U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1996.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
TO ___________
Commission file number 0-23524
PHC, INC.
(Exact name of small business issuer as specified in its
charter)
Massachusetts 04-2601571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Lake Street, Suite 102, Peabody MA 01960
Address of principal executive offices) (Zip Code)
508-536-2777
(Issuer's telephone number)
_______________________________________________________________________________
(Former Name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No____
PHC, Inc. became subject to the Exchange Act on March 3, 1994.
Applicable only to corporate issuers
Number of shares outstanding of each class of common equity, as of January 31,
1997:
Class A Common Stock 2,578,052
Class B Common Stock 790,628
Class C Common Stock 199,816
Transitional Small Business Disclosure Format
(Check one):
Yes______ No X
<PAGE>
PHC, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1996 and
June 30, 1996.
Condensed Consolidated Statements of Operations - Three months
ended December 31, 1996 and December 31, 1995; Six months ended
December 31, 1996 and December 31, 1995.
Condensed Consolidated Statements of Cash Flows - Six months ended
December 31, 1996 and December 31, 1995.
Notes to Condensed Consolidated Financial Statements - December 31,
1996.
Item 2. Management's Discussion and Analysis of Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other
Item 6. Exhibits
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION PHC INC. AND SUBSIDIARIES
Item 1 Financial Statements CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
Dec. 31 June 30
1996 1996
ASSETS (Unaudited)
Current assets:
Cash.............................................. $ 290,253 $293,515
Accounts receivable, net of allowance for bad
debts of 1,517,586 at Dec. 31, 1996 and
1,492,983 at June 30, 1996........................... 10,529,186 8,866,065
Prepaid expenses.................................. 698,279 259,893
Other receivables and advances.................... 2,806,155 66,513
Deferred Income Tax Asset......................... 515,300 515,300
Total current assets............................ 14,839,173 10,001,286
Accounts Receivable, Non Current..................... 740,000 740,000
Loan Receivable...................................... 112,805 113,805
Property and equipment, net.......................... 7,926,515 7,884,063
Deferred incoming taxes.............................. 154,700 154,700
Deferred financing costs, net of amortization....... 837,931 702,948
Goodwill, net of accumulated amortization............ 905,872 709,573
Other assets......................................... 639,081 454,160
Net assets of dicontinued operation.................. 1,394 56,682
Total........................................... 26,157,471 20,817,217
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable................................... 3,996,476 3,127,052
Notes payable--related parties..................... 51,600 56,600
Current maturities of long term debt............... 1,104,875 403,894
Current portion of obligations under capital
leases............................................... 113,374 88,052
Accrued and witheld taxes.......................... 49,048 -0-
Accrued payroll, payroll taxes and benefits........ 555,790 715,515
Accrued expenses and other liabilities............. 472,446 738,784
Deferred revenue................................... -- --
Total Current liabilities.................... 6,343,609 5,129,897
Long-term debt....................................... 8,427,592 7,754,262
Obligations under capital lease...................... 1,593,148 1,468,475
Notes payable related parties........................ 31,596 47,394
7% Convertible Debentures (3,125,000 less
discount 546,875).................................... 2,578,125 --
Total noncurrent liabilities....................... 12,630,461 9,270,131
Total liabilities.................................. 18,974,070 14,400,028
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000
shares authorized, none issued..................... --
Class A common stock, $.01 value; 10,000,000
shares authorized, 2,493,552 and 2,293,568 issued
December and June 1996.............................. 24,936 22,936
Class B common stock, $.01 par value; 2,000,000
shares authorized,790,628 and 812,127 shares issued
December and June 1996 convertible into one
share of Class A common stock....................... 7,906 8,122
Class C common stock, $.01 par value; 200,000
shares authorized same as above and 199,816
shares issued December and June, 1996.............. 1,998 1,998
Additional paid-in capital........................ 8,764,408 8,078,383
Notes receivable related to purchase of 31,000
shares of Class A common stock...................... (63,266) (63,928)
Accumulated Deficit............................... (1,552,581) (1,630,322)
Total Stockholders' Equity........................ 7,183,401 6,417,189
Total.............................................. 26,157,471 $20,817,217
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
Revenues:
Patient Care, net .......... $6,472,204 $4,875,755 12,257,060 $9,368,635
Management Fees............. 270,731 64,688 403,935 101,245
Total revenue............ 6,742,935 4,940,443 12,660,995 9,469,880
Operating expenses
Patient care expenses........ 3,368,222 3,015,538 6,425,116 5,616,081
Administrative expenses...... 3,022,738 1,971,316 5,492,182 3,622,866
Contract expenses............ 70,005 30,365 139,898 62,002
Total operating expenses. 6,460,965 5,017,219 12,057,196 9,300,949
Income (loss) from operations.. 281,970 (76,776) 603,799 168,931
Interest income.............. 30,681 3,799 33,331 6,562
Startup Cost Nursing Facility. -- (128,313) -- (128,313)
Other income.................. 134,475 45,716 215,939 95,462
Interest expense.............. (464,321) (221,726) (759,665) (369,724)
Gain (loss) from operations
held for sale............... 37,202 18,650 36,478 17,683
Total other income (expense)... (261,963) (281,874) (473,917) (378,330)
Income (loss) before Provision
for Taxes....................... 20,007 (358,650) 129,882 (209,399)
Provision for Income Taxes....... 8,008 (54,378) 52,141 --
NET INCOME (LOSS)................ $11,999 $(304,272) $ 77,741 $ (209,399)
Net Income (Loss) per share...... --- (.13) .03 (.09)
Weighted average number
of shares outstanding.......... 3,183,908 2,433,588 3,175,775 2,419,246
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended
December 31
1996 1995
Cash flows from operating activities:
Net income ..................................... $ 77,741 $(209,399)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and Amortization.................... 292,385 216,668
Increase in accounts receivable.................. (2,374,540 (1,564,093)
Increase in prepaid expenses and other current
assets............................................ (438,386) (78,576)
Decrease in other assets......................... 133,804 40,102
Decrease in net assets of operations held for
sale.............................................. 55,288 107,371
Increase in accounts payable..................... 524,622 740,269
Increase in accrued and withheld taxes.......... 16,736 16,224
Increase in accrued expenses and other
liabilities....................................... (323,349) 134,130
Net cash used in operating activities............. (1,957,958) (597,304)
Cash flows from investing activities:
Acquisition of property and equipment............ (293,866) (1,125,862)
Costs related to business acquisition........... (2,718,201) (575,000)
Net cash used in investing activities............. (3,012,067) (1,700,862)
Cash flows from financing activities:
Issuance of Common Stock......................... 688,471 --
Net debt activity................................ 1,777,908 1,771,473
Convertible debt................................. 2,578,125 --
Net cash provided by financing activities........ 5,044,504 1,771,473
NET INCREASE (DECREASE) IN CASH................... (3,262) (526,693)
Beginning cash balance............................ 293,515 586,738
ENDING CASH BALANCE............................... 290,253 $60,045
See Notes to Consolidated Financial Statements
<PAGE>
PHC, Inc.
PHC, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 1996
Note A - The Company
PHC, Inc. ("PHC") operates substance abuse treatment centers in several
locations in the United States, a psychiatric hospital in Michigan,
outpatient psychiatric centers in Nevada, Kansas and Michigan and a
long-term care facility in Massachusetts. PHC, Inc. also manages a
psychiatric practice in New York through its newest acquisition. The
consolidated financial statements include PHC and its subsidiaries, all of
which are 100% owned (collectively the "Company"):
PHC's subsidiaries, PHC of Utah, Inc., ("PHU"), PHC of Virginia, Inc.
("PHV"), and PHC of Rhode Island , Inc. ("PHRI") provide treatment of addictive
disorders and chemical dependency. Quality Care Centers of Massachusetts, Inc.
("Quality Care") operates a long-term care facility known as the Franvale
Nursing and Rehabilitation Center. PHC of Michigan, Inc. ("PHM"), operates
Harbor Oaks Hospital. PHM provides inpatient psychiatric care to children,
adolescents and adults and operates a partial hospitalization program that
includes outpatient treatment services. PHC of Nevada, Inc. ("PHN"), operates
Harmony Healthcare which was purchased on November 1, 1995. PHN provides
outpatient psychiatric care to children, adolescents and adults. PHC of Kansas,
Inc. ("PHK"), operates Total Concept EAP which was purchased on March 15, 1996.
PHK operates Employee Assistance Programs and provides outpatient behavioral
health care to children, adolescents and adults. North Point-Pioneer, Inc.
("NPP"), operates six outpatient behavioral health centers under the name of
Pioneer Counseling Centers. Four of the centers were purchased on August 31,
1996 for $110,000 and 15,000 shares of PHC, Inc. Class A Common Stock. The other
two centers were purchased on September 6, 1996 for $150,000. STL, Inc. ("STL")
operated day care centers prior to July, 1993. Since that time, PHC has been
systematically phasing out its day care center operations and the operating
results of STL and its net assets have been classified as "operations held for
sale" in the Condensed Consolidated Financial Statements. On November 1, 1996,
BSC-NY, Inc. ("BSC"), merged with Behavioral Stress Centers, Inc., a provider of
management and administrative services to psychotherapy and psychological
practices in the greater New York City Metropolitan Area. In connection with the
merger, the Company issued 150,000 shares of PHC, Inc. Class A Common Stock to
the former owners of Behavioral Stress Centers, Inc. At the closing Perlow
Physicians, P.C. acquired certain assets of Clinical Associates for $1,500,000
and notes for $750,000 issued to the former owners of Behavioral Stress Centers,
Inc. BSC-NY, Inc. is the provider of management, administrative and billing
services to Perlow Physicians, P.C.
<PAGE>
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB and
Item 310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the six months ended December 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1997. The
accompanying financial statements should be read in conjunction with the June
30, 1996 consolidated financial statements and footnotes thereto included in
the Company's 10-KSB filed on October 4, 1996.
Note C - Subsequent Events
On January 17, 1997, with an effective date of January 1, 1997, PHC,
Inc. entered into a Stock Exchange Agreement with Psychiatric & Counseling
Associates of Roanoke, Inc. a Virginia corporation organized by Drs. M. Patel
and H. Patel consisting of their private practices of psychiatry in the
Roanoke, Virginia area.
The Stock Exchange Agreement provided that PHC, Inc. in exchange for 64,500
shares of restricted Class A common stock, conveyed to Drs. M. Patel and H.
Patel, received 80% of the outstanding shares of Psychiatric & Counseling
Associates of Roanoke, Inc. The remaining 20% were owned by Dr. M. Patel (10%)
and Dr. H. Patel (10%).
Concurrent with the Stock Exchange Agreement Dr. H. Patel and Dr. M.
Patel each executed Employment Agreements with Psychiatric & Counseling
Associates of Roanoke, Inc. to provide professional services to the latter.
Each physician received payment in the amount of $25,000.00 in exchange for
the restrictive covenants contained within the Employment Agreements.
Further, concurrent with the execution of the Stock Exchange Agreement
and Employment Agreements, a Plan and Agreement of Merger was executed
wherein Psychiatric & Counseling Associates of Roanoke, Inc. was merged into
Pioneer Counseling of Virginia, Inc., a Massachusetts corporation. Pioneer
Counseling of Virginia, Inc., prior to the merger was a wholly-owned
subsidiary of PHC, Inc. Subsequent to the merger Pioneer Counseling of
Virginia, Inc. will be owned 80% by PHC, Inc., 10% by Dr. H. Patel and 10% by
Dr. M. Patel.
On January 17, 1997 Pioneer Counseling of Virginia, Inc. entered into a
Purchase and Sale Agreement with Dillon and Dillon Associates, an unrelated
General Partnership, to purchase real estate with buildings and improvements
for $600,000. When renovations are complete, this property will house the
outpatient clinic operations of Pioneer Counseling of Virginia, Inc.
On January 13, 1997 PHC of Michigan, Inc. executed a $400,000.00 Secured
Bridge Note and a $2,000,000.00 mortgage on the Real Estate of PHC of Michigan,
Inc. in favor of HCFP FUNDING, INC.
On February 3, 1997, PHC of Michiga, Inc. entered into a Loan and Security.
Agreement and pursuant to that executed a $1,500,000.00 revolvong credit note
with HCFP FUNDING, INC. The obligations under this Loan and Security Agreement
are secured by all the assets of the corporation.
On February 3, 1997 PHC of Utan, Inc. executed an amendment to the Loan
and Security Agreement which cross collaterized and cross defaulted the
obligations of PHC of Utah, Inc. and PHC of Michigan, Inc.
On February 3, 1997, PHC, Inc. executed an Unconditional Guarantee of
payment and performance guartanteeing the obligations of PHC of Michiga, Inc. to
HCFP FUNDING, INC.
<PAGE>
Item 2. Management's Discussion and Analysis of Plan of Operation
PHC, INC. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net patient care revenue increased 32.7% to $6,472,204 for the three
months ended December 31, 1996 from $4,875,755 for the three months ended
December 31, 1995. This increase in revenue is due primarily to the acquisition
of Pioneer Counseling Centers in September 1996, Behavioral Stress Centers in
November 1996 and an increased census at the long term care facility as a result
of an increase in available beds.
Net patient care revenue for the psychiatric and substance abuse facilities
increased to $4,833,122 for the quarter ended September 30, 1996 from $3,626,579
for the same period in 1995. This increse in revenue is due primarily to the
newly acquired psychiatric treatment facilities in Nevada, Kansas and Michigan.
This does not include the management fees $140,060 as a result of the New York
acquisition. Net patient care revenue for the long term care facility increased
to $1,639,082 for the three months ended December 31, 1996 from $1,249,176 for
the same period in 1995 due to an increase in net revenue per patient day
and the number of occupied beds.
The net loss for the quarter was $304,272 as compared to a loss of
$19,411 for the quarter ended December 31, 1994 primarily due to start-up
costs related to the new long term care beds opened during this quarter. In
addition to routine start-up costs, licensing of long term care beds in
Massachusetts requires full staffing for all beds to be licensed which
resulted in related start-up costs of $128,313.
Liquidity and Capital Resources
A significant factor in the liquidity and cash flow of the Company is the
timely collection of its accounts receivable. Accounts receivable increased
during the quarter ended December 31, 1996 by 4.1%, approximately $412,500,
resulting in cash used in operations during the quarter of approximately
$375,100. The Company continues to closely monitor its accounts receivable
balances and is working to reduce amounts due consistent with growth in
revenues.
The Company believes that it has the necessary liquidity and capital
resources and contingent funding commitments to sustain existing operations for
the foreseeable future. The Company also intends to expand its operations
through the acquisition or establishment of additional treatment facilities. The
Company's expansion plans will be dependent upon obtaining adequate financing as
such opportunities arise.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In connection with the trademark challenge by Pioneer Health Care, Inc.
(described in the Company's 10- KSB for the years ended June 30, 1994, June 30,
1995 and June 30, 1996) the Company filed an appeal on July 10, 1995 with the
United States First Circuit Court of Appeals from an unfavorable judgment of the
Federal District Court. The Company does not believe that an adverse decision
would have a material adverse effect on the company.
PHC, Inc.("PHC") was named as a defendant in a complaint filed in the
Supreme Court of the State of New York, County of New York entitled Bentley
Associates, L.P. v. PHC, Inc., Behavioral Stress Center, Inc., Clinical
Diagnostics, Inc., Professional Health Associates, Inc., Yakov Burnstein and
Irwin J. Mansdorf (Index No. 605870/96). The complaint alleges claims for breach
of contract, specific performance and quantum meruit in connection with the
merger and acquisition of PHC with Behavioral Stress Center, Inc. ("BSC"). PHC
has referred the defense of the action to BSC, which has agreed to defend and
indemnify PHC for all claims in the action. The complaint seeks compensatory
damages for alleged unpaid advisory fees of approximately $1.3 million and
equitable relief. Plaintiff filed the complaint pursuant to an Order to Show
Cause on November 25, 1996 seeking to enjoin defendants from consummating the
sale or otherwise encumbering the consideration to be paid pursuant to the
transaction. The Court denied plaintiff's request for a preliminary injunction
in a Memorandum Decision dated December 24, 1996. PHC subsequently moved to
dismiss the complaint on January 15, 1997 on the grounds that it is not a party
to nor is it responsible for any fees allegedly owed under the contract at issue
in the case. PHC's motion is currently pending before the Court.
Item 3. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on December 31, 1996.
In addition to the election of directors (with regards to which (I) proxies were
solicited pursuant to Regulation 14A under the Securities and Exchange Act of
1934, as amended, (II) there was no solicitation in opposition to the
management's nominees as listed on the proxy statement, and (iii) all of such
nominees were elected), the stockholders ratified the selection by the Board of
Directors of Richard A. Eisner & Company, LLP as the Company's independent
auditors for the fiscal year ending June 30, 1997. The stockholders also voted
to amend the Company's Restated Articles of Organization to increase the number
of authorized shares of Class A Common Stock from 10,000,000 to
20,000,000.
Item 5. Other Information
On January 17, 1997, with an effective date of January 1, 1997, PHC, Inc.
entered into a Stock Exchange Agreement with Psychiatric & Counseling Associates
of Roanoke, Inc. a Virginia corporation organized by Drs. M. Patel and H. Patel
consisting of their private practices of psychiatry in the Roanoke, Virginia
area.
The Stock Exchange Agreement provided that PHC, Inc. in exchange for 64,500
shares of restricted Class A common stock, conveyed to Drs. M. Patel and H.
Patel, received 80% of the outstanding shares of Psychiatric & Counseling
Associates of Roanoke, Inc. The remaining 20% were owned by Dr. M. Patel (10%)
and Dr. H. Patel (10%).
Concurrent with the Stock Exchange Agreement Dr. H. Patel and Dr. M. Patel
each executed Employment Agreements with Psychiatric & Counseling Associates of
Roanoke, Inc. to provide professional services to the latter. Each physician
received payment in the amount of $25,000.00 in exchange for the restrictive
covenants contained within the Employment Agreements.
Further, concurrent with the execution of the Stock Exchange Agreement and
Employment Agreements, a Plan and Agreement of Merger was executed wherein
Psychiatric & Counseling Associates of Roanoke, Inc. was merged into Pioneer
Counseling of Virginia, Inc., a Massachusetts corporation. Pioneer Counseling of
Virginia, Inc., prior to the merger was a wholly-owned subsidiary of PHC, Inc.
Subsequent to the merger Pioneer Counseling of Virginia, Inc. will be owned 80%
by PHC, Inc., 10% by Dr. H. Patel and 10% by Dr. M. Patel.
On January 17, 1997 Pioneer Counseling of Virginia, Inc. entered into a
Purchase and Sale Agreement with Dillon and Dillon Associates, an unrelated
general partnership, to purchase real estate with buildings and improvements for
$600,000. When renovations are complete, this property will house the outpatient
clinic operations of Pioneer Counseling of Virginia, Inc.
On January 13, 1997, PHC of Michigan, Inc. executed a $400,000.00 Secured
Bridge Note and a $2,000,000.00 mortgage on the Real Estate of PHC of Michigan,
Inc. in favor of HCFP FUNDING, INC.
On February 3, 1997, PHC of Michigan, Inc. entered into a Loan and Security
Agreement and pursuant to that executed a $1,500,000 Revolving Credit Note with
HCFP FUNDING, INC. The obligations under this Loan and Security Agreement are
secured by all the assets of the corporation.
On February 3, 1997, PHC of Utah, Inc. executed an amendment to the Loan
and Security Agreement which cross collateralized and cross defaulted the
obligations of PHC of Utah, Inc. and PHC of Michigan, Inc.
On February 3, 1997, PHC, Inc. executed an Unconditional Guarantee of
Payment and Performance guaranteeing the obligations of PHC of Michigan Inc. to
HCFP FUNDING, INC.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.15 Form of Warrant Agreement issued to Alpine Capital Partners,
Inc. to purchase 25,000 Class A Common shares dated October
7, 1996.
4.16 Stock Exchange Agreement by and between PHC, Inc. and
Psychiatric & Counseling Associates of Roanoke, Inc.
10.103 Secured Bridge Note in the principal amount of $400,000 by
and between PHC of Michigan, Inc. and HealthCare Financial
Partners, Inc. dated January 13, 1997.
10.104 Guaranty by PHC, Inc. for Secured Bridge Note in principal
amount of $400,000 by and between PHC of Michigan, Inc. and
HealthCare Financial Partners, Inc. dated January 17, 1997.
10.105 First Amendment to Lease Agreement and Option Agreement by
and between NMI Realty, Inc. and PHC of Rhode Island, Inc.
dated December 20, 1996.
10.106 Mortgage by and between PHC of Michigan, Inc. and HCFP
Funding , Inc. date dated January 13, 1997 in the amount of
$2,000,000.
10.107 A Employment Agreement for Dr. Himanshu Patel; Employment
Agreement for Dr. Mukesh Patel; and Fringe Benefit Exhibit
for both of the Patels' Employment Agreements
10.108 Plan Plan of Merger by and between Pioneer Counseling of
Virginia, Inc. and Psychiatric & Counseling Associates of
Roanoke, Inc.
10.109 Sales Agreement by and between Dillon & Dillon
Associates and Pioneer Counseling of Virginia Inc. for
building and land located at 400 East Burwell St., Salem
Virginia in the amount of $600,000.
10.110 Loan and Security Agreement by and between PHC of Michigan,
Inc. and HCFP Funding, Inc. in the amount of $1,500,000.
10.111 Revolving Credit Agreement by and between HCFP and PHC
of Michigan, Inc. in the amount of $1,500,000.
10.112 Unconditional Guaranty of Payment and Performance by
and between PHC, Inc. in favor of HCFP.
10.113 Amendment number 1 to Loan and Security Agreement dated
May 21, 1996 by and between PHC of Utah, Inc. and HCFP
Funding providing collateral for the PHC of Michigan Inc.
Loan and Security Agreement
(b) Reports on Form 8-K
On November 5, 1996, the Company filed a Current Report on Form 8-K
regarding the issuance of Convertible Debentures. This was reported under Item
5.
On December 20, 1996, the Company filed a Current Report on Form 8-K
regarding the Company's inability to provide audited financial statements of the
acquired companies previously conducting business as Behavioral Stress Centers,
Inc., Clinical Associates and Clinical Diagnostics. This was reported under Item
7.
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHC, Inc.
Registrant
Date: January ____, 1997 /s/ Bruce A. Shear
Bruce A. Shear
President
Chief Executive Officer
Date: January ____, 1997 /s/ Paula C. Wurts
Paula C. Wurts
Controller
Assistant Treasurer
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHC, Inc.
Registrant
Date: January ____, 1997
Bruce A. Shear
President
Chief Executive Officer
Date: January ____, 1997
Paula C. Wurts
Controller
Assistant Treasurer
<PAGE>
List of Exhibits
4.15 Form of Warrant Agreement issued to Alpine Capital
Partners, Inc. to purchase 25,000 Class A Common
shares dated October 7, 1996.
4.16 Stock Exchange Agreement by and between PHC, Inc.
and Psychiatric & Counseling Associates of Roanoke,
Inc.
10.103 Secured Bridge Note in the principal amount of
$400,000 by and between PHC of Michigan, Inc. and
HealthCare Financial Partners, Inc. dated January
13, 1997.
10.104 Guaranty by PHC, Inc. for Secured Bridge Note in
principal amount of $400,000 by and between PHC of
Michigan, Inc. and HealthCare Financial Partners,
Inc. dated January 17, 1997.
10.105 First Amendment to Lease Agreement and Option
Agreement by and between NMI Realty, Inc. and PHC
of Rhode Island, Inc. dated December 20, 1996.
10.106 Mortgage by and between PHC of Michigan, Inc. and
HCFP Funding Inc. date dated January 13, 1997 in
the amount of $2,000,000.
10.107 Employment Agreement for Dr. Himanshu Patel; Employment
Agreement for Dr. Mukesh Patel; and Fringe Benefit Exhibit
for both of the Patels' Employment Agreement
10.108 Plan of Merger by and between Pioneer Counseling of Vrginia,
Inc. and Psychiatric & Counseling Associates of Roanoke, Inc.
10.109 Sales agreement by and between Dillon and Dillon Associates
and Pioneer Counsling of Virginia, Inc. for building and land
located at 400 East Burwell St, Salem, Virginia in the amount
of $600,000.
(b) There are no Current Reports filed on Form 8-K during the
second quarter of fiscal year 1997
<PAGE>
Exhibit 4.15
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS
OF THIS WARRANT.
Shares Issuable Upon Exercise: Up to 25,000 shares of the Class A
Common Stock, S.01 par value, of PHC, Inc.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT dated as of October 7, 1996 is entered into by
PHC, Inc. (the "Company') and Alpine Capital Partners, Inc. (the 'Holder").
WITNESSETH:
WHEREAS, the Holder has rendered certain financial advisory services to
the Company; and
WHEREAS, in partial consideration of the financial advisory services
rendered to the Company by the Holder, the Company has authorized the
issuance to the Holder of the warrant (the "Warrant") of the Company
represented by this Wan-ant Agreement, which Warrant entities the Holder to
purchase, upon the terms and conditions hereinafter set forth, shares of the
Company's Class A common stock, $O.01 par value per share (the "Class A
Common Stock").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
ARTICLE I
GRANT OF WARRANT
For value received, this Warrant Agreement entitles the Holder to
subscribe for and purchase up to 25,000 shares of Class A Common Stock, at a
price per share of $6.88 (the "Warrant Price"). As used herein, the term
"Shares" shall mean the Company's Class A Common Stock, or any stock into or
for which such Class A Common Stock shall have been or may hereafter be
converted or exchanged pursuant to the Articles of Organization of the
Company as from time to time amended as provided by law and in such articles
(hereinafter the "Charter"), and the term "Grant Date" shall mean October 7,
1996. The number of shares of Class A Common Stock purchasable pursuant to
the rights -ranted hereunder and the purchase price for such shares of Class
A Common Stock are subject to adjustment pursuant to the provisions contained
in this W t Agreement.
<PAGE>
ARTICLE 11
EXERCISE OF WARRANT: EXERCISE PRICE
Section 2.1 Term. Subject to the provisions of this Warrant Agreement,
the purchase right represented by this Warrant Agreement is exercisable, in
whole or in part, at any time and from time to time from and after the Grant
Date and prior to October 7, 2001 (the "Exercise Period").
Section 2.2 Method of Exercise. The purchase right represented by this
Warrant Agreement may be exercised by the holder hereof, in whole or in part
and from time to time, by the surrender of this warrant (with the Form of
Election attached hereto as Exhibit A duly executed ) at the principal office
of the Company and by the payment to the Company by certified or bank check
or by wire transfer, of an amount equal to the Warrant Price multiplied by
the number of shares then being purchased (the 'Exercise Price").
Section 2.3 Issuance of Shares of Common Stock. As soon as reasonably
practicable after the exercise of all or part of the purchase right
represented by this Warrant Agreement, the Company shall (provided that it
has received the Form of Election duly executed, accompanied by payment of
the Exercise Price pursuant to Section 2.2 hereof for each of the shares of
Class A Common Stock to be purchased) cause certificates for the number of
shares of Class A Common Stock to be issued in respect of this Warrant
Agreement to be delivered to or upon the order of the Holder, registered in
such name as may be designated by such holder; provided that if the Class A
Common Stock is to be registered in the name of any entity or person other
than the Holder, the Company may require evidence of compliance by the Holder
with all applicable securities laws.
ARTICLE III
RESERVATION AND AVAILABILITY OF COMMON STOCK:
ADJUSTMENTS, REGISTRATION
Section 3.1 Reservation of Common Stock. The Company covenants and
agrees that it will cause to be kept available out of its authorized and
unissued Class A Common Stock, or its authorized and issued Class A Common
Stock held in its treasury, the number of shares of Class A Common Stock that
will be sufficient to permit the exercise in full of this Warrant Agreement.
Section 3.2 Common Stock to be Duly Authorized and Issued, Fully-Paid
and Non-assessable. The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of Class A Common
Stock delivered upon exercise of this Warrant Agreement shall, at the time of
delivery of the certificates for such shares, be duly and validly authorized
and issued and fully paid and non-assessable shares.
<PAGE>
Section 3.3 Common Stock Record Date. Each person or entity in whose
name any certificate for shares of Class A Common Stock is issued upon the
exercise of this Warrant Agreement shall for all purposes be deemed to have
become the holder of record of the shares of Class A Common Stock represented
thereby on, and such certificate shall be dated, if practicable, the date
upon which the Form of Election was duly executed and payment of the
aggregate Exercise Price was made pursuant to Section 2.2 hereof. Prior to
the exercise of this Warrant Agreement, the Holder shall not be entitled to
any rights of a stockholder of the Company with respect to the shares of
Class A Common Stock for which this Warrant Agreement shall be exercisable,
including, without limitation, the right to vote, to receive dividends or
other distributions or to exercise any preemptive rights and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 3.4 Adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable upon the exercise of the Warrant
Agreement and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
3.4 (a) Reclassification. In case of any reclassification, change or
conversion of the Company's Class A Common Stock (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), the Company, shall
execute a new Wan-ant Agreement (in form and substance reasonably
satisfactory to the Holder) providing that the Holder of this Wan-ant
Agreement shall have the right to exercise such new Warrant Agreement and
upon such exercise and payment of the then applicable Warrant Price to
receive, in lieu of each Share theretofore issuable upon exercise of this
Warrant Agreement, the kind and amount of shares of stock. other
securities, money and property receivable upon such reclassification or
change by a holder of one share of Class A Common Stock. Such new Warrant
Agreement shall provide for adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 3.4.
The provisions of this Section 3.4 (a) shall similarly apply to successive
reclassifications and changes.
3.4 (b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant Agreement remains outstanding and unexpired shall
subdivide or combine its Class A Common Stock, the Warrant Price and the
number of Shares issuable upon exercise
hereof shall be equitably adjusted.
3.4 (c) Stock Dividends. If the Company at any time while this
Warrant Agreement is outstanding and unexpired shall pay a dividend payable
in shares of Class A Common Stock (except any distribution specifically
provided for in the foregoing Sections 3.4 (a) and (b)), then the Warrant
Price shall be adjusted. from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that
price determined by Multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (a) the numerator of
which shall be the total number of shares of Class A Common Stock
outstanding immediately prior to such dividend or distribution, and (b) the
denominator 3 of which shall be the total number of shares of Class A
Common Stock outstanding immediately after such dividend or distribution
and the number of Shares subject to this Warrant Agreement shall be
appropriately adjusted.
3.5 Registration of Shares. The Company covenants and agrees that it
will use its best efforts to ensure that all shares of Class A Common Stock
deliverable upon exercise in full of the purchase right represented by this
Warrant Agreement are registered under the Securities Act of 1933, as
amended (the "Act") at the same time as the Class A Common Stock issuable
upon the conversion of the Company's 7% Convertible Debentures issued to
Infinity Investors, Ltd. and Seacrest Capital Limited on October 7, 1996
are registered under the Act.
<PAGE>
3.6 No Impairment. The Company will not, by amendment of its Charter
or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Company, but will at all times in -good faith assist in the carrying
out of all the provisions of this Warrant Agreement and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Holder of this Warrant Agreement against impairment.
3.7 Notices of Record Date. In the event of any @g by the Company of
a record of its shareholders for the purpose of determining shareholders
who are entitled to receive payment of any dividend or other distribution,
or for the purpose of determining shareholders who are entitled to vote in
connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance
of all or substantially all of the assets of the Company, or any proposed
liquidation, dissolution or winding up of the Company, the Company shall
mail to the holder of this Warrant Agreement, at least fifteen (15) days
prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend,
distribution or vote, and the amount and character of such dividend,
distribution or vote.
ARTICLE IV
HOLDER REPRESENTATIONS, WARRANTIES AND COVENANTS
The Holder represents and wan-ants to and covenants with the Company
as follows:
Section 4.1 Representations. It understands the risks of investing in
the Company and can afford a loss of its entire investment. It is acquiring
the Warrant or investment for its own account and not with the view to, or
for resale in connection with any distribution thereof. It understands that
the Warrant and the shares of Class A Common Stock issuable upon exercise
thereof have not been registered under the Act, or any state blue sky laws.
by reason of specified exemptions from the registration provisions of the Act
and such laws. It acknowledges that the Warrant and the shares of Common
Stock issuable upon exercise thereof must be held indefinitely unless they
are subsequently registered under the Act or an exemption from such
registration is available. It has been advised or is aware of the provisions
of Rule 144 promulgated under the Act, which permits the resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions and that such Rule may not be available for resale of the shares
issuable upon the exercise of the Warrant. It has had an opportunity to (i)
discuss the Company's business, management and financial affairs with its
management (ii) review the financial statements relating to the Company's
last two fiscal years and (iii) review the Company's facilities.
Section 4.2 Restrictions on Transferability. Neither the Warrant, nor
the shares of Class A Common Stock received upon exercise thereof, shall be
transferable, except upon the conditions specified in and in accordance with
the terms of this Article IV or until such time as an effective registration
statement covering the shares issuable upon the exercise of this Warrant has
been filed with the Securities and Exchange Commission (the "Commission").
Section 4.3 Restrictive Legend. Each certificate representing shares
of the Company's Class A Common Stock issuable upon exercise of the Warrant,
or any other securities issued in respect of the Class A Common Stock issued
upon exercise of the Warrant, upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend in substantially the following form (in
addition to any legend required under applicable state securities laws)
unless and until such shares have been registered under the Act.:
<PAGE>
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY
THE HOLDER NAMED HEREON FOR ITS OWN ACCOUNT FOR
INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING
TO BE MADE ANY PUBLIC DISTRIBUTION OF ALL OR ANY
PORTION THEREOF; AND SUCH SECURITIES MAY NOT BE
PLEDGED, SOLD OR IN ANY OTHER WAY TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS IN EFFECT AT THAT TIME, OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
Section 4.4 Restrictions on, and Notice of, Proposed Transfers. The
Holder agrees that prior to any proposed transfer of this Warrant or any of
the shares of Class A Common Stock issuable upon exercise of this Warrant
(collectively, the "Restricted Securities"), in the absence of an effective
registration statement filed with the Commission covering the shares of Class
A Common Stock ; Issuable upon exercise of the Warrant, the Holder shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed
transfer in sufficient detail, and shall be accompanied by a written opinion
of legal counsel who shall be reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Act or
under any applicable state or other
securities laws.
Section 4.5 Restrictions on Transferability after Registration. Upon
registration under the Act of the shares issuable upon the exercise of this
Warrant, the Holder covenants not to sell in excess of 5,000 shares of Class
A Common Stock in any thirty (30) day period without the written consent of
the Company.
ARTICLE V
MISCELLANEOUS
Section 5.1 Notices. Notices or demands relating to this Warrant
Agreement shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed as follows, or telecopied, or delivered by
nationally-recognized overnight or other courier:
If to the Holder: Alpine Capital Partners, Inc.
645 Fifth Avenue
New York, NY 10022
Attention: Evan J. Bines
Fax (212) 317-9620
If to the Company: PHC, Inc.
200 Lake Street
Peabody, MA 01960
Attention: Bruce A. Shear
Fax (508) 536-2677
copy to: Roslyn G. Daum, Esq.
Choate, Hall & Stewart
Exchange Place
Boston. MA 02109
Fax: (617) 248-4000
Section 5.2 Successors. All the covenants and provisions of this
Warrant Agreement by or for the benefit of the Company or the Holder shall
bind and inure to the benefit of their respective successors and assigns
hereunder; provided that this Warrant Agreement may be assigned by the Holder
only with the prior written consent of the Company, and without such consent
any attempted transfer shall be null and void.
Section 5.3 MASSACHUSETTS CONTRACT. THIS WARRANT AGREEMENT AND THE
WARRANT, AND ALL QUESTIONS RELATING TO THE INTERPRETATION, CONSTRUCTION AND
ENFORCEABILITY OF TIES WARRANT AGREEMENT AND THE WARRANT, SHALL BE GOVERNED
IN ALL RESPECTS BY THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
Section 5.4 Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Warrant Agreement may not be amended, modified
or supplemented, other than by a written instructions executed by the Company
and the Holder.
Section 5.5 Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the Company the Holder shall be enforceable to the fullest extent
permitted by law.
IN WITTINESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed and delivered, all as of the date and year
first above written.
PHC, INC.
By: ________________________
Name: Bruce A. Shear
Title: President
ALPINE CAPITAL PARTNERS, INC.
