SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 2, 1998
PHC, Inc.
(Exact Name of Registrant as Specified in its Charter)
Massachusetts
(State of Incorporation or Organization)
0-23524 04-260571
(Commission File Number) (I.R.S. Employer
Identification No.)
200 Lake Street, Suite 102, Peabody, Massachusetts 01960
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 536-2777
<PAGE>
Item 3. Other Events.
Discontinuance of Operations of Nursing and Rehabilitation Facility.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported): June 5, 1998 (May 26, 1998)
PHC, Inc.
(Exact Name of Registrant as Specified in its Charter)
Massachusetts
(State of Incorporation or Organization)
0-23524 04-260571
(Commission File Number) (I.R.S. Employer
Identification No.)
200 Lake Street, Suite 102, Peabody, Massachusetts 01960
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 536-2777
<PAGE>
Item 3. Bankruptcy or Receivership
On May 26, 1998, PHC, Inc.'s wholly owned subsidiary, Quality Care Centers
of Massachusetts, Inc., doing business as Franvale Nursing and Rehabilitation
Center, filed for reorganization under Chapter 11 of the United States
bankruptcy Code in the Eastern Division of the District of Massachusetts at
Boston, Massachusetts. The case was assigned to C J Kenner. On May 27, 1998 on
motion of Franvale, the court authorized the appointment of a Trustee and
appointed Joseph Braunstein as the Chapter 11 Trustee. On May 29, 1998, the
Bankruptcy Court terminated the Chapter 11 proceeding determining that there was
no likelihood of reorganization since the prospective acquirer of the facility
was now imposing certain terms unacceptable to all interested parties and that
the transfer of patients and liquidation of assets could be as readily
effectuated in a state court receivership under the aegis of the Massachusetts
Health Care Statutes and accordingly dismissed the Chapter 11 case. On June 1,
1998, on the Petition of the Attorney General of the Commonwealth of
Massachusetts on behalf of the Department of Public Health with the acquiescence
of Franvale, Robert Griffin was appointed by J. Kottmyer as Receiver to transfer
the patients and close the facility expeditiously.
Although the full extent of the financial impact on PHC, Inc cannot be
determined at this time, the management of PHC does not believe that the
liquidation of the assets of Quality Care Centers of Massachusetts, Inc. will
have a substantial impact on PHC's financial position as previously reported.
Quality Care Centers of Massachusetts, Inc. posted a loss from Discontinued
Operations of approximately $1.8 million in the nine months ended March 31, 1998
and $1.9 million in the previous fiscal year. The elimination of this loss will
enhance the profitability of PHC.
Item 5. Other Events.
On May 27, 1998, PHC of Rhode Island, Inc, ("PHRI") entered into an
agreement with NMI Realty, ("NMI") the owners of the Good Hope Center real
estate. This agreement releases PHRI from the remaining 16 years on the Good
Hope Center property lease in exchange for some of the PHRI fixed assets and
payments of approximately $125,000.00 over the next seven months. This agreement
reduces the future cash requirements of PHRI considerably.
PHRI will continue to incur some operating expenses over the next several
months as a result of the costs related to the ongoing collection of outstanding
Accounts Receivable. The closure of PHRI will eliminate approximately $65,000 in
losses each month and further enhance the profitability of PHC.
<PAGE>
SIGNATURE
Pursuant to the requirements of the securities exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHC, INC.
Date: June 5, 1998 By: /s/ Bruce A. Shear
Bruce A. Shear
President
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit Index
Exhibit No. Description
4.29 Notice and Agreement of Termination of Lease and Option to Purchase; Bill
of Sale; Assignment of Licenses; Promissory Note; and Guaranty by and
between NMI Realty, Inc. and PHC of Rhode Island, Inc. dated May 31, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the securities exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHC, INC.
Date: June 2, 1998 By: /s/ Bruce A. Shear
Bruce A. Shear
President
<PAGE>
Exhibit List Description
4.29 Notice and Agreement of Termination of Lease and Option to Purchase; Bill
of Sale; Assignment of Licenses; Promissory Note; and Guaranty by and
between NMI Realty, Inc. and PHC of Rhode Island, Inc. dated May 31, 1998.
<PAGE>
Exhibit 4.29
NOTICE AND AGREEMENT OF TERMINATION OF LEASE
AND OPTION TO PURCHASE
Notice is hereby given that the following Lease and Option Agreement
dated March 16, 1994 (the "Agreement") is hereby terminated:
LANDLORD: NMI Realty, Inc., a Rhode Island corporation having a
mailing address of P. O. Box 470, East Greenwich, RI 02818.
TENANT: PHC of Rhode Island, Inc., d/b/a Pioneer Healthcare, a
Massachusetts corporation having an address of 200 Lake
Street, Suite 102, Peabody, MA 01960.
