PHC, INC.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
November 24, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
PHC, Inc., which will be held on December 26, 1997, at 2:00 PM, at the offices
of Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston,
Massachusetts 02109.
The following Notice of Annual Meeting of Stockholders and Proxy Statement
describes the items to be considered by the stockholders and contains certain
information about PHC, Inc.'s officers and directors.
Please sign and return the enclosed proxy card as soon as possible in the
envelope provided so that your shares can be voted at the meeting in accordance
with your instructions. Even if you plan to attend the meeting, we urge you to
sign and promptly return the enclosed proxy. You can revoke it at any time prior
to the meeting, or vote your shares personally if you attend the meeting. We
look forward to seeing you.
Sincerely,
Bruce A. Shear
President
<PAGE>
PHC, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 26, 1997
The Annual Meeting of Stockholders of PHC, Inc. (the "Company")
will be held at the offices of Choate, Hall & Stewart, Exchange Place,
53 State Street, Boston, Massachusetts, on December 26, 1997, at 2:00
PM, for the following purposes:
1. To elect five directors (two to be elected by the holders of the Company's
Class A Common Stock and three to be elected by the holders of the
Company's Class B Common Stock)to hold office until the annual meeting next
following their election and until their successors are duly elected and
qualified;
2. To approve and ratify an amendment to the 1993 Employee Stock Purchase and
Option Plan to increase the number of shares of Class A Common Stock
available for issuance thereunder from 300,000 shares to 400,000 shares;
3. To approve and ratify an amendment to the 1995 Employee Stock Purchase Plan
to increase the number of shares of Class A Common Stock available for
issuance thereunder from 100,000 shares to 150,000 shares;
4. To approve and ratify an amendment to the 1995 Non-Employee Director Stock
Option Plan to increase the number of shares of Class A Common Stock
available for issuance thereunder from 30,000 shares to 50,000 shares;
5. To ratify the selection by the Board of Directors of Richard A. Eisner &
Company, LLP as the Company's independent auditors; and
6. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Stockholders of record at the close of business on November 14, 1997, will
be entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting.
By order of the Board of Directors
Paula C. Wurts, Assistant Clerk
Peabody, Massachusetts
November 24, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
<PAGE>
PHC, INC.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
(978) 536-2777
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of PHC, Inc. (the "Company") for use at the
Annual Meeting of Stockholders to be held at the offices of Choate, Hall &
Stewart, Exchange Place, 53 State Street, Boston, Massachusetts on December 26,
1997 at 2:00 PM (Boston time), and at any adjournment of that meeting (the
"Annual Meeting"). Each proxy will be voted in accordance with the instructions
specified, and if no instruction is specified, the proxy will be voted in favor
of the proposals set forth in the Notice of Annual Meeting. Any proxy may be
revoked by a stockholder at any time before it is exercised by filing a later
dated proxy or written notice of revocation with Paula C. Wurts, Assistant Clerk
of the Company, or by voting in person at the Annual Meeting.
The Company's Annual Report on Form 10-KSB for the year ended June 30, 1997
is being mailed to stockholders together with this Proxy Statement. The Company
will furnish any exhibit to the Company's Annual Report on Form 10-KSB upon the
payment of a fee of ten cents per page plus mailing costs. The date of mailing
of this Proxy Statement is expected to be on or about November 24, 1997.
The Board of Directors has fixed November 14, 1997 as the record date for
the determination of stockholders entitled to vote at the Annual Meeting (the
"Record Date"). On that date there were outstanding and entitled to vote [ ]
shares of Class A Common Stock and [ ] shares of Class B Common Stock of the
Company (the shares of Class A Common Stock and Class B Common Stock are
referred to collectively herein as the "Shares"). Each share of Class A Common
Stock is entitled to one vote and each share of Class B Common Stock is entitled
to five votes. The holders of the Company's Class A Common Stock are entitled to
elect two members of the Company's Board of Directors (the "Class A Directors")
and holders of the Company's Class B Common Stock are entitled to elect all the
remaining members of the Company's Board of Directors (the "Class B Directors").
Holders of Class A Common Stock will receive white proxy cards which will be
different from those received by the holders of Class B Common Stock. The proxy
cards received by the holders of Class A Common Stock will contain a proposal
relating to the election of the two members of the Board of Directors to be
elected by the holders of the Class A Common Stock, in addition to any other
proposals to be voted upon during the General Session. Holders of Class B Common
Stock will receive blue proxy cards which will contain a proposal relating to
the election of the three members of the Board of Directors to be elected by the
holders of the Class B Common Stock, in addition to any other proposals to be
voted upon during the General Session.
The Annual Meeting will comprise three related but separate sessions: (i) a
special session of the holders of Class A Common Stock, during which session
only holders of Class A Common Stock are entitled to vote, for the separate
election by such holders of two directors, and no other business may properly
come before the meeting (the "Class A Session"); (ii) a special session of the
holders of Class B Common Stock, during which session only holders of Class B
Common Stock are entitled to vote, for the separate election by such holders of
three directors, and no other business may properly come before the meeting (the
"Class B Session"); and (iii) a general session of the holders of the Class A
Common Stock and the Class B Common Stock for the approval and ratification of
an amendment to the 1993 Employee Stock Purchase and Option Plan to increase the
number of shares of Class A Common Stock available for issuance thereunder from
300,000 shares to 400,000 shares, the approval and ratification of an amendment
to the 1995 Employee Stock Purchase Plan to increase the number of shares of
Class A Common Stock available for issuance thereunder from 100,000 shares to
150,000 shares, the approval and ratification of an amendment to the 1995
Non-Employee Director Stock Plan to increase the number of shares of Class A
Common Stock available for issuance thereunder from 30,000 shares to 50,000
shares, ratification of the selection of independent auditors and for the
conduct of such other business as may properly come before the Annual Meeting
(the "General Session"). The presence in person or by proxy of holders of shares
of Class A Common Stock and Class B Common Stock outstanding as of the Record
Date which, combined, have the right to cast a majority of the votes which may
be cast with respect to matters arising during the General Session will
constitute a quorum for the conduct of business at the General Session. The
presence in person or by proxy of holders of shares of Class A Common Stock and
Class B Common Stock outstanding as of the Record Date which have the right to
cast a majority of the votes which may be cast with respect to matters arising
during the Class A Session and the Class B Session, respectively, will
constitute a quorum for purposes of the Class A Session and the Class B Session,
respectively.