By: ________________________
Name: Evan J. Bines
Title: President
dsl-309261
<PAGE>
EXHIBIT A
Form of Election
To: PHC, Inc. 200 Lake Street Peabody, MA 01960
Attention: Bruce A. Shear
1. The undersigned hereby elects to purchase _____ shares of Class A
Common Stock PHC, Inc. pursuant to the terms of the attached Warrant
Agreement, and tenders herewith payment of the Exercise Price of such shares
in full.
2. Please issue a certificate or certificates representing the
shares deliverable upon the exercise set forth in paragraph 1 in the name of
the undersigned or, subject to compliance with the restrictions on transfer
set forth in Article IV of the Warrant Agreement, in such other name or names
as are specified below:
(Name)
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares until and unless
such shares are registered under the Securities Act of 1933.
Signature
Date
dsl/309261
<PAGE>
Exhibit 4.16
STOCK EXCHANGE AGREEMENT
This Agreement is made this __ day of ______________________, with an
effective date of _______________________________, by and between MUKESH PATEL,
MD, and HIMANSHU PATEL, MD, who constitute all of the Stockholders of
PSYCHIATRIC & COUNSELING ASSOCIATES OF ROANOKE, INC., (hereinafter referred to
individually as a "stockholder" and collectively as the "Stockholders"), and
PHC, Inc., a Massachusetts corporation, (hereinafter referred to as the
"Acquiring Corporation").
RECITALS
A. Psychiatric & Counseling Associates of Roanoke, Inc., (hereinafter
referred to as "Psychiatric Associates") is a corporation organized under the
laws of the Commonwealth of Virginia, and having its principal place of business
in Roanoke, Virginia.
B. Acquiring Corporation has authorized capitalization of _____________
shares of Class A voting common stock, par value ______________ Dollars ($ ) per
share, of which _______________________________ shares are issued and
outstanding and ______________________ shares Class B convertible common stock;
C. Stockholders are the owners, in the aggregate of 100% of the authorized,
issued and outstanding shares of common stock of Psychiatric Associates and have
agreed to accept Class A voting common stock of Acquiring Corporation in
exchange for certain of their shares of the common stock of Psychiatric
Associates so that the business of Psychiatric Associates can continue to be
operated by Acquiring Corporation as a subsidiary corporation on a profitable
basis and pursuant to principles of managed care.
In consideration of the premises and of the mutual covenants set forth
below, the parties agree as follows:
SECTION I
EFFECT OF AGREEMENT
In accordance with the terms and conditions set forth in this Agreement, it
is contemplated that Stockholders shall exchange a total of eighty (80) shares
of voting common stock of Psychiatric Associates which constitute, in the
aggregate, eighty percent (80%) of the authorized, issued and outstanding
capital stock of Psychiatric Associates for a total of sixty four thousand five
hundred (64,500) shares of Class A voting stock of Acquiring Corporation, which
shares shall not be registered under the Securities Act of 1933 and will
constitute restricted securities subject to the provisions of Rule 144 and other
applicable federal and state securities, rules and regulations; said shares to
have a deemed per share value for purposes of the exchanged contemplated herein
of the closing bid price for the stock on the effective date of this Agreement.
Each Stockholder is to receive the number of shares of such stock listed
opposite the Stockholder's name in Exhibit 2.3, attached hereto and made a part
hereof.
<PAGE>
SECTION II
DELIVERY OF SHARES
2.1. Prior to the closing date set forth below, Stockholders shall deposit
their certificates of common stock in Psychiatric Associates, properly endorsed,
representing the shares to be transferred by them, in escrow with W. William
Gust, Esquire of the Roanoke, Virginia law firm of Gentry Locke Rakes & Moore.
2.2. Prior to the closing date, Acquiring Corporation shall deposit, in
escrow with the same holder designated in paragraph 2.1 above, certificates of
common stock in Acquiring Corporation representing the shares of restricted
Class A voting stock to be transferred by it.
2.3. On the closing date, which shall be _____________________________,
(the "Closing Date"), if all the conditions precedent to closing as set forth in
this Agreement have been met, the eighty (80) shares of voting common stock of
the Stockholders in Psychiatric Associates shall be delivered to Acquiring
Corporation, and the 64,500 shares of common stock of Acquiring Corporation
shall be delivered to Stockholders, each Stockholder to receive delivery of
certificates representing the number of shares of such stock listed opposite the
Stockholder's name in Exhibit 2.3 attached hereto and made a part hereof.
2.4. In the event of termination of this Agreement as set forth in Section
VII hereof prior to the Closing Date, all stock certificates shall be returned
to the parties who deposited such certificates.
SECTION III
COVENANTS AND REPRESENTATIONS OF STOCKHOLDERS
Stockholders covenant, warrant and represent to Acquiring Corporation as
follows:
3.1 Psychiatric Associates is a corporation duly organized, validly
existing, and in good standing under the laws of the Commonwealth of Virginia,
has full power to own, lease, and operate its properties and assets and to carry
on its business as now being conducted, and has no subsidiaries nor any direct
or indirect interest, by way of stock ownership or otherwise, in any other
corporation, partnership, joint venture, association, or business enterprise.
3.2 The eighty (80) shares of voting common stock in Psychiatric Associates
are owned and held exclusively by the Stockholders, and there are no outstanding
options, warrants, rights, or commitments for the sale or issuance of any
additional common stock in Psychiatric Associates, or for the sale, pledge,
transfer or conveyance by Stockholders of any of their shares, other than as
contemplated in this Agreement. Except for the transactions contemplated by this
Agreement there are not any agreements or understandings among the Stockholders
with respect to the voting or transfer of shares on any matter.
3.3 Except for commitments and obligations incurred in the ordinary course
of business, consistent with past practice, Psychiatric Associates has no
liabilities, claims, or obligations which would have a material adverse effect
on the operations (whether accrued, absolute, contingent, or otherwise) of
Psychiatric Associates, other than such liabilities that have been disclosed
pursuant to this Agreement. Psychiatric Associates and the Stockholders
acknowledge and agree that except as otherwise specifically provided for in this
Agreement, that Acquiring Corporation is not assuming any debts or other
contractual obligations, in existence prior to, or as of, the effective date of
this Agreement, of either Psychiatric Associates or the Stockholders, including
but not limited to real property and/or equipment leases, and this transaction
is a conveyance of Stockholders shares free of any such obligations.
Stockholders further acknowledge and agree that should Acquiring Corporation be
required or compelled, by law or in the exercise of sound business practice, to
pay any obligation or liability of Psychiatric Associates and/or the
Stockholders, which are not being assumed by Acquiring Corporation under the
terms of this Agreement, then Stockholders grant to Acquiring Corporation a
right to set off all amounts paid by Acquiring Corporation, as described herein,
against any obligation due, or becoming due, from Acquiring Corporation to one,
or both, of the Stockholders, including, but not limited to, any amount due, or
to be due under the terms of Stockholder's employment agreements with Acquiring
Corporation or Psychiatric Associates or an affiliate. This right to set off as
grant, is absolute and unconditional, with Stockholders waiving any demand for
notice prior to the Acquiring Corporation making the set off.
3.4 No representations, warranties, or disclosures of information made by
the Stockholders in connection with this Agreement and the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits to state any material fact which is necessary in order to make the
disclosures not misleading.
3.5 All accounts receivable of Psychiatric Associates are current and
collectible.
3.6 Psychiatric Associates is not a party to any lease, except those lease
agreements set forth in Exhibit 3.6, attached hereto, (true and exact copies of
which agreements have heretofore been delivered to Acquiring Corporation), and
there are no defaults by Psychiatric Associates under any such agreements.
Psychiatric Associates and the Stockholders acknowledge and agree that except as
otherwise specifically provided for in this Agreement, that Acquiring
Corporation is not assuming any debts or other contractual obligations,
including but not limited to real property and/or equipment leases, of
Psychiatric Associates, that are in existence prior to, or as of, the effective
date of this Agreement, and this transaction is a conveyance of shares free of
any such obligations.
3.7 There is no litigation, arbitration, governmental claim, investigation,
or proceeding, or adverse action by any administrative or regulatory body
pending or threatened against Psychiatric Associates before any court,
arbitration tribunal, or governmental agency.
3.8 Stockholders have and will have good and marketable title to the shares
of capital stock to be transferred to Acquiring Corporation on the Closing Date,
with full right and authority to transfer and deliver those shares hereunder;
and on delivery of those shares, Acquiring Corporation will receive good and
marketable title to them, free and clear of all liens, encumbrances, and claims
whatsoever; and such shares are and will be validly issued, outstanding, fully
paid, and nonassessable.
3.9 The common voting stock of Acquiring Corporation to be received by
Stockholders on the Closing Date shall be held by Stockholders for investment
and not with a view to, or for sale in connection with, any distribution of such
stock. No Stockholder shall sell or otherwise dispose of such shares without
first offering them to Acquiring Corporation at their fair market value for a
period of two (2) years following the Closing Date.
3.10 No Stockholder shall sell or otherwise dispose of such shares of
Psychiatric Associates, owned by Stockholder after the Closing Date, without
first requiring Acquiring Corporation to purchase said shares in accord with the
provisions of Section 4.5.
3.11 Each of the Stockholders, individually, represents, warrants, and
covenants that he will enter into an employment agreement with Psychiatric
Associates, on the Closing Date, in substantially the same form as that which is
attached hereto as Exhibit 3.10, which shall require each of the Stockholders to
render medical services exclusively for the benefit of Psychiatric Associates,
or an affiliate thereof.
3.12 Stockholders will use their best efforts to satisfy all conditions
precedent to this Agreement.
3.13 Psychiatric Associates and Stockholders hereby indemnify and hold
Acquiring Corporation, its directors, officers, employees and agents harmless
from any and all liabilities and obligations or claims, including but not
limited to, any and all liabilities, obligations, claims, fines, penalties or
similar charges levied upon Psychiatric Associates and/or the Stockholders due
to the non-compliance of Psychiatric Associates and/or the Stockholders, with
any applicable federal, state and local laws, ordinances, codes, regulations and
requirements, against Psychiatric Associates and/or Stockholder, and from all
liabilities and obligations or claims arising out of the operation of
Psychiatric Associates prior to and through the effective date of this
Agreement, and from all liabilities and obligations or claims arising out of
Stockholders' practice of medicine, whether as individuals, partners, or
shareholders of a professional corporation prior to and through the effective
date of this Agreement.
3.14 Stockholders covenant, warrant and represent that there has been no
significant change in revenues generated on a monthly basis by the medical
practices of the Stockholders from the date of execution of the Letter of Intent
between the parties through, and inclusive of, the closing date. Further,
attached hereto, and incorporated herein, as Exhibit 3.14, is a schedule of
billings and collections of each of the Stockholders, individually, accurately
representing individual billings and collections from June 1, 1996 to the date
of closing.
<PAGE>
3.15 Psychiatric Associates and Stockholders covenant, warrant and
represent that except as provided and accounted for in this Agreement, or as set
forth in Schedule 3.15 attached hereto and made a part hereof, there are no
contingent liabilities or claims, of any kind whatsoever, owing from Acquiring
Corporation, or any parent, sibling or related corporation, or any officer,
director, agent, servant or employee of Acquiring Corporation, or any parent,
sibling or related corporation, to Psychiatric Associates or Stockholders,
jointly and/or individually. It is further covenanted, warranted and
represented, that, except as described in Schedule 3.15, any and all contingent
liabilities and claims that were in existence, or may have been existence,
whether known or unknown, at the time of execution of this Agreement, are hereby
released and discharged forever.
SECTION IV
COVENANTS AND REPRESENTATIONS OF ACQUIRING
CORPORATION
Acquiring Corporation covenants and represents as follows:
4.1 Acquiring Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Massachusetts and
has full power and authority to enter into this Agreement. The directors,
members, and officers of Acquiring Corporation have taken all action required,
whether by law, its Articles of Incorporation, its Bylaws, or otherwise, to
authorize the execution and delivery of this Agreement. The execution, delivery,
and performance of this Agreement constitutes a valid and binding agreement of
Acquiring Corporation enforceable in accordance with its terms.
4.2 Acquiring Corporation has and will have good and marketable title to
the shares of its Class A voting common stock that are to be delivered to
Stockholders on the Closing Date to the extent that such shares are already
issued, and it has the power and authority under its Articles of Incorporation
to issue so many more shares of stock as are required to equal the total of
64,500 such shares to be delivered hereunder.
4.3 Acquiring Corporation has full right and authority to transfer and
deliver the shares as provided in this Agreement; and upon such delivery,
Stockholders will receive good and marketable title to such shares, free and
clear of all liens, encumbrances, and claims whatsoever except with respect to
any transfer restrictions imposed under the applicable state and/or federal
securities rules and regulations; and such shares are and will be validly
issued, outstanding, fully paid, and nonassessable.
4.4 Acquiring Corporation, shall cause Psychiatric Associates to enter into
an employment agreement, in substantially the same form as that which is
attached hereto as Exhibit 3.10, with each of the Stockholders, on or
immediately after the Closing Date, which shall require each of the Stockholders
to render medical services exclusively to patients of Psychiatric Associates and
certain affiliates of Acquiring Corporation.
4.5 Acquiring Corporation, or Psychiatric Associates, upon receipt of a
written request from either Stockholder, shall be obligated to purchase from
such Stockholder all or any portion of his remaining common stock in Psychiatric
Associates which has not been transferred to Acquiring Corporation pursuant to
the terms of this Agreement, upon condition that no such purchase shall occur
earlier than one (1) year from the Closing Date; the purchase price for such
stock shall be the fair market value of the stock as determined by an
independent appraisal at the time the written request is made by the
Stockholder, unreduced by a discount for lack of marketability and minority
status.
4.6 Acquiring Corporation shall provide each Stockholder with the option to
purchase, at the fair market rate current at the time such option is granted an
additional Fifteen Thousand (15,000) shares of the Class A voting common stock
of Acquiring Corporation, which options shall be granted within ninety (90) days
of the Closing Date.
4.7 Acquiring Corporation acknowledges and agrees that Psychiatric
Associates shall be the exclusive acquiror of other psychiatric or psychological
counseling practices on behalf of Acquiring Corporation and Acquiring
Corporation shall cause all such practices located within a Two Hundred (200)
mile radius of the Psychiatric Associates principal place of business in Salem,
Virginia, which Acquiring Corporation has the opportunity to acquire, to be
acquired by, through, for, and on behalf of Psychiatric Associates.
4.8 Acquiring Corporation shall pay a finder's fee to each Stockholder as
described in Exhibit 4.8, attached hereto, whenever either Stockholder
identifies on behalf of Acquiring Corporation appropriate psychiatric or
psychological counseling medical practices which are subsequently acquired or
become affiliated by contract with Acquiring Corporation, Psychiatric Associates
or other affiliate of Acquiring Corporation regardless of where such psychiatric
or psychological counseling medical practice may be located.
It is further acknowledged and agreed by the parties that for any and all
amounts earned by Stockholders under the terms of this Paragraph 4.8, then
payment by the Acquiring Corporation shall be made according to the following
priority:
(a) Unrestricted Common Stock: If available to Acquiring Corporation, in
the form of unrestricted shares of Class A Common Stock of PHC, Inc., in the
amounts earned per the schedule in Exhibit 4.8.
(b) Restricted Common Stock and Cash: If Acquiring Corporation is unable to
issue its unrestricted Class A Common Stock, because none is immediately
available for transfer to Stockholders for payment of the amounts earned under
this Paragraph 4.8, and Acquiring Corporation will not be registering any
additional shares of its Class A Common Stock prior to the time that
Stockholders are required by law to make any income tax payment for the amounts
earned under this Paragraph 4.8, then Acquiring Corporation will make payment to
Stockholders by paying to the Stockholders:
(1) Fifty (50%) percent of the amount earned under this Paragraph 4.8 in
restricted Class A Common Stock of PHC, Inc., and,
(2) Cash in an amount equal to the fair market value, as determined by the
closing bid price on the day that the amounts are earned under this Paragraph
4.8, of fifty (50%) percent of the number of shares Stockholders earned under
this Paragraph 4.8.
4.9 Acquiring Corporation shall use its best efforts to satisfy all
conditions precedent to this Agreement.
SECTION V
CONDITIONS PRECEDENT TO CLOSING BY ACQUIRINGCORPORATION
Acquiring Corporation's duty to close under the terms of this Agreement is
subject to the following conditions precedent:
5.1 The representations of Stockholders, as set forth in this Agreement.
shall be true as of the Closing Date, and Stockholders shall have performed all
acts in accordance with their covenants as set forth in this Agreement.
5.2 As of the Closing Date, Stockholders shall have disclosed all facts and
transactions relating to the condition and future prospects of Psychiatric
Associates, and shall not have withheld information concerning such facts and
transactions.
5.3 Stockholders shall have deposited their stock of Psychiatric Associates
in escrow in accordance with Section II of this Agreement.
5.4 From the date of execution of this Agreement, Acquiring Corporation,
its directors, officers, agents, attorneys, and auditors, shall have had the
right of inspecting at reasonable times Psychiatric Associates's properties,
books, accounts, commitments, and records of every kind; and, to effect this
provision, Stockholders shall have cooperated fully with Acquiring Corporation
and its representatives, and shall have kept Acquiring Corporation fully
informed of the affairs of Psychiatric Associates.
5.5 All papers and proceedings hereunder must be acceptable to counsel for
Acquiring Corporation.
5.6 This Agreement shall have been duly executed and delivered on behalf of
Stockholders and shall constitute a legal, valid, and binding obligation,
enforceable in accordance with its terms.
SECTION VI
CONDITIONS PRECEDENT TO CLOSING BY STOCKHOLDERS
Stockholders' duty to close under the terms of this Agreement is subject to
the following conditions precedent:
6.1 The representations of Acquiring Corporation, as set forth in this
Agreement, must be true as of the Closing Date, and Acquiring Corporation shall
have performed all acts in accordance with its covenants as set forth in this
Agreement.
6.2 Acquiring Corporation shall have deposited 50,000 shares of its Class A
voting common stock in escrow, in accordance with Section II of this Agreement.
6.3 All papers and proceedings hereunder must be acceptable to counsel for
Stockholders.
6.4 This Agreement shall have been duly executed and delivered on behalf of
Acquiring Corporation and shall constitute a legal, valid, and binding
obligation, enforceable in accordance with its terms.
SECTION VII
TERMINATION OF AGREEMENT
If any duties or obligations of the parties hereto, contemplated by this
Agreement to occur to be performed before the Closing Date, shall have not taken
place before that date, or if the conditions precedent, contemplated by this
Agreement to be satisfied before the Closing Date, shall not have been satisfied
or waived by the proper party before that date, this Agreement shall be
terminated and of no further force or effect, and the parties shall be relieved
of all obligations under the terms of this Agreement. In the event of such
termination, the parties shall bear their own expenses incurred pursuant to this
Agreement, each of the parties shall return all documents, instruments, and
commercial paper transferred pursuant to the terms of this Agreement, unless
otherwise provided in this Agreement, to the owner of, or the party who
originally submitted. such documents, instruments, or commercial paper.
SECTION VIII
NOTICES
8.1 Any notification to be given pursuant to this Agreement shall be deemed
to have been duly given when such notification is deposited in the United States
mails or with a telegraph company, with all charges of postage or transmittal
prepaid, and properly addressed to:
Psychiatric & Counseling Associates of Roanoke, Inc.
_______________________________________________
_____________________________, Virginia, 24014
<PAGE>
With a copy to: W. William Gust, Esq.
Gentry Locke Rakes & Moore
P.O. Box 40013
Roanoke, VA 24038-0013
Bruce A. Shear
PHC, Inc.
200 Lake Street, Suite 102
Peabody, Massachusetts 01960
With a copy to: Philip Cwagenberg, Esq.
Ishbia & Gagleard, PC
251 Merrill, Second Floor
Birmingham, MI 48009
8.2 Liability for any taxes mentioned in this Agreement attributable to the
operations of Psychiatric Associates before the Closing Date, and subsequently
assessed against Acquiring Corporation pursuant to the transfer of Psychiatric
Associates's stock under the terms of this Agreement, shall be made known to
Stockholders so that they may contest such assessment. Such notice shall be
given by Acquiring Corporation so as afford Stockholders a reasonable amount of
time to prepare a defense, and Acquiring Corporation shall be bound by the
reasonable determinations and decisions of Stockholders and their counsel in the
course of contesting any such tax liability.
SECTION IX
SUCCESSORS AND ASSIGNS
This Agreement and all the terms hereof shall be binding on and inure to
the benefit of the parties hereto, and their respective legal representatives,
successors, or assigns, as the case may be, with the same force and effect as if
specifically mentioned in each instance where a party hereto is named.
SECTION X
INTERPRETATION OF AGREEMENT
10.1 This Agreement and the exhibits attached hereto constitute the entire
agreement between the parties concerning the transaction contemplated by this
Agreement.
10.2 The transaction contemplated hereunder is intended to qualify as a
tax-free exchange under Section 368 (a)(1)(B) of the Internal Revenue Code and
Acquiring Corporation agrees to take any and all reasonable action necessary to
ensure such tax treatment for the benefit of the Stockholder.
10.3 Issues of formation, interpretation, and performance of this Agreement
are to be resolved in accordance with the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
_____________________________________
Mukesh Patel, MD
_____________________________________
Himanshu Patel, MD
PHC, Inc.
By:__________________________________
Bruce A. Shear
Its: President
Exhibit 10.103
SECURED BRIDGE NOTE
$400,000.00
January 13, 1997
FOR VALUE RECEIVED, and intending to be legally bound, PHC OF MICHIGAN,
INC. a Massachusetts corporation (the "Borrower"),hereby promises to pay to the
order of HCFP FUNDING, INC., a Delaware corporation, its successors and assigns
("Lender"), the principal sum of FOUR HUNDRED THOUSAND AND NO/100 DOLLARS
($400,000.00 (the "Principal Sum") together with any interest and other fees as
further set forth herein, to be paid in accordance with the terms set forth
below.
1. Principal. Borrower promises to pay to Lender the entire Principal Sum
on February 3, 1997 (the "Maturity Date").
2. Interest. In addition to the repayment of the Principal Sum, Borrower
promises to pay interest on the Principal Sum from the date hereof until the
Maturity Date, at a rate per annum of ten and one-half percent (10.50t),
computed on a 360-day basis (the "Base Rate"). Such interest shall be payable in
arrears on the Maturity Date. After maturity, and until the entire Principal Sum
shall be paid in full, the amount of the Principal Sum outstanding shall bear
interest, payable on demand, at the Base Rate plus five percent (5t), but in no
event to exceed the maximum lawful rate.
3. INTENTIONALLY OMITTED.
4. Additional Payments. Borrower further promises to pay to Lender,
immediately upon demand, any and all other sums and charges that may at the time
become due and payable hereunder, and all reasonable costs, disbursements and
attorneys' fees incurred by Lender in connection with any action, suit or
proceeding to protect, sustain or enforce the rights and remedies of Lender
hereunder.
5. Borrowing.
a. Subject to the terms and conditions hereof, Lender shall make
available to Borrower the Principal Sum in immediately available
funds not later than 12:00 Noon (Washington, D.C. time) on the
Business Day on which the Lender shall have received Uniform
Commercial Code ("UCC"), judgment and tax lien searches with the
Secretary of State and local filing offices of each jurisdiction
where Borrower maintains a place of business, which yield results
consistent with the representations and warranties contained
herein;
b. Borrower may prepay the entire Principal Sum without penalty,
together with all interest accrued thereon and all other sums
that are payable pursuant to this Secured Bridge Note.
6. Payment Office. Both the Principal Sum and the interest hereon and any
other amounts payable hereunder are payable in lawful money of the United States
of America at the office of Lender, at 2 Wisconsin Circle, Suite 320, Chevy
Chase, MD 2081S, Attn: Mr. John K. Delaney, or at such other place as Lender may
specify in writing to Borrower. Any payment by other than immediately available
funds shall be subject to collection. Interest shall continue to accrue until
the funds by which payment is made are available to Lender for its use. Any
payment hereunder which is stated to be due on a day on which banks in
Washington, D.C. are required or permitted to be closed for business shall be
due and payable on the next business day (each such next day a "Business Day")
and such extension of time shall be included in the computation of interest in
connection with such payment.
7. Acceleration; No Presentment. On the Maturity Date, or upon the
occurrence of an Event of Default (as defined in Section 12 hereof), the
outstanding Principal Sum, accrued and unpaid interest thereon and all other
sums owed by Borrower to Lender in connection herewith shall immediately become
due and payable. Borrower hereby expressly waives any presentment for payment,
demand for payment, notice of nonpayment or dishonor, protest and notice of
protest of any kind.
8. Security Agreement. This Secured Bridge Note shall constitute a security
agreement as that term is used in the UCC and Borrower hereby grants to Lender,
as security for Borrower's obligations hereunder, a first priority security
interest in the following, (collectively, the "Collateral") (i) all of
Borrower's present and future accounts, contract rights, general intangibles,
chattel paper, documents and instruments, as such terms are defined in the UCC,
including, without limitation, all obligations for the payment of money arising
out of Borrower's sale of goods or rendition of services ("Accounts"), (ii) all
moneys, securities and other property and the proceeds thereof, now or hereafter
held or received by, or in transit to, Lender from or for Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all of
Borrower's deposits (general or special), balances, sums and credits with Lender
at any time existing, (iii) all of Borrower's right, title and interest, and all
of Borrower's rights, remedies, security and liens, in, to and in respect of the
Accounts, including, without limitation, rights of stoppage in transit,
replevin, repossession and reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, guaranties or other contracts of
suretyship with respect to the Accounts, deposits or other security for the
obligation of any Account debtor, and credit and other insurance, (iv) all of
Borrower's right, title and interest in, to and in respect of all goods relating
to, or which by sale have resulted in, Accounts, including, without limitation,
all goods described in invoices or other documents or instruments with respect
to, or otherwise representing or evidencing, any Account, and all returned,
reclaimed or repossessed goods, (v) all books, records, ledger cards, computer
programs and other property and general intangibles at any time evidencing or
relating to the Accounts ("Records"), (vi) all other general intangibles of
every kind and description, including (without limitation) licenses, trade names
and trademarks and the goodwill of the business symbolized thereby, and Federal,
State and local tax refund claims of all kinds, and (vii) all proceeds of the
foregoing. Borrower shall, at Borrower's expense, perform all acts and execute
all documents requested by Lender at any time to evidence, perfect, maintain and
enforce Lender's security interest and the priority thereof in the Collateral.
Upon Lender's request, at any time and from time to time, Borrower shall, at
Borrower's sole cost and expense, execute and deliver to Lender one or more
financing statements (in form and substance satisfactory to Lender) pursuant to
the UCC and, where permitted by law, Borrower hereby authorizes Lender to
execute and file one or more financing statements signed only by Lender.
Notwithstanding anything to the contrary contained in this Secured Bridge Note,
Borrower and Lender agree that Lender is, and shall be deemed to be, the
"secured party" as that term is defined in the UCC and elsewhere with respect to
personal property.
In addition to the foregoing Collateral, Borrower covenants and agrees to
grant in favor of Lender, within two (2) Business Days following the date of
this Secured Bridge Note, a mortgage lien, in form suitable for recording in
Michigan and otherwise satisfactory to Lender in form and substance, with
respect to the real property and improvements owned by Borrower and located in
New Baltimore, Michigan.
9. Use of Funds. Borrower covenants and agrees that the loan of the
Principal Sum or any portion thereof shall be used solely for working capital or
other commercial purposes.
10. Representations. Borrower hereby warrants and represents to Lender
that:
a. This Secured Bridge Note constitutes a valid and binding
obligation of Borrower, enforceable in accordance with its terms.
b. The execution, delivery or performance of or under this Secured
Bridge Note will not violate or conflict with any law, rule,
regulation, order, judgment, indenture, instrument, or agreement
by which Borrower or Borrower's properties or assets are bound or
affect, or conflict or be inconsistent with, or result in any
breach of, any of the terms, covenants or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of Borrower,
pursuant to the terms of any indenture, mortgage, deed of trust,
agreement or other instrument to which Borrower is a party or by
which Borrower's properties or assets may be bound or to which
they may be subject other than a lien, security interest, charge
or other encumbrance in favor of Lender.
c. There are no actions, suits or other proceedings pending,
including, without limitation, any condemnation proceeding, or to
the knowledge of Borrower threatened, against or adversely
affecting Borrower's properties or assets or the validity or
enforceability of this Secured Bridge Note. Borrower is not in
default with respect to any order, writ, injunction, decree or
demand of any court or governmental authority. There is no
litigation or proceeding, including, without limitation, any
condemnation proceeding, pending or, to the knowledge of
Borrower, threatened against or affecting Borrower's properties
or assets, or any circumstances existing which would in any
manner materially adversely affect Borrower's properties or
assets, or the validity or ability of Borrower to perform any
obligations under this Secured Bridge Note.
d. The financial statements of Borrower delivered to Lender are
true, correct and complete and fairly present the financial
condition of Borrower as of the date thereof. No material adverse
change in the financial condition of Borrower has occurred since
the date of such financial statements of Borrower delivered to
Lender.
e. Borrower is the sole owner of all right, title and interest in
and to all of the Collateral free and clear of any lien, security
interest, charge or encumbrance.
11. Covenants. Borrower shall deliver to Lender: (i) its monthly financial
statements, prepared in accordance with the financial statements of such party
previously delivered to Lender, consistently applied, and certified by such
party to Lender to be true and correct and accurately reflecting such party's
financial condition as of the date thereof; (ii) prompt written notice of any
event or occurrence (including any pending or threatened litigation) of which
such party has knowledge which may materially adversely affect the financial
condition of Borrower; and (iii) any other information relating to Borrower
reasonably requested by Lender.
12. Events of Default. The following events are each an "Event of Default"
hereunder:
a. Borrower fails to make any payment of principal when due or fails
to make any payment of interest, fees or other amounts owed to or
for the account of Lender hereunder; or
b. Borrower has made any representations or warranties in this
Secured Bridge Note or any financial statement delivered to
Lender or otherwise in connection herewith or therewith which
contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein
or therein not misleading; or
c. Borrower shall fail to perform or observe, or cause to be
performed or observed, any other term, obligation, covenant,
condition or agreement contained in this Secured Bridge Note, and
such failure shall have continued for a period of three (3) days
after written notice thereof; or
d. Borrower shall (i) apply for, or consent in writing to, the
appointment of a receiver, trustee or liquidator; or (ii) file a
voluntary petition seeking relief under the Bankruptcy Code, or
be unable, or admit in writing Borrower's inability, to pay their
debts as they become due; or (iii) make a general assignment for
the benefit of creditors; or (iv) file a petition or an answer
seeking reorganization or an arrangement or a readjustment of
debt with creditors, apply for, take advantage, permit or suffer
to exist the commencement of any insolvency, bankruptcy,
suspension of payments, reorganization, debt arrangement,
liquidation, dissolution or similar event, under the law of the
United States or of any state in which Borrower is a resident; or
(v) file an answer admitting the material allegations of a
petition filed against Borrower in any such bankruptcy,
reorganization or insolvency case or proceeding or (vi) take any
action authorizing, or in furtherance of, any of the foregoing;
or
e. (i) an involuntary case is commenced against Borrower and the
petition is not controverted within ten (10) days or is not
dismissed within thirty (30) days after the commencement of the
case or (ii) an order, judgment or decree shall be entered by any
court of competent jurisdiction on the application of a creditor
adjudicating Borrower bankrupt or insolvent, or appointing a
receiver, trustee or liquidation of Borrower or of all or
substantially all of the assets of Borrower and such order,
judgment or decree shall continue unstayed and in effect for a
period thirty (30) days or shall not be discharged within ten
(10) days after the expiration of any stay thereof; or
f. An Event of Default occurs under the Loan and Security Agreement
by and between PHC of Utah, Inc. (an affiliate of Borrower) and
Lender (as successor-in-interest to HealthPartners Funding,
L.P.).
13. Lender's Rights.
a. Upon the occurrence of an Event of Default, Lender may, in
addition to the remedies set forth in Section 7 herein, proceed,
to the extent permitted by law, to protect and enforce its rights
either by suit in equity or by action at law, or both, whether
for the specific performance of any covenant, condition or
agreement contained in this Secured Bridge Note or in aid of the
exercise of any power granted in this Secured Bridge Note, or
proceed to enforce the payment of this Secured Bridge Note or to
enforce any other legal or equitable right of Lender. No right or
remedy herein or in other agreement or instrument to the benefit
of Lender is intended to be exclusive of any other right or
remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. without limiting the
generality of the foregoing, if the outstanding Principal Sum, or
any of the other obligations of Borrower to Lender shall not be
paid when due, Lender shall not be required to resort to any
particular security, right or remedy or to proceed in any
particular order of priority, and Lender shall have the right at
any time and from time to time, in any manner and in any order,
to enforce its security interests, liens, rights and remedies, or
any of them, as it deems appropriate in the circumstances, and
apply the proceeds of any collateral (including the Collateral)
to such obligations of Borrower as it determines in its sole
discretion.
b. In the event that an Event of Default has occurred as provided
herein and Borrower has not paid the total outstanding principal,
together with interest accrued thereon upon demand by Lender,
then Borrower shall pay to Lender interest on such outstanding
amounts at a rate per annum equal to the Base Rate plus five
percent (5%) from the date such outstanding amounts are due until
the date this Secured Bridge Note is paid in full. The Borrower
promises to pay all costs of collection, including reasonable
attorneys, fees, if this Secured Bridge Note is referred to an
attorney for collection after the Event of Default.
14. No Defenses. Borrower's obligations hereunder shall not be
subject to any set-off, counterclaim or defense to payment which
Borrower now has or may have.
15. No Waiver. No failure or delay on the part of Lender in
exercising any right, power or privilege under this Secured
Bridge Note nor any course of dealing between Borrower and
Lender, shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise
or the exercise of any right, power or privilege.
16. Writing Required. No modification or waiver of any provisions of
this Secured Bridge Note, nor consent to any departure by
Borrower, shall in any event be effective, irrespective of any
course of dealing between the parties, unless the same shall be
in a writing executed by Lender and then such waiver or consent
shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on Borrower in
any case shall thereby entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
17. Usury Limitation. Notwithstanding anything contained herein to
the contrary, Lender shall never be entitled to receive, collect
or apply as interest any amount in excess of the maximum rate of
interest permitted to be charged by applicable law; and in the
event Lender receives, collects or applies as interest any such
excess, such amount which would be excessive interest shall be
applied to the reduction of the Principal Sum; and if the
Principal Sum is paid in full, any remaining excess shall be paid
to Borrower. In determining whether or not the interest paid or
payable in any specific case exceeds the highest lawful rate,
Lender and Borrower shall to the maximum extent permitted under
applicable law (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest; (ii) exclude
voluntary prepayments and the effects thereof; and (iii) "spread"
the total amount of interest throughout the entire term of the
obligation so that the interest rate is deemed to have been
uniform throughout said entire term.
18. Notices. Any notice or demand given under this Secured Bridge
Note shall be given by delivering it, sending by telecopier (with
a confirming copy by regular mail), or by mailing it by certified
or registered mail, postage prepaid, return receipt requested, or
sent by prepaid overnight courier service addressed to Borrower
at: 200 Lake Street, Suite 102, Peabody, MA 01960, Attn: Ms.
Paula Wurts, Chief Financial Officer--Telecopier: (508) 536-2677.
Any notice to be given to Lender under this Secured Bridge Note
shall be given by delivering it, sending by telecopier (with a
confirming copy by regular mail), or mailing it by certified or
registered mail, return receipt requested, or sent by prepaid
overnight courier service, addressed to Lender at: 2 Wisconsin
Circle, Suite 320, Chevy Chase, MD 20815 Attn: Mr. John K.
Delaney, President-Telecopier: (301) 664-9860, or at such other
place as Lender may specify in writing to Borrower. Each party
may designate a change of address by notice to the other given in
accordance herewith at least fifteen (15) days before such change
of address is to become effective. A notice given under this
Secured Bridge Note shall be deemed received five (5) days after
it is sent by regular mail, or upon receipt when it is delivered
or sent by telecopier according to the requirements of this
paragraph, or if sent by courier on the next Business Day
following deposit with the courier.
19. Section Headings. The headings of the several paragraphs of this
Secured Bridge Note are inserted solely for convenience of
reference and are not a part of and are not intended to govern,
limit or aid in the construction of any term or provision.
