a
part of the Registrable Shares it holds.
(i) If the Company shall request inclusion in any registration
pursuant to Section 2 of securities being sold for its own account,
or if officers or directors of the Company holding other securities
of the Company or other holders of registration rights, shall request
inclusion in any registration pursuant to Section 2, the
Initiating Holders shall, on behalf of all holders of Registrable
Shares, offer to include Other Registrable Shares and the securities
of the Company, such officers and directors and such other holders
of registration rights in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. he Company shall (together with all holders of Registrable
Shares, officers and directors, ther holders of registration rights
and holders of Other Registrable Shares proposing to distribute
their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
representative of the underwriters selected for such underwriting
by the Company, which underwriter(s) shall be reasonably acceptable
to a majority in interest of the Initiating Holders.
(ii) Notwithstanding any other provision of this Section 2, if
the representative of the underwriters advises the Company in
writing that marketing factors require a limitation on the number
of shares to be underwritten, the Company shall so advise all holders
of Registrable Shares and other shareholders whose securities would
otherwise be underwritten pursuant to such registration, and the
number of Registrable Shares and other securities that may be included
in the registration and underwriting shall be allocated in the
following manner: the securities to be offered by the Company and
the securities of the Company held by officers and directors of the
Company (other than Registrable Shares) shall be excluded from
such registration and underwriting to the extent required by such
limitation, and, if a limitation on the number of shares is still
<PAGE>
required, the Other Registrable Shares shall be excluded pro rata with
Registrable Shares, unless another method of determining such
exclusion is specified in the agreements governing the Other
Registrable Shares, according to the relative number of Other
Registrable Shares requested to be included in such registration and
underwriting, from such registration and underwriting to the extent
required by such liitation, and, if a limitation on the number of
shares is still required, the number of Registrable Shares that may
be included in the registration and underwriting shall be allocated
among all holders of Registrable Shares in proportion, as nearly as
practicable, to the respective amounts of Registrable Shares which
they had requested to be included in such registration at the time of
filing the registration statement. No Registrable Shares or any other
securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall also be included in such
registration.
(iv). If the Company or any officer, director or holder of
Registrable Shares or Other Registrable Shares who has requested
inclusion in such registration and underwriting as provided above
disapproves of the terms of the underwriting, such person may elect to
withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be
withdrawn from registration.
3. Expenses of registration. The company shall bear all registration
expenses incurred in connection with any registration, qualification or
compliance of the Registrable Shares pursuant to this Agreement. All Selling
Expenses shall be borne by the holders of the securities so registered pro rata
on the basis of the number of their shares so registered (except for the fees
and disbursements of counsel to the Investors.
4. Registration Procedures. Pursuant to this Agreement, the Company will
keep each holder of Registrable Shares advised in writing as to the initiation
of a registration under this Agreement and as to the completion thereof.
At its expense, the Company will:Agreement and as to the completion thereof
At its expense, the Company will:
(a). Use reasonable efforts to keep such registration effective for a
period of one hundred eighty (180) days or until the holder or
holders of Registrable Shares have completed the distribution described in
the registration statement relating thereto or until the securities
registered cease to be Registrable Shares, whichever first occurs;
(b). Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition
of securities covered by such registration statement;
(c). Furnish such number of prospectuses and other documents incidental
thereto, including any amendment of or supplement
(d). use reasonable efforts to (i) register and qualify the
Registrable Shares covered by the Registration Statement under such other
securities or blue sky laws of such jurisdictions as the Investors who
hold a majority in interest of the Registrable Shares being offered
reasonably request, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements, (iii)
take such other actions as may be necessary to maintain such registrations
and qualifications in effect until such date set forth in clause (a) above
and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Shares for sale in such jurisdictions; provided,
However, that the Company shall not be required in connection therewith or
as a condition thereto to (I) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section
3(d), (II) subject itself to general, taxation in any such jurisdiction,
(III) file a general consent to service of process in any such
jurisdiction, (IV) provide any undertakings that cause more than nominal
<PAGE>
expense or burden to the Company or (V) make any change in its charter or
by-laws, which in each case the Board of Directors of the Company
determines to be conPROVIDED, HOWEVER, that the Company shall not be
required in rs; connection therewith or as a condition thereto to (I)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (II) subject itself to
general, taxation in any such jurisdiction, (III) file a general consent
to service of process in any such jurisdiction, (IV) provide any
undertakings that cause more than nominal expense or burden to the Company
or (V) make any change in its charter or by-laws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders;
(e). in the event Investors who hold a majority in interest of the