The affirmative vote of the holders of a plurality of the shares of each of
Class A Common Stock and Class B Common Stock represented at the meeting is
required for the election of the Class A Directors and the Class B Directors,
respectively. The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Class A Common Stock entitled to vote thereon and the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Class A Common Stock and Class B Common Stock entitled to vote thereon voting
together as a separate class is required for the approval of the proposal to
amend the Company's Restated Articles of Organization. Approval of each of the
other matters which is before the meeting will require the affirmative vote of
the holders of a majority of the Shares represented at the meeting and voting
thereon. No votes may be taken at the meeting, other than a vote to adjourn,
unless the appropriate quorum (as set forth in the preceding paragraph) has been
constituted. Shares voted to abstain or to withhold as to a particular matter,
or as to which a nominee (such as a broker holding shares in street name for a
beneficial owner) has no voting authority in respect of a particular matter,
shall be deemed represented for quorum purposes. Such shares, however, shall not
be deemed to be voting on such matters, and therefore will not be the equivalent
of negative votes as to such matters. Votes will be tabulated by the Company's
transfer agent subject to the supervision of persons designated by the Board of
Directors as inspectors.
<PAGE>
The following table sets forth, to the knowledge of the Company, the only
beneficial owners of more than 5% equity of any class of the Company's
outstanding voting common stock as of October 27, 1997.
Name and Address of Shares of Class Percent
Beneficial Beneficially of
Title of Class Owner Owned Class
_______________________ ____________________ _________________ _________
Class A Common Stock..... None
Class B Common Stock..... Bruce A. Shear 671,259 91.9%
c/o PHC, Inc.
200 Lake Street
Suite 102
Peabody, MA 0l960
The percentages of voting rights for certain persons or groups are set
forth in the footnotes to the table contained under the heading, "Security
Ownership of Certain Beneficial Owners and Management."
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of shares of the Company's Class A Common Stock and Class B Common Stock (the
only classes of capital stock of the Company currently outstanding) as of
October 27, 1997 by (i) each person known by the Company to beneficially own
more than 5% of any class of the Company's voting securities, (ii) each director
of the Company, (iii) each of the named executive officers as defined in 17 CFR
228.402(a)(2) and (iv) all directors and officers of the Company as a group.
Unless otherwise indicated below, to the knowledge of the Company, all persons
listed below have sole voting and investment power with respect to their shares
of Common Stock, except to the extent authority is shared by spouses under
applicable law. In preparing the following table, the Company has relied on the
information furnished by the persons listed below:
Amount and
Name and Address Nature
of Beneficial of Beneficial Percent of
Title of Class Owner Owner Class (11)
____________________ __________________ _______________ _____________
Class A Common Stock Gerald M. Perlow 16,000(1) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Donald E. Robar 9,250(2) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Bruce A. Shear 17,500(3) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Robert H. Boswell 31,824(4) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Howard W. Phillips 38,004(5) *
P. O. Box 2047
East Hampton, NY 11937
William F. Grieco 59,780(6)(7) 1.3%
115 Marlborough Street
Boston, MA 02116
J. Owen Todd 59,280(7) 1.3%
c/o Todd and Weld
1 Boston Place
Boston, MA 02108
All Directors and 188,283(8) 3.9%
Officers as a
Group (7 persons)
Class B Common Stock Bruce A. Shear 671,259(10) 91.9%
(9) c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
All Directors and 671,259 91.9%
Officers as a
Group (7 persons)
* Less than 1%.
(1) Includes 6,000 shares issuable pursuant to currently exercisable stock
options or stock options which will become exercisable within sixty days,
having an exercise price range of $3.50 to $6.63 per share.
(2) Includes 7,750 shares issuable pursuant to currently exercisable stock
options or stock options which will become exercisable within sixty days,
having an exercise price range of $3.50 to $6.63 per share.
(3) Includes 12,500 shares of Class A Common Stock issuable pursuant to
currently exercisable stock options, having an exercise price of $2.63 per
share. Excludes an aggregate of 59,280 shares of Class A Common Stock owned
by the Shear Family Trust and the NMI Trust, of which Bruce A. Shear is a
remainder beneficiary.
(4) Includes an aggregate of 30,250 shares of Class A Common Stock issuable
pursuant to currently exercisable stock options at an exercise price range
of $2.63 to $3.50 per share.
(5) Includes 37,504 shares issuable upon the exercise of a currently
exercisable Unit Purchase Option for 18,752 Units, at a price per unit of
$5.60, of which each unit consists of one share of Class A Common Stock and
one warrant to purchase an additional share of Class A Common Stock at a
price per share of $7.50 and 500 shares issuable pursuant to currently
exercisable stock options having an exercise price of $3.50 per share.
(6) Includes 500 shares of Class A Common Stock issuable pursuant to currently
exercisable stock options, having an exercise price of $3.50 per share.
(7) Messrs. Todd and Grieco are the two trustees of the Trusts which
collectively hold 72,453 shares of the Company's outstanding Common Stock.
Gertrude Shear, Bruce A. Shear's mother, is the lifetime beneficiary of the
Trusts. In addition to the shares held by the Trusts, to the best of the
Company's knowledge, Gertrude Shear currently owns less than 1% of the
Company's outstanding Class B Common Stock.
(8) Includes an aggregate of 71,500 shares issuable pursuant to currently
exercisable stock options. Of those options, 2,750 have an exercise price
of $6.63 per share, 51,250 have an exercise price of $3.50 per share and
17,500 have an exercise price of $2.63. Also includes 37,504 shares
issuable upon the exercise of the Unit Purchase Option as described in (5).
(9) Each share of Class B Common Stock is convertible into one share of Class A
Common Stock automatically upon any sale or transfer thereof or at any time
at the option of the holder.
(10) Includes 56,369 shares of Class B Common Stock pledged to Steven J. Shear
of 2 Addison Avenue, Lynn, Massachusetts 01902, Bruce A. Shear's brother,
to secure the purchase price obligation of Bruce A. Shear in connection
with his purchase of his brother's stock in the Company in December 1988.
In the absence of any default under this obligation, Bruce A. Shear retains
full voting power with respect to these shares.
(11) Represents percentage of equity of class, based on numbers of shares listed
under the column headed "Amount and Nature of Beneficial Ownership". Each
share of Class A Common Stock is entitled to one vote per share and each
share of Class B Common Stock is entitled to five votes per share on all
matters on which stockholders may vote (except that the holders of the
Class A Common Stock are entitled to elect two members of the Company's
Board of Directors and holders of the Class B Common Stock are entitled to
elect all the remaining members of the Company's Board of Directors).