20. Severability. Any provision contained in this Secured Bridge Note
which is prohibited or unenforceable in any respect in any
jurisdiction shall, as to such jurisdiction be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
21. Survival of Terms. All covenants, agreements, representations and
warranties made in this Secured Bridge Note or in any financial
statements delivered pursuant hereto shall survive Borrower's
execution and delivery of this Secured Bridge Note to Lender and
shall continue in full force and effect so long as this Secured
Bridge Note or any other obligation hereunder shall be
outstanding and unpaid or any other obligation of Borrower
hereunder shall remain unperformed.
22. GOVERNING LAW, JURISDICTION, ETC. This Secured Bridge Note is to
be governed by and construed in accordance with the laws of the
State of Maryland without respect to any otherwise applicable
conflicts-of-laws principles, both as to interpretation and
performance, and the parties expressly agree to the non-exclusive
jurisdiction of the State of Maryland courts, waiving all claims
or defenses based on lack of personal jurisdiction, improper
venue, inconvenient forum or the like. Borrower hereby consents
to service of process by mailing a copy of the summons to
Borrower, by certified or registered mail, to Borrower's address
set forth in Section 18 above, or otherwise furnished to Lender
in writing. Borrower further waives any claim for consequential
damages in respect of any action taken or omitted to be taken by
lender in good faith.
23. JURY TRIAL WAIVER. In any action or proceeding relating to this
Secured Bridge Note, Borrower, and Lender by its acceptance of
this Secured Bridge Note, irrevocably and unconditionally waive
trial by jury. Borrower understands that this waiver is a
material inducement to Lender's agreement to lend the principal
sum.
24. CONFESSED JUDGMENT. Borrower irrevocably authorizes and empowers
any attorney of record, or the prothonotary, clerk or similar
officer of any court in any county of the State of Maryland or of
Baltimore City, Maryland, or in the United States District Court
for the District of Maryland, as attorney for Borrower, as well
as for any persons claiming under, by or through Borrower, to
appear for Borrower in any such court in any such action brought
against Borrower at the suit of Lender to confess judgment
against Borrower in favor of Lender in the full amount due amount
due On this Secured Bridge Note (including principal, accrued
interest and any and all charges, fees and costs) plus attorneys
fees for fifteen percent (15%) of the amount due, plus court
costs, all without prior notice or opportunity of Borrower for
prior hearing. Borrower waives the benefit of any and every
statute, ordinance, or rule of court which may be lawfully waived
conferring upon Borrower any right or privilege of exemption,
homestead rights, stay of execution, or supplementary
proceedings, or other relief from the enforcement or immediate
enforcement of a judgment or related proceedings on a judgment.
The authority and power to appear for and enter judgment against
Borrower shall not be exhausted by one or more exercises thereof,
or by any imperfect exercise thereof, and shall not be
extinguished by any judgment entered pursuant thereto; such
authority and power may be exercised on one or more occasions
from time to time, in the same or different jurisdictions, as
often as Lender shall deem necessary, convenient and proper.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Secured Bridge Note
as of the day and year first above written.
ATTEST: PHC OF MICHIGAN, INC., a
Massachusetts corporation
___________________________ By: _______________________________
Name:
Title
(SEAL)
<PAGE>
Exhibit 10.104
GUARANTY
THIS GUARANTY is given this 13th day of January, 1997 by PHC, INC., a
Massachusetts corporation (the "Guarantor"), in order to induce the acceptance
by HCFP FUNDING, INC. (the "Lender"), the holder of the attached Secured Bridge
Note (the "Secured Bridge Note") of even date herewith in the principal amount
of FOUR HUNDRED THOUSAND AND N0/100 DOLLARS ($400,000.00) made by PHC of
Michigan, Inc., a Massachusetts corporation (the "Borrower") in favor of Lender,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged. 1. Guarantor hereby unconditionally guarantees to
Lender, its
successors and assigns, and to every subsequent holder of the Secured Bridge
Note:
a. The due performance and full prompt payment, whether at
maturity or by acceleration or otherwise of the payment of the indebtedness
set forth in the Secured Bridge Note, together with accrued and unpaid
interest on the Secured Bridge Note in accordance with the provisions of the
Secured Bridge Note; and
b. The costs and expenses, including reasonable attorneys'
fees, paid or incurred in the enforcement of collection of the Secured Bridge
Note.
2. Guarantor represents and warrants that it has the full
corporate right, power and authority to enter into this Guaranty.
3. Guarantor hereby agrees that Lender is not required to rely on
Borrower or any collateral for the payment of the Secured Bridge Note upon
the occurrence of an Event of Default as provided for therein, but may
proceed directly against Guarantor in such manner as may be deemed desirable
by Lender.
4. Guarantor hereby unconditionally agrees that its liability
hereunder shall not be affected by:
a. Any amendments), modifications) or extensions) of time for
payment of the Secured Bridge Note;
b. The release of the Borrower from its obligations under the
Secured Bridge Note or the release of any security securing the Secured
Bridge Note, whether made with or without notice to Guarantor; and
c. Any delay in exercising any right or remedy under the
Secured Bridge Note or this Guaranty.
5. Guarantor hereby waives:
a. Presentment, demand, protest and notice of dishonor, and all
exemptions including, but not limited to, those relating to attachment,
garnishment or execution.
b. Any right or claim of right to cause a marshalling of the
assets of Borrower.
6. This Guaranty shall be construed in accordance with the laws of the
State of Maryland.
ATTEST: PHC, INC.,
a Massachusetts corporation
____________________________ _____________________________
Name:
Title:
note.phc
January 13, 1997
HCFP Funding, Inc.
2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: John K. Delaney, President
Dear Mr. Delaney:
Reference is made to that certain Loan and Security Agreement dated as
of May 21, 1996 (the "Loan Agreement") by and between PHC OF UTAH, INC., a
Massachusetts corporation (the "Borrower"), and HCFP FUNDING, INC. (as
successor-in-interest to HealthPartners Funding, L.P.) (the "Lender"). All
capitalized terms used but not defined in this letter shall have the
respective meanings given them in the Loan Agreement.
Borrower hereby agrees as follows:
1. An Event of Default under that certain Secured Bridge Note dated
January 13, 1997 in the principal amount of $400,000.00 (the "Bridge Note"),
executed by PHC of Michigan, Inc. (an Affiliate of Borrower) in favor of
Lender, shall constitute an Event of Default under the Loan Agreement.
2. The Collateral shall also secure the obligations of PHC of
Michigan, Inc. under the Bridge Note.
3. Except as specifically amended above, the Loan Agreement, and all
other Loan Documents, shall remain in full force and effect, and are hereby
ratified and confirmed.
Very truly yours,
ATTEST: PHC OF UTAH, INC.
(Seal) a Massachusetts corporation
By: _______________________ By:
__________________________________
Name: Name:
Title: Title:
THE FOREGOING IS ACKNOWLEDGED AND AGREED AS OF THIS ________ DAY OF
JANUARY, 1997:
HCFP FUNDING, INC.,
By: ______________________________ (SEAL)
Name:
Title:
sideltr.phc
<PAGE>
January 13, 1997
HCFP Funding, Inc.
2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: John K. Delaney, President
Dear Mr. Delaney:
Reference is made to that certain Secured Bridge Note dated January 13,
1997 in the principal amount of $400,000.00 (the "Bridge Note"), executed by PHC
OF MICHIGAN, INC., a Massachusetts corporation (the "Borrower"), in favor of
HCFP FUNDING, INC. (the "Lender"). Borrower hereby agrees to pay a financing
commitment fee of Twenty-Five Thousand and No/100 Dollars ($25,000.00) in
consideration for the financing to be provided by Lender pursuant to the Bridge
Note (the "Financing Fee'). Such Financing Fee shall be paid by Borrower to
Lender no later than February 3, 1997 (the Maturity Date of the Bridge Note),
irrespective of whether or not Lender provides Borrower with revolving credit
financing in replacement of the financing evidenced by the Bridge Note. The
obligation of Borrower to pay the Financing Fee shall be satisfied by the
payment of the entire $400,000.00 principal amount of the Bridge Note, together
with interest relating thereto. Very truly yours,
ATTEST: PHC OF MICHIGAN, INC.
(Seal) a Massachusetts corporation
By: ____________________________ By:
_________________________________
Name: Name:
Title: Title:
sideltr2.phc
<PAGE>
Exhibit 10.105
FIRST AMENDMENT TO LEASE AND OPTION AGREEMENT
First Amendment to Lease and Option Agreement by and between NMI REALTY,
INC., a Rhode Island corporation, hereinafter referred to as "Landlord" and PHC
OF RHODE ISLAND, INC. d/b/a Good Hope Center, a Massachusetts corporation,
hereinafter referred to as "Tenant", dated this 20th day of December, 1996.
W I T N E S S E T H
WHEREAS, Landlord and Tenant executed that certain Lease and Option
Agreement dated March 16, 1994 (the "Lease") regarding certain property
described therein and located in West Greenwich, Rhode Island; and
WHEREAS, Landlord and Tenant desire to amend and set forth their
understanding regarding certain items set forth in the Lease;
NOW, THEREFORE, in consideration of their mutual promises herein contained
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Landlord and the Tenant hereby covenant and
agree as follows:
1. All capitalized terms used herein shall, unless otherwise defined
herein, have the same meaning as set forth in the Lease.
2. In accordance with Section 2.01 of the Lease, Landlord and Tenant are
now in the third year of the Lease which period runs from March 1, 1996, to
February 28, 1997. The fourth year of the Lease runs from March 1, 1997, to
February 28, 1998. The annual rental for such third year and fourth year is
$203,000.00 payable in equal monthly installments of $19,250.00 on the first day
of each month.
3. Tenant is in arrears in the amount of $9,250.00 for the December 1996
rental payment. Tenant will pay said amount in arrears on or before January 7,
1997. Failure to pay said amount shall constitute an Event of Default under the
Lease without further notice required by Landlord or cure period by Tenant.
4. Based upon representations by Tenant concerning its financial status,
Landlord agrees to reduce the monthly rental payment due for January 1997,
February 1997, March 1997, April 1997, May 1997 and June 1997 from $19,250.00
per month to $13,000.00 per month. Tenant will resume payment of rent due for
subsequent months beginning in July 1997, in accordance with Section 2.01 of the
Lease.
5. The option price as described in Section 24.04 of the Lease to be paid
by Tenant to Landlord for the Premises if the option is exercised at any time
shall be increased by $37,500.00,which amount is equivalent to the rent
reduction described in paragraph 4 herein.
6. The Lease, as amended by this First Amendment to Lease and Option
Agreement constitutes the entire agreement between the parties hereto concerning
the Lease and may not be modified in any manner other than by written agreement,
executed by all of the parties hereto or their successors in interest. No prior
understanding or representation of any kind made before the execution of this
First Amendment to Lease and option Agreement shall be binding upon either party
unless incorporated herein.
7. All references wherever or however made to the Lease are hereby deemed
to mean the Lease as amended by this First Amendment to Lease and option
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Lease and Option Agreement as of the date first set forth above.
<PAGE>
In the presence of:
Landlord:
_________________________________ By: ______________________________
Peter Fratantuono, V. Pres.
_________________________________ By: ______________________________
Alan Willoughby, President
Tenant:
PHC OF RHODE ISLAND, INC.
_________________________________ __________________________________
Bruce A. Shear, President
STATE OF RHODE ISLAND
COUNTY OF WASHINGTON
In North Kingstown on the 20th day of 1996, before me personally appeared
Peter Fratantuono, Vice President and Alan Willoughby, President of NMI Realty,
Inc., to me known and known by me to be the parties executing the foregoing
instrument, and they acknowledged said instrument, by them executed to be their
free act and deed individually and in their said capacities, and the free act
and deed of said NMI Realty, Inc.
__________________________________
Notary Public
My Commission expires: 07/30/97
<PAGE>
STATE OF
COUNTY OF MASS
In Middlesex/Peabody on the 8th day of Jan, 1996, before me personally
appeared Bruce A. Shear, President of PHC OF RHODE ISIAND, INC., to me known and
known by me to be the party executing the foregoing instrument, and he
acknowledged said instrument, by him executed to be his free act and deed
individually and in his said capacity, and the free act and deed of said PHC OF
RHODE ISLAND, INC.
______________________________________
Notary Public
My Commission expires:
nmilease.amd
PAULA C. WURTS
Notary Public
My Commission Expires November 29, 2002
<PAGE>
Exhibit 4.15
GUARANTY
THIS GUARANTY is given this 13th day of January, 1997 by PHC, INC., a
Massachusetts corporation (the "Guarantor"), in order to induce the acceptance
by HCFP FUNDING, INC. (the "Lender"), the holder of the attached Secured Bridge
Note (the "Secured Bridge Note") of even date herewith in the principal amount
of FOUR HUNDRED THOUSAND AND N0/100 DOLLARS ($400,000.00) made by PHC of
Michigan, Inc., a Massachusetts corporation (the "Borrower") in favor of Lender,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged.
1. Guarantor hereby unconditionally guarantees to Lender, its successors
and assigns, and to every subsequent holder of the Secured Bridge Note:
a. The due performance and full prompt payment, whether at maturity or by
acceleration or otherwise of the payment of the indebtedness set forth in the
Secured Bridge Note, together with accrued and unpaid interest on the Secured
Bridge Note in accordance with the provisions of the Secured Bridge Note; and
b. The costs and expenses, including reasonable attorneys' fees, paid or
incurred in the enforcement of collection of the Secured Bridge Note.
2. Guarantor represents and warrants that it has the full corporate right,
power and authority to enter into this Guaranty.
3. Guarantor hereby agrees that Lender is not required to rely on Borrower
or any collateral for the payment of the Secured Bridge Note upon the occurrence
of an Event of Default as provided for therein, but may proceed directly against
Guarantor in such manner as may be deemed desirable by Lender.
4. Guarantor hereby unconditionally agrees that its liability hereunder
shall not be affected by:
a. Any amendments), modifications) or extensions) of time for payment of
the Secured Bridge Note;
b. The release of the Borrower from its obligations under the Secured
Bridge Note or the release of any security securing the Secured Bridge Note,
whether made with or without notice to Guarantor; and
c. Any delay in exercising any right or remedy under the Secured Bridge
Note or this Guaranty.
5. Guarantor hereby waives:
a. Presentment, demand, protest and notice of dishonor, and all exemptions
including, but not limited to, those relating to attachment, garnishment or
execution.
b. Any right or claim of right to cause a marshalling of the assets of
Borrower.
6. This Guaranty shall be construed in accordance with the laws of the
State of Maryland.
ATTEST: PHC, INC.,
a Massachusetts corporation
____________________________ _____________________________
Name:
Title:
note.phc
<PAGE>
Exhibit 10.106
This Mortgage, made as of January 13, 1997, between PHC OF MICHIGAN, INC.,
a Massachusetts corporation header referred to as the "Mortgagor" and HCFP
FUNDING, INC., a Delaware Corporation, herein referred to as the
"Mortgagee."
Witnesseth, That the Mortgagor mortgages and warrants to the mortgagee land
situate in the City of New Baltimore, County of Macomb and State of
Michigan, described on Exhibit A attached hereto and made a part hereto
(the "Land"), together with the hereditaments and appurtenances thereunto
belonging and if the said Land be improved with a building designed for
commercial or business purposes, also together with all disappearing beds,
refrigerators, equipment for heating, lighting, cooking, mirrors, doors and
window shades, screens and a and such other goods, chattels and personal
property as are ever furnished by a landlord in letting and operating an
unfurnished building similar to the buildings erected upon the Land and
now or hereafter installed therein by the mortgagor or his assigns, which
shall be between the parties hereto, and all parties claiming by, through
or under them, an accession to the freehold and a part of the realty and
encumbered by this Mortgage (collectively, the "Mortgage Premises") to the
performance of the covenants hereinafter contained, and the payment of the
principal sum of Two Million and No/l00 Dollars ($2,000,000.00), or so much
thereof as may be advanced or readvanced by the Mortgagee to the Mortgagor
pursuant to a certain Security Bridge Note dated January 13,
1997, a certain Loan and Security Agreement by and between the Mortgagor
and the Mortgagee, or such other financing documents that may be entered
into by the Mortgagor with respect to indebtedness owed to the Mortgagee in
connection with such Security Bridge Note and Loan and Security Agreement
(collectively, the "Financing Documents").
And the Mortgagor covenants with the Mortgagee while this Mortgage
remains in force, as follows:
I. To pay said indebtedness and the interest thereon in the time and in
the manner provided in the Financing Documents;
II. To pay all taxes and assessments levied on the Land within thirty
days after the same become due and payable, and deliver the official
receipts therefor to the Mortgagee;
III. To keep the buildings and equipment on the Mortgaged Premises
insured against loss or damage by fire for the benefit of, with loss
payable to, and in manner and amount approved by, and deliver the
policies as issued to, the Mortgagee with the premiums therefor paid
in full,
IV. To abstain from the commission of waste on the Mortgaged Premises,
and keep the buildings thereon and equipment in good repair, and
promptly comply with all laws, ordinances, regulations or other
government requirements affecting the Mortgaged Premises.
<PAGE>
V. That, if there be default in delivering any insurance policy or in
the payment of any tax, assessment or premium required to be
delivered or paid hereunder, the Mortgagee may effect such insurance
or such policy and pay such assessment, taxes or insurance
premiums, and any amount so paid shall be added to said indebtedness
and hereby secured and be payable to the Mortgagee forthwith
VI. That, in the event of the passage of any law or regulation, state,
federal or municipal, subsequent to the date hereof in any manner
changing or modifying the laws now in force governing the taxation
of mortgages or debts secured by mortgages, or the manner of
collecting such taxes and such change or modification has a material
adverse effect on the Mortgagee, the entire principal secured by this
mortgage and all interest accrued thereon shall become due and
payable, forthwith, at the option of the Mortgagee,
VII. That, in the event the ownership of the Mortgaged Premises, or any
part thereof, become vested in a person other than the Mortgagor, the
Mortgagee may deal with such successor in interest with reference to
this Mortgage, and the debt hereby , in the same manner as with the
Mortgagor, without in any manner vitiating or discharging the
Mortgagor's liability hereunder, or upon the debt hereby secured.
VII. The power is hereby granted by the Mortgagor to the Mortgagee,
if default is made in the payment of the indebtedness, interest,
taxes, or insurance premiums, or any part thereof, at the time and in
the manner agreed in the Financing Documents, to grant bargain, sell
release, and convey the Mortgaged Premises, with the appurtenances
at public auction and to execute and deliver to the purchaser or
purchasers, at such sale, deeds of conveyance, good and sufficient at
law, pursuant to the statute in such case made and provided, and out
of the proceeds to retain all sums due hereon, the costs and charges
of such sale, and the attorney fees provided by law, returning the
surplus money, if any, to the Mortgagor or Mortgagor's heirs and
assigns, and such sale or a sale pursuant to a decree of chancery for
the foreclosure hereof may, at the option of the Mortgagee, be made
en masse.
IX. Upon the request of the Mortgagor, the Mortgagee, at is option may
hereafter at any time before full payment of the indebtedness secured
by this Mortgage, make further advances to the Mortgagor and any such
advances with interest shall be secured by this Mortgage and shall be
evidenced by an additional note then to be given by the Mortgagor;
the Mortgagor covenants and agrees to and with the Mortgagee to repay
such further advances and in accordance with the note then executed;
that such further advances and each note evidencing the same shall be
secured by this Mortgage and that all of the covenants and agreements
in the Mortgage contained shall apply to such advances as well as to
the original principal sum herein recited.
The covenants herein shall bind and the benefits and advantages to
the respective heirs, assigns and successors of the parties.
<PAGE>
Signed, Sealed and Delivered in Presence of:
Signed and Sealed:
ATTEST
PHC OF MICHIGAN, INC.
By: _______________________________ By: ____________________________
Name: Teresa A. Bates Name: Bruce A. Shear
Title: Assistant Title: President
STATE OF MASSACHUSETTS
COUNTY OF Essex, MA.
On this 23rd day of January 1997 before me appeared Bruce A. Shear, in
his capacity as President of PHC of Michigan, Inc., to me known to be the
person described in and who executed the foregoing instrument and
acknowledged that he executed the same as his free act and deed.
PAULA C. WURTS
Notary Public
My commission expires: November 30, 2002
________________________ Essex, Ma
Notary Public County, MA
del-318865.1
<PAGE>
January 13, 1997
HCFP Funding, Inc.
2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: John K. Delaney, President
Dear Mr. Delaney:
Reference is made to that certain Loan and Security Agreement dated as of
May 21, 1996 (the "Loan Agreement") by and between PHC OF UTAH, INC., a
Massachusetts corporation (the "Borrower"), and HCFP FUNDING, INC. (as
successor-in-interest to HealthPartners Funding, L.P.) (the "Lender"). All
capitalized terms used but not defined in this letter shall have the respective
meanings given them in the Loan Agreement.
Borrower hereby agrees as follows:
1. An Event of Default under that certain Secured Bridge Note dated January
13, 1997 in the principal amount of $400,000.00 (the "Bridge Note"), executed by
PHC of Michigan, Inc. (an Affiliate of Borrower) in favor of Lender, shall
constitute an Event of Default under the Loan Agreement.
2. The Collateral shall also secure the obligations of PHC of Michigan,
Inc. under the Bridge Note.
3. Except as specifically amended above, the Loan Agreement, and all other
Loan Documents, shall remain in full force and effect, and are hereby ratified
and confirmed.
Very truly yours,
ATTEST: PHC OF UTAH, INC.
(Seal) a Massachusetts corporation
By: _______________________ By: __________________________________
Name: Name:
Title: Title:
THE FOREGOING IS ACKNOWLEDGED AND AGREED AS OF THIS ________ DAY OF
JANUARY, 1997:
HCFP FUNDING, INC.,
By: ______________________________ (SEAL)
Name:
Title:
sideltr.phc
<PAGE>
January 13, 1997
HCFP Funding, Inc.
2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: John K. Delaney, President
Dear Mr. Delaney:
Reference is made to that certain Secured Bridge Note dated January 13,
1997 in the principal amount of $400,000.00 (the "Bridge Note"), executed by PHC
OF MICHIGAN, INC., a Massachusetts corporation (the "Borrower"), in favor of
HCFP FUNDING, INC. (the "Lender"). Borrower hereby agrees to pay a financing
commitment fee of Twenty-Five Thousand and No/100 Dollars ($25,000.00) in
consideration for the financing to be provided by Lender pursuant to the Bridge
Note (the "Financing Fee'). Such Financing Fee shall be paid by Borrower to
Lender no later than February 3, 1997 (the Maturity Date of the Bridge Note),
irrespective of whether or not Lender provides Borrower with revolving credit
financing in replacement of the financing evidenced by the Bridge Note. The
obligation of Borrower to pay the Financing Fee shall be satisfied by the
payment of the entire $400,000.00 principal amount of the Bridge Note, together
with interest relating thereto.
Very truly yours,
ATTEST: PHC OF MICHIGAN, INC.
(Seal) a Massachusetts corporation
By: ____________________________ By: _________________________________
Name: Name:
Title: Title:
sideltr2.phc
<PAGE>
Exhibit 10.107
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this 1st day
of January, 1997, with an effective date of January 1, 1997, by and between
PSYCHIATRIC & COUNSELING ASSOCIATES OF ROANOKE, INC., a Virginia corporation
(hereinafter referred to as "Employer"), and MUKESH PATEL M.D., a physician
licensed to practice medicine in the Commonwealth of Virginia (hereinafter
referred to as ("Dr. Patel").
W I T N E S S E T H:
WHEREAS, Employer is a Virginia corporation which renders professional
psychiatric counseling services through employees who are duly licensed to
practice medicine in the Commonwealth of Virginia;
WHEREAS, Employer is a wholly-owned subsidiary of Pioneer Healthcare of
Virginia, Inc., a Virginia corporation ("Pioneer"), which is in the business
of owning and operating mental health inpatient facilities as well as mental
health counseling professional practices, and providing consulting
administrative and other support services to medical practices with the
necessary facilities, equipment, non-physician personnel, supplies and
non-physician support staff services;
WHEREAS Dr. Patel desires to be employed by Employer so that he may
devote his best efforts on a concentrated and continuous basis to the
rendering of medical services to patients; and
WHEREAS, Employer desires to employ Dr. Patel, and Dr. Patel desires to
be employed by Employer, on the terms and conditions provided herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, as well as the initial sum of Twenty Five Thousand and
00/100 Dollars ($25,000.00) to be paid on the effective date of this
Agreement for Dr. Patel's agreement not to compete in accordance with the
provisions of Section 5 herein, the parties agree as follows:
1. Employment
1.1 Engagement and Acceptance. Employer hereby employs, engages, and
hires Dr. Patel, and Dr. Patel hereby accepts and agrees to such hiring,
engagement, and employment, to render medical services exclusively for
Employer to patients of Employer. Dr. Patel agrees to perform all duties and
services in accordance with all policies and procedures established by
Employer, all federal, state and local laws and ordinances, and all
applicable rules of professional conduct.
1.2 Licensure. Dr. Patel shall, as of the date of this Agreement, be
licensed to practice medicine in the Commonwealth of Virginia and shall be
certified by the American Board of Psychiatry and Neurology, and shall,
throughout the term of this Agreement, maintain his license and privileges to
render medical services in the Commonwealth of Virginia.
1.3 Duties. During the term of this Agreement, Dr. Patel shall
perform such duties as may be assigned to Dr. Patel by Employer and/or by
Pioneer from time to time including, but not limited to those duties
described herein. Dr. Patel shall, as part of his duties, provide clinical
and administrative services at the offices of Employer and/or at Mount Regis
Center (the "Center"), including, but not limited to service as the Medical
Director of Center, in accord with the rules and regulations of the Center,
or at such other locations as may be designated from time to time by
Employer, at reasonable times to be set by Employer, exclusively.
a. Dr. Patel's duties shall include the provision of on call
coverage 24 hours a day on a rotational basis pursuant to a coverage schedule
to be set by Employer. Dr. Patel shall perform such duties under the
supervision and direction of the President of Employer.
b. The duties of Dr. Patel will be varied and may range from
direct care, including treatment of inpatients and partially hospitalized
patients at the Center, or outpatients at the offices of Employer, or at a
site designated by Employer, as described herein, to providing medication
reviews. psychiatric evaluations and supervision at community agencies.
Marketing arid administrative duties may also be part of the duties of Dr.
Patel.
1.4 Equipment and Material. Employer shall supply to Dr Patel all
equipment and materials which Dr. Patel deems to be necessary for performance
of his duties hereunder, which are customary in the clinical and
administrative practice of psychiatry. All equipment and materials provided
Dr. Patel shall belong to Employer.
1.5 Exclusive Employment. Dr. Patel, during the term of this
agreement. will not, without the express prior written consent of Employer
(or Pioneer if applicable) accept employment or practice medicine at a health
care facility or in a health care setting other than at the offices of
Employer or at the Center or at such other locations as may be designated
from time to time by Employer.
1.6 Medical Standards. During the term of this Agreement Dr, Patel
shall use his best efforts in the performance of his duties under this
Agreement in accordance with the rules and regulations of Employer and of
the medical staff of the Center and the applicable standards for the medical
profession, and all such service shall be performed in compliance with all
federal, state and local laws, ordinances and regulations.
1.7 Good Standing. Dr. Patel shall at all times during the term of
this Agreement:
a. Be a member in good standing on the medical staff of the
Center with appropriate privileges in Psychiatry, or any other hospital
designated by Employer;
b. Be board certified in Psychiatry or be eligible for and
actively pursuing such certification; and
c. Be, and remain, a participating provider in the Medicare
and Medicaid programs (Titles XVIII and XIX of the Social Security Act,
respectively), and with any managed care program with which Employer and/or
the Center is now or hereafter becomes affiliated.
1.8 Staff Privileges. This Agreement is not and should not be
construed as any form of guarantee or assurance that Dr. Patel will receive
necessary medical staff membership or privileges at the Center for purposes
of discharging his responsibilities hereunder, and the application,
appointment, reappointment and granting of such privileges shall be governed
solely by the Medical Staff Bylaws of the Center then in effect. Dr. Patel
represents and warrants, that he possesses the professional skills and
training necessary to perform the services which he is to perform hereunder.
1.9 Applicable Rules and Regulations. Dr. Patel shall provide
services under this Agreement in accordance with all quality standards
established, from time to time by the Employer and by the Center for its
medical staff and in compliance with all applicable statutes, regulations,
rules, and directives of federal, state and other governmental and
regulatory bodies having jurisdiction over the Employer and/or Center; the
Bylaws, rules and regulations of the Center and its medical staff, applicable
standards of the Joint Commission on Accreditation of Healthcare
Organizations; the rules, regulations and requirements of third party payors;
and current accepted and approved methods and practices applicable to the
practice of Psychiatry.
1.10 Loss of Privileges or Licensure.
(a) Should Dr. Patel's license to practice medicine in the
Commonwealth of Virginia, be suspended, revoked or canceled, then, effective
as of the date of the suspension, revocation or cancellation of such license,
Employer may terminate this Agreement, effective immediately.
(b) Should Dr. Patel's medical staff privileges on the medical
staff of the Center be restricted or made subject to supervision in
accordance with the applicable medical staff bylaws, rules and regulations or
comparable rules, regulations, or policies applicable to the practice of
physicians, then Dr. Patel may continue to render services hereunder only in
accordance with such restriction or supervision as approved by Employer. If
Employer determines, in its sole discretion, that imposition of such
restriction or supervision of Dr. Patel's privileges unreasonably interferes
with the performance of Dr. Patel's duties under this Agreement, Employer may
terminate this Agreement, effective immediately.
1.11 Peer Review. Dr. Patel shall participate in such department
meetings, quality management and other peer review activities as required by
Employer and/or the Center.
1.12 Maintenance of Skills. Throughout the term of this agreement, Dr
Patel agrees to maintain his professional skills as evidenced by
participation in appropriate continuing medical education activities and will
maintain good standing in professional associations. Employer shall provide
Dr. Patel with an annual amount of Two Thousand ($2,000.00) Dollars per year
for the purpose of deferring the cost of continuing medical education, which
may only be used for events, seminars, etc. with the prior express approval
of Employer. Any expenses in excess of the annual allowance shall be borne by
Dr. Patel.
1.13 Administrative Duties. During the term of this Agreement, Dr.
Patel shall perform such duties as may be assigned to Dr. Patel by Employer
and/or Pioneer from time to time including, but not limited to, those duties
described below. Dr. Patel shall, as part of his duties, provide clinical and
administrative services at the Center or at such other locations as may be
designated from time to time by Employer. The performance of such duties may
require travel and may also require Dr, Patel to be directly involved in the
development of marketing and business development strategies in conjunction
with certain administrative employees of the Employer and/or Pioneer. Except
with regard to duties assigned by Pioneer, Dr. Patel shall perform all such
administrative duties under the supervision and direction of the President of
Employer. All medical decisions relative to patient care shall be made by
Dr. Patel and shall be in accordance with appropriate standards of medical
practice. All expenses incurred by Dr. Patel in carrying out the
administrative/marketing duties assigned to him during the term of this
Agreement shall be paid directly or reimbursed by the Employer or Pioneer as
appropriate.
1.14 Full Time and Best Efforts. During the term of this Agreement
Dr. Patel shall be employed full time by Employer and shall use his best
efforts in the performance of his duties under this Agreement. Dr. Patel
acknowledges that the obligations incumbent upon Dr. Patel under this
Agreement shall constitute the primary claim upon his professional time,
effort, energy and skill and agrees to undertake no additional professional.
obligations without obtaining the prior written consent of the President of
Employer.
1.15 Assignment. Employer shall, in the name of and on behalf of Dr,
Patel, bill patients, insurance companies and other third-party payers and
collect the professional fees for medical services rendered by Dr. Patel
under the terms of this agreement. Dr. Patel hereby appoints Employer for the
term of this Agreement to be his true and lawful attorney in-fact, for the
following purposes. (i) to bill patients, insurance companies and other
third-party payers in Dr. Patel's name and on his behalf; (ii) to collect
accounts receivable resulting from such billing in Dr. Patel's name and on
his behalf; (iii) to receive on behalf of Dr. Patel payments from insurance
companies, prepayments from health care plans, reimbursements from Medicare
and Medicaid, and all other third-party payments from insurance companies;
(iv) to take possession of and endorse in the name of Dr. Patel any notes,
checks, money orders, insurance payments, and other instruments received in
payment of accounts receivable; and (v) to initiate the institution of legal
proceedings in the name of Dr. Patel to collect any accounts and monies owed
to Dr. Patel, to enforce the rights of Dr. Patel as creditor under any
contract or in connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or their fiscal
intermediaries) as third-party payers. All monies shall be accounted for by
Employer as being directly attributable to Dr. Patel. Dr. Patel may perform
the functions or exercise the rights set forth in this Section only with the
consent of Employer. Dr. Patel shall execute a Power of Attorney in form and
substance acceptable to the parties hereto in connection with the rights and
powers granted to Employer pursuant to Section 2. Dr Patel shall cooperate
with and at the request of Employer shall provide reasonable assistance to
Employer with the functions set forth herein. In the performance of the
services described in this Section 1, Employer shall use commercially
reasonable efforts to collect such professional fees and shall comply with
all managed care contracts and all applicable laws, rules and regulations.
1.16 Records and Reports. Dr. Patel shall complete medical records in
a timely and legible fashion as required by applicable laws and in keeping
with generally accepted standards of record keeping and documentation, and as
required by third party payors to permit billing for and collection of
revenues for professional services rendered, and shall maintain and furnish
Employer with such records, reports and documentation evidencing the
performance of Dr. Patel's duties hereunder as may be requested by Employer
in accordance with applicable law.
2. Obligations of Employer.
2.1 Overall Function. Employer shall provide or arrange for such
services and amenities as are necessary or appropriate for the efficient
medical practice of Dr. Patel pursuant to this Agreement. Employer shall
comply, and shall use its best efforts to cause its employees to comply, with
all applicable federal, state and local laws, rules and regulations in its
provision or services hereunder.
2.2 General Administrative Services.
a. Employer shall provide management and administration of
non-physician services relating to the medical practice of Dr. Patel, subject
to matters reserved for Dr. Patel. Dr. Patel acknowledges that a purpose of
this Agreement is to relieve Dr. Patel to the maximum extent possible of the
administrative, accounting, purchasing, non-physician personnel, and other
aspects of his practice. Except as may be otherwise agreed to by the parties,
Employer agrees that Dr. Patel, and only Dr. Patel, will perform the medical
functions of his practice. Employer shall have no authority directly or
indirectly, to perform or supervise and shall not perform or supervise any
medical function performed by Dr. Patel. Employer may, however, advise Dr.
Patel as to the relationship between his performance of medical functions and
the overall administrative and business functions of his practice, to the
extent permitted by applicable law.
b. Employer shall supply to Dr. Patel the ordinary, necessary,
and appropriate services for the efficient operation of Dr. Patel's practice,
including without limitation, necessary clerical, accounting, purchasing,
payroll, legal, bookkeeping and computer services, information management,
printing, postage and duplication services and medical transcribing services;
c. Employer shall maintain all files and records relating to
the medical practice of Dr Patel, including but not limited to, accounting,
billing, collection, and financial records and patient files and medical
records. The management of all files and records shall comply with all
applicable federal, state and local statutes and regulations, and all patient
files and medical records shall be located so that they are readily
accessible for patient care, consistent with ordinary records management
practices. Dr. Patel shall supervise the preparation of, and direct the
contents of, patient medical records, all of which shall remain confidential
in accordance with applicable laws and regulations. All original patient
records shall be and remain the property of Employer, subject to applicable
Virginia law.
d. Employer shall take such legal and appropriate actions in
the name of and on behalf of Dr Patel as are required to collect professional
fees and pay in a timely manner all expenses associated with Dr. Patel's
medical practice, which are the responsibility of Employer, pursuant to this
Agreement, except as otherwise agreed in writing between Employer arid Dr.
Patel.
e. Employer shall distribute to Dr Patel compensation and
other amounts due to him pursuant to this Agreement upon such terms and at
such times as are provided in Section 3 hereof.
f. Employer shall not refer a patient for Designated Health
Services as defined in 42 U.S.C. 1395 ("Stark") to or provide Designated
Health Services to a patient upon a referral from an entity or person with
which the physician or an immediate family member has a financial
relationship other than as permitted by exceptions set forth in Stark.