Registrable Shares being offered in the offering select underwriters for
the offering, enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the managing underwriter of such offering;
(f). as promptly as practicable after becoming aware of such event
notify each Investor of the happening of any event of which the Company
has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver a
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(g). as promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Shares being sold (or, in the
event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of
effectiveness of the Registration Statement at the earliest possible time;
(h). permit a single firm of counsel designated as selling stockholders
counsel by the Investors who hold a majority in interest of the Registrable
Shares being sold to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing
with the Commission, and shall not file any document in a form to which
such counsel reasonably objects;
(i). make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal
quarter next following the effective date of the Registration Statement;
(j). at the request of the Investors who hold a majority in interest of
the Registrable Shares being sold, furnish on the date that Registrable
Shares are delivered to an underwriter for sale in connection with the
Registration Statement (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters; and (ii) an opinion, dated such date, from counsel
representing the Company for purposes of such Registration Statement, in
form and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investors;
(k). make available for inspection by any Investor, any underwriter
participating in any disposition pursuant to the Registration Statement,
and any attorney, accountant or other agent retained by any such Investor
or underwriter (collectively, the "Inspectors"), all ertinent financial
and other records, pertinent corporate documents and properties of the
Company (collectively, the "Records"), as shall be reasonably necessary
to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of
such due diligence; Provided, However, that each Inspector shall hold in
confidence and shall not make any disclosure (except to an Investor)
of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are
so notified, unless (i) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration Statement,
<PAGE>
(ii) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction or
(iii) the information in such Records has been made generally available
to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any
confidential information in such Records to any Inspector until and unless
such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with
respect thereto, substantially in the form of this Section 3(k). Each
Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential. The Company shall hold in confidence and
shall not make any disclosure of information concerning an Investor
provided to the Company pursuant to Section 4(e) hereof unless (i)
disclosure of such information is necessary to comply with federal or
state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any
Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other order from a court or governmental body of
competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or
any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective
order PROVIDED, HOWEVER, that each Inspector shall hold in confidence and
shall not make any disclosure (except to an Investor) of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified,
unless (i) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement, (ii) the release
of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction or (iii) the
information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor
agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the
Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. The Company shall hold in confidence and shall not make any
disclosure of information concerning an Investor provided to the Company
pursuant to Section 4(e) hereof unless (i) disclosure of such information
is necessary to comply with federal or state securities laws, (ii) the
disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other order from
a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that it shall, upon learning that disclosure of such information
concerning an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information;
(l) use its best efforts either to (i) cause all the Registrable
Shares covered by the Registration Statement to be listed on a national
securities exchange and on each additional national securities exchange on
which similar securities issued by the, Company are then listed, if any,
if the listing of such Registrable Shares is then permitted under
the rules of such exchange or (ii) secure designation of all the
Registrable Shares covered by the Registration Statement as a National
Association of Securities Dealers Automated Quotations System "NASDAQ")
"national market system security" within the meaning of Rule 11Aa2-1 of
the Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the quotation of the Registrable Shares on either the
NASDAQ National Market or NASDAQ Small Cap Market or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii) , the
Company is unsuccessful in satisfying the preceding clause (i) or (ii), to
secure listing on a national securities exchange or NASDAQ uthorization
and quotation for such Registrable Shares and, without limiting the
generality of the foregoing, to arrange for at least two market makers
to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Shares;
(m). provide a transfer agent and registrar, which may be a single
entity, for the Registrable Shares not later than the effective date of
the Registration Statement;
(n). cooperate with the Investors who hold Registrable Shares being
offered and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing Registrable Shares to be
offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts as the case may be, as
the managing underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing
underwriter or underwriters, if any, or the Investors may request; and
(o). take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Shares
pursuant to the Registration Statement.