DESCRIPTION A certain parcel of land together with the buildings and
OF PREMISES: other improvements located thereon situated on John Potter
Road, West Greenwich, Rhode Island, as more particularly
described in Exhibit A to the Notice of Lease and Option to
Purchase recorded in Book 65, Page 841 of the Town of West
Greenwich Land Evidence Records (the "Premises").
COMMENCEMENT March 1, 1994
DATE:
TERMINATION OF Landlord and Tenant have agreed to irrevocably cancel and
OPTION TO terminate the right to purchase the Premises pursuant to the
PURCHASE: terms of the Agreement.
OTHER This Notice is intended to terminate all the rights, terms
PROVISIONS: and conditions of the Agreement.
Executed as a sealed instrument as of the 31st day of May, 1998.
Signed in the presence of: Landlord:
NMI REALTY, INC.
/s/ T. A. Bates By: /s/ Alan Willoughby
President
Tenant:
PHC OF RHODE ISLAND, INC.
/s/ T. A. Bates By: /s/ Bruce A. Shear
President
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF ESSEX
In Peabody on the 27th day of May, 1998, before me personally appeared
Alan Willoughby, President of NMI Realty, 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, as
President aforesaid, and the free act and deed of NMI Realty, Inc.
/s/ Stuart Kaufman
SEAL Stuart Kaufman, Notary Public
My Commission expires
February 26, 2004
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF ESSEX
In Peabody on the 27th day of May, 1998, before me personally appeared
Bruce A. Shear, President of PHC of Rhode Island, 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,
as President as aforesaid and the free act and deed of PHC of Rhode Island,
Inc.
/s/ Stuart Kaufman
SEAL Stuart Kaufman, Notary Public
My Commission expires
February 26, 2004
<PAGE>
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, PHC of Rhode Island, Inc. a duly organized and
existing Massachusetts corporation (hereinafter referred to as "Seller"),
does hereby sell, assign, transfer and convey to GHC, Inc. a duly organized
and existing Rhode Island corporation (hereinafter referred to as
"Purchaser") all right, title and interest in and to the Business Assets (as
defined below), free and clear of any lien, charge and encumbrance of claim
of any third party. The term "Business Assets" shall mean all of the assets
owned by Seller or in which Seller has any rights or interests comprising and
used by Seller in connection with or related to the ownership, management or
operation of the treatment center for chemically dependent individuals known
as Good Hope Center (the "Facility") located off John Potter Road, West
Greenwich, Rhode Island, as of the date hereof, tangible and intangible,
wheresoever situated and whether or not specifically referred to, and any and
all of Seller's right, title and interest therein and thereto (but excluding
the Excluded Assets, as hereinafter defined), including without limiting the
generality of the foregoing, the following:
(a) All machinery, equipment, furniture, furnishings, fixtures,
vehicles, computers, telephones, supplies, and all other tangible assets now
or hereafter owned by Seller prior to June 1, 1998 and used in connection
with the operation of the Facility, wherever located, with the exception of
the rights to any and all yellow page advertisements and any and all
telephone numbers associated therewith.
(b) All of Seller's right, title and interest in, to or under the
contracts, agreements, leases, licenses, permits, approvals, purchase orders
and commitments, and any other intangible assets in which Seller now or
hereafter has any present or future right or interest prior to June 1, 1998
and used in connection with the operation of the Facility, which will be
assumed by Purchaser.
(c) All leasehold improvements owned or made to the real property
where the Facility is located (the "Property") by seller.
(d) All other tangible and intangible assets owned by Seller and used
in connection with the ownership and operation of the Facility, on the date
hereof, including, without limitation, all books and records, customer and
supplier lists, provider agreements, patient lists, approvals, permits,
contracts, plans, surveys, policy manuals, accounts, records, Seller's forms
and office supplies, all advertising and promotional literature relating to
Seller's products, services or operations, all software and computer programs
and documentation, if any, used in conducting the business, including,
without limitation, flow charts, diagrams, descriptive texts and programs,
computer printouts, underlying tapes, computer data bases and similar items
used in Seller's business.
(e) Any and all of Seller's trademarks and trademark applications,
service marks and service mark applications, trade names (including, without
limitation, the name "Good Hope Center" and all derivatives thereof),
copyrights and copyright applications, and including the associated goodwill,
the right to sue for and recover such damages and such other relief as might
be granted by a court of competent jurisdiction for past infringement
thereof, and, to the extent transferable, any and all licenses or permits
(including, without limitation, any transferable licenses, permits,
certificates, registrations or authorizations from or with federal and state
regulatory authorities and/or Medicare and/or Medicaid) with respect to the
business and/or operations of Seller and the Facility.