2.3 Facilities.
a. Premises. Employer shall make available to Dr. Patel within
Employer's offices and at the Center, an office in which to practice.
Provided. that in the event that Employer's rights to use any such premises
shall terminate, Employer shall use its best efforts to provide other
suitable premises to be used by Dr. Patel. Employer shall maintain the
premises and make all necessary repairs thereto. Dr. Patel shall use and
occupy the premises provided to him by Employer or the Center exclusively for
the practice of medicine and for providing other related services. It is
expressly acknowledged by the parties hereto that the medical practice
conducted by Dr. Patel shall be conducted solely by Dr. Patel. Dr. Patel
shall be solely and exclusively in control of all aspects of the practice of
medicine and the delivery of medical services at the Center. The rendition of
all therapy, the prescription of medicine and drugs, and the supervision and
preparation of medical reports shall be the sole responsibility of Dr. Patel.
b. Personal Property. Employer shall provide Dr. Patel with
the use of the equipment, furniture, fixtures, furnishing and other personal
property acquired by Employer for the use of Dr. Patel pursuant to the terms
hereof (the "Personal Property"). Employer shall, at all times, maintain the
Personal Property in good condition.
2.4 Inventory and Supplies. Employer shall order and purchase
inventory and supplies, and such other ordinary, necessary or appropriate
materials which arc necessary to the practice of Dr. Patel.
2.5 Advertising and Public Relations. With the consultation and
prior consent of Dr. Patel, Employer shall implement (and design where
requested) any appropriate local public relations or advertising program on
behalf of Dr. Patel, with appropriate emphasis on public awareness of the
availability of Dr. Patel's services, as Employer deems appropriate in its
sole and absolute discretion. Employer shall also design and implement all
national or other non-local public relations or advertising programs on
behalf of Dr. Patel, as Employer with Dr. Patel's consultation and consent,
deems appropriate. The parties hereto agree that all public relations and
advertising programs shall be conducted in compliance with applicable
standards of medical ethics, laws, and regulations.
2.6 Personnel. Employer, as Employer deems appropriate in its
sole and absolute discretion, shall provide professional support and
administrative, clerical, secretarial, bookkeeping and collection personnel
as reasonably necessary for the efficient conduct of Dr. Patel's practice.
Such personnel shall be employees of Employer, and Employer shall determine
and cause to be paid the salaries and benefits of all such personnel. If Dr.
Patel is dissatisfied with the services of any such personnel who provide
services primarily for Dr. Patel, Dr. Patel shall consult with the
appropriate administrator of Employer, and Employer shall in good faith
determine whether the performance of that employee could be brought to
acceptable levels through counsel and assistance, or whether such employee
should be re-assigned or terminated, Employer shall maintain established
working relationships whenever possible and Employer shall make every effort
consistent with sound business practices to honor the specific requests of
Dr. Patel with regard to the assignment of Employer's employees.
2.7 Quality Assurance. Employer shall assist Dr. Patel as
required in fulfilling his professional obligation to his patients to
maintain a high quality of medical and professional services. Employer
recognizes and respects the professional capabilities of Dr. Patel and
acknowledges that nothing in this Agreement is intended to interfere with the
exercise of Dr. Patel's independent professional medical judgment.
3. Compensation.
3.1 Annual Remuneration.
(a) For services rendered during the term of this Agreement and
any renewals thereof, Dr. Patel shall be paid an annual salary which shall be
payable in bi-weekly installments during each calendar month, in accord with
Employer's standard payroll practice.
(1) During the first year that this Agreement is in
effect, Dr. Patel shall be paid for services rendered pursuant to this
Agreement an annual salary in the amount of Two Hundred Thousand Dollars
($200,000.00).
(2) For each subsequent year that this Agreement is in
effect and during any renewal thereof, the annual salary paid to Dr. Patel
shall be as described in Exhibit 3.1, or any amendment thereto.
3.2 Services Performed for Pioneer. Any additional professional
duties or services performed for or provided by Dr. Patel to Pioneer or any
affiliates (other than Employer) that is not directly related to Dr. Patel's
responsibilities, during the term of this Agreement, or any renewal thereof
shall be valued on a daily basis at Dr. Patel's then current, average daily
collections and shall be credited towards the amount of Joint Collections
for the year during which such services were performed or provided as if they
were fully collected professional fees. It is agreed that for the first year
of this Agreement, the value of Dr. Patel's average daily collections is One
Thousand ($1,000.00) Dollars. It is further agreed that the value of Dr.
Patel's average daily collections for the second year of this Agreement, and
forward, will be Dr. Patel's actual average daily collections for the year
prior.
3.3 Bonus Compensation. In addition to the base annual compensation
to be paid pursuant to subparagraph 3.1, Dr. Patel shall be entitled to
receive reasonable bonus compensation in such amounts as the Board of
Directors of Employer may determine from. time to time in its sole discretion.
3.4 Fringe Benefits. Employer shall provide Dr. Patel with
those benefits which are set forth on Schedule 3.4, which is attached hereto
and incorporated herein by reference. In addition, Employer shall provide to
Dr. Patel professional liability insurance coverage in the amount of at least
One Million Dollars ($1,000,000.00) for each occurrence with a per annum
aggregate of at least Three Million Dollars ($3,000,000.00). Upon termination
of Dr. Patel's employment for any reason, with or without cause, Employer
shall obtain and maintain a professional liability insurance policy covering
any acts, errors, omissions of Dr. Patel occurring prior to the effective
date of termination of Dr. Patel's employment. The policy obtained shall be
in the nature of "tail" insurance coverage for both Dr. Patel and Employer,
in that it shall cover acts, errors and omissions during the term of the Dr
Patel's employment with Employer. The policy shall be obtained from a
commercial insurer doing business in the Commonwealth of Virginia reasonably
satisfactory to Dr. Patel, and shall contain minimum limits of liability per
occurrence and in the aggregate in amounts not less than the limits of
liability of the professional liability insurance covering Dr. Patel during
the policy period immediately preceding the termination of his employment.
4. Term and Termination.
4.1 Term. This Agreement shall commence on the date set forth
hereinabove and shall be and remain in effect for an initial term of five (5)
years. Thereafter this Agreement shall automatically renew for successive one
(1) year terms upon the same terms and conditions hereof unless written
notice of intent not to renew is given by either party in accordance with
Section 4.2 hereinbelow.
4.2 Voluntary Termination. Either party may terminate this
Agreement by giving at least one hundred twenty (120) days prior written
notice to the other party, which notice shall specify the effective date for
such termination. In the event Employer shall elect to terminate this
Agreement during its term without cause, or Dr. Patel shall elect to
terminate this Agreement during its term for cause, then the non-compete
provisions of Section 5 shall not apply.
4.3 Termination for Cause. Either party shall have the right to
terminate this Agreement for cause by giving at least thirty (30) days prior
written notice to the other party, which notice shall state the cause and
specify the effective date of such termination.
a. Employer. For Employer, "cause" shall include without
limitation (i) a material breach by Dr. Patel of any of his obligations
hereunder or (ii) other good cause determined after a good faith
investigation relating solely to patient care or Dr. Patel's ability to
render services, the existence of which shall be a matter for the final
judgment of Employer in conjunction with the President of Pioneer.
b. Dr. Patel. For Dr Patel "cause" shall include without
limitation a material breach by Employer of any of its obligations hereunder
or a material breach by Pioneer of any of its obligations under that certain
Stock Exchange Agreement by and between Dr Patel and Pioneer dated January
17, 1997.
4.4 Immediate Termination by Employer. Employer may terminate
this Agreement for cause, such termination to be effective immediately upon
provision of notice thereof to Dr. Patel, if Dr. Patel's license to practice
medicine in the Commonwealth of Virginia is revoked, suspended, terminated or
restricted, or if Dr. Patel's credentials at Mt. Regis Center are revoked,
suspended, terminated or restricted.
5. Non-Compete. During the term of this Agreement and for a period
of three (3) years after the termination of this Agreement by Employer for
cause or by Dr. Patel without cause, Dr. Patel shall not, for himself or as a
representative, agent, partner, stockholder, independent contractor, joint
venturer or otherwise:
a. engage, directly or indirectly, in the same or similar
business as Employer or any of its affiliated companies, which relates to
providing professional medical services through employees who are duly
licensed to practice medicine in the Commonwealth of Virginia within a
twenty-five (25) mile radius of the offices of Employer or the Center, or any
other facility acquired or started by Employer or an affiliate, during the
term of this Agreement or any renewals thereof;
b. solicit, directly or indirectly, any patients receiving
treatment from employees of Employer during the term of this Agreement who
are considered to be active patients of Employer at the time, for services
similar to or of the same nature as those provided by Employer, or any
facility acquired or started by Employer, or an affiliate, during the term of
this Agreement;
c. solicit or induce any employee of Employer, Center or
affiliate to terminate his or her position with the Employer, Center or
affiliate; or
d. request, counsel or otherwise advise any patient of
Employer and/or the Center to curtail, cancel or withdraw from treatment with
the Employer and/or the Center, or any facility acquired or started by
Employer, or an affiliate, other than as may be required for the best medical
interests of the patient, as determined in the independent, professional
judgment of Dr. Patel in rendering appropriate care and treatment to the
patient.
For purposes of this Agreement, "patients: shall be defined as
individuals for whom Employer and/or the Center, or any facility acquired or
started by Employer, or an affiliate, presently existing or which may exist
upon the termination of this Agreement provided professional services in the
ordinary course of its business. In addition, the term "affiliate" shall be
defined as any entity possessing or controlling interest in Employer, any
entity owned by Employer or any other entities in which Employer's parent
corporation may have a controlling interest
6. Notices. Any notice permitted or required to be given hereunder
shall be deemed properly given when sent by registered or certified mail,
postage pre-paid, return receipt requested, as follows:
If to Employer, to: Bruce Shear
President
PHC, Inc.
200 Lake Street
Peabody, MA 01960
With a copy to: Philip Cwagenberg, Esq.
Ishbia & Gagleard, P.C.
251 Merrill, Second Floor
Birmingham, Mi 48009
If to Dr. Patel: Dr. M. Patel
Roanoke, Virginia
With a copy to: W. William Gust, Esq.
Gentry Locke Rakes & Moore
10 Franklin Road, SE, Suite 800
P.O. Box 40013
Roanoke, VA 24038-0013
or such other person or address as either party may designate by notice duly
given.
7. Compliance with Applicable Law. It is the parties intention to
comply in all respects with provisions of applicable laws, rules and
regulations governing the health services industry. Accordingly, Dr, Patel
agrees that he shall not, and he shall not permit physician employees
supervised by him to refer patients of Dr. Patel to Employer for the
furnishing of Designated Health Services except as may be permitted by
applicable exemptions or safe harbors or as otherwise permitted under Stark,
In such cases of prohibited referrals, Dr. Patel and Employer shall cooperate
to cause any prescription for a Designated Health Service to bear a legend
stating such prescription shall not be filled by Employer and Dr. Patel
shall, and shall cause any physician employees to, instruct the patient not
to have such prescription filled by Employer or any wholly owned subsidiary
of Employer. Employer shall not fill any prescription bearing such
restrictive legend placed by Dr. Patel and shall use its best efforts not to
furnish any Designated Health Services to patients of Dr. Patel or any
physician employee, except as permitted by applicable exemptions or safe
harbors or as otherwise permitted under Stark.
8. Indemnification.
a. Employer shall indemnify and hold harmless Dr. Patel to the
maximum extent permitted by Virginia law during and after termination of his
employment hereunder against all judgments, settlement payments, costs, and
expenses (including reasonable attorney's fees) and other reasonable expenses
incurred by Dr, Patel in connection with the defense of any action, suit or
proceeding arising from events during or subsequent to the term of Dr.
Patel's employment to which he has been made a party because of the
performance of his duties under this Agreement.
b. Dr. Patel shall indemnify and hold harmless Employer to the
maximum extent permitted by Virginia law during and after termination of his
employment hereunder against all judgments, settlement payments, costs and
expenses (including reasonable attorney fees) and other reasonable expenses
incurred by Employer in connection with the defense of any action, suit or
proceeding arising from events prior to the term of Dr. Patel's employment to
which Employer has been made a party because of the performance of Employer's
duties under this Agreement, or because of Employer's relationship with, or
status with, Dr. Patel. The foregoing notwithstanding, nothing contained in
this Subsection b shall impair Dr. Patel's rights to indemnification under
any collateral or pre-existing agreement with Pioneer or any of its
affiliates, other than Employer, for services rendered on behalf of such
entity or entities.
9. Assignment. Assignment by either party of any rights or
obligations under this Agreement is expressly prohibited without the prior
written consent of the party whose rights and obligations are to be assigned.
10. Severability. Should any provision of this Agreement or
application thereof be held invalid or unenforceable, the remainder of this
Agreement shall not be affected and shall continue to be valid and
enforceable to the fullest extent permitted by law unless to do so would
defeat the purpose of this Agreement.
12. Waiver. The failure by a party at any time to require performance
of any provision of this Agreement shall not constitute a waiver of such
provision and shall not affect the right of such party to require
performance at a later time.
13. Confidentiality. It is the intention of Employer and Dr. Patel
that the confidential information of Employer, as hereinafter defined, shall
remain the sole and exclusive property of Employer. Dr. Patel agrees that
during the term of this Agreement and upon the termination of this Agreement
for any reason, he shall keep in strict confidence all such confidential
information. Dr Patel agrees that he shall not, directly or indirectly, use,
publish, communicate, divulge or disclose to any person or business entity
any confidential information or assist any third parties in doing so, without
the prior written consent of Employer.
For purposes of this Agreement, "confidential information" shall be
defined as the Employer's proprietary information or information which, from
the circumstances, in good faith and conscience, should be treated as
confidential, which includes, but is not limited to, information regarding
Employer's trade secrets, prices, costs, charges, patient lists, or other
information regarding the Employer's business affairs which Dr. Patel may
acquire in connection with, incident to, or as a result of the performance of
his duties under this Agreement.
Confidential information shall not include information which (I)
becomes generally available to the public other than as a result of
disclosure by Dr. Patel (ii) was legally available to Dr. Patel on a
non-confidential basis prior to its disclosure by Employer; or (iii) becomes
legally available to Dr. Patel on a non-confidential basis from a source
other than Employer, provided that such source is not bound by a
confidentiality or similar agreement.
In the event that Dr. Patel shall become legally compelled to disclose
all or part of the confidential information, Dr Patel agrees to promptly
notify Employer, in writing, of such situation so that Employer may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. In such instance, Dr. Patel agrees that he
shall only reveal that portion of the confidential information which he is
legally required to reveal and obtain reasonable assurance that the
confidential information will be treated by the recipient thereof as
confidential.
Dr. Patel agrees, upon demand by Employer, to promptly return all
confidential information which has been furnished to him and all copies
thereof. Dr. Patel further agrees that he shall, upon request from Employer,
destroy all material, notes and other work product related in any way to the
confidential information.
14. Amendment. This Agreement, along with the Stock Exchange
Agreement of January 17, 1997, represent the entire agreement and
understanding between the parties with respect to the subject matter hereof
and may not be amended except by the written agreement of the parties.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
16. Counterparts. This Agreement may be executed it, two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument
17. Attorney's Fees and Costs. In connection with any litigation with
respect to this Agreement, the prevailing party, to the greatest quantifiable
extent, shall be entitled to recover its expenses, including reasonable
attorneys' fees and costs, in connection with such litigation, including
appellate proceedings and post-judgment proceedings.
18. Post-Employment Responsibilities. Upon Dr. Patel's termination
of employment with Employer, and notwithstanding anything contained in this
Agreement to the contrary, the parties agree as follows relative to the
post-employment responsibilities of the parties.
a. Upon termination of this Agreement for any reason, Dr.
Patel shall promptly surrender to Employer all assets, belonging to Employer,
together with all goods, monies, receipts, keys, documents, credit cards and
other written documents owned by or pertaining to Employer, presently
existing or which may exist upon the termination of this Agreement.
b. Dr. Patel shall be entitled to remove all of his personal
belongings, effects and property which may be located at the offices of
Employer or at the Center or which are in the possession of Employer and/or
the Center, presently existing or which may exist upon the termination of
this Agreement.
IN WITNESS WHEREOF, the parties hereunto set their hands to this
Agreement as of the day and year first written above.
PSYCHIATRIC & COUNSELING
ASSOCIATES OF ROANOKE, INC
By:_____________________________
Title:____________________________
________________________________
MUKESH PATEL, M.D.
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of this 1st day
of January, 1997, with an effective date of January 1, 1997, by and between
PSYCHIATRIC & COUNSELING ASSOCIATES OF ROANOKE, INC., a Virginia corporation
(hereinafter referred to as "Employer"), and HIMANSHU PATEL M.D., a physician
licensed to practice medicine in the Commonwealth of Virginia (hereinafter
referred to as "Dr. Patel").
W I T N E S S E T H:
WHEREAS, Employer is a Virginia corporation which renders professional
psychiatric counseling services through employees who are duly licensed to
practice medicine in the Commonwealth of Virginia;
WHEREAS, Employer is a wholly-owned subsidiary of Pioneer Healthcare of
Virginia, Inc., a Virginia corporation ("Pioneer"), which is in the business
of owning and operating mental health inpatient facilities as well as mental
health counseling professional practices, and providing consulting
administrative and other support services to medical practices with the
necessary facilities, equipment, non-physician personnel, supplies and
non-physician support staff services;
WHEREAS Dr. Patel desires to be employed by Employer so that he may
devote his best efforts on a concentrated and continuous basis to the
rendering of medical services to patients; and
WHEREAS, Employer desires to employ Dr. Patel, and Dr. Patel desires to
be employed by Employer, on the terms and conditions provided herein.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, as well as the initial sum of Twenty Five Thousand and
00/100 Dollars ($25,000.00) to be paid on the effective date of this
Agreement for Dr. Patel's agreement not to compete in accordance with the
provisions of Section 5 herein, the parties agree as follows:
1. Employment
1.1 Engagement and Acceptance. Employer hereby employs, engages, and
hires Dr. Patel, and Dr. Patel hereby accepts and agrees to such hiring,
engagement, and employment, to render medical services exclusively for
Employer to patients of Employer. Dr. Patel agrees to perform all duties and
services in accordance with all policies and procedures established by
Employer, all federal, state and local laws and ordinances, and all
applicable rules of professional conduct.
1.2 Licensure. Dr. Patel shall, as of the date of this Agreement, be
licensed to practice medicine in the Commonwealth of Virginia and shall be
certified by the American Board of Psychiatry and Neurology, and shall,
throughout the term of this Agreement, maintain his license and privileges to
render medical services in the Commonwealth of Virginia.
1.3 Duties. During the term of this Agreement, Dr. Patel shall
perform such duties as may be assigned to Dr. Patel by Employer and/or by
Pioneer from time to time including, but not limited to those duties
described herein. Dr. Patel shall, as part of his duties, provide clinical
and administrative services at the offices of Employer and/or at Mount Regis
Center (the "Center"), including, but not limited to service as the Medical
Director of Employer's outpatient clinics, or at such other locations as may
be designated from time to time by Employer, at reasonable times to be set by
Employer, exclusively.
a. Dr. Patel's duties shall include the provision of on call
coverage 24 hours a day on a rotational basis pursuant to a coverage schedule
to be set by Employer. Dr. Patel shall perform such duties under the
supervision and direction of the President of Employer.
b. The duties of Dr. Patel will be varied and may range from
direct care, including treatment of inpatients and partially hospitalized
patients at the Center, or outpatients at the offices of Employer, or at a
site designated by Employer, as described herein, to providing medication
reviews. psychiatric evaluations and supervision at community agencies.
Marketing arid administrative duties may also be part of the duties of Dr.
Patel.
1.4 Equipment and Material. Employer shall supply to Dr Patel all
equipment and materials which Dr. Patel deems to be necessary for performance
of his duties hereunder, which are customary in the clinical and
administrative practice of psychiatry. All equipment and materials provided
Dr. Patel shall belong to Employer.
1.5 Exclusive Employment. Dr. Patel, during the term of this
agreement. will not, without the express prior written consent of Employer
(or Pioneer if applicable) accept employment or practice medicine at a health
care facility or in a health care setting other than at the offices of
Employer or at the Center or at such other locations as may be designated
from time to time by Employer.
1.6 Medical Standards. During the term of this Agreement Dr, Patel
shall use his best efforts in the performance of his duties under this
Agreement in accordance with the rules and regulations of Employer and of
the medical staff of the Center and the applicable standards for the medical
profession, and all such service shall be performed in compliance with all
federal, state and local laws, ordinances and regulations.
1.7 Good Standing. Dr. Patel shall at all times during the term of
this Agreement:
a. Be a member in good standing on the medical staff of the
Center with appropriate privileges in Psychiatry, or any other hospital
designated by Employer;
b. Be board certified in Psychiatry or be eligible for and
actively pursuing such certification; and
c. Be, and remain, a participating provider in the Medicare
and Medicaid programs (Titles XVIII and XIX of the Social Security Act,
respectively), and with any managed care program with which Employer and/or
the Center is now or hereafter becomes affiliated.
1.8 Staff Privileges. This Agreement is not and should not be
construed as any form of guarantee or assurance that Dr. Patel will receive
necessary medical staff membership or privileges at the Center for purposes
of discharging his responsibilities hereunder, and the application,
appointment, reappointment and granting of such privileges shall be governed
solely by the Medical Staff Bylaws of the Center then in effect. Dr. Patel
represents and warrants, that he possesses the professional skills and
training necessary to perform the services which he is to perform hereunder.
1.9 Applicable Rules and Regulations. Dr. Patel shall provide
services under this Agreement in accordance with all quality standards
established, from time to time by the Employer and by the Center for its
medical staff and in compliance with all applicable statutes, regulations,
rules, and directives of federal, state and other governmental and
regulatory bodies having jurisdiction over the Employer and/or Center; the
Bylaws, rules and regulations of the Center and its medical staff, applicable
standards of the Joint Commission on Accreditation of Healthcare
Organizations; the rules, regulations and requirements of third party payors;
and current accepted and approved methods and practices applicable to the
practice of Psychiatry.
1.10 Loss of Privileges or Licensure.
(a) Should Dr. Patel's license to practice medicine in the
Commonwealth of Virginia, be suspended, revoked or canceled, then, effective
as of the date of the suspension, revocation or cancellation of such license,
Employer may terminate this Agreement, effective immediately.
(b) Should Dr. Patel's medical staff privileges on the medical
staff of the Center be restricted or made subject to supervision in
accordance with the applicable medical staff bylaws, rules and regulations or
comparable rules, regulations, or policies applicable to the practice of
physicians, then Dr. Patel may continue to render services hereunder only in
accordance with such restriction or supervision as approved by Employer. If
Employer determines, in its sole discretion, that imposition of such
restriction or supervision of Dr. Patel's privileges unreasonably interferes
with the performance of Dr. Patel's duties under this Agreement, Employer may
terminate this Agreement, effective immediately.
1.11 Peer Review. Dr. Patel shall participate in such department
meetings, quality management and other peer review activities as required by
Employer and/or the Center.
1.12 Maintenance of Skills. Throughout the term of this agreement, Dr
Patel agrees to maintain his professional skills as evidenced by
participation in appropriate continuing medical education activities and will
maintain good standing in professional associations. Employer shall provide
Dr. Patel with an annual amount of Two Thousand ($2,000.00) Dollars per year
for the purpose of deferring the cost of continuing medical education, which
may only be used for events, seminars, etc. with the prior express approval
of Employer. Any expenses in excess of the annual allowance shall be borne by
Dr. Patel.
1.13 Administrative Duties. During the term of this Agreement, Dr.
Patel shall perform such duties as may be assigned to Dr. Patel by Employer
and/or Pioneer from time to time including, but not limited to, those duties
described below. Dr. Patel shall, as part of his duties, provide clinical and
administrative services at the Center or at such other locations as may be
designated from time to time by Employer. The performance of such duties may
require travel and may also require Dr, Patel to be directly involved in the
development of marketing and business development strategies in conjunction
with certain administrative employees of the Employer and/or Pioneer. Except
with regard to duties assigned by Pioneer, Dr. Patel shall perform all such
administrative duties under the supervision and direction of the President of
Employer. All medical decisions relative to patient care shall be made by
Dr. Patel and shall be in accordance with appropriate standards of medical
practice. All expenses incurred by Dr. Patel in carrying out the
administrative/marketing duties assigned to him during the term of this
Agreement shall be paid directly or reimbursed by the Employer or Pioneer as
appropriate.
1.14 Full Time and Best Efforts. During the term of this Agreement Dr.
Patel shall be employed full time by Employer and shall use his best efforts
in the performance of his duties under this Agreement. Dr. Patel acknowledges
that the obligations incumbent upon Dr. Patel under this Agreement shall
constitute the primary claim upon his professional time, effort, energy and
skill and agrees to undertake no additional professional. obligations without
obtaining the prior written consent of the President of Employer.
1.15 Assignment. Employer shall, in the name of and on behalf of Dr,
Patel, bill patients, insurance companies and other third-party payers and
collect the professional fees for medical services rendered by Dr. Patel
under the terms of this agreement. Dr. Patel hereby appoints Employer for the
term of this Agreement to be his true and lawful attorney in-fact, for the
following purposes. (i) to bill patients, insurance companies and other
third-party payers in Dr. Patel's name and on his behalf; (ii) to collect
accounts receivable resulting from such billing in Dr. Patel's name and on
his behalf; (iii) to receive on behalf of Dr. Patel payments from insurance
companies, prepayments from health care plans, reimbursements from Medicare
and Medicaid, and all other third-party payments from insurance companies;
(iv) to take possession of and endorse in the name of Dr. Patel any notes,
checks, money orders, insurance payments, and other instruments received in
payment of accounts receivable; and (v) to initiate the institution of legal
proceedings in the name of Dr. Patel to collect any accounts and monies owed
to Dr. Patel, to enforce the rights of Dr. Patel as creditor under any
contract or in connection with the rendering of any service, and to contest
adjustments and denials by governmental agencies (or their fiscal
intermediaries) as third-party payers. All monies shall be accounted for by
Employer as being directly attributable to Dr. Patel. Dr. Patel may perform
the functions or exercise the rights set forth in this Section only with the
consent of Employer. Dr. Patel shall execute a Power of Attorney in form and
substance acceptable to the parties hereto in connection with the rights and
powers granted to Employer pursuant to Section 2. Dr Patel shall cooperate
with and at the request of Employer shall provide reasonable assistance to
Employer with the functions set forth herein. In the performance of the
services described in this Section 1, Employer shall use commercially
reasonable efforts to collect such professional fees and shall comply with
all managed care contracts and all applicable laws, rules and regulations.
1.16 Records and Reports. Dr. Patel shall complete medical records in
a timely and legible fashion as required by applicable laws and in keeping
with generally accepted standards of record keeping and documentation, and as
required by third party payors to permit billing for and collection of
revenues for professional services rendered, and shall maintain and furnish
Employer with such records, reports and documentation evidencing the
performance of Dr. Patel's duties hereunder as may be requested by Employer
in accordance with applicable law.
2. Obligations of Employer.
2.1 Overall Function. Employer shall provide or arrange for such
services and amenities as are necessary or appropriate for the efficient
medical practice of Dr. Patel pursuant to this Agreement. Employer shall
comply, and shall use its best efforts to cause its employees to comply, with
all applicable federal, state and local laws, rules and regulations in its
provision or services hereunder.
2.2 General Administrative Services.
a. Employer shall provide management and administration of
non-physician services relating to the medical practice of Dr. Patel, subject
to matters reserved for Dr. Patel. Dr. Patel acknowledges that a purpose of
this Agreement is to relieve Dr. Patel to the maximum extent possible of the
administrative, accounting, purchasing, non-physician personnel, and other
aspects of his practice. Except as may be otherwise agreed to by the parties,
Employer agrees that Dr. Patel, and only Dr. Patel, will perform the medical
functions of his practice. Employer shall have no authority directly or
indirectly, to perform or supervise and shall not perform or supervise any
medical function performed by Dr. Patel. Employer may, however, advise Dr.
Patel as to the relationship between his performance of medical functions and
the overall administrative and business functions of his practice, to the
extent permitted by applicable law.
b. Employer shall supply to Dr. Patel the ordinary, necessary,
and appropriate services for the efficient operation of Dr. Patel's practice,
including without limitation, necessary clerical, accounting, purchasing,
payroll, legal, bookkeeping and computer services, information management,
printing, postage and duplication services and medical transcribing services;
c. Employer shall maintain all files and records relating to
the medical practice of Dr Patel, including but not limited to, accounting,
billing, collection, and financial records and patient files and medical
records. The management of all files and records shall comply with all
applicable federal, state and local statutes and regulations, and all patient
files and medical records shall be located so that they are readily
accessible for patient care, consistent with ordinary records management
practices. Dr. Patel shall supervise the preparation of, and direct the
contents of, patient medical records, all of which shall remain confidential
in accordance with applicable laws and regulations. All original patient
records shall be and remain the property of Employer, subject to applicable
Virginia law.
d. Employer shall take such legal and appropriate actions in
the name of and on behalf of Dr Patel as are required to collect professional
fees and pay in a timely manner all expenses associated with Dr. Patel's
medical practice, which are the responsibility of Employer, pursuant to this
Agreement, except as otherwise agreed in writing between Employer arid Dr.
Patel.
e. Employer shall distribute to Dr Patel compensation and
other amounts due to him pursuant to this Agreement upon such terms and at
such times as are provided in Section 3 hereof.
f. Employer shall not refer a patient for Designated Health
Services as defined in 42 U.S.C. 1395 ("Stark") to or provide Designated
Health Services to a patient upon a referral from an entity or person with
which the physician or an immediate family member has a financial
relationship other than as permitted by exceptions set forth in Stark.
2.3 Facilities.
a. Premises. Employer shall make available to Dr. Patel within
Employer's offices and at the Center, an office in which to practice.
Provided. that in the event that Employer's rights to use any such premises
shall terminate, Employer shall use its best efforts to provide other
suitable premises to be used by Dr. Patel. Employer shall maintain the
premises and make all necessary repairs thereto. Dr. Patel shall use and
occupy the premises provided to him by Employer or the Center exclusively for
the practice of medicine and for providing other related services. It is
expressly acknowledged by the parties hereto that the medical practice
conducted by Dr. Patel shall be conducted solely by Dr. Patel. Dr. Patel
shall be solely and exclusively in control of all aspects of the practice of
medicine and the delivery of medical services at the Center. The rendition of
all therapy, the prescription of medicine and drugs, and the supervision and
preparation of medical reports shall be the sole responsibility of Dr. Patel.
b. Personal Property. Employer shall provide Dr. Patel with
the use of the equipment, furniture, fixtures, furnishing and other personal
property acquired by Employer for the use of Dr. Patel pursuant to the terms
hereof (the "Personal Property"). Employer shall, at all times, maintain the
Personal Property in good condition.
2.4 Inventory and Supplies. Employer shall order and purchase
inventory and supplies, and such other ordinary, necessary or appropriate
materials which arc necessary to the practice of Dr. Patel.
2.5 Advertising and Public Relations. With the consultation and
prior consent of Dr. Patel, Employer shall implement (and design where
requested) any appropriate local public relations or advertising program on
behalf of Dr. Patel, with appropriate emphasis on public awareness of the
availability of Dr. Patel's services, as Employer deems appropriate in its
sole and absolute discretion. Employer shall also design and implement all
national or other non-local public relations or advertising programs on
behalf of Dr. Patel, as Employer with Dr. Patel's consultation and consent,
deems appropriate. The parties hereto agree that all public relations and
advertising programs shall be conducted in compliance with applicable
standards of medical ethics, laws, and regulations.
2.6 Personnel. Employer, as Employer deems appropriate in its
sole and absolute discretion, shall provide professional support and
administrative, clerical, secretarial, bookkeeping and collection personnel
as reasonably necessary for the efficient conduct of Dr. Patel's practice.
Such personnel shall be employees of Employer, and Employer shall determine
and cause to be paid the salaries and benefits of all such personnel. If Dr.
Patel is dissatisfied with the services of any such personnel who provide
services primarily for Dr. Patel, Dr. Patel shall consult with the
appropriate administrator of Employer, and Employer shall in good faith
determine whether the performance of that employee could be brought to
acceptable levels through counsel and assistance, or whether such employee
should be re-assigned or terminated, Employer shall maintain established
working relationships whenever possible and Employer shall make every effort
consistent with sound business practices to honor the specific requests of
Dr. Patel with regard to the assignment of Employer's employees.
2.7 Quality Assurance. Employer shall assist Dr. Patel as
required in fulfilling his professional obligation to his patients to
maintain a high quality of medical and professional services. Employer
recognizes and respects the professional capabilities of Dr. Patel and
acknowledges that nothing in this Agreement is intended to interfere with the
exercise of Dr. Patel's independent professional medical judgment.
3. Compensation.
3.1 Annual Remuneration.
(a) For services rendered during the term of this Agreement and
any renewals thereof, Dr. Patel shall be paid an annual salary which shall be
payable in bi-weekly installments during each calendar month, in accord with
Employer's standard payroll practice.
(1) During the first year that this Agreement is in
effect, Dr. Patel shall be paid for services rendered pursuant to this
Agreement an annual salary in the amount of Two Hundred Thousand Dollars
($200,000.00).
(2) For each subsequent year that this Agreement is in
effect and during any renewal thereof, the annual salary paid to Dr. Patel
shall be as described in Exhibit 3.1, or any amendment thereto.
3.2 Services Performed for Pioneer. Any additional professional
duties or services performed for or provided by Dr. Patel to Pioneer or any
affiliates (other than Employer) that is not directly related to Dr. Patel's
responsibilities, during the term of this Agreement, or any renewal thereof
shall be valued on a daily basis at Dr. Patel's then current, average daily
collections and shall be credited towards the amount of Joint Collections
for the year during which such services were performed or provided as if they
were fully collected professional fees. It is agreed that for the first year
of this Agreement, the value of Dr. Patel's average daily collections is One
Thousand ($1,000.00) Dollars. It is further agreed that the value of Dr.
Patel's average daily collections for the second year of this Agreement, and
forward, will be Dr. Patel's actual average daily collections for the year
prior.
3.3 Bonus Compensation. In addition to the base annual compensation
to be paid pursuant to subparagraph 3.1, Dr. Patel shall be entitled to
receive reasonable bonus compensation in such amounts as the Board of
Directors of Employer may determine from. time to time in its sole discretion.
3.4 Fringe Benefits. Employer shall provide Dr. Patel with
those benefits which are set forth on Schedule 3.4, which is attached hereto
and incorporated herein by reference. In addition, Employer shall provide to
Dr. Patel professional liability insurance coverage in the amount of at least
One Million Dollars ($1,000,000.00) for each occurrence with a per annum
aggregate of at least Three Million Dollars ($3,000,000.00). Upon termination
of Dr. Patel's employment for any reason, with or without cause, Employer
shall obtain and maintain a professional liability insurance policy covering
any acts, errors, omissions of Dr. Patel occurring prior to the effective
date of termination of Dr. Patel's employment. The policy obtained shall be
in the nature of "tail" insurance coverage for both Dr. Patel and Employer,
in that it shall cover acts, errors and omissions during the term of the Dr
Patel's employment with Employer. The policy shall be obtained from a
commercial insurer doing business in the Commonwealth of Virginia reasonably
satisfactory to Dr. Patel, and shall contain minimum limits of liability per
occurrence and in the aggregate in amounts not less than the limits of
liability of the professional liability insurance covering Dr. Patel during
the policy period immediately preceding the termination of his employment.
4. Term and Termination.
4.1 Term. This Agreement shall commence on the date set forth
hereinabove and shall be and remain in effect for an initial term of five (5)
years. Thereafter this Agreement shall automatically renew for successive one
(1) year terms upon the same terms and conditions hereof unless written
notice of intent not to renew is given by either party in accordance with
Section 4.2 hereinbelow.
4.2 Voluntary Termination. Either party may terminate this
Agreement by giving at least one hundred twenty (120) days prior written
notice to the other party, which notice shall specify the effective date for
such termination. In the event Employer shall elect to terminate this
Agreement during its term without cause, or Dr. Patel shall elect to
terminate this Agreement during its term for cause, then the non-compete
provisions of Section 5 shall not apply.