5. INDEMNIFICATION.
(a). The Company will indemnify each holder of Registrable Shares, each
of its officers, directors and partners, and each person controlling such holder
<PAGE>
of Registrable Shares, with respect to which registration has been effected
pursuant to this Agreement, and each underwriter, if any and each person who
controls any underwriter, and their respective counsel against all claims,
losses, damages and liabilities (or actions, proceedings or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, or other
document incident to any such registration, or based on 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, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company in connection with any such registration and will reimburse each
such holder of Registrable Shares, each of its officers, directors and partners,
and each person controlling such holder of Registrable Shares, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses as they are reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided, however, that the indemnity contained in this Section 5(a) shall not
apply to amounts paid in settlement of any such claim, loss, damage, liability
or action if such settlement is effected without the consent of the Company; and
provided further that the Company shall not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such holder of Registrable Shares or underwriter and
stated to be specifically for use therein. The foregoing indemnity agreement is
further subject to the condition that insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in a
preliminary prospectus, such indemnity agreement shall not inure to the benefit
of the foregoing indemnified parties if copies of a final prospectus correcting
the misstatement, or alleged misstatement, omission or alleged omission upon
which such loss, liability, claim or damage is based is timely delivered to such
indemnified party and a copy thereof was not furnished to the person asserting
the loss, liability, claim or damage.
(b). Each holder of Registrable Shares will, if Registrable Shares held by
it are included in the securities as to which such registration is being
effected, indemnify the Company, each of its directors and officers and each
underwriter, if any, of the Company's securities covered by such a Registration
Statement, each person who controls the Company or such underwriter within the
meaning of the Securities Act and the rules and regulations thereunder, each
other such holder of Registrable Shares and each of its officers, directors and
partners, and each person controlling such holder of Registrable Shares, and
their respective counsel (collectively, the "Company, Underwriters and Counsel")
against all claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact relating to such Holder
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein relating to such holder or necessary
to make the statements therein relating to such holder not misleading or any
violation by such holder of any rule or regulation promulgated under the
Securities Act applicable to such holder and relating to action or inaction
required of such holder in connection with any such registration; and will
reimburse the Company, such holders of Registrable Shares, directors, officers,
partners, persons, underwriters or control persons for any legal or any other
expense reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) relating to such holder is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such holder of Registrable Shares and stated to be specifically for
use therein; provided, however, that such indemnification obligations shall not
apply if the Company modifies or changes to a material extent written
information furnished by such Holder. Each holder of Registrable Shares will, if
Registrable Shares held by it are included in the securities as to which such
registration is being effected, indemnify the Company, Underwriters and Counsel
against all claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof), arising out of or based on any sale of
Registrable Shares made by such holder following receipt by such holder of
written notice from the Company, Underwriters or Counsel that the registration
statement filed with respect to such Registrable Shares contains an untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
<PAGE>
(c). To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 5 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 5, (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Shares who was
not guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Shares shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Shares.
(d). Each party entitled to indemnification under this Section 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld or delayed), and the Indemnified Party may participate
in such defense at such Indemnified Party's expense. No Indemnifying Party, in
the defense of any such claim or litigation, shall except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
6. Agreements of Holders of Registrable Shares. Each holder of
Registrable Shares shall furnish to the Company such information regarding such
holder of Registrable Shares and the distribution proposed by such holder of
Registrable Shares as the Company may reasonably request in writing and as shall
be reasonably required in connection with any registration referred to in this
agreement.
7. Reports under Exchange Act. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the Commission that may at any time
permit the Investors to sell securities of the Company to the public without
registration and without imposing restrictions arising under the federal
securities laws on the purchases thereof ("Rule 144") the Company agrees to:
(a). make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the Commission in a timely manner, all
reports and other documents required of the Company under the Securities
Act and the Exchange Act; and
(c). furnish to each Investor so long as such Investor
owns Registrable Shares, promptly upon request, (i) a written statement by
the Company that it has complied with the reporting requirements of Rule
144, the Securities Act and the Exchange Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as
may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
8. Miscellaneous
A. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
conflict of laws of such jurisdiction.