Based on the number of shares listed under the column headed "Amount and
Nature of Beneficial Ownership", the following persons or group hold the
following percentages of voting rights for all shares of common stock combined
as October 27, 1997:
Bruce A.Shear...........................40.45%
J. Owen Todd..............................0.7%
William F. Grieco.........................0.7%
All Directors and Officers as a Group
(7 persons)...........................42.5%
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and officers of the Company as of June 30, 1997 are as follows:
NAME AGE POSITION
Bruce A. Shear 42 President, Chief Executive Officer and
Director
Robert H. Boswell 48 Executive Vice President
Paula C. Wurts 48 Controller, Assistant Clerk and
Assistant Treasurer
Gerald M. Perlow, M.D.(1)(2) 59 Director and Clerk
Donald E. Robar (1)(2) 60 Director and Treasurer
Howard W. Phillips 67 Director
William F. Grieco 44 Director
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
All of the directors hold office until the annual meeting of stockholders
next following their election, or until their successors are elected and
qualified. Officers are elected annually by the Board of Directors and serve at
the discretion of the Board. There are no family relationships among any of the
directors or officers of the Company.
Information with respect to the business experience and affiliations of the
directors and officers of the Company is set forth below.
BRUCE A. SHEAR has been President, Chief Executive Officer and a Director
of the Company since 1980 and Treasurer of the Company from September 1993 until
February 1996. From 1976 to 1980 he served as Vice President, Financial Affairs,
of the Company. Mr. Shear has served on the Board of Governors of the Federation
of American Health Systems for over ten years. Mr. Shear received an MBA from
Suffolk University in 1980 and a BS in Accounting and Finance from Marquette
University in 1976.
ROBERT H. BOSWELL has served as the Executive Vice President of the Company
since 1992. From 1989 until Spring of 1994 Mr. Boswell served as the
Administrator of the Company's Highland Ridge Hospital facility where he is
based. Mr. Boswell is principally involved with the Company's substance abuse
facilities. From 1981 until 1989, he served as the Associate Administrator at
the Prevention Education Outpatient Treatment Program--the Cottage Program,
International. Mr. Boswell graduated from Fresno State University in 1975 and
from 1976 until 1978 attended Rice University's doctoral program in philosophy.
Mr. Boswell is a Board Member of the National Foundation for Responsible Gaming
and the Chair for the National Center for Responsible Gaming.
<PAGE>
PAULA C. WURTS has served as the Controller of the Company since 1989, as
Assistant Treasurer since 1993, and as Assistant Clerk since January 1996. Ms.
Wurts served as the Company's Accounting Manager from 1985 until 1989. Ms. Wurts
received an Associate's degree in Accounting from the University of South
Carolina in 1980, a BS in Accounting from Northeastern University in 1989 and
passed the examination for Certified Public Accountants. She received an MBA in
Accounting from Western New England College in 1996.
GERALD M. PERLOW, M.D. has served as a Director of the Company since May
1993 and as Clerk since February 1996. Dr. Perlow is a cardiologist in private
practice in Lynn, Massachusetts, and has been Associate Clinical Professor of
Cardiology at the Tufts University School of Medicine since 1972. Dr. Perlow is
a Diplomat of the National Board of Medical Examiners and the American Board of
Internal Medicine (with a subspecialty in cardiovascular disease) and a Fellow
of the American Heart Association, the American College of Cardiology, the
American College of Physicians and the Massachusetts Medical Center. From 1987
to 1990, Dr. Perlow served as the Director, Division of Cardiology, at
AtlantiCare Medical Center in Lynn, Massachusetts. From October 1996 to March
1997, Dr. Perlow served as President and Director of Perlow Physicians, P.C.
which has a management contract with BSC. Dr. Perlow received compensation of
$8,333 for the period. Dr. Perlow received a BA from Harvard College in 1959 and
an MD from Tufts University School of Medicine in 1963.
DONALD E. ROBAR has served as a Director of the Company since 1985 and has
served as the Treasurer since February 1996. He served as Clerk of the Company
from 1992 to 1996. Dr. Robar has been a professor of Psychology since 1961, most
recently at Colby-Sawyer College in New London, New Hampshire. Dr. Robar
received a Ed.D. from the University of Massachusetts in 1978, an MA from Boston
College in 1968 and a BA from the University of Massachusetts in 1960.
HOWARD W. PHILLIPS has served as a Director of the Company since August
1996 and has been employed by the Company as a public relations specialist since
August 1995. From 1982 until October 1995, Mr. Phillips was the Director of
Corporate Finance for D. H. Blair Investment Corp. From 1969 until 1981, Mr.
Phillips was associated with Oppenheimer & Co. where he was a partner and
Director of Corporate Finance. Mr. Phillips currently is a member of the Board
of Directors of Food Court Entertainment Network, Inc., an operator of shopping
mall television networks, and Telechips Corp., a manufacturer of visual phones.
WILLIAM F. GRIECO has served as a Director of the Company since February
18, 1997. Since November of 1995, he has served as Senior Vice President and
General Counsel for Fresenius Medical Care North America. From 1989 until
November of 1995, Mr. Grieco was a partner at Choate, Hall & Stewart, the
Company's principal outside legal counsel. Mr. Grieco is a member of the Board
of Directors of Fresenius National Medical Care Holdings, Inc. Mr. Grieco
received a BS from Boston College in 1975, an MS in Health Policy and Management
in 1978 and a JD from Boston College Law School in 1981.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year 1997, the Board of Directors of the Company held
five meetings. Each incumbent director attended at least 75% of the aggregate
number of meetings of the Board and the meetings of the committees of the Board
on which he served.
The current members of the Audit Committee are Dr. Robar and Dr. Perlow.
The principal functions of the Committee are to review matters relating to the
examination of the Company by its independent auditors and its accounting
control procedures. The committee met once in fiscal year 1997.
The Board of Directors established a Compensation Committee in November 4,
1993. The current members of this Committee are Dr. Robar and Dr. Perlow. The
principal function of the committee is to review and set executive compensation.
The committee met once in fiscal year 1997.
The Board of Directors does not have a nominating or similar committee.
In fiscal year 1997, two of the executive officers or directors of the
Company served on a board of directors of another publicly traded entity. Mr.