4.3 Termination for Cause. Either party shall have the right to
terminate this Agreement for cause by giving at least thirty (30) days prior
written notice to the other party, which notice shall state the cause and
specify the effective date of such termination.
a. Employer. For Employer, "cause" shall include without
limitation (I) a material breach by Dr. Patel of any of his obligations
hereunder or (ii) other good cause determined after a good faith
investigation relating solely to patient care or Dr. Patel's ability to
render services, the existence of which shall be a matter for the final
judgment of Employer in conjunction with the President of Pioneer.
b. Dr. Patel. For Dr Patel "cause" shall include without
limitation a material breach by Employer of any of its obligations hereunder
or a material breach by Pioneer of any of its obligations under that certain
Stock Exchange Agreement by and between Dr Patel and Pioneer dated January 1,
1997.
4.4 Immediate Termination by Employer. Employer may terminate
this Agreement for cause, such termination to be effective immediately upon
provision of notice thereof to Dr. Patel, if Dr. Patel's license to practice
medicine in the Commonwealth of Virginia is revoked, suspended, terminated or
restricted, or if Dr. Patel's credentials at Mt. Regis Center are revoked,
suspended, terminated or restricted.
5. Non-Compete. During the term of this Agreement and for a period
of three (3) years after the termination of this Agreement by Employer for
cause or by Dr. Patel without cause, Dr. Patel shall not, for himself or as a
representative, agent, partner, stockholder, independent contractor, joint
venturer or otherwise:
a. engage, directly or indirectly, in the same or similar
business as Employer or any of its affiliated companies, which relates to
providing professional medical services through employees who are duly
licensed to practice medicine in the Commonwealth of Virginia within a
twenty-five (25) mile radius of the offices of Employer or the Center, or any
other facility acquired or started by Employer or an affiliate, during the
term of this Agreement or any renewals thereof;
b. solicit, directly or indirectly, any patients receiving
treatment from employees of Employer during the term of this Agreement who
are considered to be active patients of Employer at the time, for services
similar to or of the same nature as those provided by Employer, or any
facility acquired or started by Employer, or an affiliate, during the term of
this Agreement;
c. solicit or induce any employee of Employer, Center or
affiliate to terminate his or her position with the Employer, Center or
affiliate; or
d. request, counsel or otherwise advise any patient of
Employer and/or the Center to curtail, cancel or withdraw from treatment with
the Employer and/or the Center, or any facility acquired or started by
Employer, or an affiliate, other than as may be required for the best medical
interests of the patient, as determined in the independent, professional
judgment of Dr. Patel in rendering appropriate care and treatment to the
patient.
For purposes of this Agreement, "patients: shall be defined as
individuals for whom Employer and/or the Center, or any facility acquired or
started by Employer, or an affiliate, presently existing or which may exist
upon the termination of this Agreement provided professional services in the
ordinary course of its business. In addition, the term "affiliate" shall be
defined as any entity possessing or controlling interest in Employer, any
entity owned by Employer or any other entities in which Employer's parent
corporation may have a controlling interest
6. Notices. Any notice permitted or required to be given hereunder
shall be deemed properly given when sent by registered or certified mail,
postage pre-paid, return receipt requested, as follows:
If to Employer, to: Bruce Shear
President
PHC, Inc.
200 Lake Street
Peabody, MA 01960
With a copy to: Philip Cwagenberg, Esq.
Ishbia & Gagleard, P.C.
251 Merrill, Second Floor
Birmingham, Mi 48009
If to Dr. Patel: Dr. M. Patel
Roanoke, Virginia
With a copy to: W. William Gust, Esq.
Gentry Locke Rakes & Moore
10 Franklin Road, SE, Suite 800
P.O. Box 40013
Roanoke, VA 24038-0013
or such other person or address as either party may designate by notice duly
given.
7. Compliance with Applicable Law. It is the parties intention to
comply in all respects with provisions of applicable laws, rules and
regulations governing the health services industry. Accordingly, Dr, Patel
agrees that he shall not, and he shall not permit physician employees
supervised by him to refer patients of Dr. Patel to Employer for the
furnishing of Designated Health Services except as may be permitted by
applicable exemptions or safe harbors or as otherwise permitted under Stark,
In such cases of prohibited referrals, Dr. Patel and Employer shall cooperate
to cause any prescription for a Designated Health Service to bear a legend
stating such prescription shall not be filled by Employer and Dr. Patel
shall, and shall cause any physician employees to, instruct the patient not
to have such prescription filled by Employer or any wholly owned subsidiary
of Employer. Employer shall not fill any prescription bearing such
restrictive legend placed by Dr. Patel and shall use its best efforts not to
furnish any Designated Health Services to patients of Dr. Patel or any
physician employee, except as permitted by applicable exemptions or safe
harbors or as otherwise permitted under Stark.
8. Indemnification.
a. Employer shall indemnify and hold harmless Dr. Patel to the
maximum extent permitted by Virginia law during and after termination of his
employment hereunder against all judgments, settlement payments, costs, and
expenses (including reasonable attorney's fees) and other reasonable expenses
incurred by Dr, Patel in connection with the defense of any action, suit or
proceeding arising from events during or subsequent to the term of Dr.
Patel's employment to which he has been made a party because of the
performance of his duties under this Agreement.
b. Dr. Patel shall indemnify and hold harmless Employer to the
maximum extent permitted by Virginia law during and after termination of his
employment hereunder against all judgments, settlement payments, costs and
expenses (including reasonable attorney fees) and other reasonable expenses
incurred by Employer in connection with the defense of any action, suit or
proceeding arising from events prior to the term of Dr. Patel's employment to
which Employer has been made a party because of the performance of Employer's
duties under this Agreement, or because of Employer's relationship with, or
status with, Dr. Patel. The foregoing notwithstanding, nothing contained in
this Subsection b shall impair Dr. Patel's rights to indemnification under
any collateral or pre-existing agreement with Pioneer or any of its
affiliates, other than Employer, for services rendered on behalf of such
entity or entities.
9. Assignment. Assignment by either party of any rights or
obligations under this Agreement is expressly prohibited without the prior
written consent of the party whose rights and obligations are to be assigned.
10. Severability. Should any provision of this Agreement or
application thereof be held invalid or unenforceable, the remainder of this
Agreement shall not be affected and shall continue to be valid and
enforceable to the fullest extent permitted by law unless to do so would
defeat the purpose of this Agreement.
12. Waiver. The failure by a party at any time to require performance
of any provision of this Agreement shall not constitute a waiver of such
provision and shall not affect the right of such party to require
performance at a later time.
13. Confidentiality. It is the intention of Employer and Dr. Patel
that the confidential information of Employer, as hereinafter defined, shall
remain the sole and exclusive property of Employer. Dr. Patel agrees that
during the term of this Agreement and upon the termination of this Agreement
for any reason, he shall keep in strict confidence all such confidential
information. Dr Patel agrees that he shall not, directly or indirectly, use,
publish, communicate, divulge or disclose to any person or business entity
any confidential information or assist any third parties in doing so, without
the prior written consent of Employer.
For purposes of this Agreement, "confidential information" shall be
defined as the Employer's proprietary information or information which, from
the circumstances, in good faith and conscience, should be treated as
confidential, which includes, but is not limited to, information regarding
Employer's trade secrets, prices, costs, charges, patient lists, or other
information regarding the Employer's business affairs which Dr. Patel may
acquire in connection with, incident to, or as a result of the performance of
his duties under this Agreement.
Confidential information shall not include information which (I)
becomes generally available to the public other than as a result of
disclosure by Dr. Patel (ii) was legally available to Dr. Patel on a
non-confidential basis prior to its disclosure by Employer; or (iii) becomes
legally available to Dr. Patel on a non-confidential basis from a source
other than Employer, provided that such source is not bound by a
confidentiality or similar agreement.
In the event that Dr. Patel shall become legally compelled to disclose
all or part of the confidential information, Dr Patel agrees to promptly
notify Employer, in writing, of such situation so that Employer may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. In such instance, Dr. Patel agrees that he
shall only reveal that portion of the confidential information which he is
legally required to reveal and obtain reasonable assurance that the
confidential information will be treated by the recipient thereof as
confidential.
Dr. Patel agrees, upon demand by Employer, to promptly return all
confidential information which has been furnished to him and all copies
thereof. Dr. Patel further agrees that he shall, upon request from Employer,
destroy all material, notes and other work product related in any way to the
confidential information.
14. Amendment. This Agreement, along with the Stock Exchange
Agreement of January 1, 1997, represent the entire agreement and
understanding between the parties with respect to the subject matter hereof
and may not be amended except by the written agreement of the parties.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
16. Counterparts. This Agreement may be executed it, two or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument
17. Attorney's Fees and Costs. In connection with any litigation with
respect to this Agreement, the prevailing party, to the greatest quantifiable
extent, shall be entitled to recover its expenses, including reasonable
attorneys' fees and costs, in connection with such litigation, including
appellate proceedings and post-judgment proceedings.
18. Post-Employment Responsibilities. Upon Dr. Patel's termination
of employment with Employer, and notwithstanding anything contained in this
Agreement to the contrary, the parties agree as follows relative to the
post-employment responsibilities of the parties.
a. Upon termination of this Agreement for any reason, Dr.
Patel shall promptly surrender to Employer all assets, belonging to Employer,
together with all goods, monies, receipts, keys, documents, credit cards and
other written documents owned by or pertaining to Employer, presently
existing or which may exist upon the termination of this Agreement.
b. Dr. Patel shall be entitled to remove all of his personal
belongings, effects and property which may be located at the offices of
Employer or at the Center or which are in the possession of Employer and/or
the Center, presently existing or which may exist upon the termination of
this Agreement.
IN WITNESS WHEREOF, the parties hereunto set their hands to this
Agreement as of the day and year first written above.
PSYCHIATRIC & COUNSELING
ASSOCIATES OF ROANOKE, INC
By:_____________________________
Title:____________________________
________________________________
HIMANSHU PATEL, M.D.
F:\DATA\PIONEER\PATEL\EMPLOYME\HPATEL6.AGT
<PAGE>
Exhibit 3.1
Salary Increases
The parties hereto acknowledge and agree that annual salary increases
are a function to several factors, including but not limited to, (1) the
joint collected revenues from the clinical practices of Dr. M. Patel and Dr.
H. Patel; (2) the Joint Costs and Expenses associated with supporting those
practices as determined by generally accepted accounting principles; and,
(3) agreed to minimum requirements. There are no annual salary increases if
the joint collected revenues of Dr. M. Patel and Dr. H. Patel do not exceed,
jointly, Five Hundred Thousand ($500,000.00) Dollars for the immediate past
contract year.
If the joint collections do exceed $500,000.00 then the annual salary
increase is determined as:
Joint Annual Increase = (Joint Collections) - (Joint Costs and Expenses)
2
By way of example, assume that Joint Collections during year 1 were
$575,000.00. Further, assume that Joint Practice Costs and Expenses were
$480,000.00. Then the year two combined salary increase would be:
$47,500 = ($575,000.00 - $480,000.00)
2
Dr. M. Patel and Dr. H. Patel would share, equally, in a $47,500.00
joint salary increase. Payment per physician would be, as follows: 50% of
the joint increase in cash, in equal installments as per Employer's standard
payroll policy and 50% in PHC, Inc. Common stock. In year 2 Dr. M. Patel and
Dr. H. Patel would, under this example, each have an annual salary of
$223,750.00.
It is further acknowledged and agreed by the parties that for any and
all amounts earned by Dr. Patel, payable in the form of Class A Common Stock
of PHC, Inc., payment of those shares will be as follows:
(a) Unrestricted Common Stock: Payment to Dr. Patel may be made in
the form of unrestricted shares of Class A Common Stock of PHC, Inc., in the
amounts earned per Paragraph 3.1 of this Agreement, at the time that the
payment is earned.
(b) Restricted Common Stock and Cash: If Employer, or its parent or
affiliate, is unable to issue unrestricted PHC, Inc., Class A Common Stock,
because none is immediately available for transfer to Dr. Patel for payment
of the amounts earned under Paragraph 3.1 of this Agreement, and PHC, Inc.,
will not be registering any additional shares of its Class A Common Stock
prior to the time that Dr. Patel is required by law to make any income tax
payment for the amounts earned under Paragraph 3.1 of this Agreement, then
Employer will make payment to Dr. Patel by paying to the Dr. Patel:
(1) Fifty (50%) percent of the amount earned under Paragraph
3.1 of this Agreement, in restricted Class A Common Stock of PHC, Inc., and,
(2) The fair market value, as determined by the closing bid
price on the day that the amounts are earned under Paragraph 3.1 of this
Agreement, of fifty (50%) percent of the number of shares Dr. Patel earned
under Paragraph 3.1 of this Agreement.
<PAGE>
Exhibit 3.4
Fringe Benefits
1. Health Insurance. Fully paid major medical health insurance
coverage for physician and immediate family members.
2. Dental Insurance.
3. Life Insurance. Employer sponsored policy equal to one times
salary, up to $50,000.00.
4. Vacation.
(a) Employee is provided with four (4) weeks and five (5) weeks
paid vacation time in alternating years.
(b) In addition to the vacation described above, Employee is
granted one (1) week annually for continuing medical education purposes per
Paragraph 1.12 of the Agreement.
Prior to scheduling any vacation time or CME time, Employee must seek
and obtain the advanced consent and approval of Employer as to the times and
date scheduled and as to clinical and administrative coverage for Employee
during his absence. Employer will not unreasonably withhold its consent and
approval. This advance approval is in addition to any advance approval
necessary for CME, as per Paragraph 1.12 of the Agreement.
5. 401K. Non contributory plan administered by HRC-ARMCO.
6. Additional benefits. Direct deposit, section 125 cafeteria plan,
tuition assistance, employee assistance program, and employee stock purchase
plan.
7. Automobile Allowance. Monthly payments of $250.00 cash to
reimburse for use of personal automobile.
<PAGE>
Exhibit 10.108
PLAN OF MERGER
THIS PLAN OF MERGER made and entered into as of this ____ day of
January, 1997, by and between PIONEER COUNSELING OF VIRGINIA, INC., a
Massachusetts Corporation (hereinafter referred to as "Surviving
Corporation") and PSYCHIATRIC & COUNSELING ASSOCIATES OF ROANOKE, INC., a
Virginia Corporation (hereinafter referred to as "Psychiatric Associates").
W I T N E S S E T H:
THAT WHEREAS, the Boards of Directors of Psychiatric Associates and
Surviving Corporation have resolved that Psychiatric Associates be merged
under and pursuant to the laws of the Commonwealth of Massachusetts and the
Commonwealth of Virginia, into a single corporation existing under the laws
of the Commonwealth of Massachusetts, to-wit: Surviving Corporation shall be
the surviving corporation with the transaction qualifying as a reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986;
WHEREAS, the authorized capital stock of Psychiatric Associates
consists of Five Thousand (5,000) shares of common stock with no par value
per share (hereinafter referred to "Psychiatric Associates Common Stock"), of
which One Hundred (100) shares are issued and outstanding; WHEREAS, the
authorized capital stock of Surviving Corporation consists of Two Hundred
Thousand (200,000) shares of common stock with a par value of one cent ($.01)
per share (hereinafter referred to as "Surviving Corporation Common Stock"),
_____________ ( ) shares of which are issued and outstanding; and
WHEREAS, the respective Boards of Directors of Psychiatric Associates
and Surviving Corporation have approved the merger upon the terms and
conditions hereinafter set forth and have approved this Plan of Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants contained herein, the parties hereto
hereby agree in accordance with the provisions of the Annotated Laws of
Massachusetts and the Virginia Stock Corporation Act that Psychiatric
Associates shall be, at the effective date (as hereinafter defined) merged
(hereinafter referred to as the "Merger") into a single corporation existing
under the laws of the Commonwealth of Massachusetts to-wit, which shall be
the Surviving Corporation, and the parties hereto adopt and agree to the
following agreements, terms and conditions relating to the Merger and the
method of carrying the same into effect.
1. Stockholders' Meetings; Filings; Effects of Merger.
1.1. Psychiatric Associates Stockholders' Meeting. Psychiatric
Associates shall call a meeting of its stockholders to be held in accordance
with the general corporation laws of the Commonwealth of Virginia at the
earliest permissible date, upon due notice thereof to its stockholders to
consider and vote upon, among other matters, adoption of this Plan of Merger.
1.2. Surviving Corporation Stockholders' Meeting. Surviving
Corporation shall call a meeting of its stockholders to be held in accordance
with the general corporation laws of the Commonwealth of Massachusetts at the
earliest permissible date, upon due notice thereof to its stockholders to
consider and vote upon, among other matters, adoption of this Plan of
Merger.
1.3. Filing of Articles of Merger; Effective Date. To the extent (a)
this Plan of Merger is adopted by the stockholders of Psychiatric Associates
in accordance with the Virginia Stock Corporations Act, (b) this Plan of
Merger is adopted by the stockholders of Surviving Corporation in accordance
with the corporate laws of the Commonwealth of Massachusetts, and (c) this
Plan of Merger is not thereafter, and has not theretofore been, terminated or
abandoned as permitted by the provisions hereof, then Articles of Merger
shall be filed and recorded with the Secretary of State of Massachusetts and
Virginia State Corporation Commission in accordance with the laws of
Massachusetts and Virginia. Such filing shall be made on approximately the
same date. The Merger shall become effective on the day of such filing with
the Secretary of State of Massachusetts, which date and time are hereinafter
referred to as the "Effective Date".
1.4. Effects of Merger. On the Effective Date, the separate existence
of Psychiatric Associates shall cease, and Psychiatric Associates shall be
merged into Surviving Corporation which, as the surviving corporation, shall
possess all the rights, privileges, powers and franchises, of a public as
well as of a private nature, and shall be subject to all of the restrictions,
disabilities, and duties of Psychiatric Associates; and all and singular the
rights, privileges, powers and franchises of Psychiatric Associates, and all
property, real, personal, and mixed, and all debts due to Psychiatric
Associates on whatever account, as well for stock subscriptions and all other
things and action or belonging to Psychiatric Associates, shall be vested in
the Surviving Corporation, and all property, rights, privileges, powers, and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of
Psychiatric Associates, and the title to any real estate vested by deed or
otherwise, under the laws of the Commonwealth of Virginia, or any other
jurisdiction, in Psychiatric Associates, shall not revert or be in any way
impaired, but all rights of creditors and all liens upon any property of
Psychiatric Associates shall be preserved unimpaired, and all debts,
liabilities, and duties of Psychiatric Associates shall thenceforth attach to
the Surviving Corporation and may be enforced against it to the same extent
as if said debts, liabilities, and duties had been incurred or contracted by
it. At any time, or from time to time, after the Effective Date, the last
acting officers of Psychiatric Associates or the corresponding officers of
the Surviving Corporation, may, in the name of Psychiatric Associates execute
and deliver all such proper deeds, assignments and other instruments and take
or cause to be taken all such further or other action as the Surviving
Corporation they deem necessary or desirable in order to vest, perfect, or
confirm in the Surviving Corporation title to and possession of all
Psychiatric Associates's property, rights, privileges, powers, franchises,
immunities, and interests and otherwise to carry out the purposes of this
Plan of Merger.
2. Name of Surviving Corporation; Articles of
Incorporation/By-Laws.
2.1. Name of Surviving Corporation. The name of the Surviving
Corporation shall, after the Effective Date, be Pioneer Counseling of
Virginia, Inc.
2.2. Articles of Incorporation. The Articles of Incorporation of
Surviving Corporation as in effect on the date hereof shall from and after
the Effective Date be, and continue to be, the Articles of Incorporation of
the Surviving Corporation until changed or amended as provided by law except
with respect to the amendment of the Articles of Incorporation necessary to
make the change set forth in Paragraph 2.1. hereinabove.
2.3. By-Laws. The By-Laws of Surviving Corporation as in effect
immediately before the Effective Date, shall be from and after the Effective
Date, and continue to be, the By-Laws of the Surviving Corporation until
amended as provided therein except with respect to any amendment necessary to
reflect the change set forth in Paragraph 2.1 hereinabove.
3. Status and Conversion of Securities. The manner and basis of
converting the shares of the capital stock of Psychiatric Associates and the
nature and amount of securities of Surviving Corporation which the holders of
shares of Psychiatric Associates Common Stock are to receive in exchange for
such shares are as follows:
3.1. Psychiatric Associates Common Stock. Each share of Psychiatric
Associates Common Stock which shall be issued and outstanding immediately
before the Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled in the event that each
shareholder's ownership interest in Surviving Corporation is identical to
that shareholder's ownership interest in Psychiatric Associates and, if not,
each share of Psychiatric Associates Common Stock shall be converted at the
Effective Date into one fully paid share of Surviving Corporation Common
Stock, and outstanding certificates representing shares of Psychiatric
Associates Common Stock shall thereafter represent shares of Surviving
Corporation Common Stock. Such certificates may, but need not be, exchanged
by the holders thereof after the Merger becomes effective, for new
certificates for the appropriate number of shares bearing the name of the
Surviving Corporation.
3.2. Surviving Corporation Common Stock. All issued and outstanding
shares of Surviving Corporation Common Stock shall, by virtue of the Merger
and at the Effective Date, continue to remain outstanding and in full force
and effect.
4. Further Assurance of Title. If at any time the Surviving
Corporation shall consider or be advised that any acknowledgments or
assurances in law or other similar actions are necessary or desirable in
order to acknowledge or confirm in and to Surviving Corporation and any
right, title, or interest that Psychiatric Associates held immediately prior
to the Effective Date, Psychiatric Associates and its proper officers and
directors shall and will execute and deliver all such acknowledgments and
assurances in law and do all things necessary or proper to acknowledge or
confirm such right, title, or interest that Surviving Corporation may acquire
by virtue of the Merger as shall be necessary to carry out the purposes of
this Plan of Merger, and Surviving Corporation and the proper officers and
directors thereof are fully authorized to take any all such action in the
name of Psychiatric Associates or otherwise.
5. Capital Accounting Entries. The Merger contemplated hereby shall
be treated as a pooling of interests and as of the Effective Date entries
shall be made upon the books of Surviving Corporation in accordance with the
following:
(a) The assets and liabilities of Psychiatric Associates shall
be reported at the amounts at which they are carried on the books of
Psychiatric Associates immediately prior to the Effective Date.
(b) There shall be credited to Capital Account the aggregate
amount of a par value per share of all of the common stock of Surviving
Corporation resulting from the conversion of the outstanding common shares of
Psychiatric Associates.
(c) There shall be credited to Capital Surplus Account an amount
equal to that carried on the Capital Surplus Account of Psychiatric
Associates immediately prior to the Effective Date.
(d) There shall be credited to Earned Surplus Account an amount
equal to that carried on the Earned Surplus Account of Psychiatric Associates
immediately prior to the Effective Date.
6. Directors. The names and addresses of the first directors of
Surviving Corporation following the Effective Date, who shall be four (4) in
number and who shall hold office from the Effective Date until the annual
meeting of the shareholders of Surviving Corporation and until their
successors shall be elected and shall qualify, are as follows:
Name Address
Donald E. Robar 48 Burpee Hill
New London, NH 03257
Gerald M. Perlow, MD 40 Atlantic Road
Swampscott, MA 01907
Howard W. Phillips 435 L'Ambiance #K706
Longboat Key, FL 34228
Bruce A. Shear 14 Ida Road
Marblehead, MA 01945
7. Officers. The names and offices of the first officers of
Surviving Corporation following the Effective Date, who shall be three (3) in
number and who shall hold office from the Effective Date until their
successors shall be appointed and shall qualify or until they shall resign or
be removed from office, are as follows:
Name Office
Bruce A. Shear President
Donald E. Robar Treasurer
Gerald M. Perlow, MD Clerk
8. Termination/Modification. This Plan of Merger may be terminated
and the proposed Merger abandoned at any time before the Effective Date of
the Merger, and whether before or after approval of this Plan of Merger by
the shareholders of either Psychiatric Associates or Surviving Corporation,
if the Board of Directors of Psychiatric Associates or of the Surviving
Corporation duly adopt a resolution abandoning this Plan of Merger.
9. Duplicate Copies. For the convenience of the parties hereto and
to facilitate the filing of this Plan of Merger, any number of counterparts
hereof may be executed; and each such counterpart shall be deemed to be an
original instrument.
<PAGE>
IN WITNESS WHEREOF, each of the corporate parties hereto, pursuant to
authority duly granted by Board of Directors, has caused this Plan of Merger
to be executed all on the date and year first above written.
PIONEER COUNSELING OF VIRGINIA, INC.
By:_______________________________
Bruce A. Shear
Its: President
ATTEST:
________________________________
Corporate Clerk
(SEAL)
PSYCHIATRIC & COUNSELING PSYCHIATRIC
ASSOCIATES OF ROANOKE, INC.
By:_______________________________
Mukesh Patel
Its: President
ATTEST:
__________________________________
Corporate Secretary
(SEAL)
<PAGE>
Exhibit 10.109
PLAN OF MERGER
THIS PLAN OF MERGER made and entered into as of this ____ day of
January, 1997, by and between PIONEER COUNSELING OF VIRGINIA, INC., a
Massachusetts Corporation (hereinafter referred to as "Surviving
Corporation") and PSYCHIATRIC & COUNSELING ASSOCIATES OF ROANOKE, INC., a
Virginia Corporation (hereinafter referred to as "Psychiatric Associates").
W I T N E S S E T H:
THAT WHEREAS, the Boards of Directors of Psychiatric Associates and
Surviving Corporation have resolved that Psychiatric Associates be merged
under and pursuant to the laws of the Commonwealth of Massachusetts and the
Commonwealth of Virginia, into a single corporation existing under the laws
of the Commonwealth of Massachusetts, to-wit: Surviving Corporation shall be
the surviving corporation with the transaction qualifying as a reorganization
pursuant to the provisions of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986;
WHEREAS, the authorized capital stock of Psychiatric Associates
consists of Five Thousand (5,000) shares of common stock with no par value
per share (hereinafter referred to "Psychiatric Associates Common Stock"), of
which One Hundred (100) shares are issued and outstanding; WHEREAS, the
authorized capital stock of Surviving Corporation consists of Two Hundred
Thousand (200,000) shares of common stock with a par value of one cent ($.01)
per share (hereinafter referred to as "Surviving Corporation Common Stock"),
_____________ ( ) shares of which are issued and outstanding; and
WHEREAS, the respective Boards of Directors of Psychiatric Associates
and Surviving Corporation have approved the merger upon the terms and
conditions hereinafter set forth and have approved this Plan of Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants contained herein, the parties hereto
hereby agree in accordance with the provisions of the Annotated Laws of
Massachusetts and the Virginia Stock Corporation Act that Psychiatric
Associates shall be, at the effective date (as hereinafter defined) merged
(hereinafter referred to as the "Merger") into a single corporation existing
under the laws of the Commonwealth of Massachusetts to-wit, which shall be
the Surviving Corporation, and the parties hereto adopt and agree to the
following agreements, terms and conditions relating to the Merger and the
method of carrying the same into effect.
1. Stockholders' Meetings; Filings; Effects of Merger.
1.1. Psychiatric Associates Stockholders' Meeting. Psychiatric
Associates shall call a meeting of its stockholders to be held in accordance
with the general corporation laws of the Commonwealth of Virginia at the
earliest permissible date, upon due notice thereof to its stockholders to
consider and vote upon, among other matters, adoption of this Plan of Merger.
1.2. Surviving Corporation Stockholders' Meeting. Surviving
Corporation shall call a meeting of its stockholders to be held in accordance
with the general corporation laws of the Commonwealth of Massachusetts at the
earliest permissible date, upon due notice thereof to its stockholders to
consider and vote upon, among other matters, adoption of this Plan of
Merger.
1.3. Filing of Articles of Merger; Effective Date. To the extent (a)
this Plan of Merger is adopted by the stockholders of Psychiatric Associates
in accordance with the Virginia Stock Corporations Act, (b) this Plan of
Merger is adopted by the stockholders of Surviving Corporation in accordance
with the corporate laws of the Commonwealth of Massachusetts, and (c) this
Plan of Merger is not thereafter, and has not theretofore been, terminated or
abandoned as permitted by the provisions hereof, then Articles of Merger
shall be filed and recorded with the Secretary of State of Massachusetts and
Virginia State Corporation Commission in accordance with the laws of
Massachusetts and Virginia. Such filing shall be made on approximately the
same date. The Merger shall become effective on the day of such filing with
the Secretary of State of Massachusetts, which date and time are hereinafter
referred to as the "Effective Date".
1.4. Effects of Merger. On the Effective Date, the separate existence
of Psychiatric Associates shall cease, and Psychiatric Associates shall be
merged into Surviving Corporation which, as the surviving corporation, shall
possess all the rights, privileges, powers and franchises, of a public as
well as of a private nature, and shall be subject to all of the restrictions,
disabilities, and duties of Psychiatric Associates; and all and singular the
rights, privileges, powers and franchises of Psychiatric Associates, and all
property, real, personal, and mixed, and all debts due to Psychiatric
Associates on whatever account, as well for stock subscriptions and all other
things and action or belonging to Psychiatric Associates, shall be vested in
the Surviving Corporation, and all property, rights, privileges, powers, and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of
Psychiatric Associates, and the title to any real estate vested by deed or
otherwise, under the laws of the Commonwealth of Virginia, or any other
jurisdiction, in Psychiatric Associates, shall not revert or be in any way
impaired, but all rights of creditors and all liens upon any property of
Psychiatric Associates shall be preserved unimpaired, and all debts,
liabilities, and duties of Psychiatric Associates shall thenceforth attach to
the Surviving Corporation and may be enforced against it to the same extent
as if said debts, liabilities, and duties had been incurred or contracted by
it. At any time, or from time to time, after the Effective Date, the last
acting officers of Psychiatric Associates or the corresponding officers of
the Surviving Corporation, may, in the name of Psychiatric Associates execute
and deliver all such proper deeds, assignments and other instruments and take
or cause to be taken all such further or other action as the Surviving
Corporation they deem necessary or desirable in order to vest, perfect, or
confirm in the Surviving Corporation title to and possession of all
Psychiatric Associates's property, rights, privileges, powers, franchises,
immunities, and interests and otherwise to carry out the purposes of this
Plan of Merger.
2. Name of Surviving Corporation; Articles of
Incorporation/By-Laws.
2.1. Name of Surviving Corporation. The name of the Surviving
Corporation shall, after the Effective Date, be Pioneer Counseling of
Virginia, Inc.
2.2. Articles of Incorporation. The Articles of Incorporation of
Surviving Corporation as in effect on the date hereof shall from and after
the Effective Date be, and continue to be, the Articles of Incorporation of
the Surviving Corporation until changed or amended as provided by law except
with respect to the amendment of the Articles of Incorporation necessary to
make the change set forth in Paragraph 2.1. hereinabove.
2.3. By-Laws. The By-Laws of Surviving Corporation as in effect
immediately before the Effective Date, shall be from and after the Effective
Date, and continue to be, the By-Laws of the Surviving Corporation until
amended as provided therein except with respect to any amendment necessary to
reflect the change set forth in Paragraph 2.1 hereinabove.
3. Status and Conversion of Securities. The manner and basis of
converting the shares of the capital stock of Psychiatric Associates and the
nature and amount of securities of Surviving Corporation which the holders of
shares of Psychiatric Associates Common Stock are to receive in exchange for
such shares are as follows:
3.1. Psychiatric Associates Common Stock. Each share of Psychiatric
Associates Common Stock which shall be issued and outstanding immediately
before the Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled in the event that each
shareholder's ownership interest in Surviving Corporation is identical to
that shareholder's ownership interest in Psychiatric Associates and, if not,
each share of Psychiatric Associates Common Stock shall be converted at the
Effective Date into one fully paid share of Surviving Corporation Common
Stock, and outstanding certificates representing shares of Psychiatric
Associates Common Stock shall thereafter represent shares of Surviving
Corporation Common Stock. Such certificates may, but need not be, exchanged
by the holders thereof after the Merger becomes effective, for new
certificates for the appropriate number of shares bearing the name of the
Surviving Corporation.
3.2. Surviving Corporation Common Stock. All issued and outstanding
shares of Surviving Corporation Common Stock shall, by virtue of the Merger
and at the Effective Date, continue to remain outstanding and in full force
and effect.
4. Further Assurance of Title. If at any time the Surviving
Corporation shall consider or be advised that any acknowledgments or
assurances in law or other similar actions are necessary or desirable in
order to acknowledge or confirm in and to Surviving Corporation and any
right, title, or interest that Psychiatric Associates held immediately prior
to the Effective Date, Psychiatric Associates and its proper officers and
directors shall and will execute and deliver all such acknowledgments and
assurances in law and do all things necessary or proper to acknowledge or
confirm such right, title, or interest that Surviving Corporation may acquire
by virtue of the Merger as shall be necessary to carry out the purposes of
this Plan of Merger, and Surviving Corporation and the proper officers and
directors thereof are fully authorized to take any all such action in the
name of Psychiatric Associates or otherwise.
5. Capital Accounting Entries. The Merger contemplated hereby shall
be treated as a pooling of interests and as of the Effective Date entries
shall be made upon the books of Surviving Corporation in accordance with the
following:
(a) The assets and liabilities of Psychiatric Associates shall
be reported at the amounts at which they are carried on the books of
Psychiatric Associates immediately prior to the Effective Date.
(b) There shall be credited to Capital Account the aggregate
amount of a par value per share of all of the common stock of Surviving
Corporation resulting from the conversion of the outstanding common shares of
Psychiatric Associates.
(c) There shall be credited to Capital Surplus Account an amount
equal to that carried on the Capital Surplus Account of Psychiatric
Associates immediately prior to the Effective Date.
(d) There shall be credited to Earned Surplus Account an amount
equal to that carried on the Earned Surplus Account of Psychiatric Associates
immediately prior to the Effective Date.
6. Directors. The names and addresses of the first directors of
Surviving Corporation following the Effective Date, who shall be four (4) in
number and who shall hold office from the Effective Date until the annual
meeting of the shareholders of Surviving Corporation and until their
successors shall be elected and shall qualify, are as follows:
Name Address
Donald E. Robar 48 Burpee Hill
New London, NH 03257
Gerald M. Perlow, MD 40 Atlantic Road
Swampscott, MA 01907
Howard W. Phillips 435 L'Ambiance #K706
Longboat Key, FL 34228
Bruce A. Shear 14 Ida Road
Marblehead, MA 01945
7. Officers. The names and offices of the first officers of
Surviving Corporation following the Effective Date, who shall be three (3) in
number and who shall hold office from the Effective Date until their
successors shall be appointed and shall qualify or until they shall resign or
be removed from office, are as follows:
Name Office
Bruce A. Shear President
Donald E. Robar Treasurer
Gerald M. Perlow, MD Clerk
8. Termination/Modification. This Plan of Merger may be terminated
and the proposed Merger abandoned at any time before the Effective Date of
the Merger, and whether before or after approval of this Plan of Merger by
the shareholders of either Psychiatric Associates or Surviving Corporation,
if the Board of Directors of Psychiatric Associates or of the Surviving
Corporation duly adopt a resolution abandoning this Plan of Merger.
9. Duplicate Copies. For the convenience of the parties hereto and
to facilitate the filing of this Plan of Merger, any number of counterparts
hereof may be executed; and each such counterpart shall be deemed to be an
original instrument.
<PAGE>
IN WITNESS WHEREOF, each of the corporate parties hereto, pursuant to
authority duly granted by Board of Directors, has caused this Plan of Merger
to be executed all on the date and year first above written.
PIONEER COUNSELING OF VIRGINIA, INC.
By:_______________________________
Bruce A. Shear
Its: President
ATTEST:
________________________________
Corporate Clerk
(SEAL)
PSYCHIATRIC & COUNSELING PSYCHIATRIC
ASSOCIATES OF ROANOKE, INC.
By:_______________________________
Mukesh Patel
Its: President
ATTEST:
__________________________________
Corporate Secretary
(SEAL)
<PAGE>
Exhibit 10.110
$1,500,000.00
LOAN AND SECURITY AGREEMENT
by and between
PHC OF MICHIGAN, INC.
(the "Borrower")
and
HCFP FUNDING, INC.
(the "Lender")
February _, 1997
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this
day of February, 1997, by and between PHC OF MICHIGAN, INC., a Massachusetts
corporation (the "Borrower") and HCFP FUNDING, INC., a Delaware corporation
("Lender").