<PAGE>
B. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties
C. Entire Agreement. This Agreement constitutes the full and entire
understanding and agreemen t between the parties with regard to the subject
matter hereof.
D. Notices, Etc. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand or by messenger or courier delivery service,
addressed (a) if to an Investor at 27 Wellington Road, Cork, Ireland, Fax:
011-44-71-355-4975, Attn: ames Loughran, with a copy to HW Finance, L.L.C,
4000 Thanksgiving Tower, 1601 Elm Street, Dallas, Texas 75204, Attention:
Barrett N. Wissman, or at such other address as such Investor shall have
furnished to the Company in writing, or (b) if to the Company at PHC, Inc., 200
Lake Street, Suite 102, Peabody, Massachusetts 01960, Fax: 508/536-2677; Attn:
Bruce A. Shear, President, or at such other address as the Company shall have
furnished to each Investor and each such other holder in writing.
E. Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Registrable Shares, upon any breach or
default of the Company under this Agreement, shall impair any such right, power
or remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereunder occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default thereafter occurring.
Any waiver, permit, consent or approval of any kind or character on the part of
any holder of any breach or default under this Agreement, or any waiver on the
part of any party of any provisions of conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
F. Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute
one instrument.
G. Severability. In the case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected orimpaired thereby.
H. Amendments. The provisions of this Agreement may be amended at any time
and from time to time, and particular provisions of this Agreement may be
waived, with and only with an agreement or consent in writing signed by the
Company and by the Investors currently holding fifty percent (50%) of the
Registrable Shares as of the date of such amendment or waiver.
<PAGE>
I. Termination of Registration Rights. This Agreement shall terminate at
such time as there ceases to be at least $250,000 of principal amount of the
Convertible Debentures.
The foregoing Registration Rights Agreement is hereby executed as of the
date first above written.
COMPANY: INVESTORS:
PHC, INC. INFINITY INVESTORS LTD.
By: ________________________ By: ______________________
Name: ________________________ Name: ______________________
Title:________________________ Title:______________________
SEACREST CAPITAL LIMITED
By:
Name:
Title:
45624.2H
<PAGE>
EXHIBIT 4.10
BOOK ENTRY TRANSFER AGENT AGREEMENT
This Book Entry Transfer Agent Agreement (this "Agreement"), dated October
7, 1996, between PHC, INC., a Massachusetts corporation (the "Company"),
INFINITY INVESTORS LTD., a Nevis West Indies corporation ("Infinity"), and
SEACREST CAPITAL LIMITED, a Nevis West Indies corporation ("Seacrest") (Infinity
and Seacrest collectively being referred to as the "Holders") and AMERICAN STOCK
TRANSFER & TRUST COMPANY (the "Transfer Agent").
R E C I T A L S:
WHEREAS, pursuant to that certain Registration D Securities Subscription
Agreement dated October 7, 1996 (the "Subscription Agreement") by and among the
Company and the Holders, the Company agreed to issue to the Holders an aggregate
of $3,125,000 principal amount of Convertible Debentures of the Company in the
form annexed to the Subscription Agreement (the "Debentures"); and WHEREAS, the
Company and the Holders have agreed to enter into this Agreement with the
Transfer Agent to provide for (i) the closing of the issuance of the Debentures
and (ii) a "book entry" system of accounting for the Debentures; and WHEREAS,
the Transfer Agent is willing to (i) serve as an escrow agent to facilitate the
closing under the Subscription Agreement, (ii) hold the Debentures on behalf of
the Holders, and (iii) establish a book entry system of accounting for the
Debentures, on the terms hereafter described. NOW, THEREFORE, in consideration
of the foregoing, the parties hereby agree as follows:
1. Closings. The Transfer Agent hereby agrees to act as an escrow agent to
facilitate the Closings as follows:
(a) On the date hereof the Holders shall wire transfer to an account
designated by the Transfer Agent $2,500,000 in the aggregate (the "Purchase
Price"), and the Company shall deliver to the Transfer Agent the Debentures in
the names of the Holders and in the amounts as set forth on Schedule 1 hereto.