Grieco serves on the board of directors of Fresenius National Medical Care
Holdings, Inc. a maker of medical supplies and Mr. Phillips serves on the board
of directors of Food Court Entertainment Network, Inc., an operator of shopping
mall television networks, and Telechips Corp., a manufacturer of visual phones.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Employment Agreements
The Company has not entered into any employment agreements with its
executive officers. The Company has acquired a $1,000,000 key man life insurance
policy on the life of Bruce A. Shear.
Executive Compensation
Two executive officers of the Company received compensation in the 1997
fiscal year which exceeded $100,000. The following table sets forth the
compensation paid or accrued by the Company for services rendered to these
executives in fiscal year 1997, 1996 and 1995:
<PAGE>
Summary Compensation Table
ANNUAL COMPENSATION
_____________________
Long Term
Compensation
Awards
____________
(a) (b) (c) (d) (e) (g) (i)
Name and Other Annual Securities All Other
Principal Year Salary Bonus Compensation Underlying Compensation
Position ($) ($) ($) Opions/SARs
($) ($)
(#)
__________ ____ _______ _____ _____________ ___________ __________
Bruce A. Shear 1997 $294,167 -- $12,633(1) -- --
President and 1996 $294,063 -- $10,818(2) -- --
Chief
Executive 1995 $237,500 -- $8,412(3) -- --
Officer
Robert H. Boswell 1997 $ 92,750 -- $6,000(4) 5,000 $6,821
Executive Vice 1996 $ 80,667 $1,000 $23,750(5) 5,000 $11,250
President 1995 $ 69,750 -- $6,000(4) 15,000 $28,050
(1) This amount represents (i) $2,687 contributed by the Company to the
Company's Executive Employee Benefit Plan on behalf of Mr. Shear, (ii)
$6,769 in premiums paid by the Company with respect to life insurance for
the benefit of Mr. Shear, and (iii) $3,177 personal use of a Company car
held by Mr. Shear.
(2) This amount represents (i) $2,650 contributed by the Company to the
Company's Executive Employee Benefit Plan on behalf of Mr. Shear, (ii)
$5,146 in premiums paid by the Company with respect to life insurance for
the benefit of Mr. Shear, and (iii) $3,022 for the personal use of a
Company car held by Mr. Shear.
(3) This amount represents (i) $2,450 contributed by the Company to the
Company's Executive Employee Benefit Plan on behalf of Mr. Shear, (ii)
$1,195 in premiums paid by the Company for club memberships used by Mr.
Shear for personal activities and (iii) $4,767 in premiums paid by the
Company with respect to life insurance for the benefit of Mr. Shear.
(4) This amount represents an automobile allowance
(5) This amount represents (i) $3,750 automobile allowance, and (ii) $20,000
net gain from the exercise of options and subsequent sale of stock.
Compensation of Directors
Directors who are employees of the Company receive no compensation for
services as members of the Board. Directors who are not employees of the Company
receive $2,500 stipend per year and $1,000 for each Board meeting they attend.
In addition, directors of the Company are entitled to receive certain stock
option grants under the Company's Non-Employee Director Stock Option Plan (the
"Director Plan"). Pursuant to the Director Plan, in January of 1996, Dr. Perlow
was granted an option to purchase 1,000 shares of the Company's Class A Common
Stock at an exercise price of $6.63 per share and Dr. Robar was granted an
option to purchase 4,500 shares of the Company's Class A Common Stock at an
exercise price of $6.63 per share. Also pursuant to the Director Plan, in
February, 1997, Dr. Perlow, Dr. Robar and Mr. Grieco were each granted 2,000
shares of the Company's Class A Common Stock at an exercise price of $3.50 per
share. In addition, pursuant to the Company's 1993 Employee Stock Purchase and
Option Plan, in February, 1997, Dr. Perlow, Dr. Robar, Mr. Phillips and Mr.
Grieco were each granted an option to purchase 5,000 shares of Class A Common
Stock at an exercise price of $3.50 per share.
ELECTION OF DIRECTORS
The members of the Board of Directors elected at the Annual Meeting will be
classified into two classes of directors. Two directors will be elected by the
holders of the Company's Class A Common Stock (the "Class A Directors") and the
balance of the directors will be elected by the holders of the Company's Class B
Common Stock (the "Class B Directors"). The terms of the present directors
expire at the Annual Meeting or when the successors are chosen and qualified, if
later. The Board of Directors has fixed at five the number of directors to be
elected at the Annual Meeting.
The nominees for Class A Directors for election at the Annual Meeting are
Donald E. Robar and Gerald M. Perlow. The nominees for Class B Directors for
election at the Annual Meeting are Bruce A. Shear, Howard W. Phillips and
William F. Grieco. The proxy for holders of Class A Common Stock will be voted
to elect as Class A Directors the two nominees (Donald E. Robar and Gerald M.
Perlow), unless authority to vote for the election of directors is withheld by
marking the proxy to that effect or the proxy is marked with the names of
directors as to whom authority to vote is withheld. The proxy for holders of
Class B Common Stock will be voted to elect as Class B Directors the three
nominees (Bruce A. Shear, Howard W. Phillips and William F. Grieco), unless
authority to vote for the election of directors is withheld by marking the proxy
to that effect. Donald E. Robar, Gerald M. Perlow, Bruce A. Shear, Howard W.
Phillips and William F. Grieco are presently directors of the Company and have
consented to serve if reelected.
Each director will be elected to hold office until the next annual meeting
of stockholders following the 1997 Annual Meeting (1998) and until his successor
is elected and qualified. If a nominee becomes unavailable, the proxy may be
voted, unless authority has been withheld as to the nominee, for the election of
a substitute.
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR.
AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE AND OPTION PLAN
On _______, 1997, the Board of Directors of the Company adopted an amendment to
the 1993 Employee Stock Purchase and Option Plan (the "Stock Plan") to increase
the maximum number of shares of Common Stock available for issuance thereunder
from 300,000 to 400,000 shares. The purpose of the increase is to permit the
continuing grant of stock options to employees, officers, directors and
consultants which the Board of Directors believes is necessary to continue to
attract and retain such persons, particularly in view of the fact that the
Company's business is dependent upon its human resources. The executive officers
and directors of the Company are eligible to receive options and restricted
stock under the Stock Plan and will therefore benefit from such approval.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE AND OPTION PLAN
Description of the Company's Stock Plan
General. The Company's Stock Plan was adopted by the Board of Directors on
August 26, 1993 and approved by stockholders on November 30, 1993. The Stock
Plan currently provides for the issuance of a maximum of 300,000 shares of Class
A Common Stock pursuant to the grant of incentive stock options to employees and
the grant of non-qualified stock options or restricted stock to employees,
consultants, directors and officers of the Company and its subsidiaries.