Recitals
A. Borrower desires to establish certain financing arrangements with
and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower, on the
terms and conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants contained
in this Agreement, and for other consideration, the receipt and sufficiency
of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
Section 1.1. Account. "Account" means any right to payment for goods
sold or leased or services rendered, whether or not evidenced by an
instrument or chattel paper, and whether or not earned by performance,
including, without limitation, the right to payment of management fees.
Section 1.2. Account Debtor. "Account Debtor" means any Person
obligated on any Account of Borrower, including without limitation, any
Insurer and any Medicaid/Medicare Account Debtor.
Section 1.3. Affiliate. "Affiliate" means, with respect to a specified
Person, any Person directly or indirectly controlling, controlled by, or
under common control with the specified Person, including without limitation
their stockholders and any Affiliates thereof. A Person shall be deemed to
control a corporation if the Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and business of the
corporation whether through the ownership of voting securities, by contract,
or otherwise.
<PAGE>
Section 1.4. Agreement. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time.
Section 1.5. Base Rate. "Base Rate" means a rate of interest equal to
two and one quarter percent (2.25%) above the "Prime Rate of Interest".
Section 1.6. Borrowed Money. "Borrowed Money" means any obligation to
repay money, any indebtedness evidenced by notes, bonds, debentures or
similar obligations, any obligation under a conditional sale or other title
retention agreement and the net aggregate rentals under any lease which under
GAAP would be capitalized on the books of the Borrower or which is the
substantial equivalent of the financing of the property so leased.
Section 1.7. Borrower. "Borrower" has the meaning set forth in the
Preamble.
Section 1.8. Borrowing Base. "Borrowing Base" has the meaning set
forth in Section 2.1(d).
Section 1.9. Business Day. "Business Day" means any day on which
financial institutions are open for business in the State of Maryland,
excluding Saturdays and Sundays.
Section 1.10. Closing; Closing Date. "Closing" and "Closing Date" have
the meanings set forth in Section 5.3.
Section 1.11. Commitment Fee. "Commitment Fee" has the meaning set
forth in Section 2.4(a).
Section 1.12. Collateral. "Collateral" has the meaning set forth in
Section 3.1.
Section 1.13. Controlled Group. "Controlled Group" means a "controlled
group" within the meaning of Section 4001(b) of ERISA.
Section 1.14. Cost Report Settlement Account. "Cost Report Settlement
Account" means an "Account" owed to Borrower by a Medicaid/Medicare Account
Debtor pursuant to any cost report, either interim, filed or audited, as the
context may require.
Section 1.15. Default Rate. "Default Rate" means a rate per annum
equal to two percent (2%) above the Base Rate.
Section 1.16 Concentration Account. "Concentration Account" has the
meaning set forth in Section 2.3(a).
Section 1.17. ERISA. "ERISA" has the meaning set forth in Section 4.12.
<PAGE>
Section 1.18. Event of Default. "Event of Default" and "Events of
Default" have the meanings set forth in Section 8.1.
Section 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a matter consistent with the financial statements
referred to in Section 4.7.
Section 1.20. Governmental Authority. "Governmental Authority" means
and includes any federal, state, District of Columbia, county, municipal, or
other government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
Section 1.21. Hazardous Material. "Hazardous Material" means any
substances defined or designated as hazardous or toxic waste, hazardous or
toxic material, hazardous or toxic substance, or similar term, by any
environmental statute, rule or regulation or any Governmental Authority.
Section 1.22. Highest Lawful Rate. "Highest Lawful Rate" means the
maximum lawful rate of interest referred to in Section 2.7 that may accrue
pursuant to this Agreement.
Section 1.23. Insurer. A Person that insures a Patient against certain
of the costs incurred in the receipt by such Patient of Medical Services, or
that has an agreement with Borrower to compensate Borrower for providing
services to a Patient.
Section 1.24. Lender. "Lender" has the meaning set forth in the
Preamble.
Section 1.25. Loan. "Loan" has the meaning set forth in Section 2.1(a).
Section 1.26. Loan Documents. "Loan Documents" means and includes this
Agreement, the Note, and each and every other document now or hereafter
delivered in connection therewith, as any of them may be amended, modified,
or supplemented from time to time.
Section 1.27. Loan Management Fee. "Loan Management Fee" has the
meaning set forth in Section 2.4(c).
Section 1.28. Lockbox. "Lockbox" has the meaning set forth in Section
2.3 (a).
Section 1.29. Lockbox Bank. "Lockbox Bank" has the meaning set forth in
Section 2.3(a).
Section 1.30. Maximum Loan Amount. "Maximum Loan Amount" has the
meaning set forth in Section 2.1(a).
3
<PAGE>
Section 1.31. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to
the Social Security Act, (ii) any state or the District of Columbia acting
pursuant to a health plan adopted pursuant to Title XIX of the Social
Security Act or (iii) any agent, carrier, administrator or intermediary for
any of the foregoing.
Section 1.32. Medical Services. Medical and health care services
provided to a Patient, including, but not limited to, medical and health care
services provided to a Patient and performed by Borrower which are covered by
a policy of insurance issued by an Insurer, and includes physician services,
nurse and therapist services, dental services, hospital services, skilled
nursing facility services, comprehensive outpatient rehabilitation services,
home health care services, residential and out-patient behavioral healthcare
services, and medicine or health care equipment provided by Borrower to a
Patient for a necessary or specifically requested valid and proper medical or
health purpose.
Section 1.33. Note. "Note" has the meaning set forth in Section 2. 1
(c) .
Section 1.34. Obligations. "Obligations" has the meaning set forth in
Section 3.1.
Section 1.35. Patient. Any Person receiving Medical Services from
Borrower and all Persons legally liable to pay Borrower for such Medical
Services other than Insurers.
Section 1.36. Permitted Liens. "Permitted Liens" means: (a) liens for
taxes not delinquent, or which are being contested in good faith and by
appropriate proceedings which suspend the collection thereof and in respect
of which adequate reserves have been made (provided that such proceedings do
not, in Lender's sole discretion, involve any substantial danger of the sale,
loss or forfeiture of such property or assets or any interest therein); (b)
deposits or pledges to secure obligations under workmen's compensation,
social security or similar laws, or under unemployment insurance; (c)
deposits or pledges to secure bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety and appeal
bonds and other obligations of like nature arising in the ordinary course of
business; (d) mechanic's, workmen's, materialmen's or other like liens
arising in the ordinary course of business with respect to obligations which
are not due, or which are being contested in good faith by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Lender's sole discretion, involve any substantial danger of the
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sale, loss or forfeiture of such property or assets or any interest therein);
(e) liens and encumbrances in favor of Lender; (f) liens granted in
connection with the lease or purchase of property or assets financed by
borrowings permitted by Section 7.1 (provided, however, that no such
borrowings permitted by Section 7.1 may be secured by liens on any of the
Collateral); and (g) liens set forth on Schedule 1.36.
Section 1.37. Person. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
Section 1.38. Plan. "Plan" has the meaning set forth in Section 4.12.
Section 1.39. Premises. "Premises" has the meaning set forth in
Section 4.14.
Section 1.40. Prime Rate of Interest. "Prime Rate of Interest" means
that rate of interest quoted by Shawmut Bank, N.A., or any successor thereto,
as the same may from time to time fluctuate.
Section 1.41. Prohibited Transaction. "Prohibited Transaction" means a
"prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Internal Revenue Code.
Section 1.42. Qualified Account. "Qualified Account" means an Account
of Borrower generated in the ordinary course of Borrower's business from the
sale of goods or rendition of medical services which Lender, in its sole
credit judgment, deems to be a Qualified Account. without limiting the
generality of the foregoing, no Account shall be a Qualified Account if: (a)
the Account or any portion thereof is payable by an individual beneficiary,
recipient or subscriber individually and not directly to Borrower by a
Medicaid/Medicare Account Debtor or commercial medical insurance carrier
acceptable to Lender in its sole discretion; (b) the Account remains unpaid
more than one hundred fifty (150) days past the claim or invoice date; (c)
the Account is subject to any defense, set-off, counterclaim, deduction,
discount, credit, chargeback, freight claim, allowance, or adjustment of any
kind; (d) any part of any goods the sale of which has given rise to the
Account has been returned, rejected, lost, or damaged; (e) if the Account
arises from the sale of goods by Borrower, such sale was not an absolute sale
or on consignment or on approval or on a sale-or-return basis or subject to
any other repurchase or return agreement, or such goods have not been shipped
to the Account Debtor or its designee; (f) if the Account arises from the
Performance of services, such services have not been actually been performed
or
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were undertaken in violation of any law; (g) the Account is subject to a lien
other than a Permitted Lien; (h) the Borrower knows or should have known of
the bankruptcy, receivership, reorganization, or insolvency of the Account
Debtor; (i) the Account is evidenced by chattel paper or an instrument of any
kind, or has been reduced to judgment; (j) the Account is an Account of an
Account Debtor having its principal place of business or executive office
outside the United States; (k) the Account Debtor is an Affiliate or
Subsidiary of Borrower; (1) more than ten percent (10%) of the aggregate
balance of all Accounts owing from the Account Debtor obligated on the
Account are outstanding more than one hundred eighty (180) days past their
invoice date; (m) fifty percent (50%) or more of the Accounts from the
Account Debtor are not deemed Qualified Accounts hereunder; (n) the total
unpaid Accounts of the Account Debtor, except for a Medicaid/Medicare Account
Debtor, exceed twenty percent (20%) of the net amount of all Qualified
Accounts; (o) any covenant, representation or warranty contained in the Loan
Documents with respect to such Account has been breached; or (p) the Account
fails to meet such other specifications and requirements which may from time
to time be reasonably established by Lender.
Section 1.43. Reportable Event. "Reportable Event" means a "reportable
event" as defined in Section 4043(b) of ERISA.
Section 1.44. Revolving Credit Loan. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
Section 1.45. Term. "Term" has the meaning set forth in Section 2.8.
Section 1.46. Intentionally Deleted
ARTICLE II
LOAN
Section 2.1. Terms.
(a) The maximum aggregate principal amount of credit extended
by Lender to Borrower hereunder (the "Loan") that will be outstanding at any
time is One Million Five Hundred Thousand and No/100 Dollars ($1,5OO,000.00)
(the "Maximum Loan Amount")'
(b) The Loan shall be in the nature of a revolving line of
credit, and shall include sums advanced and other credit extended by Lender
to or for the benefit of the Borrower from time to time under this Article II
(each a "Revolving Credit Loan") up to the Maximum Loan Amount depending upon
the availability in the Borrowing Base, the requests of Borrower pursuant to
the terms and conditions of Section 2.2 below, and on
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such other basis as Lender may reasonably determine. The outstanding
principal balance of the Loan may fluctuate from time to time, to be reduced
by repayments made by Borrower (which may be made without penalty or
premium), and to be increased by future Revolving Credit Loans, advances and
other extensions of credit to or for the benefit of Borrower, and shall be
due and payable in full upon the expiration of the Term. For purposes of
this Agreement, any determination as to whether there is ability within the
Borrowing Base for advances or extensions of credit shall be made by Lender
in its sole discretion and is final and binding upon Borrower.
(c) At Closing, Borrower shall execute and deliver to Lender a
promissory note evidencing the Borrower's unconditional obligation to repay
Lender for Revolving Credit Loans, advances, and other extensions of credit
made under the Loan, in the form of Exhibit A to this Agreement (the
"Note"), dated the date hereof, payable to the order of Lender in
accordance with the terms thereof. The Note shall bear interest from the
date thereof until repaid, with interest payable monthly in arrears on the
first Business Day of each month, at a rate per annum (on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Base
Rate, provided that after an Event of Default such rate shall be equal to
the Default Rate. Each Revolving Credit Loan, advance and other extension
of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
(d) Subject to the terms and conditions of this Agreement,
advances under the Loan shall be made against a borrowing base equal to (i)
eighty percent (80'%) of Qualified Accounts that remain unpaid for fewer
than one hundred twenty (120) days, and (ii) sixty percent (60%) of
Qualified Accounts that remain unpaid for between one hundred twenty (120)
and one hundred fifty (150) days, in either case due and owing from any
Medicaid/Medicare, Insurer or other Account Debtor, including, without
limitation, Accounts payable pursuant to Cost Report Settlement Accounts or
in the form of management fees (the "Borrowing Base").
Section 2.2. Loan Administration. Borrowings under the Loan shall be
as follows:
(a) A request for a Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner: (i) Borrower, may give
Lender notice of its intention to borrow, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing
date, not later than 2:00 p.m. Eastern time one (1) Business Day prior to
the proposed borrowing date; provided, however, that no such request may be
made at a time when there exists an Event of Default; and (ii) the becoming
due of any amount required to be paid under this
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Agreement, whether as interest or for any other Obligation, shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in
the amount required to pay such interest or other obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse
the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, as follows: (i) the proceeds of each Revolving Credit Loan
requested under subsection 2.2(a)(i) shall be disbursed by Lender by wire
transfer to such bank account as may be agreed upon by Borrower or Lender
from time to time or elsewhere if pursuant to written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan requested under
subsection 2.2(a)(ii) shall be disbursed by Lender by way of direct payment
of the relevant interest or other Obligation.
(c) All Revolving Credit Loans, advances and other extensions
of credit to or for the benefit of Borrower shall constitute one general
obligation of Borrower, and shall be secured by Lender's lien upon all of the
Collateral.
(d) Lender shall enter all Revolving Credit Loans as debits to
a loan account in the name of Borrower and shall also record in said loan
account all payments made by Borrower on any Obligations and all proceeds of
Collateral which are indefeasibly paid to Lender, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to
Borrower.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrower unless Lender is notified by Borrower in writing to
the contrary within sixty (60) days of the date each accounting is mailed to
Borrower. Such notice shall be deemed an objection to those items
specifically objected to therein.
Section 2.3. Collections, Disbursements, Borrowing Availability, and
Lockbox Account. Borrower shall maintain a lockbox account (the "Lockbox")
with (the "Lockbox Bank"), subject to the provisions of this Agreement, and
shall execute with the Lockbox Bank a Lockbox Agreement in the form attached
as Exhibit B, and such other agreements related thereto as Lender may
require. Borrower shall ensure that all collections of Accounts are paid
directly from Account Debtors into the Lockbox, and that all funds paid into
the Lockbox are immediately transferred into a depository account maintained
by Lender at Bank One Arizona, N.A. or First Bank, N.A., as determined by
Lender in its sole discretion and communicated to Borrower (the
"Concentration Account"). Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to this Section 2.3 to
reduce the outstanding indebtedness under the Loan with future Revolving
Credit Loans, advances and other extensions of credit to be made by Lender
under the conditions set forth in this Article II. To the extent that any
collections of Accounts or proceeds of other Collateral are not sent directly
to the Lockbox but are received by Borrower, such collections shall be held
in trust for the benefit of Lender and immediately remitted, in the form
received, to the Lockbox Bank for transfer to the Concentration Account
immediately upon receipt by Borrower. All funds transferred from the
Concentration Account for application to Borrower's indebtedness to Lender
shall be applied to reduce the Loan balance, but for purposes of calculating
interest, shall be subject to a five (5) Business Day clearance period. If
as the result of collections of Accounts pursuant to the terms and conditions
of this Section 2.3 a credit balance exists with respect to the Concentration
Account, such credit balance shall not accrue interest in favor of Borrower,
but shall be available to Borrower at any time or times for so long as no
Event of Default exists.
<PAGE>
Section 2.4. Fees.
(a) At Closing and thereafter Borrower shall unconditionally
pay to Lender, in one or more installments, a commitment fee (the "Commitment
Feel') equal to one percent (1'6) of incremental Revolving Credit Loans up to
the Maximum Loan Amount. For example, if at Closing Lender makes a Revolving
Credit Loan in the amount of Five Hundred Thousand and No/l00 Dollars
($500,000.00), and ten (10) days after Closing Lender makes an additional
Revolving Credit Loan resulting in. aggregate outstanding principal of Eight
Hundred Thousand and No/100 Dollars ($800,000.00), Borrower shall be
obligated to pay an initial installment of the Commitment Fee of Five
Thousand and No/100 Dollars ($5,000.00) at Closing, and a second installment
of the Commitment Fee of Three Thousand and No/100 ($3,000.00) ($800,000.00 -
$500,000.00 x 1%) in connection with the second advance. Consistent with the
foregoing, the maximum aggregate Commitment Fee payable by Borrower hereunder
shall be $15,000.00 ($1,500,000.00 x 1'-.).
(b) Intentionally Deleted.
(c) For so long as the Loan is available to Borrower,
Borrower unconditionally shall pay to Lender a monthly loan management fee
(the "Loan Management Feel,) equal to twenty-seven and one-half one
hundredths of one percent (0.275'-.) of the average amount of the outstanding
principal balance of the Revolving Credit Loans during the preceding month.
The Loan Management Fee shall be payable monthly in arrears on the first day
of each successive calendar month.
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(d) Borrower shall pay to Lender all out-of-pocket audit and
appraisal fees in connection with audits and appraisals of Borrower's books
and records and such other matters as Lender shall deem appropriate, which
shall be due and payable on the first Business Day of the month following the
date of issuance by Lender of a request for payment thereof to Borrower.
Notwithstanding anything herein to the contrary, Lender acknowledges and
agrees that, absent the occurrence of an Event of Default hereunder,
Borrower's maximum obligation for the payment of out-of-pocket audit and
appraisal fees in any calendar year shall be Seven Thousand Five Hundred and
No/100 Dollars ($7,500.00). Following the occurrence of an Event of Default,
such limitation shall not be applicable.
(e) Borrower shall pay to Lender, on demand, any and all fees,
costs or expenses which Lender or any participant pays to a bank or other
similar institution (including, without limitation, any fees paid by Lender
to any participant) arising out of or in connection with (i) the forwarding
to Borrower or any other Person on behalf of Borrower, by Lender, of proceeds
of Revolving Credit Loans made by Lender to Borrower pursuant to this
Agreement, and (ii) the depositing for collection, by Lender or any
participant, of any check or item of payment received or delivered to Lender
or any participant on account of obligations.
Section 2.5. Payments. Principal payable on account of Revolving
Credit Loans shall be payable by Borrower to Lender immediately upon the
earliest of (i) the receipt by Borrower of any proceeds of any of the
Collateral, to the extent of such proceeds, (ii) the occurrence of an Event
of Default in consequence of which the Loan and the maturity of the payment
of the Obligations are accelerated, or (iii) the termination of this
Agreement pursuant to Section 2.8 hereof; provided, however, that if any
advance made by Lender in excess of the Borrowing Base shall exist at any
time, Borrower shall, immediately upon demand, repay such overadvance.
Interest accrued on the Revolving Credit Loans shall be due on the earliest
of (i) the first Business Day of each month (for the immediately preceding
month), computed on the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default in consequence of which the Loan and the
maturity of the payment of the obligations are accelerated, or (iii) the
termination of this Agreement pursuant to Section 2.8 hereof. Except to the
extent otherwise set forth in this Agreement, all payments of principal and
of interest on the Loan, all other charges and any other obligations of
Borrower hereunder, shall be made to Lender to the Concentration Account, in
immediately available funds.
Section 2.6. Use of Proceeds. Except as otherwise expressly permitted
under this Agreement, the proceeds of Lender's advances under the Loan shall
be used solely for workingcapital and for other costs and expenses of
Borrower arising in the ordinary course of Borrower's business.
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<PAGE>
Section 2.7. Interest Rate Limitation. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated hereby would
be usurious under such laws, then notwithstanding any other provision hereof:
(a) the aggregate of all interest that is contracted for, charged, or
received under this Agreement or under any other Loan Document shall not
exceed the maximum amount of interest allowed by applicable law (the "Highest
Lawful Rate"), and any excess shall be promptly credited to Borrower by
Lender (or, to the extent that such consideration shall have been paid, such
excess shall be promptly refunded to Borrower by Lender); (b) neither
Borrower nor any other Person now or hereafter liable hereunder shall be
obligated to pay the amount of such interest to the extent that it is in
excess of the Highest Lawful Rate; and (c) the effective rate of interest
shall be reduced to the Highest Lawful Rate. All sums paid, or agreed to be
paid, to Lender for the use, forbearance, and detention of the debt of
Borrower to Lender shall, to the extent permitted by applicable law, be
allocated throughout the full term of the Note until payment is made in full
so that the actual rate of interest does not exceed the Highest Lawful Rate
in effect at any particular time during the full term thereof. If at any
time the rate of interest under the Note exceeds the Highest Lawful Rate, the
rate of interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary herein, to the Highest Lawful Rate,
but any subsequent reductions in the Base Rate shall not reduce the interest
to accrue pursuant to this Agreement below the Highest Lawful Rate until the
total amount of interest accrued equals the amount of interest that would
have accrued if a varying rate per annum equal to the interest rate under the
Note had at all times been in effect. If the total amount of interest paid
or accrued pursuant to this Agreement under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate
per annum equal to the interest rate under the Note had been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference between
(a) the lesser of (i) the amount of interest that would have accrued if the
Highest Lawful Rate had at all times been in effect, or (ii) the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect, and (b) the
amount of interest accrued in accordance with the other provisions of this
Agreement.
Section 2.8. Term.
(a) Subject to Lender's right to cease making Revolving Credit
Loans to Borrower upon or after any Event of Default, this Agreement shall be
in effect for a period of two (2) years from the Closing Date, and this
Agreement shall automatically renew itself for one-year periods thereafter,
unless terminated as provided in this Section 2.8 (the "Term").
11
(b) Upon at least thirty (30) days prior written notice to
Borrower, Lender may terminate this Agreement as of the day of the second and
each subsequent annual anniversary of the Closing Date, and may terminate
this Agreement without notice upon or after the occurrence of an Event of
Default.
(c) Upon at least thirty (30) days prior written notice to
Lender, Borrower may terminate this Agreement effective as of the day of the
second or any subsequent annual anniversary of the Closing Date without
incurring the liquidated damages described below. in addition, upon at least
thirty (30) days prior written notice to Lender, Borrower may terminate this
Agreement prior to the second or any subsequent annual anniversary of the
Closing Date, provided that, at the effective date of such termination prior
to the second anniversary, Borrower shall pay to Lender (in addition to the
then outstanding principal, accrued interest and other Obligations owing
under the terms of this Agreement and any other Loan Documents) as liquidated
damages for the loss of bargain and not as a penalty, an amount equal to two
percent (2'1) of the Maximum Loan Amount.
(d) All of the Obligations shall be immediately due and payable
upon the termination date stated in any notice of termination of this
Agreement. All undertakings, agreements, covenants, warranties, and
representations, of Borrower contained in the Loan Documents shall survive
any such termination and Lender shall retain its liens in the Collateral and
all of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Lender, in full, in
immediately available funds.
ARTICLE III
COLLATERAL
Section 3.1. Generally. As security for the payment of all liabilities
of Borrower to Lender, including without limitation: (i) indebtedness
evidenced under the Note, repayment of Revolving Credit Loans, advances and
other extensions of credit, all fees and charges owing by Borrower, and all
other liabilities and obligations of every kind or nature whatsoever of
Borrower to Lender, whether now existing or hereafter incurred, joint or
several, matured or unmatured, direct or indirect, primary or secondary,
related or unrelated, due or to become due, including
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but not limited to any extensions, modifications, substitutions, increases
and renewals thereof, (ii) the payment of all amounts advanced by Lender to
preserve, protect, defend, and enforce its rights hereunder and in the
following property in accordance with the terms of this Agreement, and (iii)
the payment of all expenses incurred by Lender in connection therewith
(collectively, the "Obligations"), Borrower hereby assigns and grants to
Lender a continuing first priority lien on and security interest in, upon,
and to the following property (the "Collateral") :
(a) All of Borrower's now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind and
description, and any contract rights, chattel paper, documents and
instruments with respect thereto;
(b) All of Borrower's now owned and hereafter acquired or
arising general intangibles of every kind and description pertaining to its
Accounts, accounts receivable and other rights to payment, including, but not
limited to, all existing and future customer lists, choses in action, claims,
books, records, contracts, licenses, formulae, tax and other types of
refunds, returned and unearned insurance premiums, rights and claims under
insurance policies, and computer information, software, records, and data;
(c) All of borrower's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Concentration
Account;
(d) All of Borrower's monies and other property of every kind
and nature now or at any time or times hereafter in the possession of or
under the control of Lender or a bailee or Affiliate of Lender; and
(e) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
Section 3.2. Lien Documents. At Closing and thereafter as Lender deems
necessary in its sole discretion, Borrower shall execute and deliver to
Lender, or have executed and delivered (all in form and substance
satisfactory to Lender in its sole discretion):
(a) UCC-1 Financing statements pursuant to -he Uniform
Commercial Code in effect in the jurisdictions) in which Borrower operates,
which Lender may file in any jurisdiction where any Collateral is or may be
located and in any other jurisdiction that Lender deems appropriate; provided
that a carbon, photographic, or other reproduction or other copy of this
Agreement or of a financing statement is sufficient as and may be filed in
lieu of a financing statement;
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(b) A Concentration Account Agreement in the form of Exhibit C
attached hereto; and
(c) Any other agreements, documents, instruments, and writings
deemed necessary by Lender or as Lender may otherwise request from time to
time in its sole discretion to evidence, perfect, or protect Lender's lien
and security interest in the Collateral required hereunder.
Section 3.3. Collateral Administration.
(a) All Collateral (except deposit accounts) will at all times
be kept by Borrower at its principal office(s) as set forth on Exhibit D
hereto and shall not, without the prior written approval of Lender, be moved
therefrom.
(b) Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to Lender
on such periodic basis as Lender shall request a sales and collections report
for the preceding period, in form satisfactory to Lender. In addition, if
Accounts in an aggregate face amount in excess of $50,000.00 become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Qualified Accounts or otherwise,
Borrower shall notify Lender of such occurrence on the first Business Day
following such occurrence and the Borrowing Base shall thereupon be adjusted
to reflect such occurrence. If requested by Lender, Borrower shall execute
and deliver to Lender formal written assignments of all of its Accounts
weekly or daily, which shall include all Accounts that have been created
since the date of the last assignment, together with copies of claims,
invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender, any designee of Lender or Borrower,
to verify the validity, amount or any other matter relating to any Accounts
by mail, telephone, telegraph or otherwise. Absent an Event of Default,
Lender shall notify Borrower prior to commencing such verification process
and Borrower shall cooperate fully with Lender in an effort to facilitate and
promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the
first instance to make collection of its Accounts for Lender. Lender retains
the right at all times after the occurrence of an Event of Default, subject
to applicable law regarding Medicaid/Medicare Account Debtors, to notify
Account Debtors that Accounts have been assigned to Lender and to collect
Accounts directly in its own name and to charge the collection costs and
expenses, including reasonable attorneys' fees, to Borrower.
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Section 3.4. Other Actions. In addition to the foregoing, Borrower (i)
shall provide prompt written notice to each private indemnity, managed care
or other Insurer who either is currently an Account Debtor or becomes an
Account Debtor at any time following the date hereof that the Lender has been
granted a first priority lien and security interest in, upon and to all
Accounts applicable to such Insurer, and Lender may from time to time require
Borrower to create any and all similar notices which will be forwarded to
such Insurers by Lender, and (ii) shall do anything further that may be
lawfully required by Lender to secure Lender and effectuate the intentions
and objects of this Agreement, including but not limited to the execution and
delivery of lockbox agreements, continuation statements, amendments to
financing statements, and any other documents required hereunder. At
Lender's request, Borrower shall also immediately deliver to Lender all items
for which Lender must receive possession to obtain a perfected security
interest. Borrower shall, on Lender's demand, deliver to Lender all notes,
certificates, and documents of title, chattel paper, warehouse receipts,
instruments, and any other similar instruments constituting Collateral.
Section 3.5. Searches. Prior to Closing, and thereafter (as and when
requested by Lender in its sole discretion), Borrower shall obtain and
deliver to Lender the following searches against Borrower (the results of
which are to be consistent with Borrower's representations and warranties
under this Agreement), all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower maintains
its executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate tax lien searches,
in each jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good
standing in its state of formation and in each other state in which it is
doing and presently intends to do business for which qualification is
required.
Section 3.6. Power of Attorney. Each of the officers of Lender is
hereby irrevocably made, constituted and appointed the true and lawful
attorney for Borrower (without requiring any of them to act as such) with
full power of substitution to do the following: (a) endorse the name of
Borrower upon any and all checks, drafts, money orders, and other instruments
for the payment of money that are payable to Borrower and constitute
collections on Borrower's Accounts; (b) execute in the name of Borrower any
financing statements, schedules, assignments,
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<PAGE>
instruments, documents, and statements that Borrower is obligated to give
Lender hereunder; and (c) do such other and further acts and deeds in the
name of Borrower that Lender may deem necessary or desirable to enforce any
Account or other Collateral or perfect Lender's security interest or lien in
any Collateral.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, and shall be deemed
to represent and warrant on each day on which any Obligations shall be
outstanding hereunder, that:
Section 4.1. Subsidiaries. Except as set forth in Schedule 4.1,
Borrower has no subsidiaries.
Section 4.2. Organization and Good Standing. Borrower is a corporation
duly organized, validly existing, and in good standing under the laws of its
state of incorporation, is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it
therein or the nature of its business makes such qualification necessary, has
the corporate power and authority to own its assets and transact the business
in which it is engaged, and has obtained all certificates, licenses and
qualifications required under all laws, regulations, ordinances, or orders of
public authorities necessary for the ownership and operation of all of its
properties and transaction of all of its business.
Section 4.3. Authority. Borrower has full corporate power and
authority to enter into, execute, and deliver this Agreement and to perform
its obligations hereunder, to borrow the Loan, to execute and deliver the
Note, and to incur and perform the obligations provided for in the Loan
Documents, all of which have been duly authorized by all necessary corporate
action. No consent or approval of shareholders of, or lenders to, Borrower
and no consent, approval, filing or registration with any Governmental
Authority is required as a condition to the validity of the Loan Documents or
the performance by Borrower of its obligations thereunder.
Section 4.4. Binding Agreement. This Agreement and all other Loan
Documents constitute, and the Note, when issued and. delivered pursuant
hereto for value received, will constitute, the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms.
Section 4.5. Litigation.. Except as disclosed in Schedule 4.5, there
are no actions, suits, proceedings or investigations pending or, to the best
of the Borrowers, knowledge, threatened
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against Borrower before any court or arbitrator or before or by any
Governmental Authority which, in any one case or in the aggregate, if
determined adversely to the interests of the Borrower, could have a material
adverse effect on the business, properties, condition (financial or
otherwise) or operations, present or prospective, of Borrower, or upon its
ability to perform its obligations under the Loan Documents. Borrower is not
in default with respect to any order of any court, arbitrator, or
Governmental Authority applicable to Borrower or its properties.
Section 4.6. No Conflicts. The execution and delivery by Borrower of
this Agreement and the other Loan Documents do not, and the performance of
its obligations thereunder will not, violate, conflict with, constitute a
default under, or result in the creation of a lien or encumbrance upon the
property of Borrower under: (a) any provision of Borrower's articles of
incorporation or its bylaws, (b) any provision of any law, rule, or
regulation applicable to Borrower, or (c) any of the following: (i) any
indenture or other agreement or instrument to which Borrower is a party or by
which Borrower or its property is bound; or (ii) any judgment, order or
decree of any court, arbitration tribunal, or Governmental Authority having
jurisdiction over Borrower which is applicable to Borrower.
Section 4.7. Financial Condition. The audited financial statements of
PHC, Inc. and its subsidiaries (including the entity comprising the Borrower)
(collectively, the "Consolidated Company") as of June 30, 1996, certified by
Richard A. Eisner Co., LLP, and the unaudited financial statements of the
Consolidated Company as of December 31, 1996, certified by the chief
financial officer of the Consolidated Company, which have been delivered to
Lender, fairly present the financial condition of the Consolidated Company
and the results of its operations and changes in financial condition as of
the dates and for the periods referred to, and have been prepared in
accordance with GAAP. There are no material unrealized or anticipated
liabilities, direct or indirect, fixed or contingent, of the Consolidated
Company as of the dates of such financial statements which are not reflected
therein or in the notes thereto. There has been no adverse change in the
business, properties, condition (financial or otherwise) or operations
(present or prospective) of any of the entities comprising Borrower since
December 31, 1996. The Consolidated Company's fiscal year ends on June 30.
The federal tax identification number of the Borrower is listed on Schedule
4.7.
Section 4.8. No Default. Borrower is not in default under or with
respect to any obligation in any respect which could be adverse to its
business, operations, property or financial condition, or which could
materially adversely affect the ability of Borrower to perform its
obligations under the Loan
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Documents. No Event of Default or event which, with the giving of notice or
lapse of time, or both, could become an Event of Default, has occurred and is
continuing.
Section 4.9. Title to Properties. Borrower has good and marketable
title to its properties and assets, including the Collateral and the
properties and assets reflected in the financial statements described in
Section 4.7, subject to no lien, mortgage, pledge, encumbrance or charge of
any kind, other than Permitted Liens. Borrower has not agreed or consented
to cause any of its properties or assets whether owned now or hereafter
acquired to be subject in the future (upon the happening of a contingency or
otherwise) to any lien, mortgage, pledge, encumbrance or charge of any kind
other than Permitted Liens.
Section 4.10. Taxes. Borrower has filed, or has obtained extensions
for the filing of, all federal, state and other tax returns which are
required to be filed, and has paid all taxes shown as due on those returns
and all assessments, fees and other amounts due as of the date hereof. All
tax liabilities of Borrower were, as of September 30, 1996, and are now,
adequately provided for on Borrower's books. No tax liability has been
asserted by the Internal Revenue Service or other taxing authority against
Borrower for taxes in excess of those already paid except as described in
Schedule 4.10.
Section 4.11. Securities and Banking Laws and Regulations.
(a) The use of the proceeds of the Loan and Borrower's issuance
of the Note will not directly or indirectly violate or result in a violation
of the Securities Act of 1933 or the Securities Exchange Act of 1934, as
amended, or any regulations issued pursuant thereto, including without
limitation Regulations U, T, G, or X of the Board of Governors of the Federal
Reserve System. Borrower is not engaged in the business of extending credit
for the purpose of the purchasing or carrying "margin stock" within the
meaning of those regulations. No part of the proceeds of the Loan hereunder
will be used to purchase or carry any margin stock or to extend credit to
others for such purpose.
(b) Borrower is not an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
Section 4.12. ERISA. No employee benefit plan (a "Plan") subject to
the Employee Retirement Income Security Act of 1974 ("ERISA") and regulations
issued pursuant thereto that is maintained by Borrower or under which
Borrower could have any liability under ERISA (a) has failed to meet minimum
funding
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standards established in Section 302 of ERISA, (b) has failed to comply with
all applicable requirements of ERISA and of the Internal Revenue Code,
including all applicable rulings and regulations thereunder, (c) has engaged
in or been involved in a prohibited transaction (as defined in ERISA) under
ERISA or under the Internal Revenue Code, or (d) has been terminated.
Borrower has not assumed, or received notice of a claim asserted against
Borrower for, withdrawal liability (as defined in the Multi-Employer Pension
Plan Amendments Act of 1980, as amended) with respect to any multi-employer
pension plan and is not a member of any Controlled Group (as defined in
ERISA). Borrower has timely made when due all contributions with respect to
any multi-employer pension plan in which it participates and no event has
occurred triggering a claim against Borrower for withdrawal liability with
respect to any multi-employer pension plan in which Borrower participates.
Section 4.13. Compliance with Law. Except as described in Schedule
4.13, Borrower is not in material violation of any statute, rule or
regulation of any Governmental Authority (including, without limitation, any
statute, rule or regulation relating to employment practices or to
environmental, occupational and health standards and controls). Borrower has
obtained all licenses, permits, franchises, and other governmental
authorizations necessary for the ownership of its properties and the conduct
of its business. Borrower is current with all reports and documents required
to be filed with any state or federal securities commission or similar
Governmental Authority and is in full compliance with all applicable rules
and regulations of such commissions.
Section 4.14. Environmental Matters. No use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material has occurred or is occurring on or from any real property
on which the Collateral is located or which is owned, leased or otherwise
occupied by Borrower (the "Premises"), or off the Premises as a result of any
action of Borrower, except as described in Schedule 4.14. All Hazardous
Material used, treated, stored, transported to or from, generated or handled
on the Premises, or off the Premises by Borrower, has been disposed of on or
off the Premises by or on behalf of Borrower in a lawful manner. There are
no underground storage tanks present on or under the Premises owned or leased
by Borrower. No other environmental, public health or safety hazards exist
with respect to the Premises.