(f) Any and all advances or pre-payments made by patients for
services not rendered prior to the Closing Date.
(g) Except as expressly provided herein to the contrary, all other
assets, tangible or intangible, wherever located, held or used in connection
with the ownership, operation and management of the Facility, whether or not
included in or reflected on the books of Seller or its financial statements.
Notwithstanding anything to the contrary herein provided, the Business
Assets shall not include (a) any accounts receivable, cash, bank balances,
money market accounts, certificates of deposit, marketable securities or
accounts, or accounts or loans received by Seller, (b) any endowment or
restricted or unrestricted accounts of Seller, and any funds received
pursuant to any grant awards, (c) the Packard Bell computer and Hewlett
Packard Inkjet printer currently being utilized in the Facility
administrative offices, (d) any payment obligation or liability for services
rendered, materials, supplies or labor which obligation arose prior to June
1, 1998; all of which assets listed in foregoing clauses (a), (b), (c) and
(d) of this paragraph shall be retained by Seller, as the case may be (the
"Excluded Assets") and shall not be sold, assigned, transferred, conveyed or
delivered to Purchaser.
IN WITNESS WHEREOF, this Bill of Sale has been executed by Seller as of
the 27th day of May, 1998.
PHC of Rhode Island, Inc.
By /s/ Bruce A. Shear
President
phc. bs
<PAGE>
PROMISSORY NOTE
$100,000.00 May 27, 1998
FOR VALUE RECEIVED, PHC of Rhode island, Inc., with an address of Suite
102, 200 Lake Street, Peabody, MA 01960 (hereinafter referred to as "Maker"),
promise to pay to the order of NMI Realty, Inc., with an address of 902
Whaley Hollow Road, Coventry, RI 02816 (hereinafter referred to as "Payee"),
the principal sum of One Hundred Thousand Dollars ($100,000.00), which shall
be paid (i) in equal monthly installments of Twenty Thousand Dollars
($20,000.00), beginning on the lst day of June, 1998, and on the 1st day of
July, 1998 and August, 1998; and (ii) in equal monthly installments of Ten
Thousand Dollars ($10,000.00) on the lst day of September, 1998, and on the
lst day of October, 1998, November, 1998, and December, 1998, and until all
unpaid principal, all other expenses and other charges payable hereunder
shall be paid in full.
The entire principal balance and any Collection Charges (hereinafter
defined) shall be paid to Payee on December 1, 1998 (the "Maturity Date").
All sums payable hereunder are payable at the above stated address of
Payee or such other place or places as Payee, its successors or assigns (the
"Holder") may designate in writing.
This Note may be prepaid at any time, in whole or in part, without
penalty or premium.
All sums paid under this Note shall be applied first to any Collection
Charges then due and unpaid, with the remaining balance, if any, to be
applied to unpaid principal.
Payee and any successor Holder may assign, transfer or negotiate this
Note and any security for the performance of Maker's obligations hereunder,
and in such event all the provisions of this Note shall inure to the benefit
of and may be exercised by or on behalf of the successor Holder.
The occurrence of any one or more of the following events shall
constitute an Event of Default hereunder:
1. Nonpayment of principal due under this Note when it shall become
due and payable (no prior demand therefor being necessary) and such
nonpayment shall have continued for more than fifteen days. However, upon
receipt of payment by Payee, said default will be considered cured.
2. Nonpayment of any Collection Charges.
3. The breach of, or the proving false or misleading, in any
material respect, of any representation or warranty now or hereafter made to
any Holder by, on behalf of, or for the benefit of Maker, or by Maker as
contained in the Letter Agreement between PHC of Rhode Island, Inc., PHC,
Inc., NMI Realty, Inc. and GHC, Inc. dated May 22, 1998, (the "Letter
Agreement").
4. Failure to make payment of the property tax bill for the quarter
ended August 31, 1998, in accordance with paragraph 3 of the Letter Agreement.