The Stock Plan is administered by the Board of Directors. Subject to the
provisions of the plan itself, the Board of Directors has the authority to
select the recipients of options or restricted stock and determine the terms of
the options or restricted stock granted, including: (i) the number of shares;
(ii) option exercise terms; (iii) the exercise or purchase price (which in the
case of an incentive stock option cannot be less than the fair market value of
the Class A Common Stock on the date of grant); (iv) the type and duration of
transfer or other restrictions; and (v) the time and form of payment for
restricted stock and upon exercise of options. Generally, an option is not
transferable by the option holder except by will or by the laws of descent and
distribution. Also, generally, no incentive stock option may be exercised more
than 60 days following termination of employment. In the event that termination
is due to death or disability, however, the option is exercisable for a period
of one year following such termination. Options granted to date generally become
exercisable in equal installments over a three-year period on the first, second
and third anniversaries of the grant date and expire on the tenth anniversary of
the grant date.
As of October 27, 1997, the Company had issued options to purchase an aggregate
of 283,500 shares of Class A Common Stock. The exercise prices of all options
granted through October 27, 1997 have ranged from $2.63 to $7.00 per share. The
last sale price of the Class A Common Stock on October 15, 1997 as reported by
the Nasdaq National Market was $2.75 per share.
The following table provides information about options granted to the named
executive officers during fiscal 1997 under the Company's Stock Plan, Employee
Stock Purchase Plan and Non-Employee Director Stock Plan.
Option/SAR Grants in Last Fiscal Year
Individual Grants
_______________________________________
(a) (b) (c) (d) (e)
Number of % of
Securities Total
Underlying Options/SARs Exercise
Options/SARs Granted to or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Sh) Date
__________ ______________ ______________ __________ ____________
Bruce A. Shear -- -- -- --
Robert H. Boswell 5,000 9.7% $3.50 2/18/2002
The following table provides information about options exercised by the
named executive officers during fiscal 1997 and the number and value of options
held at the end of fiscal 1997.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End at FY-End ($)
(#)
Shares
Acquired
on Value Exercisable/ Exercisable/
Name Exercise ($) Realized ($) Unexercisabe Unexercisable
______________ _____________ ____________ _____________ ______________
Bruce A. Shear -- -- -- --
Robert H. Boswell -- -- -- --
Federal Income Tax Information. Set forth below is a general summary of the
federal income tax consequences to the Company and to recipients who receive
options or restricted stock under the Stock Plan. The following summary is not
intended to be exhaustive, does not address certain special federal tax
provisions, and does not address state, municipal or foreign tax laws.
Tax Treatment of Non-Qualified Stock Options. Under Section 83 of the Code,
optionees realize no taxable income when a non-qualified stock option ("NSO") is
granted. Instead, the difference between the fair market value of the stock and
the option price paid is taxed as ordinary compensation income, on or after the
date on which the option is exercised. The difference is measured and taxed as
of the date of exercise if the stock is not subject at that time to a
"substantial risk of forfeiture," as defined in Section 83. To the extent that
the stock is subject to a substantial risk of forfeiture, the difference is
measured as of the date or dates on which the risk terminates. The Stock Plan
permits the Compensation Committee to impose repurchase rights on stock acquired
upon exercise of options that would constitute such a "substantial risk of
forfeiture." If such repurchase rights are imposed, the optionee would recognize
taxable income and incur a tax liability, and the optionee's holding period for
tax purposes would commence, in the year or years that the substantial risk of
forfeiture terminates with respect to the stock.
Alternatively, an optionee holding an NSO may elect, within thirty days
after the option is exercised, in accordance with Section 83(b), to be taxed on
the difference between the option exercise price and the fair market value of
the stock on the date of exercise even though the stock acquired is subject to a
substantial risk of forfeiture. If the optionee makes this election, subsequent
changes in the value of the Common Stock at the time the forfeiture provisions
lapse will not result in ordinary compensation income to the optionee.
The Company receives no tax deduction on the grant of an NSO, but is
entitled to a tax deduction when the optionee recognizes taxable income on or
after exercise of the option, in the same amount as the income recognized by the
optionee.
Tax Treatment of Incentive Stock Options. Under Section 422 of the Code, an
optionee incurs no federal income tax liability on either the grant or exercise
of an incentive stock option ("ISO"). Provided that the stock is held for at
least one year after the date of exercise of the option and at least two years
after its date of grant, any gain realized on the subsequent sale of stock will
be taxed as long-term or mid-term capital gain depending on the holding period
since the date of exercise. If the stock is disposed of within a shorter period,
the optionee will be taxed, with respect to the gain realized, as if he or she
had then received ordinary compensation income in an amount equal to the
difference between the fair market value of the stock on the date of exercise of
the option and its fair market value on the date on which the option was
granted. The balance of the gain realized will be taxed as capital gain,
long-term, mid-term or short-term depending on the holding period since the date
of exercise.
The Company receives no tax deduction on the grant or exercise of an ISO,
but is entitled to a tax deduction if the optionee recognizes ordinary
compensation income on account of a premature disposition of ISO stock in the
same amount and at the same time as the optionee's recognition of income.
Tax Treatment of Purchases of Restricted Stock. An employee or consultant
who receives a grant of restricted stock generally will not recognize taxable
income at the time such stock is received, but will recognize ordinary
compensation income when the transfer and forfeiture restrictions lapse in an
amount equal to the excess of the aggregate fair market value, as of the date
the restrictions lapse, over the amount, if any, paid by the employee or
consultant for the restricted stock. Alternatively, an employee or consultant
receiving restricted stock may elect, in accordance with Section 83(b) of the
Code, to be taxed on the excess of the fair market value of the shares of
restricted stock at the time of grant over the amount, if any, paid by the
employee or consultant, notwithstanding the transfer and forfeiture restrictions
on the stock. All such taxable amounts are deductible by the Company at the time
and in the amount of the ordinary compensation income recognized by the employee
or consultant. The full amount of dividends or other distributions of property
made with respect to restricted stock prior to the lapse of the transfer and
forfeiture restrictions will constitute ordinary compensation income to the
employee or consultant and the Company will be entitled to a deduction at the
same time and in the same amount.