Section 4.15. Places of Business. The only places of business of
Borrower, and the places where it keeps and intends to keep the Collateral
and records concerning the Collateral, are at the addresses set forth in
Schedule 4.15. Schedule 4.15 also lists the owner of record of each such
property.
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Section 4.16. Intellectual Property. Borrower exclusively owns or
possesses all the patents, patent applications trademarks trademark
applications, service marks, trade names, copyrights, franchises, licenses,
and rights with respect to the foregoing necessary for the present and
planned future conduct of its business, without any conflict with the rights
of others. A list of all such intellectual property (indicating the nature
of Borrower's interest), as well as all outstanding franchises and licenses
given by or held by Borrower, is attached as Schedule 4.16. Borrower is not
in default of any obligation or undertaking with respect to such intellectual
property or rights.
Section 4.17. Stock Ownership. The identity of the stockholders of all
classes of the outstanding stock of Borrower, together with the respective
ownership percentages held by such stockholders, are as set forth on Schedule
4.17.
Section 4.18. Material Facts. Neither this Agreement nor any other
Loan Document nor any other agreement, document, certificate, or statement
furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated hereby contains any untrue statement of material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact
known to Borrower that adversely affects or in the future (so far as Borrower
can reasonably foresee) may adversely affect the business, operations,
affairs or financial condition of Borrower, or any of its properties or
assets.
Section 4.19. Investments, Guarantees, and Certain Contracts. Borrower
does not own or hold any equity or long-term debt investments in, have any
outstanding advances to, have any outstanding guarantees for the obligations
of, or have any outstanding borrowings from, any Person, except as described
on Schedule 4.19. Borrower is not a party to any contract or agreement, or
subject to any charter or other corporate restriction, which materially
adversely affects its business.
Section 4.20. Business Interruptions. Within five years prior to the
date hereof, neither the business, property or assets, or operations of
Borrower has been materially adversely affected in any way by any casualty,
strike, lockout, combination of workers, or order of the United States of
America or other Governmental Authority, directed against Borrower. There
are no pending or, to the best of Borrower's knowledge, threatened labor
disputes, strikes, lockouts, or similar occurrences or grievances against
Borrower or its business.
Section 4.21. Names. Within five years prior to the date hereof,
Borrower has not conducted business under or used any other name (whether
corporate or assumed) other than as shown on Schedule 4.21. Borrower is the
sole owner of all names listed on
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that Schedule and any and all business done and invoices issued in such names
are borrower's sales, business, and invoices. Each trade name of Borrower
represents a division or trading style of Borrower and not a separate
corporate subsidiary or independent Affiliate.
Section 4.22 Joint Ventures. Borrower is not engaged in any joint
venture or partnership with any other Person, except as set forth on Schedule
4.22.
Section 4.23 Accounts. Lender may rely, in determining which Accounts
are Qualified Accounts, on all statements and representations made by
Borrower with respect to any Account or Accounts. Unless otherwise indicated
in writing to Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports to be,
and is not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase
orders, contracts, certification, participation, certificate of need, or
other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor;
(c) It is for a liquidated amount maturing as stated in a
duplicate claim or invoice covering such sale or rendition of services, a
copy of which has been furnished or is available to Lender;
(d) Such Account, and Lender's security interest therein, is
not, and will not (by voluntary act or omission by Borrower), be in the
future, subject to any offset, lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and each such Account is
absolutely owing to Borrower and is not contingent in any respect or for any
reason;
(e) There are no facts, events or occurrences which in any way impair the
validity or enforceability of any Accounts or tend to reduce the amount
payable thereunder from the face amount of the claim or invoice and
statements delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, (i) the Account Debtor
thereunder had the capacity to contract at the time any contract or other
document giving rise to the Account was executed and (ii) such Account Debtor
is solvent;
(g) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against
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any Account Debt thereunder which might result in any material adverse change
in such Account Debtor's financial condition or the collectibility of such
Account;
(h) It has been billed and forwarded to the Account Debtor for
payment in accordance with applicable laws and compliance and conformance
with any and requisite procedures, requirements and regulations governing
payment by such Account Debtor with respect to such Account, and such Account
if due from a Medicaid/Medicare Account Debtor is properly payable directly
to Borrower; and
(i) Borrower has obtained and currently has all certificates of
need, Medicaid and Medicare provider numbers, licenses, permits and
authorizations as necessary in the generation of such Accounts.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to Agreement. The obligation of
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this
Agreement and all other Loan Documents required to be executed and delivered
at or prior to Closing (other than the Note, as to which Lender shall receive
only one original), executed by Borrower and any other required Persons, as
applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event
which, with the giving of notice or the lapse of time, or both, could
constitute such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct.
(f) Lender shall have received copies of all board of directors
resolutions and other corporate action taken by Borrower to authorize the
execution, delivery and performance of
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the Loan Documents and the borrowing of the Loan thereunder, as well as the
names and signatures of the officers of Borrower authorized to execute
documents on its behalf in connection herewith, all as also certified as of
the date hereof by Borrower's chief financial officer, and such other papers
as Lender may require.
(g) Lender shall have received copies, certified as true,
correct and complete by a corporate officer of Borrower, of the articles of
incorporation and bylaws of Borrower, with any amendments thereto, and all
other documents necessary for performance of the obligations of Borrower
under this Agreement and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel for
Borrower, dated the date hereof, in the form of Exhibit E.
(i) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered hereunder, including without limitation an initial borrowing base
certificate calculating the Borrowing Base.
(j) Lender shall have received the portion of the Commitment
Fee payable at Closing in accordance with Section 2.4(a)
of this Agreement.
(k) The Lockbox and the Concentration Account shall have been
established.
(1) Lender shall have received a certificate of Borrower's
chief financial officer, dated the Closing Date, certifying that all of the
conditions specified in this Section have been fulfilled.
Section 5.2. Conditions Precedent to Advances. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit Loans,
advances or other extensions of credit under the Loan shall be disbursed
hereunder unless the following conditions have been satisfied or waived
immediately prior to such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made on
and as of such date (except to the extent that such representations and
warranties expressly relate solely to an earlier date and except that the
references in Section 4.7 to financial statements shall be deemed to be a
reference to the then most recent annual and interim financial
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statements of Borrower furnished to Lender pursuant to Section 6.1 hereof).
(b) No Event of Default or event which, with the giving of
notice of the lapse of time, or both, could become an Event of Default shall
have occurred and be continuing or would result from the making of the
disbursement or advance.
(c) No adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower shall have
occurred and be continuing with respect to Borrower since the date hereof.
Section 5.3. Closing. Subject to the conditions of this Article V, the
Loan shall be made available on the date as is mutually agreed by the parties
(the "Closing Date") at such time as may by mutually agreeable to the parties
upon the execution hereof (the "Closing") at such place as may be requested
by Lender.
Section 5.4. Waiver of Rights. By completing the Closing hereunder, or
by making advances under the Loan, Lender does not waive a breach of any
representation or warranty of Borrower hereunder or under any other Loan
Document, and all of Lender's claims and rights resulting from any breach or
misrepresentation by Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that for so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of Borrower under the Loan Documents:
Section 6.1. Financial Statements and Collateral Reports. Borrower
will furnish to Lender (a) a sales and collections report and accounts
receivable aging schedule on a form acceptable to Lender within fifteen (15)
days after the end of each calendar month, which shall include, but not be
limited to, a report of sales, credits issued, and collections received; (b)
payable aging schedules within fifteen (15) days after the end-of each
calendar month; (c) internally prepared monthly financial statements for
Borrower, certified by Borrower's chief financial officer to be in accordance
with GAAP to the best of his or her knowledge, within forty-five (45) days of
the end of each calendar month (provided, however, that Borrower reserves the
right to make reasonable accounting adjustments to such monthly financial
statements within a reasonable period of time following the delivery thereof
to Lender); (d) internally prepared
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quarterly financial statements for the Consolidated Company (accompanied by
detailed financial information pertaining to Borrower), to be furnished to
Lender simultaneous with the filing by the Consolidated Company with the U.S.
Securities and Exchange Commission of quarterly financial statements on Form
10-Q; (e) to the extent prepared by Borrower, annual projections, profit and
loss statements, balance sheets, and cash flow reports (prepared on a
monthly basis) for the succeeding fiscal year within thirty (30) days before
the end of each of Borrower's fiscal years; (f) annual audited financial
statements for the Consolidated Company (as such term is defined in Section
4.7) prepared by Richard A. Eisner & Co., LLP or a firm of independent public
accountants reasonably satisfactory to Lender, to be furnished to Lender
simultaneous with the filing by the Consolidated Company with the U.S.
Securities and Exchange Commission of annual financial statements on Form
10-K; (g) promptly upon receipt thereof, copies of any reports submitted to
Borrower by independent accountants in connection with any interim audit of
the books of Borrower and copies of each management control letter provided
to Borrower by independent accountants; (h) as soon as available, copies of
all financial statements and notices provided by Borrower to all of its
stockholders; and (i) such additional information, reports or statements as
Lender may from time to time request. Annual financial statements shall set
forth in comparative form figures for the corresponding periods in the prior
fiscal year. All financial statements shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP.
Section 6.2. Payments Hereunder. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder, under
the Loan, and under any other agreements with Lender to which Borrower is a
party, as and when due.
Section 6.3. Existence, Good Standing, and Compliance with Laws.
Borrower will do or cause to be done all things necessary (a) to obtain and
keep in full force and effect all corporate existence, rights, licenses,
privileges, and franchises of Borrower necessary to the ownership of its
property or the conduct of its business, and comply with all applicable
present and future laws, ordinances, rules, regulations, orders and decrees
of any Governmental Authority having or claiming jurisdiction over Borrower;
and (b) to maintain and protect the properties used or useful in the conduct
of the operations of Borrower, in a prudent manner, including without
limitation the maintenance at all times of such insurance upon its insurable
property and operations as required by law or by Section 6.7 hereof.
Section 6.4. Legality. The making of the Loan and each disbursement or
advance under the Loan shall not be subject to
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any penalty or special tax, shall not be prohibited by any governmental order
or regulation applicable to Borrower, and shall not violate any rule or
regulation of any Governmental Authority, and necessary consents, approvals
and authorizations of any Governmental Authority to or of any such
disbursement or advance shall have been obtained.
Section 6.5. Lender's Satisfaction. All instruments and legal
documents and proceedings in connection with the transactions contemplated by
this Agreement shall be satisfactory in form and substance to Lender and its
counsel, and Lender shall have received all documents, including records of
corporate proceedings and opinions of counsel, which Lender may have
requested in connection therewith.
Section 6.6. Taxes and Charges. Borrower will timely file all tax
reports and pay and discharge all taxes, assessments and governmental charges
or levies imposed upon Borrower, or its income or profits or upon its
properties or any part thereof, before the same shall be in default and prior
to the date on which penalties attach thereto, as well as all lawful claims
for labor, material, supplies or otherwise which, if unpaid, might become a
lien or charge upon the properties or any part thereof of Borrower; Provided,
however, that the Borrower shall not be required to pay and discharge or
cause to be paid and discharged any such tax, assessment, charge, levy or
claim so long as the validity or amount thereof shall be contested in good
faith and by appropriate proceedings by Borrower, and the Borrower shall have
set aside on their books adequate reserve therefor; and Provided further,
that such deferment of payment is permissible only so long as Borrower's
title to, and its right to use, the Collateral is not adversely affected
thereby and Lender's lien and priority on the Collateral are not adversely
affected, altered or impaired thereby.
Section 6.7. Insurance. Borrower will carry adequate public liability
and professional liability insurance with responsible companies satisfactory
to Lender in such amounts and against such risks as is customarily maintained
by similar businesses and by owners of similar property in the same general
area.
Section 6.8. General Information. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and, upon reasonable prior notice,
permit any officer, employee or agent of Lender to visit and inspect
Borrower's corporate headquarters or any of Borrower's facilities at which
Accounts are generated, to meet with appropriate personnel and to examine the
minute books, books of account and other records, including management
letters prepared by Borrower's auditors, of Borrower, and make copies thereof
or extracts therefrom, and to
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discuss its and their business affairs, finances and accounts with, and be
advised as to the same by, the accountants and officers of Borrower, all at
such reasonable times and as often as Lender may require.
Section 6.9. Maintenance of Property. Borrower will maintain, keep and
preserve all of its properties in good repair, working order and condition
and from time to time make all needful and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times.
Section 6.10. Notification of Events of Default and Adverse
Developments. Borrower promptly will notify Lender upon the occurrence of:
(a) any Event of Default; (b) any event which, with the giving of notice or
lapse of time, or both, could constitute an Event of Default; (c) any event,
development or circumstance whereby the financial statements previously
furnished to Lender fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of
Borrower; (d) any judicial, administrative or arbitration proceeding pending
against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which, if adversely decided, could
adversely affect its condition (financial or otherwise) or operations
(present or prospective) or which may expose Borrower to uninsured liability
of $25,000.00 or more; (e) any default claimed by any other creditor for
Borrowed Money of Borrower other than Lender; and (f) any other development
in the business or affairs of Borrower which may be adverse; in each case
describing the nature thereof and (in the case of notification under clauses
(a) and (b)) the action Borrower proposes to take with respect thereto.
Section 6.11. Employee Benefit Plans. Borrower will (a) comply with
the funding requirements of ERISA with respect to the Plans for its
employees, or will promptly satisfy any accumulated funding deficiency that
arises under Section 302 of ERISA; (b) furnish Lender, promptly after filing
the same, with copies of all reports or other statements filed with the
United States Department of Labor, the Pension Benefit Guaranty Corporation,
or the Internal Revenue Service with respect to all Plans, or which Borrower,
or any member of a Controlled Group, may receive from such Governmental
Authority with respect to any such Plans, and (c) promptly advise Lender of
the occurrence of any Reportable Event or Prohibited Transaction with respect
to any such Plan and the action which Borrower proposes to take with respect
thereto. Borrower will make all contributions when due with respect to any
multi-employer pension plan in which it participates and will promptly advise
Lender: (a) upon its receipt of notice of the assertion against Borrower of a
claim for withdrawal liability;
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(b) upon the occurrence of any event which could trigger the assertion of a
claim for withdrawal liability against Borrower; and (c) upon the occurrence
of any event which would place Borrower in a Controlled Group as a result of
which any member (including Borrower) thereof may be subject to a claim for
withdrawal liability, whether liquidated or contingent.
Section 6.12. Financing Statements. Borrower shall provide to Lender
evidence satisfactory to Lender as to the due recording of termination
statements, releases of collateral, and Forms UCC-3, and shall cause to be
recorded financing statements on Form UCC-1, duly executed by Borrower and
Lender, in all places necessary to release all existing security interests
and other liens in the Collateral (other than as permitted hereby) and to
perfect and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
Section 6.13. Financial Records. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will
be made of all of its business transactions, and will reflect in its
financial statements adequate accruals and appropriations to reserves, all in
accordance with GAAP.
Section 6.14. Collection of Accounts. Borrower shall continue to
collect its Accounts in the ordinary course of business.
Section 6.15. Places of Business. Borrower shall give thirty (30)
days, prior written notice to Lender of any change in the location of any of
its places of business, of the places where its records concerning its
Accounts are kept, of the places where the Collateral is kept, or of the
establishment of any new, or the discontinuance of any existing, places of
business.
Section 6.16. Business Conducted. Borrower shall continue in the
business presently conducted by i ' t using its best efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or indirectly,
in any line of business substantially different from the business conducted
by it immediately prior to the Closing Date, or engage in business or lines
of business which are not reasonably related thereto.
Section 6.17. Litigation and Other Proceedings. Borrower shall give
prompt notice to Lender of any litigation, arbitration, or other proceeding
before any Governmental Authority against or affecting Borrower if the amount
claimed is more than $25,000.00
Section 6.18. Bank Accounts. Borrower shall assign all of its
depository accounts to Lender.
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Section 6.19. Submission of Collateral Documents. Borrower will, on
demand of Lender, make available to Lender copies of shipping and delivery
receipts evidencing the shipment of goods that gave rise to an Account,
medical records, insurance verification forms, assignment of benefits,
in-take forms or other proof of the satisfactory performance of services that
gave rise to an Account, a copy of the claim or invoice for each Account and
copies of any written contract or order from which the Account arose.
Borrower shall promptly notify Lender if an Account becomes evidenced or
secured by an instrument or chattel paper and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender.
Section 6.20. Licensure; Medicaid/Medicare Cost Reports. Borrower will
maintain all certificates of need, provider numbers and licenses necessary to
conduct its business as presently conducted, and take any steps required to
comply with any such new or additional requirements that may be imposed on
providers of medical products and services. If required, all
Medicaid/Medicare costs reports will be properly filed.
Section 6.21. Officer's Certificates. Together with the monthly
financial statements delivered pursuant to clause (c) of Section 6.1, and
together with the audited annual financial statements delivered pursuant to
clause (g) of that Section, Borrower shall deliver to Lender a certificate of
its chief financial officer in form and substance satisfactory to Lender
setting forth:
(a) The information (including detailed calculations) required
in order to establish whether Borrower is in compliance with the requirements
of Articles VI and VII as of the end of the period covered by the financial
statements then being furnished; and
(b) That the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review
of the transactions and conditions of Borrower from the beginning of the
accounting period covered by the income statements being delivered to the
date of the certificate, and that such review has not disclosed the existence
during such period of any condition or event which constitutes an Event of
Default or which is then, or with the passage of time or giving of notice or
both, could become an Event of Default, and if any such condition or event
existed during such period or now exists, specifying the nature and period of
existence thereof and what action Borrower has taken or proposes to take with
respect thereto.
Section 6.22. Visits and Inspections. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be reasonably
requested upon at least twenty-four (24) hours'
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prior notice, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its
books and records, and discuss with its President or Controller, or other
persons designated by either of them, and its independent accountants,
Borrower's business, assets, liabilities, financial condition, business
prospects and results of operations.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of the Borrower under the Loan Documents:
Section 7.1. Borrowing. Borrower will not create, incur, assume or
suffer to exist any liability for Borrowed Money except: (a) indebtedness to
Lender; (b) indebtedness of Borrower secured by mortgages, encumbrances or
liens expressly permitted by Section 7.3 hereof; (c) accounts payable to
trade creditors and current operating expenses (other than for borrowed
money) which are not aged more than one hundred twenty (120) days from the
billing date or more than thirty (30) days from the due date, in each case
incurred in the ordinary course of business and paid within such time period,
unless the same are being contested in good faith and by appropriate and
lawful proceedings, and Borrower shall have set aside such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by Borrower
and its independent accountants; (d) borrowings incurred in the ordinary
course of its business and not exceeding $50,000.00 in the aggregate
outstanding at any one time; or (e) indebtedness incurred to finance the
acquisition of fee simple ownership of the facility identified in Schedule
4.15, with such indebtedness to be secured solely by a mortgage on such
facility. Borrower will not make prepayments on any existing or future
indebtedness for Borrowed Money to any Person (other than Lender, to the
extent permitted by this Agreement or any subsequent agreement between
Borrower and Lender).
Section 7.2. Joint Ventures. Borrower will not invest directly or
indirectly in any joint venture for any purpose without the prior written
notice to, and the express written consent of, Lender, which consent may be
withheld in Lender's sole discretion.
Section 7.3. Liens and Encumbrances. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of
any kind (including the charge upon property purchased under a conditional
sale or other title
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retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except for Permitted
Liens.
Section 7.4. Merger, Acquisition, or Sale of Assets. Borrower will
not enter into any merger or consolidation with or acquire all or
substantially all of the assets of any Person, and will not sell, lease, or
otherwise dispose of any of its assets except in the ordinary course of its
business.
Section 7.5. Sale and Leaseback. Borrower will not, directly or
indirectly, enter into any arrangement whereby Borrower sells or transfers
all or any part of its assets and thereupon and within one year thereafter
rents or leases the assets so sold or transferred without the prior written
notice to, and the express written consent of, Lender, which consent may be
withheld in Lender's sole discretion; provided, however, that in any fiscal
year Borrower shall be permitted to enter into any transactions described
in this Section 7.5 without obtaining Lender's prior written consent so
long as the aggregate amount involved in such transactions during such
fiscal year is lower than Fifty Thousand and No/100 Dollars ($50,000.00).
Section 7.6. Dividends and Management Fees. Borrower will not
declare or pay any dividends, purchase, redeem or otherwise acquire for
value any of its outstanding stock, or return any capital of its
stockholders, nor shall Borrower pay or become obligated to pay management
fees or fees of a similar nature to any Person; provided, however, that so
long as no Event of Default has occurred hereunder, Borrower may make any
such dividends or purchase, redeem or otherwise acquire such outstanding
stock, return any such capital, or pay any such management fees, so long as
doing so would not violate any of the other terms and conditions of this
Agreement.
Section 7.7. Loans. Borrower will not make loans or advances to any
Person, other than (i) trade credit extended in the ordinary course of its
business, and (ii) advances for business travel and similar temporary
advances in the ordinary course of business to officers, stockholders,
directors, and employees.
Section 7.8. Contingent Liabilities. Borrower will not assume,
guarantee, endorse, contingently agree to purchase or otherwise become
liable upon the obligation of any Person, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business.
Section 7.9. Subsidiaries. Borrower will not form any subsidiary, or
make any investment in or any loan in the nature of an investment to, any
other Person.
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Section 7.10. Compliance with ERISA. Borrower will not permit with
respect to any Plan covered by Title IV of ERISA any Prohibited Transaction
or any Reportable Event.
Section 7.11. Certificates of Need. Amend, alter or suspend or
terminate or make provisional in any material way, any certificate of need or
provider number without the prior written consent of Lender.
Section 7.12. Transactions with Affiliates. Borrower will not enter
into any transaction, including without limitation the purchase, sale, or
exchange of property, or the loaning or giving of funds to any Affiliate or
subsidiary, except in the ordinary course of business and pursuant to the
reasonable requirements of Borrower's business and upon terms substantially
the same and no less favorable to Borrower as it would obtain in a comparable
arm's length transaction with any Person not an Affiliate or subsidiary, and
so long as the transaction is not otherwise prohibited hereunder. For
purposes of the foregoing, Lender consents to the transactions described on
Schedule 7.12.
Section 7.13. Use of Lender's Name. Borrower will not use Lender's
name (or the name of any of Lender's affiliates) in connection with any of
its business operations. Borrower may disclose to third parties that
Borrower has a borrowing relationship with Lender. Nothing herein contained
is intended to permit or authorize Borrower to make any contract on behalf of
Lender.
Section 7.14. Chancre in Capital Structure. There shall occur no
change in Borrower's capital structure as set forth in Schedule 4.17.
Section 7.15. Contracts and Agreements. Borrower will not become or be
a party to any contract or agreement which would breach this Agreement, or
breach any other instrument, agreement, or document to which Borrower is a
party or by which it is or may be bound.
Section 7.16. Margin Stock. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, G, T or X of the Board
of Governors of the Federal Reserve System.
Section 7.17. Truth of Statements and Certificates. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary
to make it not misleading in light of the circumstances under which it was
furnished.
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ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. Each of the following (individually, an
"Event of Default" and collectively, the "Events of Default") shall
constitute an event of default hereunder:
(a) A default in the payment of any installment of principal
of, or interest upon, the Note when due and payable, whether at maturity or
otherwise, which default shall have continued unremedied for a period of five
(5) days after written notice thereof from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or
other monetary obligations owing to Lender arising out of or incurred in
connection with this Agreement, when such payment is due and payable, which
default shall have continued unremedied for a period of five (5) days after
written notice from Lender;
(c) A default in the due observance or performance by Borrower
of any other term, covenant or agreement contained in any of the Loan
Documents, which default shall have continued unremedied for a period of
thirty (30) days after written notice from Lender;
(d) If any representation or warranty made by Borrower herein
or in any of the other Loan Documents, any financial statement, or any
statement or representation made in any other certificate, report or opinion
delivered in connection herewith or therewith proves to have been incorrect
or misleading in any material respect when made, which default shall have
continued unremedied for a period of ten (10) days after written notice from
Lender;
(e) If any obligation of Borrower (other than its Obligations
hereunder) for the payment of Borrowed Money is not paid when due or within
any applicable grace period, or such obligation becomes or is declared to be
due and payable prior to the expressed maturity thereof, or there shall have
occurred an event which, with the giving of notice or lapse of time, or both,
would cause any such obligation to become, or allow any such obligation to be
declared to be, due and payable;
(f) If Borrower makes an assignment for the benefit of
creditors, offers a composition or extension to creditors, or makes or sends
notice of an intended bulk sale of any business or assets now or hereafter
conducted by Borrower;
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(g) If Borrower files a petition in bankruptcy, is adjudicated
insolvent or bankrupt, petitions or applies to any tribunal for any receiver
of or any trustee for itself or any substantial part of its property,
commences any proceeding relating to itself under any reorganization,
arrangement, readjustment or debt, dissolution or liquidation law or statute
of any jurisdiction, whether now or hereafter in effect, or there is
commenced against Borrower any such proceeding which remains undismissed for
a period of sixty (60) days, or any Borrower by any act indicates its consent
to, approval of, or acquiescence in, any such proceeding or the appointment
of any receiver of or any trustee for a Borrower or any substantial part of
its property, or suffers any such receivership or trusteeship to continue
undischarged for a period of sixty (60) days;
(h) If one or more final judgments against Borrower or
attachments against its property not fully and unconditionally covered by
insurance shall be rendered by a court of record and shall remain unpaid,
unstayed on appeal, undischarged, unbonded and undismissed for a period of
ten (10) days;
(i) A Reportable Event which might constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the appointment
by the appropriate United States District Court of a trustee to administer
any such Plan or for the entry of a lien or encumbrance to secure any
deficiency, has occurred and is continuing thirty (30) days after its
occurrence, or any such Plan is terminated, or a trustee is appointed by an
appropriate United States District Court to administer any such Plan, or the
Pension Benefit Guaranty Corporation institutes proceedings to terminate any
such Plan or to appoint a trustee to administer any such Plan, or a lien or
encumbrance is entered to secure any deficiency or claim;
(j) If any outstanding stock of Borrower is sold or otherwise
transferred by the Person owning such stock on the date hereof;
(k) If there shall occur any uninsured damage to or loss, theft
or destruction of any portion of the Collateral;
(1) If Borrower breaches of violates the terms of, or if a
default or an event which could, whether with notice or the passage of time,
or both, constitute a default, occurs under any other existing or future
agreement (related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process
against Borrower or any of its property or assets;
(n) If Borrower ceases any material portion of its business
operations as presently conducted;
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(o) If any indication or evidence is received by Lender that Borrower
may have directly or indirectly been engaged in any type of activity which,
in Lender's discretion, might result in the forfeiture of any property of
Borrower to any Governmental Authority, which default shall have continued
unremedied for a period of ten (10) days after written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability of
this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(q) Borrower shall be criminally indicted or convicted under
any law that could lead to a forfeiture of any Collateral.
(s) There shall occur a material adverse change in the
financial condition or business prospects of Borrower, or if Lender in good
faith deems itself insecure as a result of acts or events bearing upon the
financial condition of Borrower or the repayment of the Note, which default
shall have continued unremedied for a period of ten (10) days after written
notice from Lender.
(t) PHC, Inc. shall have breached any of its representations,
warranties or covenants contained in the Unconditional Guaranty of Payment
and Performance of even date herewith, executed in favor of Lender.
(u) An Event of Default shall have occurred under the Loan and
Security Agreement dated as of May 21, 1996 (as such Loan and Security
Agreement may be amended, replaced or modified) by and between PHC of Utah,
Inc. (an affiliate of Borrower) and Lender (as successor-in-interest to
HealthPartners Funding, L.P.).
(v) An Event of Default shall have occurred under the Secured
Bridge Note dated January 13, 1997 in the original principal amount of
$400,000.00 (as such Secured Bridge Note may be amended (by Allonge or
otherwise), replaced or modified), executed by Borrower in favor of Lender.
Section 8.2. Acceleration. Upon the occurrence of any of the foregoing
Events of Default, the Note shall become and be immediately due and payable
upon declaration to that effect delivered by Lender to Borrower; provided
that, upon the happening of any event specified in Section 8.1.(g) hereof,
the Note shall be immediately due and payable without declaration or other
notice to Borrower.
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Section 8.3. Remedies.
(a) In addition to all other rights, options, and remedies
granted to Lender under this Agreement, upon the occurrence of an Event of
Default Lender may (i) terminate the Loan, whereupon all outstanding
obligations shall be immediately due and payable, (ii) exercise all other
rights granted to it hereunder and all rights under the Uniform Commercial
Code in effect in the applicable jurisdictions) and under any other
applicable law, and (iii) exercise all rights and remedies under all Loan
Documents now or hereafter in effect, including the following rights and
remedies (which list is given by way of example and is not intended to be an
exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process, and to exercise all rights and remedies available to Lender with
respect to the Collateral under the Uniform Commercial Code in effect in the
jurisdictions) in which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such
premises in compliance with subsection (b), without any liability for rent,
storage, utilities, or other sums, and Borrower shall not resist or interfere
with such action;
(iii) The right to require Borrower at Borrower's expense
to assemble all or any part of the Collateral and make it available to Lender
at any place designated by Lender;
(iv) The right to reduce the Maximum Loan Amount or to use
the Collateral and/or funds in the Concentration Account in amounts up to the
Maximum Loan Amount for any reason; and
(v) The right to relinquish or abandon any Collateral or
any security interest therein.
(b) Borrower agrees that a notice received by it at least five
(5) days before the time of any intended public sale, or the time after which
any private sale or other disposition of the Collateral is to be made, shall
be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized marked may be sold
immediately by Lender without prior notice to Borrower. At any sale or
disposition of Collateral, Lender may (to the extent permitted by applicable
law) purchase all or any
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part of the Collateral, free from any right of redemption by Borrower, which
right is hereby waived and released. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase
all or any part of the Collateral, free from any right of redemption by
Borrower, which right is hereby waived and released. Borrower covenants and
agrees not to interfere with or impose any obstacle to Lender's exercise of
its rights and remedies with respect to the Collateral.
Section 8.4. Nature of Remedies. Lender shall have the right to
proceed against all or any portion of the Collateral to satisfy, in any
order, (a) the liabilities and Obligations of Borrower to Lender, or (b) upon
the occurrence of an Event of Default under the Secured Bridge Note dated
January 13, 1997(as such Secured Bridge Note may be amended (by Allonge or
otherwise), replaced or modified), the liabilities and obligations of
Borrower to Lender thereunder, or (c) upon the occurrence of an Event of
Default under the Loan and Security Agreement dated May 21, 1996 (the "Utah
Loan Agreement"), the liabilities and obligations (as defined in the Utah
Loan Agreement) of PHC of Utah, Inc. to Lender thereunder. All rights and
remedies granted Lender hereunder and under any agreement referred to herein,
or otherwise available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and Lender may proceed with any
number of remedies at the same time until the Loan, and all other existing
and future liabilities and obligations of Borrower and PHC Utah to Lender,
are satisfied in full. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and Lender, upon the
occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and
in any order."
ARTICLE IX
MISCELLANEOUS
Section 9.1. Expenses and Taxes.
(a) Borrower agrees to pay, whether or not the Closing occurs,
all out-of-pocket charges and expenses incurred by Lender (including without
limitation the reasonable fees and expenses-of Lender's counsel) in
connection with the negotiation, preparation and execution of each of the
Loan Documents; provided, however that with respect to the period through and
including the Closing, Borrower shall in no event be required to pay more
than the following amounts incurred by Lender: (i) Six Thousand and no/100
Dollars ($6,000.00) in legal fees plus (ii) out-of-pocket charges and
expenses. Borrower also agrees to pay all out-of pocket charges and expenses
incurred by Lender (including the
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reasonable fees and expenses of Lender's counsel) in connection with the
enforcement, protection or preservation of any right or claim of Lender and
the collection of any amounts due under the Loan Documents.
(b) Borrower shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues or any personal property tax), if
any, in connection with the issuance of the Note and the recording of the
security documents therefor. The obligations of Borrower under this clause
(b) shall survive the payment of Borrower's indebtedness hereunder and the
termination of this Agreement.
Section 9.2. Entire Agreement; Amendments. This Agreement and the
other Loan Documents constitute the full and entire understanding and
agreement among the parties with regard to their subject matter and supersede
all prior written or oral agreements, understandings, representations and
warranties made with respect thereto. No amendment, supplement or
modification of this Agreement nor any waiver of any provision thereof shall
be made except in writing executed by the party against whom enforcement is
sought.
Section 9.3. No Waiver; Cumulative Rights. No waiver by any party
hereto of any one or more defaults by the other party in the performance of
any of the provisions of this Agreement shall operate or be construed as a
waiver of any future default or defaults, whether of a like or different
nature. No failure or delay on the part of any party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right,
power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to any party hereto at law,
in equity or otherwise.
Section 9.4. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed by
registered or certified mail (return receipt requested and postage prepaid),
sent by telecopier (with a confirming copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party at its
address set forth below, or at such other address as such party may, by
written notice, designate as its address for purposes of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
2 Wisconsin Circle, Ste 320 Chevy Chase, MD 20814
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Attn: John K. Delaney, President
(b) If to Borrower, at:
200 Lake Street, Suite 102 Peabody, MA 01960
Attn: Ms. Paula Wurts, Chief Financial Officer
Telephone: (508) 536-2777
Telecopier: (508) 536-2677
With a copy to:
Willie J. Washington, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Telephone: (617) 248-5000
Telecopier: (617) 248-4000
If mailed, notice shall be deemed to be given five (5) days after being sent,
if sent by personal delivery or telecopier, notice shall be deemed to be
given when delivered, and if sent by prepaid courier, notice shall be deemed
to be given on the next Business Day following deposit with the courier.
Section 9.5. Severability, If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any
party or circumstance shall be found by a court of competent jurisdiction to
be, to any extent, invalid or unenforceable, the remainder of this Agreement
and the application of such term, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant or
condition shall be valid and enforced to the fullest extent permitted by
law. Upon determination that any such term is invalid, illegal or
unenforceable, the parties hereto shall amend this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner.
Section 9.6. Successors and Assigns. This Agreement, the Note, and the
other Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns.
Notwithstanding the foregoing, Borrower may not assign any of its rights or
delegate any of its obligations hereunder without the prior written consent
of Lender, which may be withheld in its sole discretion. Lender may sell,
assign, transfer, or participate any or all of its rights or obligations
hereunder without notice to or consent of Borrower.
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Section 9.7. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one instrument.
Section 9.8. Interpretation. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party
because that party or its legal representative drafted that provision. The
titles of the paragraphs of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement. Any pronoun
used in this Agreement shall be deemed to include singular and plural and
masculine, feminine and neuter gender as the case may be. The words
"herein," "hereof," and "hereunder" shall be deemed to refer to this entire
Agreement, except as the context otherwise requires.
Section 9.9. Survival of Terms. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan
Document, and in any certificates and other instruments delivered in
connection therewith shall be considered to have been relied upon by Lender
and shall survive the making by Lender of the Loans herein contemplated and
the execution and delivery to Lender of the Note, and shall continue in full
force and effect until all liabilities and obligations of Borrower to Lender
are satisfied in full.
Section 9.10. Release of Lender. Borrower releases Lender, its
officers, employees, and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them, unless caused by
Lender's recklessness, gross negligence, or willful misconduct.
Section 9.11. Time. Whenever Borrower is required to make any payment
or perform any act on a Saturday, Sunday, or a legal holiday under the laws
of the State of Maryland (or other jurisdiction where Borrower is required to
make the payment or perform the act), the payment may be made or the act
performed on the next Business Day. Time is of the essence in Borrower's
performance under this Agreement and all other Loan Documents.
Section 9.12. Commissions. The transaction contemplated by this
Agreement was brought about by Lender and Borrower acting as principals and
without any brokers, agents, or finders being the effective procuring cause.
Borrower represents that it has not committed Lender to the payment of any
brokerage fee, commission, or charge in connection with this transaction. If
any such claim is made on Lender by any broker, finder, or agent or other
person, Borrower will indemnify, defend, and hold Lender harmless from and
against the claim and will defend any action to recover on that claim, at
Borrower's cost and expense, including Lender's counsel fees. Borrower
further agrees that until any such claim
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or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the
Collateral.