The Transfer Agent may, at its discretion, confirm the authenticity of the
Debentures by transmitting a copy of the same in the form received from the
Company to the Holders or their counsel for written or oral verification as to
the form thereof. Schedule 1 hereto. The Transfer Agent may, at its discretion,
confirm the authenticity of the Debentures by transmitting a copy of the same in
the form received from the Company to the Holders or their counsel for written
or oral verification as to the form thereof.
(b) Immediately following the deliveries specified in (a) above, together
with a delivery from the Company to the Transfer Agent of a fully executed copy
of the Subscription Agreement, the Transfer Agent shall wire transfer the
Purchase Price, less the Consulting Fee (as hereafter defined), and the Company
Legal Fees (as hereafter defined), to the Company, pursuant to the wire
transaction instructions attached hereto. The Company hereby directs the
Transfer Agent to wire transfer (i) $100,000 of the Purchase Price (the
"Consulting Fee") to Alpine Capital (the "Consultant") in consideration of
certain services provided by the Consultant to the Company pursuant to the wire
transfer instructions attached hereto, and (ii) $162,288.80 of the Purchase
Price (the "Company Legal Fees") to Choate, Hall & Stewart, pursuant to wire
instructions attached hereto.
(c) The Transfer Agent shall hold the Debentures for the benefit of the
Holders, as hereafter described.
(d) All interest (if any) earned on the funds placed in escrow and prior to
their distribution to the Company shall be for the account of the Holders.
2. Ownership of Debentures. Record and beneficial ownership of the
Debentures shall remain in the name of the Holders (unless and until transferred
pursuant to the terms thereof, with written notice thereof to the Transfer
Agent). Any transfer or purported transfer of the Debentures (1) not made
pursuant to the terms of the Debentures or (2) properly noticed to the Transfer
Agent shall be null and void ab initio and shall not be given effect thereto by
the Transfer Agent. The Transfer Agent shall not be required to acknowledge any
transfer of the Debentures unless accompanied by written confirmation thereof
from the Company and the Holders. ab initio and shall not be given effect
thereto by the Transfer Agent. The Transfer Agent shall not be required to
acknowledge any transfer of the Debentures unless accompanied by written
confirmation thereof from the Company and the Holders.
<PAGE>
3. Paying Agent. The Transfer Agent shall act as paying agent for the
Debentures. Accordingly, all payments of interest and principal amounts required
of the Company related to the Debentures shall be made to the Transfer Agent for
the account and benefit of the holders of such Debentures as registered on the
books of the Transfer Agent (each, a "Registered Holder"). Upon the receipt of
any such payment of interest or principal amounts, in cash, the Transfer Agent
shall promptly wire transfer such sum to the account of the Registered Holders
as follows:
Infinity Seacrest
CitiBank New York CitiBank New York
ABA 021 000 089 ABA 021 000 089
Credit: Bear Stearns Credit: Bear Stearns
Account No. 0925-3186 Account No. 0925-3186
Credit: Infinity Investors Ltd. Credit: Seacrest Capital Ltd.
Acct. No. 102-05092 Acct. No. 483-91295
All Other Registered Holders
Such account as is reflected on the books of the Transfer Agent
4. Accounting Agent. The Transfer Agent shall act as the accounting agent
of the Company and the Registered Holders and shall establish and maintain a
book entry system of accounting for the Debentures (the "Accounting Ledger")
crediting (reducing) the outstanding balance of the Debentures by all (i)
payments in cash made by the Company to the Transfer Agent as paying agent as
required pursuant to Section 3 above, and (ii) by the appropriate amount upon
delivery of Converted Stock to the applicable Registered Holder following
receipt of a Notice of Conversion (as each such term is defined in Section 5
below). At such time as the balance of the Debentures as reflected on the
Accounting Ledger is zero following the procedures described in this Agreement,
the Transfer Agent shall return such Debentures to the Company marked "Paid in
Full."