AMENDMENT TO THE COMPANY'S 1995 EMPLOYEE STOCK PURCHASE PLAN
On _______, 1997, the Board of Directors of the Company adopted an amendment to
the 1995 Employee Stock Purchase Plan (the "Stock Purchase Plan") to increase
the number of shares of Class A Common Stock available for issuance thereunder
from 100,000 to 150,000 shares. The purpose of the increase is to provide the
employees of the Company with the continued opportunity to participate in the
Company's growth through the purchase of Class A Common Stock at a discount from
market value. The executive officers of the Company, other than those who own 5%
or more of the stock of the Company, are eligible to participate in this plan
and, accordingly, could benefit from such approval.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN
Description of the Company's 1995 Employee Stock Purchase Plan
General. The Company's 1995 Employee Stock Purchase Plan (the Stock Purchase
Plan) was adopted by the Board of Directors on October 18, 1995, approved by the
stockholders on December 15, 1995 and became effective on February 1, 1996. It
is intended to provide employees of the Company and its subsidiaries with an
opportunity to participate in the growth of the Company through the purchase of
Class A Common Stock at a discount from market value. Currently, an aggregate of
100,000 shares of Class A Common Stock has been reserved for issuance pursuant
to this plan. The Stock Purchase Plan is administered by the Board of Directors.
All employees of the Company whose customary employment is in excess of 20 hours
per week and more than five months per year, other than those employees who own
5% or more of the stock of the Company, are eligible to participate in the Stock
Purchase Plan. The Stock Purchase Plan is implemented by offerings of such
duration as the Board of Directors determines, provided that no offering period
may be longer than 27 months. An eligible employee participating in an offering
is able to purchase Common Stock at a price equal to the lesser of (i) 85% of
its fair market value on the date the right was granted or (ii) 85% of its fair
market value on the date the right was exercised. Payment for Class A Common
Stock purchased under the plan is through regular payroll deduction or lump sum
cash payment, or both, as determined by the Board of Directors. In an offering
period that began on February 1, 1996 and ended on January 31, 1997, seventeen
employees purchased an aggregate of 9,452 shares. Currently there is an offering
period in place which began on February 1, 1997 and will end on January 31,
1998. There are thirty employees participating in the second offering under this
plan.
Employee Stock Purchase Plan - Federal Income Tax Information. The Stock
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Section 423 provides that no federal
income tax is paid by the employee, and the Company is entitled to no deduction,
at either the beginning or end of an offering period. The federal income tax
consequences upon disposition of the shares acquired pursuant to an offering
under the Stock Purchase Plan depend on when such disposition occurs. If the
disposition occurs after the expiration of both (i) two years from the offering
commencement date and (ii) one year from the purchase date, and the fair market
value of the stock on the date of disposition is higher than the price paid for
the stock, the employee will recognize compensation taxable as ordinary income
equal to the lesser of (1) the excess of the fair market value of the stock on
the offering commencement date over the option price; and (2) the excess of the
fair market value of the stock at the time of disposition over the price paid
for it. If the disposition occurs before the expiration of either of the above
two dates, the employee will recognize the excess of the fair market value of
the stock on the date of the purchase over the option price as compensation
taxable as ordinary income even though there may have been no gain on the
disposition of the stock. To the extent of reported ordinary income in such
case, the Company will be allowed a tax deduction in an equal amount. Any gain
recognized in excess of the amount reported as ordinary income will be reported
as long-term, mid-term or short-term capital gain, depending on how long after
the purchase date the disposition occurs.
<PAGE>
AMENDMENT TO THE COMPANY'S 1995
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
On ___________, 1997, the Board of Directors of the Company adopted an amendment
to the 1995 Non-Employee Director Stock Option Plan (the Director Plan) to
increase the number of shares of Common Stock available from 30,000 to 50,000
shares. The purpose of the increase is to obtain and retain the services of
qualified persons who are not employees of the Company to serve as members of
its Board of Directors. Non-employee directors of the Company are eligible to
receive options under the Director Plan and will therefor benefit from such
approval.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
AMENDMENT TO THE 1995 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
General. The Director Plan was adopted by the Board of Directors on October 18,
1995 and approved by the Stockholders on December 15, 1995. Non-qualified
options to purchase a total of 30,000 shares of Class A Common Stock are
available for issuance under the Director Plan.
The Director Plan is administered by the Board of Directors or a committee of
the Board. Under the Director Plan, each director of the Company who was a
director at the time of adoption of the Director Plan and who was not a current
or former employee of the Company received an option to purchase a number of
shares of Class A Common Stock equal to 500 multiplied by the years of service
of such director as of the date of the grant. At each annual meeting of the
Board of Directors of the Company following the initial grant described above,
each non-employee director is granted under the Director Plan an option to
purchase 2,000 shares of the Class A Common Stock of the Company. The option
exercise price is the fair market value of the shares of the Company's Class A
Common Stock on the date of the grant. The options are non-transferable and
become exercisable as follows: 25% immediately and 25% on each of the first,
second and third anniversaries of the grant date. If an optionee ceases to be a
member of the Board of Directors for a reason other than death or permanent
disability, the unexercised portion of the options, to the extent unvested,
immediately terminate, and the unexercised portion of the options which have
vested lapse 180 days after the date the optionee ceases to serve on the Board.
In the event of death or permanent disability, all unexercised options vest and
the optionee or his or her legal representative has the right to exercise the
option for a period of 180 days or until the expiration of the option, if
sooner.
On January 23, 1996 a total of 5,500 options were issued under the Director Plan
at an exercise price of $6.63 per share. On February 18, 1997 a total of 6,000
options were issued under the Director Plan at an exercise price of $3.50 per
share. As of October 15, 1997, none of these options had been exercised.
Federal Income Tax Information. Set forth below is a general summary of the
federal income tax consequences to the Company and to recipients who receive
options or restricted stock under the Director Plan. The following summary is
not intended to be exhaustive, does not address certain special federal tax
provisions, and does not address state, municipal or foreign tax laws.
Tax Treatment of Non-Qualified Stock Options. Under Section 83 of the Code,
optionees realize no taxable income when a non-qualified stock option
("NSO") is granted. Instead, the difference between the fair market value
of the stock and the option price paid is taxed as ordinary compensation
income, on or after the date on which the option is exercised. The
difference is measured and taxed as of the date of exercise if the stock is
not subject at that time to a "substantial risk of forfeiture," as defined
in Section 83. To the extent that the stock is subject to a substantial
risk of forfeiture, the difference is measured as of the date or dates on
which the risk terminates. The Director Plan permits the Compensation
Committee to impose repurchase rights on stock acquired upon exercise of
options that would constitute such a "substantial risk of forfeiture." If
such repurchase rights are imposed, the optionee would recognize taxable
income and incur a tax liability, and the optionee's holding period for tax
purposes would commence, in the year or years that the substantial risk of
forfeiture terminates with respect to the stock.