Section 9.13. Third Parties. No rights are intended to be created
hereunder or under any other Loan Document for the benefit of any third party
donee, creditor, or incidental beneficiary of Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Lender of Borrower's
duty of performance, including without limitation Borrower's duties under any
account or contract in which Lender has a security interest.
Section 9.14. Discharge of Borrower's obligations. Lender, shall have
the right, if Borrower has previously failed to do so, upon reasonable notice
to Borrower, to: (a) obtain insurance covering any of the Collateral as
required hereunder; (b) pay for the performance of any of Borrower's
obligations hereunder; (c) discharge taxes, liens, security interests, or
other encumbrances at any time levied or placed on any of the Collateral in
violation of this Agreement unless Borrower is in good faith with due
diligence by appropriate proceedings contesting those items; and (d) pay for
the maintenance and preservation of any of the Collateral. Expenses and
advances shall be added to the Loan, until reimbursed to Lender and shall be
secured by the Collateral. Such payments and advances by Lender shall not be
construed as a waiver by Lender of an Event of Default.
Section 9.15. Information to Participants. Lender may divulge to any
participant it may obtain in the Loan, or any portion thereof, all
information, and furnish to such participant copies of reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement or any other Loan Document.
Section 9.16. Indemnity. Borrower hereby agrees to indemnify and hold
harmless Lender, its partners, officers, agents and employees (collectively,
"Indemniteell) from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties hereunder, or from the breach of any of the
representations or warranties contained
in Article IV hereof. In addition, Borrower shall defend Indemnitee
against and save it harmless from all claims of any Person with respect to
the Collateral.. Notwithstanding any contrary provision in this Agreement,
the obligation of Borrower under this Section 9.16 shall survive the payment
in full of the Obligations and the termination of this Agreement.
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Section 9.17. Choice of Law; Consent to Jurisdiction. THIS AGREEMENT
AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT
OR THE NOTE IS COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL COURT
LOCATED IN THE STATE OF MARYLAND, BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE
IN THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY
SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS
ADDRESS DESCRIBED IN SECTION 9.4 HEREOF.
Section 9.18. Waiver of Trial by Jury. BORROWER HEREBY (A) COVENANTS
AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A
JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY
SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS
TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY
AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING
JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE
AS CONCLUSIVE EVIDENCE OF BORROWERS WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER
(INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
42
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the date first written above.
ATTEST: HCFP FUNDING, INC.
(Seal) a Delaware corporation
By: __________________________ By: _______________________
Name: Name:
Title: Title:
ATTEST: PHC OF MICHIGAN, INC.
(Seal) a Massachusetts
corporation
By: By:
Name: Name: Bruce A. Shear
Title: Title: President
4
<PAGE>
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Concentration Account Agreement
Exhibit D - Locations of Collateral
Exhibit E - Form of Legal Opinion
44
<PAGE>
LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 Subsidiaries
Schedule 4.5 Litigation
Schedule 4.7 Tax Identification Numbers
Schedule 4.10 Taxes
Schedule 4.13 Non-Compliance with Law
Schedule 4.14 Environmental Matters
Schedule 4.l5 Places of Business
Schedule 4.16 Licenses
Schedule 4.17 Stock Ownership
Schedule 4.19 Borrowings and Guarantees
Schedule 4.21 Trade Names
Schedule 4.22 Joint Ventures
Schedule 7.12 Transactions with Affiliates
loanmici.phc
4
<PAGE>
REVOLVING CREDIT NOTE
$1,500,000.00 February 1997
For value received, the undersigned, PHC OF MICHIGAN, INC., a
Massachusetts corporation (the "Borrower"), promises to pay, in lawful money
of the United States, to the order of HCFP FUNDING, INC., a Delaware
corporation ("Lender"), the principal sum of One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000.00), or so much thereof as shall be
advanced or readvanced and shall remain unpaid under the Loan established
pursuant to that certain Loan and Security Agreement of even date herewith by
and among the undersigned and Lender (the "Loan Agreement"), plus interest on
the unpaid balance thereof, computed on a 360-day basis, at the rate per
annum that is set forth in the Loan Agreement. All capitalized terms used
herein, unless otherwise specifically defined in this Note, shall have the
meanings ascribed to them in the Loan Agreement.
This Note shall evidence the undersigned's obligation to repay all sums
advanced by Lender from time to time under and as part of the Loan. The
actual amount due and owing from time to time hereunder shall be evidenced by
Lender's records of receipts and disbursements with respect to the Loan,
which shall be conclusive evidence of that amount.
Interest hereon shall be payable monthly, in arrears, on the first
Business Day of each month hereafter (for the previous month). For purposes
hereof, a "Business Day" shall mean any day on which banks are open for
business in Maryland, excluding Saturdays and Sundays.
This Note shall become due and payable upon the earlier to occur of (i)
the expiration of the Term, or (ii) any Event of Default under the Loan
Agreement, or any other event under any other Loan Documents which would
result in this Note becoming due and payable. At such time, the entire
principal balance hereof and all other fees, costs and expenses, if any,
shall be due and payable in full. Lender shall thereupon have the option at
any time and from time to time to exercise all of the rights and remedies set
forth herein and in the other Loan Documents, as well as all rights and
remedies otherwise available to Lender at law or in equity, to collect the
unpaid indebtedness hereunder, and thereunder. This Note is secured by the
Collateral, as defined in and described in the Loan Agreement.
Whenever any principal and/or interest and/or fee hereunder shall not
be paid when due, whether at the stated maturity or by acceleration, interest
on such unpaid amounts shall thereafter be payable at a rate per annum equal
to two percentage points above the stated rate of interest on this Note until
such amounts shall be paid.
<PAGE>
The undersigned and Lender intend to conform strictly to the applicable usury
laws in effect from time to time during the term of the Loan. Accordingly,
if any transaction contemplated hereby would be usurious under such laws,
then notwithstanding any other provision hereof: (a) the aggregate of all
interest that is contracted for, charged, or received under this Note or
under any other Loan Document shall not exceed the maximum amount of interest
allowed by applicable law, and any excess shall be promptly credited to the
undersigned by Lender (or, to the extent that such consideration shall have
been paid, such excess shall be promptly refunded to the undersigned by
Lender); (b) neither the undersigned nor any other Person (as defined in the
Loan Agreement) now or hereafter liable hereunder shall be obligated to pay
the amount of such interest to the extent that it is in excess of the maximum
interest permitted by applicable law; and (c) the effective rate of interest
shall be reduced to the Highest Lawful Rate (as defined in the Loan
Agreement). All sums paid, or agreed to be paid, to Lender for the use,
forbearance, and detention of the debt of Borrower to Lender shall, to the
extent permitted by applicable law, be allocated throughout the full term of
this Note until payment is made in full so that the actual rate of interest
does not exceed the Highest Lawful Rate in effect at any particular time
during the full term thereof. If at any time the rate of interest under the
Note exceeds the Highest Lawful Rate, the rate of interest to accrue pursuant
to this Note shall be limited, notwithstanding anything to the contrary
herein, to the Highest Lawful Rate, but any subsequent reductions in the Base
Rate shall not reduce the interest to accrue pursuant to this Note below the
Highest Lawful Rate until the total amount of interest accrued equals the
amount of interest that would have accrued if a varying rate per annum equal
to the interest rate under the Note had at all times been in effect. If the
total amount of interest paid or accrued pursuant to this Note under the
foregoing provisions is less than the total amount of interest that would
have accrued if a varying rate per annum equal to the interest rate under
this Note had been in effect, then the undersigned agrees to pay to Lender an
amount equal to the difference between (a) the lesser of (i) the amount of
interest that would have accrued if the Highest Lawful Rate had at all times
been in effect, or (ii) the amount of interest that would have accrued if a
varying rate per annum equal to the interest rate under the Note had at all
times been in effect, and (b) the amount of interest accrued in accordance
with the other provisions of this Note and the Loan Agreement.,
This Note is the "Note" referred to in the Loan Agreement, and is
issued pursuant thereto. Reference is made to the Loan Agreement for a
statement of the additional rights and obligations of the undersigned and
Lender. In the event of any conflict between the terms hereof and the terms
of the Loan Agreement, the terms of the Loan Agreement shall prevail. All of
the terms, covenants, provisions, conditions, stipulations,
2
<PAGE>
promises and agreements contained in the Loan Documents to be kept, observed
and/or performed by the undersigned are made a part of this Note and are
incorporated herein by this reference to the same extent and with the same
force and effect as if they were fully set forth herein, and the undersigned
promises and agrees to keep, observe and perform them or cause them to be
kept, observed and performed, strictly in accordance with the terms and
provisions thereof.
Each party liable hereon in any capacity, whether as maker, endorser,
surety, guarantor or otherwise, (i) waives presentment for payment, demand,
protest and notice of presentment, notice of protest, notice of non-payment
and notice of dishonor of this debt and each and every other notice of any
kind respecting this Note and all lack of diligence or delays in collection
or enforcement hereof, (ii) agrees that Lender and any subsequent holder
hereof, at any time or times, without notice to the undersigned or its
consent, may grant extensions of time, without limit as to the number of the
aggregate period of such extensions, for the payment of any principal,
interest or other sums due hereunder, (iii) to the extent permitted by law,
waives all exemptions under the laws of the State of Maryland and/or any
state or territory of the United States, (iv) to the extent permitted by law,
waives the benefit of any law or rule of law intended for its advantage or
protection as an obligor hereunder or providing for its release or discharge
from liability hereon, in whole or in part, on account of any facts or
circumstances other than full and complete payment of all amounts due
hereunder, and (v) agrees to pay, in addition to all other sums of money due,
all cost of collection and attorney's fees, whether suit be brought or not,
if this Note is not paid in full when due, whether at the stated maturity or
by acceleration.
No waiver by Lender or any subsequent holder hereof of any one or more
defaults by the undersigned in the performance of any of its obligations
hereunder shall operate or be construed as a waiver of any future default or
defaults, whether of a like or different nature. No failure or delay on the
part of Lender in exercising any right, power or remedy hereunder (including,
without limitation, the right to declare this Note due and payable) shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.
If any term, covenant or condition of this Note, or the application of
such term, covenant or condition to any party or circumstance shall be found
by a court of competent jurisdiction to be, to any extent, invalid or
unenforceable, the remainder of this Note and the application of such term,
covenant, or condition to parties or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
3
<PAGE>
thereby, and each term, covenant or condition shall be valid and enforced
to the fullest extent permitted by law. Upon determination that any such
term is invalid, illegal or unenforceable, the undersigned shall cooperate
with Lender to amend this Note so as to effect the original intent of the
parties as closely as possible in an acceptable manner.
No amendment, supplement or modification of this Note nor any waiver
of any provision hereof shall be made except in writing executed by the
party against whom enforcement is sought.
This Note shall be binding upon the undersigned and its successors
and assigns. Notwithstanding the foregoing, the undersigned may not assign
any of its rights or delegate any of its obligations hereunder without the
prior written consent of Lender, which may be withheld in its sole
discretion.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS NOTE IS
COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL COURT LOCATED IN
THE STATE OF MARYLAND, THE UNDERSIGNED HEREBY CONSENTS TO THE JURISDICTION
OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE
STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO THE UNDERSIGNED AT ITS
ADDRESS DESCRIBED IN SECTION 9.4 OF THE LOAN AGREEMENT.
THE UNDERSIGNED HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL
BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY @ Y IS GIVEN KNOWINGLY
AND VOLUNTARILY BY THE UNDERSIGNED, AND THIS WAIVER IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT
TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER
THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE
EVIDENCE OF THE UNDERSIGNED'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER,
THE UNDERSIGNED HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER
(INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
ANY BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO
JURY TRIAL PROVISION.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused their authorized officers
to execute this Note as of the date first above written.
ATTEST: PHC OF MICHIGAN, INC.
(Seal) a Massachusetts corporation
By: By: 11
Name: Name: Bruce A. Shear
Title: Title: President
Notemich.phc
<PAGE>
Exhibit 10.111
HCFP FUNDING, INC.
("LENDER")
PHC OF MICHIGAN, INC.
( "BORROWER")
$1,500,000 REVOLVING CREDIT LOAN
CLOSING CHECKLIST/AGENDA
I. LIST OF PARTIES:
LENDER: "L"
HCFP Funding,
Inc.........................................................(301)961-1640
c/o HealthCare Financial Partners,
Inc. FAX (301) 664-9860
2 Wisconsin Circle, Suite 320
Chevy Chase, MD 20815
John K. Delaney, President
Steven M. Curwin, Esq., General
Counsel (301) 664-9827
Kanchan Deshmukh, Senior Legal
Assistant (301)664-9828
BORROWER: "B"
200 Lake Street. Suite 102
Peabody, MA 01960
Attn: Ms. Paula Wurts, Chief Financial Officer
Telephone: (504) 291-2239
Telecopier: ( ) ___-____
Bruce A. Shear, President
<PAGE>
BORROWER'S COUNSEL: "BC"
Willie J. Washington, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Telephone: (617) 248-5000
Telecopler: (617) 248-4000
SEARCH COMPANY:
CT Corporation
17 South High Street
Columbus, OH 43215
Tel(800) 621-3216
<PAGE>
II. PRE-SETTLEMENT AND LOAN DOCUMENTS:
RESPONSIBLE PARTY
X I. F/U UCC/Lien Searches ordered from CT
II. Provide copies to Borrower's Counsel to obtain and prepare necessary
releases.
III. Verify names
A. Research recording procedures and costs for
each jurisdiction: LC
1. State of Michigan
Recordation Tax on Receivables? ______________________________
Filing Fees: ________________________________________________
2. Macomb County, Michigan
Recordation Tax on Receivables? _______________________________
Filing Fees: ________________________________________________
3. State of Massachusetts
Recordation Tax on Receivables? ________________________________
Filing Fees: __________________________________________________
4. Peabody City, MA
Recordation Tax on Receivables? __________________________
Filing Fees: ___________________________________________
_____ B. Prepare Financing Statements and Exhibit A attached thereto
3
<PAGE>
_____ C. Loan and Security Agreement with all Exhibits and
LC/BC
Schedules Attached
Drafted X Final ___
1. Exhibits:
a. Form of Revolving Credit Loan
b. Form of Lockbox Agreement
C. Locations of Collateral
d. Form of Legal Opinion
2. Schedules:
a. 1.36 - Permitted Liens
b. 4.1 - List of Subsidiaries
C. 4.5 - Litigation
d. 4.13 - Non-Compliance with Law
e. 4.14 - Environmental Matters
f. 4.15 - Places of Business
g. 4.16 - Licenses
h. 4.17 - Stock Ownership
i. 4.19 - Borrowing and Guarantees
j. 4.21 - Trade Names
k. 4.22 - Joint Ventures
1. 7.12 - Transactions with Affiliates
_____ D. Revolving Credit Note LC
Drafted X Final ___
E. Certificate of Validity LC
Drafted X Final ___
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<PAGE>
_____ F. UCC-1 Financing Statements:
LC
[Note:X / Drafted]
1. State of Massachusetts
a. PHC of Michigan, Inc. d/b/a Harbor Oaks
Peabody City, MA
a. PHC of Michigan, Inc. d/b/a Harbor Oaks
_____ G. Prepare Statement of Costs
LC
a. Commitment Fee
_____ H. IRS Form 8821 B/BC
_____ I. Establishment of Lockbox and Concentration Account B/L
_____ J. Lockbox Agreement B/L
_____ K. Concentration Account Agreement B/L
____ L. Receipt of Financial Statements B/L
_____ M. Receipt of Certificate from Borrower's Chief
Financial Officer B/L
_____ N. Evidence of Insurance B/L
_____ 0. Delivery of Releases BC
_____ P. Provide LC with tax identification numbers B/BC
_____ Q. UCC-1 Financing Statements to be signed B
_____ R. Amendment No. I to Loan and Security Agreement (Utah) B
_____S. Guaranty by PHC, Inc. B
5
<PAGE>
_____ T. First Allonge to Secured Bridge Note (Michigan) B
111. ORGANIZATIONAL DOCUMENTS:
BC
A. Corporate Documents
_____ 1. Articles of Incorporation
_____ 2. Bylaws
_____ B. Opinion Letter BC
Other:
1. Procedures regarding funding, e.g. timing -- weekly, bi-weekly,
monthly, etc., process -- detail provided via diskette, hard
copy, modem, etc., and personnel -- respective client and
HealthPartners contacts
2. Procedures regarding collection, e.g. lockbox
3. Client wiring instructions
H:\w@ I
legal\chkist.phc
<PAGE>
Exhibit 10.112
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the "Guaranty")
dated as of February_____, 1997 by PHC, INC., a Massachusetts corporation
with its principal place of business at 200 Lake Street, Suite 102, Peabody,
MA 01960, Attn: Ms. Paula Wurts, Chief Financial Officer (the "Guarantor") ,
in favor of HCFP FUNDING, INC., a Delaware corporation with its principal
place of business at 2 Wisconsin Circle, Suite 320, Chevy Chase, MD 20815
Attn: John K. Delaney, President (the "Lender").
W I T N E S S E T H
WHEREAS, pursuant to a certain Loan and Security Agreement, dated as of
the date hereof (as such agreement may from time to time be amended, modified
or supplemented, the "Loan Agreement"), by and between PHC of Michigan, Inc.
(the "Borrower") and Lender, Lender has agreed to make available to Borrower
a revolving line of credit in the maximum aggregate principal amount of One
Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00), or so much
thereof as shall be advanced or readvanced from time to time and remain
unpaid (the "Loan"); and
WHEREAS, the Lender is willing to make the Loan under the Loan
Agreement but only upon the condition, among others, that the Guarantor shall
have executed and delivered to Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
1. Unless otherwise defined herein, all capitalized terms used in
this Guaranty shall have the respective meanings given them in the Loan
Agreement.
2. In order to induce Lender to execute and deliver the Loan Agreement and
to make the Loan upon the terms and conditions set forth in the Loan Agreement,
and in consideration thereof, the Guarantor hereby unconditionally and
irrevocably guarantees to Lender and to its successors, endorsees, transferees
and assigns, Borrower's prompt and complete payment when due, whether at the
stated maturity, by acceleration or otherwise, of the Obligations, and
Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Loan Agreement.
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<PAGE>
3. The Guarantor hereby waives notice of the acceptance of this Guaranty
and of the extending of credit as above specified and the state of indebtedness
of Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms thereof, and
waives diligence, presentment, demand of payment, protest or notice, whether of
nonpayment, dishonor, protest or otherwise of any document or documents and
notice of any extension, renewal, modification or default and assent to the
release, substitution or variation of any collateral which may at any time be
held as security for any credit extended to Borrower, all without relieving the
Guarantor of any liability under this Guaranty. The obligations of the Guarantor
hereunder shall be an unconditional obligation to make prompt payment and
performance to the Lender irrespective of the genuineness, validity, regularity
or enforceability of any indebtedness or evidence of indebtedness of Borrower to
Lender or of other circumstances which might otherwise under the laws of any
jurisdiction constitute a legal or equitable discharge of a surety or a
guarantor or a bar (in the nature of a moratorium or otherwise) to the
enforcement of Lender's rights either (i) against Borrower on all or any part of
its obligations or (ii) under this
Guaranty.
4. Notwithstanding any payment or payments made by the Guarantor hereunder
or any setoff or application of funds of the Guarantor by the Lender, the
Guarantor shall not be entitled to be subrogated to any of the rights of the
Lender against the Borrower or any collateral security or guarantee or right of
offset held by Lender for the payment or performance of the Obligations, nor
shall the Guarantor seek any reimbursement from Borrower in respect of payments
made by the Guarantor hereunder, until all amounts owing and any other
performance due to Lender by Borrower for or on account of the Obligations are
paid and satisfied in full. Upon such payment and satisfaction in full, the
Guarantor shall be subrogated to all rights of Lender against Borrower or any
collateral security or guarantee or right of offset held by Lender for the
payment and performance of the Obligations.
5. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received-by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
6. This is intended to be and shall be construed as a continuing guarantee
and shall remain in full force and effect and can be binding in accordance with
and to the extent of its terms upon the Guarantor and its successors and
assigns, and shall inure to the benefit of the Lender, and its successors,
endorsees, transferees and assigns.
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7. In the event that all or any part of the obligations as aforesaid
of Borrower to Lender are not paid when due, the Guarantor hereby guarantees
that it will pay to the same Lender, upon demand therefor, without set-off or
counterclaim and without reduction by reason of any taxes, levies, imposts,
charges and withholdings, restrictions or conditions of any nature which are
now or may hereafter be imposed levied or assessed by any country, political
subdivision or taxing authority, all of which will be for the account of and
paid by the Guarantor, and Lender need not first proceed to preserve, utilize
or exhaust any other right or remedy against the Borrower or any other
guarantor or any security the Lender may have to obtain payment. Such
payment will be made in immediately available funds to the Lender's office at
2 Wisconsin Circle, Suite 320, Chevy Chase, MD 20815, Attn: John K. Delaney,
President, or at such other place as Lender may designate in writing.
8. No failure to exercise and no delay in exercising, on the part of
the Lender, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof, or the exercise of
any other power or right. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
9. Notice or demand to the parties hereto shall be sufficiently
given if in writing and personally delivered, or mailed by registered or
certified first class mail, postage prepaid, return receipt requested, or
sent by commercial courier against receipt, or by telecopier (with a
confirming copy sent by regular mail) to the party intended and at the
address or addresses specified in the preamble to this Guaranty. Any party
may designate a change of address by notice in writing to the other parties,
such notice to be effective ten (10) days after mailing or delivery as herein
provided.
10. The Guarantor hereby represents, warrants, and covenants to
Lender that:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and
has the corporate power and authority to own its property, conduct its
business as now being conducted and to make and perform this Guaranty
and the transactions contemplated hereby, and is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the nature and extent of the business conducted by
it, or property owned by it, and applicable law require such
qualification, except where the failure so to qualify would not have a
material adverse effect on the business, operations or financial
position of Guarantor.
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<PAGE>
(b) The execution, delivery and performance of this Guaranty
have been duly authorized by all necessary corporate action and will
not violate any provision of law or any order of any court or
governmental agency or the certificate of incorporation or other
incorporating documents or bylaws of Guarantor, or conflict with, or
result in a breach of, or constitute (with or without notice or lapse
of time or both) a default under, or result in the creation of any
security interest, lien, charge or encumbrance upon any property or
assets of Guarantor, pursuant to any agreement, indenture or other
instrument to which it is a party or by which it may be bound.
(c) Except as disclosed to Lender in writing prior to the
execution hereof, no action, suit, investigation or proceeding is
pending or known to be threatened against or affecting Guarantor which,
if adversely determined, would have a material adverse effect upon its
financial condition or operations.
(d) It is not in default under any provision of its certificate
of incorporation or other incorporating documents, by-laws or stock
provisions or any amendment of any thereof or of any indenture relating
to borrowed money or agreement to which it is a party or by which it is
bound or of any other indenture or of any order, regulation, ruling or
requirement of a court or public body or authority by which it is bound
which default would have a material adverse effect on the business,
operations or financial position of Guarantor.
(e) No license, consent or approval of, or filing with, any
governmental body or other regulatory authority is required for the
making and performance of this Guaranty or any instrument or
transaction contemplated herein. Guarantor holds all certificates and
authorizations of all governmental agencies and authorities required by
law to enable it to engage in the business currently transacted by it,
except such certificates and authorizations as to which the failure to
do so hold would not, in the aggregate, have a material adverse effect
on it.
ii. No provision of this Guaranty shall be waived, amended or
supplemented except by a written instrument executed by the Lender.
12. The obligations of the Guarantor under this Guaranty shall
continue in full force and effect and shall remain in operation until all of
the obligations shall have been paid in full
4
<PAGE>
or otherwise fully satisfied, and continue to be effective or be reinstated,
as the case may be, if at anytime payment or other satisfaction of any of the
Obligations is rescinded or must otherwise be restored or returned upon the
bankruptcy, insolvency, or reorganization of Borrower, or otherwise, as
though such payment had not been made or other satisfaction occurred. No
invalidity, irregularity or unenforceability by reason of applicable
bankruptcy laws or any other similar law, or any law or order of any
government or agency thereof purporting to reduce, amend or otherwise affect,
the obligations, shall impair, affect, be a defense to or claim against the
obligations of the Guarantor under the Guaranty.
13. In addition to its guarantee of Borrower's payment of the
Obligations and Borrower's performance of all covenants, obligations and
agreements contained in the Loan Documents, the Guarantor shall pay all
costs and expenses (including reasonable attorney's fees) paid or incurred
by the Lender in connection with the enforcement of this Guaranty.
14. The Guarantor hereby agrees to execute any and all further
documents, agreements, and instruments, and take all further actions, which
the Lender shall reasonably request in order to effectuate the effect or
further preserve, evidence, perfect or protect the rights purported to be
created in favor of Lender hereunder.
15. The Guarantor hereby assumes responsibility for keeping itself
informed of the financial condition of the Borrower, and any and all
endorsers and/or other guarantors of any instrument or document evidencing
all or any part of the Obligations and of all other circumstances bearing
upon the risk of nonpayment of the Obligations or any part thereof that
diligent inquiry would reveal, and the Guarantor hereby agrees that the
Lender shall have no duty to advise the Guarantor of information known to
the Lender regarding such condition or any such circumstances. In the
event the Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to the Guarantor, the Lender
shall be under no obligation (i) to undertake any investigation not a part
of its regular business routine, (ii) to disclose any information which,
pursuant to accepted or reasonable commercial finance practices, the Lender
wishes to maintain confidential, or (iii) to make any other or future
disclosures of such information or any other information to the undersigned.
16. This Guaranty may be executed in one or more counterpart copies,
each of which shall be an original and all of which together shall
constitute one and the same instrument, and it is not necessary that all
parties, signatures appear on each counterpart.
5
<PAGE>
17. If any term, covenant or condition of this Guaranty, or the
application of such term, covenant or condition to any party or
circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Guaranty and
the application of such term, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant or
condition shall be valid and enforced to the fullest extent permitted by
law. Upon determination that any such term is invalid, illegal or
unenforceable, the parties hereto shall amend this Guaranty so as to effect
the original intent of the parties as closely as possible in an acceptable
manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF
THIS GUARANTY IS COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL
COURT LOCATED IN THE STATE OF MARYLAND, THE GUARANTOR HEREBY CONSENTS TO
THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF
VENUE IN THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE
DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO THE GUARANTOR
AT THE ADDRESS SET FORTH IN THE PREAMBLE TO THIS GUARANTY.
19. THE GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY
JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN, KNOWINGLY AND VOLUNTARILY, BY THE GUARANTOR, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH
THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY
AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY COURT HAVING
JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE
AS CONCLUSIVE EVIDENCE OF THE GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, THE GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, TO GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF
RIGHT TO JURY TRIAL PROVISION.
6
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed as
of the date first written above.
ATTEST: PHC, INC.,
a Massachusetts corporation
________________________________(SEAL)
Name:
Title:
guarmich.phc
7
<PAGE>
Exhibit 10.113
$1,000,000.00
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
dated May 21, 1996
by and between
PHC OF UTAH, INC.
and
HCFP FUNDING, INC.
February 1 1997
<PAGE>
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT ("Amendment No. 1") is
made as of this day ______ of February, 1997, by and between PHC OF UTAH,
INC., a Massachusetts corporation ("Borrower") and HCFP FUNDING, INC., a
Delaware corporation (successor-in-interest to HealthPartners Funding, L.P.)
("Lender")
Recitals
A. Pursuant to that certain Loan and Security Agreement dated May
21, 1996 by and between Borrower and Lender (the "Loan Agreement"), the
parties have established certain financing arrangements that allow Borrower
to borrow funds from Lender in accordance with the terms and conditions set
forth in the Loan Agreement.
B. Pursuant to that certain Secured Bridge Note dated as of January
13, 1997, as modified by allonge as of even date herewith, by and between
Lender and PHC of Michigan, Inc. ("PHC Michigan"), a Massachusetts
corporation that is an Affiliate of Borrower (the "Michigan Bridge Note"),
Lender agreed to provide financing to Michigan of Four Hundred Thousand and
No/100 Dollars ($400,000.00) .
C. Simultaneous with the execution of this Amendment No. 1 Lender is
entering into that certain Loan and Security Agreement with PHC of Michigan,
Inc., a Massachusetts corporation that is an Affiliate of Borrower, pursuant
to which Lender has agreed to provide financing to PHC Michigan up to a
maximum loan amount of One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00) (the "Michigan Loan Agreement").
C. The parties now desire to amend the Loan Agreement simultaneously
with the execution and delivery of the Michigan Loan Agreement, in accordance
with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower have agreed to the following amendments to the Loan
Agreement. Capitalized terms defined in the Loan Agreement which are used
herein shall have the same meanings set forth in the Loan Agreement unless
otherwise specified herein.
1. Amendment to Loan Agreement. Effective as of the date of this
Amendment No. 1, and subject to the satisfaction of each of the conditions
precedent set forth in Section 2 below, the Loan Agreement is hereby amended
as follows:
<PAGE>
1.01. Section 3.1 of the Loan Agreement is hereby amended to provide
that the Collateral shall also serve as further security for the payment and
performance of the obligations of (x) PHC Michigan under the Michigan Bridge
Note, and (y) PHC Michigan under the Michigan Loan Agreement.
1.02. Section 8.1 of the Loan Agreement (Events of Default) is hereby
amended to add the-following clause:
(u) An Event of Default shall have occurred under the Loan and
Security Agreement (as such Loan and Security Agreement may be amended,
replaced or modified) by and between PHC of Michigan, Inc. (an Affiliate of
Borrower) and Lender.
(v) An Event of Default shall have occurred under the Secured
Bridge Note dated January 13, 1997 (as such Secured Bridge Note may be
amended (by Allonge or otherwise), replaced or modified) executed by PHC of
Michigan, Inc. in favor of Lender.
1.03. Section 8.4 of the Loan Agreement is amended in its entirety to
read as follows:
"Section 8.4. Nature of Remedies. Lender shall have the right to
proceed against all or any portion of the Collateral to satisfy, in any
order, (a) the liabilities and Obligations of Borrower to Lender, or (b) upon
the occurrence of an Event of Default under the Michigan Bridge Note, the
liabilities and obligations of PHC Michigan to Lender thereunder, or (c) upon
the occurrence of an Event of Default under the Michigan Loan Agreement, the
liabilities and obligations (as defined in the Michigan Loan Agreement) of
PHC Michigan to Lender thereunder. All rights and remedies granted Lender
hereunder and under any agreement referred to herein, or otherwise available
at law or in equity, shall be deemed concurrent and cumulative, and not
alternative remedies, and Lender may proceed with any number of remedies at
the same time until the Loan, and all other existing and future liabilities
and obligations of Borrower and PHC Michigan to Lender, are satisfied in
full. The exercise of any one right or remedy shall not be deemed a waiver
or release of any other right or remedy, and Lender, upon the occurrence of
an Event of Default, may proceed against Borrower, and/or the Collateral, at
any time, under any agreement, with any available remedy and in any order."
1.04. In connection with the execution and delivery of this Amendment
No. 1, Borrower hereby acknowledges and agrees that all references to the
"Loan Agreement" in that certain Revolving Credit Note dated May 21, 1996
executed by Borrower in favor of Lender, in the maximum principal amount of
$1,000,000.00, shall be deemed to refer to the Loan Agreement and this
Amendment No. 1.
2
<PAGE>
1.05 For all purposes of the Loan Agreement, Lender's address contained in
Section 9.4 of the Loan Agreement is hereby changed to the following:
HCFP Funding, Inc. 2 Wisconsin Circle Suite 320
Chevy Chase, MD 20815
Attn: John K. Delaney, President
Telephone: (301) 961-1640
Telecopier:(301) 664-9860
2. Conditions to Effectiveness. The obligation of Lender to enter
into and perform this Amendment No. 1 is subject to the following conditions
precedent:
(a) Lender shall have received two (2) originals of this
Amendment No. 1.
(b) PHC Michigan shall have satisfied all conditions precedent
set forth in Section 5.1 of the Michigan Loan Agreement.
(c) Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event
which, with the giving of notice or the lapse of time, or both, could
constitute such an Event of Default.
3. Representations and warranties of Borrower. The Borrower
represents and warrants as follows:
(a) This Amendment No. 1 constitutes the legal, valid and
binding obligation of Borrower and is enforceable against Borrower in
accordance with its terms.
(b) Upon the effectiveness of this Amendment No. 1, Borrower
hereby reaffirms all covenants, representations and warranties made in
the Loan Agreement and agrees that all such covenants, representations
and warranties shall be deemed to have been remade as of the effective
date of this Amendment No. 1.
4. Reference to the Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 1 hereof, on and after
the date hereof, each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of similar import shall mean and be
a reference to the Loan Agreement as amended hereby.
3
<PAGE>
(b) Except as specifically amended above, the Loan Agreement,
and all other Loan Documents, shall remain in full force and effect, and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
No. 1 shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of Lender, nor constitute a waiver of any
provision of the Loan Agreement, or any other documents, instruments and
agreements executed or delivered in connection therewith.
5. Governing Law. This Amendment No. 1 shall be governed by and
construed in accordance with the laws of the State of Maryland.
6. Headings. Section headings in this Amendment No. 1 are included
herein for convenience of reference only and shall not constitute a part of
this Amendment No. 1 for any other purpose.
7. Counterparts. This Amendment No. 1 may be executed in
counterpart, and both counterparts taken together shall be deemed to
constitute one and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this AMENDMENT NO. 1
TO LOAN AND SECURITY AGREEMENT to be executed as of the date first written
above.
ATTEST: HCFP FUNDING, INC.
(Seal) a Delaware corporation
By: __________________________ By: ___________________________________
Name:
Title:
ATTEST:
(Seal) PHC OF UTAH, INC.
a Massachusetts corporation
By: ____________________________ BY: __________________________________
Name: Name:
Title: Title:
amdmutah.phc
5
<PAGE>
Schedule 1.36
Permitted Liens: None
Schedule 4.1
Subsidiaries: (BAS1) None
Schedule 4.5
Litigation: (TM2) None
Schedule 4.7
Tax Identification Numbers: 04-3232990
Schedule 4.10
Tax Liability: (PW3) None
Schedule 4.13
Non-Compliance with Law: (BAS/RB4) None
Schedule 4.14
Environmental Matters: (RIB/BAS5) None
Schedule 4.15
Places of Business: (RB6) 35031 Twenty Three Mile
Road
New Baltimore, MD 48047
* Additional records kept at Corporate Office at 200 Lake Street, Suite
102, Peabody, MA 01960
<PAGE>
Schedule 4.16
Licenses: (RB8) State of Michigan Department of
Commerce Psychiatric License
Substance Abuse License Resident
License
Schedule 4.17
Stock Ownership: (TM9) PHC, Inc. 100%
Schedule 4.19
Borrowing and Guarantees:
INAC (finance for insurance
premium)
Schedule 4.21
Trade Name: (RB 11) Harbor Oaks Hospital
Schedule 4.22
Joint Ventures: (BAS12) None
Schedule 7.12
Transaction with Affiliates: None
5
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
27 Financial Data Schedule
This schedule contains financial information extracted from the
consolidated balance sheet and the consolidated statement of income filed as
part of the report on Form 10-QSB and is qualified in its entirety by reference
to such report on Form 10-QSB.
</LEGEND>
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.000
<CASH> 290,253
<SECURITIES> 0
<RECEIVABLES> 12,046,772
<ALLOWANCES> 1,517,586
<INVENTORY> 0
<CURRENT-ASSETS> 14,839,173
<PP&E> 9,621,268
<DEPRECIATION> 1,694,753
<TOTAL-ASSETS> 26,157,471
<CURRENT-LIABILITIES> 6,343,609
<BONDS> 9,326,090
0
0
<COMMON> 34,840
<OTHER-SE> 7,148,561
<TOTAL-LIABILITY-AND-EQUITY> 26,157,471
<SALES> 0
<TOTAL-REVENUES> 12,660,995
<CGS> 0
<TOTAL-COSTS> 12,057,196
<OTHER-EXPENSES> 759,665
<LOSS-PROVISION> 549,880
<INTEREST-EXPENSE> 759,665
<INCOME-PRETAX> 129,882
<INCOME-TAX> 52,141
<INCOME-CONTINUING> 77,741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,741
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