5. Issuance of Converted Shares.
(a) Consistent with Section 4(b) of each Debenture, in order to convert all
or a portion of a Debenture into shares of Class A Common Stock of the Company
(the "Converted Stock"), a Registered Holder shall deliver written notice (each,
a "Notice of Conversion") to the Transfer Agent of the portion of the Debenture
it elects to so convert and a calculation of the number of shares of Converted
Stock to be issued upon such conversion. Upon receipt by the Transfer Agent of
any such Notice of Conversion (including receipt via facsimile) from any
Registered Holder, the Transfer Agent shall immediately deliver a copy thereof
to the Company, via facsimile, requesting the Company to confirm the number of
shares of Converted Stock to be issued to such Registered Holder in connection
therewith. The Company shall, upon receipt thereof, promptly confirm or dispute
the number of shares of Converted Stock to be issued to the Registered Holder,
providing written notice thereof via facsimile to the Transfer Agent and the
Registered Holder (the "Company Notice"). In the event the Company confirms the
number of shares of Converted Stock to be so issued, it shall, as part of the
Company Notice, direct the Transfer Agent to issue such shares of Converted
Stock to the Registered Holder. In the event the Company disputes the number of
shares of Converted Stock to be so issued, the Company and the Registered Holder
shall immediately, in good faith, seek to resolve such dispute. In the event the
Company and the Registered Holder cannot resolve such dispute, each party
reserves all rights and remedies against the other associated with such Notice
of Conversion.
(b) The Transfer Agent shall not be required to issue shares of Converted
Stock unless and until receipt (including via facsimile) of written notice from
either (i) the Company, confirming the number of shares of Converted Stock to be
issued or (ii) the Registered Holder and the Company, setting forth the number
of shares of Converted Stock to be issued.
(c) Reference is hereby made to that certain Registration Rights Agreement
appended to the Subscription Agreement as Exhibit D. At such time as a
Registration Statement as contemplated therein has been declared effective by
the Securities and Exchange Commission covering the resale of the Converted
Stock, the Company shall cause its legal counsel to deliver to the Transfer
Agent an opinion certifying that the certificates representing the Converted
Stock may be issued in the name of the Registered Holder, without restrictive
legend, which opinion shall remain effective so long as such Registration
Statement remains in full force and effect. In the event that, at any time, the
Registration Statement ceases to be effective, the Company or its legal counsel
shall immediately deliver written notice thereof to the Transfer Agent and the
Registered Holders stating that the opinion of the Company's legal counsel may
no longer be relied upon by the Transfer Agent (unless and until any new
Registration Statement is so declared effective with an accompanying opinion to
that effect of the Company's legal counsel). Upon the receipt of any Notice of
Conversion while a Registration Statement is effective, the share certificates
representing the Converted Stock described above shall be issued without
restrictive legend.Exhibit D. At such time as a Registration Statement as
contemplated therein has been declared effective by the Securities and Exchange
Commission covering the resale of the Converted Stock, the Company shall cause
its legal counsel to deliver to the Transfer Agent an opinion certifying that
the certificates representing the Converted Stock may be issued in the name of
the Registered Holder, without restrictive legend, which opinion shall remain
effective so long as such Registration Statement remains in full force and
effect. In the event that, at any time, the Registration Statement ceases to be
effective, the Company or its legal counsel shall immediately deliver written
notice thereof to the Transfer Agent and the Registered Holders stating that the
opinion of the Company's legal counsel may no longer be relied upon by the
<PAGE>
Transfer Agent (unless and until any new Registration Statement is so declared
effective with an accompanying opinion to that effect of the Company's legal
counsel). Upon the receipt of any Notice of Conversion while a Registration
Statement is effective, the share certificates representing the Converted Stock
described above shall be issued without restrictive legend.
6. Termination. This Agreement shall terminate promptly upon the earlier to
occur of (1) written demand by all of the Registered Holders of their respective
Debentures or (2) no unpaid balance remains with respect to any of the
Debentures. Notwithstanding the foregoing, the Transfer Agent may terminate its
obligations under this Agreement at such time as the Transfer Agent no longer
serves as the transfer agent for the Company's Class A Common Stock, by delivery
of written notice thereof to the Registered Holders and the Company. Upon
delivery of such notice, the Transfer Agent shall deliver the original
Debentures to Infinity, on behalf of all Registered Holders, together with a
copy of the Accounting Ledger (with a corresponding copy delivered to the
Company).