Alternatively, an optionee holding an NSO may elect, within thirty days
after the option is exercised, in accordance with Section 83(b), to be
taxed on the difference between the option exercise price and the fair
market value of the stock on the date of exercise even though the stock
acquired is subject to a substantial risk of forfeiture. If the optionee
makes this election, subsequent changes in the value of the Common Stock at
the time the forfeiture provisions lapse will not result in ordinary
compensation income to the optionee.
The Company receives no tax deduction on the grant of an NSO, but is
entitled to a tax deduction when the optionee recognizes taxable income on
or after exercise of the option, in the same amount as the income
recognized by the optionee.
APPROVAL OF AUDITORS
The Board has selected the firm of Richard A. Eisner & Company, LLP,
independent certified public accountants, as auditors of the Company for the
fiscal year ending June 30, 1998 and is submitting the selection to stockholders
for approval. The Board recommends a vote "FOR" this proposal. Unless the proxy
indicates otherwise, the shares represented by the enclosed proxy will be voted
to approve such selection.
Although there is no legal requirement that this matter be submitted to a
vote of stockholders, the Board believes that the selection of independent
auditors is of sufficient importance to seek stockholder ratification. In the
event Richard A. Eisner & Company, LLP is not ratified by the affirmative vote
of the holders of shares representing a majority of the votes cast at the Annual
Meeting, the Board may reconsider its selection. A representative of Richard A.
Eisner & Company, LLP is expected to attend the Annual Meeting. Such
representative will have an opportunity to make a statement and will be
available to respond to appropriate questions from stockholders.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE ABOVE SELECTION
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
In fiscal year 1997, both Mr. Grieco and Mr. Phillips failed to timely file
Form 3 upon joining the Company's Board of Directors. In addition, Dr. Robar,
Mr. Boswell, Ms. Wurts and Mr. Phillips each filed a Form 4 relating solely to
the grant of options outside of the prescribed time limits. These grants,
however, could have been reported on Form 5, in which case they would not have
been due until August 14, 1997. Additionally, for fiscal year 1997, Dr. Robar
failed to timely file a From 4 relating to the sale of the Company's Class A
Common Stock and Mr. Boswell and Ms. Wurts each failed to timely file a Form 4
relating to the purchase of the Company's Class A Common Stock.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
For approximately the last ten years, Bruce A. Shear, a director and the
President, Chief Executive Officer and Treasurer of the Company, and persons
affiliated and associated with him have made a series of unsecured loans to the
Company and its subsidiaries to enable them to meet ongoing financial
commitments. The borrowings generally were entered into when the Company did not
have financing available from outside sources and, in the opinion of the
Company, were entered into at market rates given the financial condition of the
Company and the risks of repayment at the time the loans were made. As of June
30, 1997, the Company owed an aggregate of $75,296 to related parties. During
the year ended June 30, 1997, the Company paid an aggregate of $114,771 to
related parties.
During the period ended June 30, 1996, the Company paid Mr. Shear and
affiliates approximately $111,971 in principal and accrued interest under
various notes.. As of June 30, 1997, the Company owed Bruce A. Shear $55,296 on
a promissory note, which is dated March 31, 1994, matures on December 31, 1998
and bears interest at the rate of 8% per year, payable quarterly in arrears, and
requires repayments of principal quarterly in equal installments.
STOCKHOLDER PROPOSALS FOR 1998 MEETING
Proposals of stockholders intended to be presented and director nominations
intended to be made at the 1998 Annual Meeting of Stockholders must be received
by the Company at its principal office, 200 Lake Street, Suite 102, Peabody,
Massachusetts 01960, Attention: Paula C. Wurts, Assistant Clerk, not later than
_____, 1998 for inclusion in the proxy statement for that meeting. Other
requirements for inclusion are set forth in Rule 14a-8 under the Securities
Exchange Act of 1934.
<PAGE>
OTHER MATTERS
The Board does not know of any other matters which may come before the
Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote, or otherwise to act, in accordance with their judgment on such
matters.
All costs of solicitation of proxies by management will be borne by the
Company. In addition to solicitations by mail, the Company's directors, officers
and regular employees, without additional remuneration, may solicit proxies by
telephone or personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting materials to the beneficial owners of the
Company's stock held in the names of such brokers, custodians and fiduciaries,
and the Company will reimburse them for their out-of-pocket expenses in this
connection.
By order of the Board of Directors
Paula C. Wurts, Assistant Clerk
November 24, 1997
The Board hopes that stockholders will attend the meeting, WHETHER OR NOT
YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A prompt response will greatly
facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their stock personally
even though they have sent in their proxies.
<PAGE>
EXHIBIT A
Section 5. Action at a Meeting. Except as otherwise provided in the
Articles of Organization, the presence of a quorum shall be separately
determined with respect to each matter to be acted on at any meeting of
stockholders, and shall consist of the holders of shares having the right to
cast a majority of the votes which may be cast with respect to such matter
(including shares as to which a nominee has no voting authority as to certain
matters brought before the meeting). Though less than a quorum be present, any
meeting may without further notice be adjourned to a subsequent date or until a
quorum be had, and at any such adjourned meeting any business may be transacted
which might have been transacted at the original meeting.
When a quorum is present at any meeting, the affirmative vote of shares
representing a majority of the votes which may be cast with respect to such
matter present or represented and voting shall be necessary and sufficient to
the determination of any questions brought before the meeting, unless a larger
vote is required by law, by the articles of organization or by these by-laws,
provided, however, that any election by stockholders shall be determined by a
plurality of the votes cast by the stockholders entitled to vote in such
election. Shares as to which a nominee has no voting authority as to a
particular question or questions brought before the meeting will not be deemed
to be cast with respect to such question or questions.
Except as otherwise provided by law or by the articles or organization or
by these by-laws, each holder of record of shares of stock entitled to vote on
any matter shall have one vote for each such share held of record by him and a
proportionate vote for any fractional shares so held by him. Stockholders may
vote either in person or by proxy. No proxy dated more than six months before
the meeting named therein shall be valid and no proxy shall be valid after the
final adjournment of such meeting. A proxy with respect to stock held in the
name of two or more persons shall be valid if executed by any one of them unless
at or prior to the exercise of the proxy the corporation receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a stockholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving its invalidity
shall rest on the challenger.