5. (a) (i) The insolvency or inability of Maker to pay its debts as
they mature; (ii) the appointment of a receiver, trustee, custodian or other
fiduciary, for, or for any of the property of, Maker; (iii) the making of an
assignment for the benefit of creditors, or the making of or entering into a
trust mortgage or deed or other instrument of similar import for the benefit
of creditors, by Maker; or (iv) the convening of a meeting of the creditors,
or the selection of a committee representing the creditors, of Maker; or
(b) The filing of a petition, complaint, motion or other
pleading seeking any relief under any receivership, insolvency, or debtor
relief law, or seeking any readjustment or any similar type of relief, or the
filing of a petition, complaint, or motion under any chapter of the Federal
Bankruptcy Code, 11 U.S.C. (Sub-section)101 et seq., as the same now exists or
may hereafter be amended (the "Bankruptcy Code"), by Maker; or
(c) The filing of a petition, complaint, motion or other
pleading seeking any relief under any receivership, insolvency, or debtor
relief law, or under any chapter of the Bankruptcy Code, or seeking any
readjustment of indebtedness, reorganization, composition, extension or any
similar type of relief, or the entry of any order for relief under any
chapter of the Bankruptcy Code, against Maker; provided, however, that if
Maker shall immediately notify Holder in writing of the filing of any such
petition, complaint, motion or other pleading against Maker and shall provide
evidence satisfactory to Holder that Maker has in good faith and within ten
(10) days after the filing of any such petition, complaint, motion or other
pleading filed an answer thereto contesting same, then there shall be no
Event of Default under this subparagraph (c) until the earliest of (i) the
entry of an order for relief or a judgment under any proceedings referred to
in this subparagraph (c), (ii) the appointment of a receiver, trustee,
custodian or other fiduciary in any such proceeding or (iii) the expiration
of a period of thirty (30) days, at the end of which such petition,
complaint, motion or other pleading remains undismissed; or
6. Upon the occurrence of any Event of Default, this Note, at the
option of the Holder, shall become immediately due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by Maker. The Holder's failure to exercise such option
shall not constitute a waiver of the right to exercise it at any other time.
No renewal or extension granted, or any indulgence shown to, or any
release of, or any dealings between the Holder and any other person,
corporation, or entity now or hereafter interested in this Note or in the
property securing this Note, whether as owner, guarantor, encumbrance,
grantor, or otherwise, shall discharge, extend or in any way affect the
obligations of Maker hereunder.
Maker shall remain primarily, liable on this Note until full payment,
unaffected by any agreement or transaction between any Holder and any alienee
as to payment of principal, interest or other monies, by any forbearance or
extension of time, guaranty or assumption by others, or by any other matter,
as to all of which notice is hereby waived by Maker.
Maker will pay the legal and other fees and expenses of the Holder
reasonably incurred in connection with or incidental to the enforcement of
any of the obligations of Maker or rights of the Holder under this Note, by
litigation or otherwise; and all such fees and expenses shall be indebtedness
under this Note, payable on demand (collectively the "Collection Charges").
This Note may not be modified or terminated orally.
This Note has been executed and delivered in Rhode Island and for all
purposes shall be enforced and construed in accordance with the substantive
law of the State of Rhode Island, without resort to Rhode Island's conflict
of laws rules.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Note as of the
day and year first above written.
PHC of Rhode Island, Inc.
Witnessed By:
/s/ Stuart Kaufman By /s/ Bruce A. Shear
President
GUARANTY
May 27, 1998
To induce NMI Realty, Inc. (the "Payee") to grant financial
accommodations to PHC of Rhode Island, Inc., Suite 102, 200 Lake Street,
Peabody, MA 01960, (the "Maker"), and in consideration thereof, the
undersigned guarantor (the "Guarantor") hereby unconditionally guarantees to
the Payee the due and punctual payment and performance of Maker's Obligations
(as herein defined), when due, whether by acceleration or otherwise.
"Obligations" means all indebtedness and liabilities whatsoever of Maker to
Payee, pursuant to the above Promissory Note between Maker and Payee.
The Guarantor hereby: (i) agrees to pay all costs and expenses
(including reasonable attorneys' fees) incurred in collecting or enforcing
the Obligations or property securing payment of this Guaranty; (ii) waives
any and all rights Guarantor may have against the Maker by way of
subrogation, reimbursement, set-off, claim or otherwise arising out of the
payment or performance by Guarantor of any of the Obligations to Payee; and
(iii) waives notice of acceptance of this Guaranty, presentment, demand,
protest, notice of protest, notice of dishonor, notice of non-payment, any
defenses available to a surety, indorser or guarantor under applicable law,
and any right to require suit against the Maker or any other party before
enforcing this Guaranty.
The Guarantor further consents and agrees that renewals and extensions
of time of payment, surrender, release, exchange, substitution, dealing with
or taking additional collateral security, taking or releasing other
guaranties, abstaining from realizing upon any collateral security or other
guaranties and any and all other forbearances or indulgences granted by the
Payee to the Maker or any other party may be made, granted and effected by
the Payee without notice to the Guarantor and without in any way affecting
the Guarantor's liability hereunder.
This Guaranty has been executed and delivered in Rhode Island and for
all purposes shall be enforced and construed in accordance with the
substantive law of the State of Rhode Island, without resort to Rhode
Island's conflict of laws rules.
PHC, Inc.
Witnessed By:
/s/ Stuart Kaufman By /s/ Bruce A. Shear
President