7. Fees. The Company hereby agrees to pay the Transfer Agent for all
services rendered hereunder.
8. Notices. Any notice or demand to be given or that may be given under
this Agreement shall be in writing and shall be (a) delivered by hand, or (b)
delivered through or by expedited mail or package service, or (c) transmitted by
telecopy, in each case with personal delivery acknowledged, addressed to the
parties as follows:
As to the Company: PHC, INC.
200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: 508/56-2777
Fax: 508/536-2677
Attn: Bruce A. Shear
As to either Holder: Infinity Investors Ltd.
c/o HW Finance, L.L.C.
4000 Thanksgiving Tower
1601 Elm Street
Dallas, TX 75201
Telephone: (214) 720-1689
Fax: (214) 720-1662
Attn: Barrett Wissman
As to any other As set forth on the books of
Registered Holder: the Transfer Agent.
As to the Transfer
Agent American Stock Transfer & Trust Company
6201 15th Avenue, 3rd Floor
Brooklyn, New York 11219
Telephone: 718/921-8200
Fax: 718/236-4588
9. Noncontravention. The Company agrees that it will not at any time take
any action or undertake any activity that would in any way impede, restrict or
limit the right and ability of the Registered Holders to convert the Debentures
into shares of Converted Stock pursuant to the terms and provisions of this
Agreement.
10. Indemnification. The Company agrees to indemnify and hold harmless the
Transfer Agent, each officer, director, employee and agent of the Transfer
Agent, and each person, if any, who controls the Transfer Agent within the
meaning of the Securities Act of 1933, as amended (the "Act") or the Securities
<PAGE>
Exchange Act of 1934, as amended (the "Exchange Act") against any losses,
claims, damages, or liabilities, joint or several, to which it, they or any of
them, or such controlling person, may become subject, under the Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
performance by the Transfer Agent of its duties pursuant to the Agreement; and
will reimburse the Transfer Agent, and each officer, director, employee and
agent of the Transfer Agent, and each such controlling person for any legal or
other expenses reasonably incurred by it or any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any case if such loss,
claim, damage or liability arises out of or is based upon any action not taken
in good faith, or any action or omission that constitutes gross negligence or
willful misconduct.provided, however, that the Company will not be liable in any
case if such loss, claim, damage or liability arises out of or is based upon any
action not taken in good faith, or any action or omission that constitutes gross
negligence or willful misconduct.
Promptly after receipt by an indemnified party under this Section of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the Company under this Section, notify in
writing the Company of the commencement thereof, and failure so to notify the
Company will relieve the Company from any liability under this Section as to the
particular item for which indemnification is then being sought but not from any
other liability which it may have to any indemnified party (unless such failure
to so notify the Company does not prejudice in any material respect the rights
and defenses of the Company). In case any such action is brought against any
indemnified party, and it notifies the Company of the commencement thereof, the
Company will be entitled to assume the defense thereof, with counsel who shall
be to the reasonable satisfaction of such indemnified party. The Company shall
not be liable to any such indemnified party on account of any settlement of any
claim of action effected without the consent of the
Company.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of New York, without giving effect to
conflicts of law rules of such jurisdiction. Any action brought to enforce, or
otherwise arising out of, this Agreement shall be heard and determined in either
a federal or state court sitting in the State of Massachusetts.
12. Entire Agreement; Amendments. This Agreement, constitutes the full and
entire understanding of the parties with respect to the subject matter hereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged,
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
13. Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile signature.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
date first above written.
PHC, INC.
By:
Title:
INFINITY INVESTORS LTD.
By:
Title:
SEACREST CAPITAL LIMITED
By:
Title:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
Title: __
45612.4H
<PAGE>
SCHEDULE 1
Principal Amount Purchase Price
of Debentures of Debentures
Seacrest Capital Limited $1,250,000 $1,000,000
Infinity Investors Ltd. 1,875,000 1,500,000
Totals $3,125,000 $2,500,000
45612.4H