Any election by stockholders and the determination of any other questions
to come before a meeting of the stockholders shall be by ballot if so requested
by any stockholder entitled to vote thereon but need not be otherwise.
DS1.372833.1
<PAGE>
Form of Proxy for Class A Common Stock Shareholders (White)
PRELIMINARY PROXY MATERIAL
P PHC, INC.
R PROXY SOLICITED BY BOARD OF DIRECTORS
O Annual Meeting of Stockholders - December 26, 1997
X
Y
The undersigned hereby acknowledge(s) receipt of the Notice and
accompanying Joint Proxy Statement/Prospectus, revoke(s) any prior proxies,
and appoint(s) Bruce A. Shear and Paula C. Wurts, or either of them, with
power of substitution in each, attorneys for the undersigned to act for and
vote, as specified below, all shares of stock which the undersigned may be
entitled to vote at the Annual Meeting of the Stockholders of PHC, Inc. to be
held on December 26, 1997, and at any adjourned sessions thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
INSTRUCTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTION IS
GIVEN, THIS PROXY CARD WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR, "FOR"
THE AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE AND OPTION PLAN, "FOR" THE
AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN, "FOR" THE AMENDMENT TO
THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, "FOR" THE SELECTION OF
INDEPENDENT AUDITORS. AN INSTRUCTION TO VOTE FOR APPROVAL OF THE AMENDMENTS
SHALL BE DEEMED TO CONSTITUTE AUTHORITY TO VOTE IN ACCORDANCE WITH THE
HOLDER'S BEST JUDGMENT UPON A PROPOSAL TO ADJOURN THE MEETING FOR THE PURPOSE
OF SOLICITING ADDITIONAL PROXIES. THE PROXY WILL BE VOTED IN ACCORDANCE WITH
THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTER.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.
Detach Card Before Mailing Detach Card Before Mailing
[Back]
<PAGE>
Dear Stockholder:
Please mark the boxes on the proxy card to indicate how your shares will be
voted, then sign the card, detach it and return your proxy card in the enclosed
postage paid envelope.
[Name of Stockholder]
[Mailing Address]
<PAGE>
Proposal (1): Elect Donald E. Robar as Director.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (2): Elect Gerald M. Perlow as Director.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (3): Approve amendment to 1993 Employee Stock
Purchase and Option Plan to increase the number
of authorized shares of common stock from
300,000 to 400,000.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (4): Approve amendment to 1995 Employee Stock
Purchase Plan to increase the number of
authorized shares of common stock from 100,000
to 150,000.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (5): Approve amendment to 1995 Non-Employee Director
Stock Option Plan to increase the number of
authorized shares of common stock from 30,000
to 50,000.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (6): Ratify selection of Richard A. Eisner &
Company, LLP as the Company's independent
auditors.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Please sign exactly as your name appears ________________ Date:________, 1997
hereon. Joint owners should each sign. Signature
If acting as attorney, executor, trustee
or in other representative capacity, ________________ Date:________, 1997
sign name and title. Signature
Mark box at right if address change has [Box] New Address: __________________
been noted below
[Front]
<PAGE>
Form of Proxy for Class B Common Stock Shareholders (Blue)
PRELIMINARY PROXY MATERIAL
P PHC, INC.
R PROXY SOLICITED BY BOARD OF DIRECTORS
O Annual Meeting of Stockholders - December 26, 1997
X
Y
The undersigned hereby acknowledge(s) receipt of the Notice and
accompanying Joint Proxy Statement/Prospectus, revoke(s) any prior proxies,
and appoint(s) Bruce A. Shear and Paula C. Wurts, or either of them, with
power of substitution in each, attorneys for the undersigned to act for and
vote, as specified below, all shares of stock which the undersigned may be
entitled to vote at the Annual Meeting of the Stockholders of PHC, Inc. to be
held on December 26, 1997, and at any adjourned sessions thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
INSTRUCTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTION IS
GIVEN, THIS PROXY CARD WILL BE VOTED "FOR" THE NOMINEES FOR DIRECTOR, "FOR"
THE AMENDMENT TO THE 1993 EMPLOYEE STOCK PURCHASE AND OPTION PLAN, "FOR" THE
AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN, "FOR" THE AMENDMENT TO
THE 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, "FOR" THE SELECTION OF
INDEPENDENT AUDITORS. AN INSTRUCTION TO VOTE FOR APPROVAL OF THE AMENDMENTS
SHALL BE DEEMED TO CONSTITUTE AUTHORITY TO VOTE IN ACCORDANCE WITH THE
HOLDER'S BEST JUDGMENT UPON A PROPOSAL TO ADJOURN THE MEETING FOR THE PURPOSE
OF SOLICITING ADDITIONAL PROXIES. THE PROXY WILL BE VOTED IN ACCORDANCE WITH
THE HOLDER'S BEST JUDGMENT AS TO ANY OTHER MATTER.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.
Detach Card Before Mailing Detach Card Before Mailing
[Back]
<PAGE>
Dear Stockholder:
Please mark the boxes on the proxy card to indicate how your shares will be
voted, then sign the card, detach it and return your proxy card in the enclosed
postage paid envelope.
[Name of Stockholder]
[Mailing Address]
<PAGE>
Proposal (1): Elect Bruce A. Shear as Director.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (2): Elect Howard W. Phillips as Director.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (3): Elect William, F. Grieco as Director.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (4): Approve amendment to 1993 Employee Stock
Purchase and Option Plan to increase the number
of authorized shares of common stock from
300,000 to 400,000.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (5): Approve amendment to 1995 Employee Stock
Purchase Plan to increase the number of
authorized shares of common stock from 100,000
to 150,000.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (6): Approve amendment to 1995 Non-Employee Director
Stock Option Plan to increase the number of
authorized shares of common stock from 30,000
to 50,000.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Proposal (7): Ractify selection of Richard A. Eisner &
Company, LLP as the Company's indepent
auditors.
FOR AGAINST ABSTAIN
[Box] [Box] [Box]
Please sign exactly as your name appears ________________ Date:________, 1997
hereon. Joint owners should each sign. Signature
If acting as attorney, executor, trustee
or in other representative capacity, ________________ Date:________, 1997
sign name and title. Signature
Mark box at right if address change has [Box] New Address: __________________
been noted below
[Front]
