As Filed with the Securities and Exchange Commission on April 13, 1999
Registration No. 333-
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT ON FORM S-3
UNDER THE SECURITIES ACT OF 1933
PHC. INC.
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of incorporation or organization)
04-2601571
(I.R.S. Employer Identification No.)
Bruce A. Shear
President and Chief Executive Officer
PHC, Inc.
200 Lake Street - Suite 102
Peabody, Massachusetts 01960
(978) 536-2777
(Address and telephone number of principal executive offices)
with a copy to:
ARNOLD WESTERMAN
ARENT FOX KINTNER PLOTKIN & KAHN, PPLC
1050 Connecticut Avenue, NW
Washington, DC 20036
(202) 857-6000
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to a Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
C A L C U L AT I ON O F R E G I S T R A T I ON F E E
Proposed Proposed Amount
Title of each Amount Maximum Maximum of
Class of to be Offering Aggregate Registration
Securities to be Registered Price Per Offering Fee
Registered Share (1) Price (1)
Class A Common 1,042,061
Stock, $.01 par shares $0.875 $911,803.38 $276.30
value
__________________________________________________________________________
<PAGE>
Subject to Completion, dated , 1999
PROSPECTUS
PHC, INC.
PIONEER BEHAVIORAL HEALTH
1,042,061 Shares of Class A Common Stock
This Prospectus relates to the public offering that may be made from
time to time of shares of the Class A Common Stock, par value $.01 per share
(the "Class A Common Stock") of PHC, Inc., Massachusetts corporation ("PHC"),
by, or for the accounts of, the holders thereof (the "Selling Security
Holders"). See "Selling Security Holders."
The shares of Class A Common Stock offered in this Prospectus were
issued by PHC in transactions exempt from registration under the Securities
Act of 1933, as amended (the "Act"), and applicable state securities laws.
Of the shares of Class A Common Stock offered in this Prospectus, (1) 99,697
were issued and 660,303 may be issued to the Selling Security Holders
pursuant to a price guarantee and in lieu of a promissory note in connection
with the conversion of their Series B Convertible Preferred Stock; and (2)
250,000 are issuable upon the conversion of Convertible Debentures.
The shares offered in this Prospectus may be sold from time to time by
the Selling Security Holders or their transferees. No underwriting
arrangements have been entered into by the Selling Security Holders as of the
date hereof. The distribution of the shares offered in this Prospectus by
the Selling Security Holders may be effected in one or more transactions that
may take place in the over-the-counter market, including ordinary broker's
transactions, privately negotiated transactions, or through sales to one or
more dealers for resale of such shares as principals, at prevailing market
prices at the time of sale, prices related to such prevailing market prices,
or negotiated prices. Underwriting discounts and usual and customary or
specifically negotiated brokerage fees or commissions will be paid by the
Selling- Security Holders in connection with sales of such shares. See "Plan
of Distribution."
PHC will not receive any proceeds from the sale of the shares offered in
this Prospectus. By agreement with the Selling Security Holders, PHC will
pay all of the expenses incident to the registration of such shares under the
Act (other than agent's or underwriter's commissions and discounts),
estimated to be approximately $24,000.
The Selling Security Holders, and any broker-dealers, agents, or
underwriters through whom the shares offered pursuant to this Prospectus are
sold, may be deemed "underwriters" within the meaning of the Act with respect
to securities offered by them, and any profits realized or commissions
received by them may be deemed underwriting compensation.
The Class A Common Stock is traded in the over-the-counter market
and prices are quoted on Nasdaq under the symbol PIHC. On April 1, 1999, the
closing bid price of the Class A Common Stock was $0.875.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" AT PAGE 9.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Proceeds to Selling
Public (1) Stockholders (1)
Per $0.875 $911,803.38
Share
Total $0.875 $911,803.38
(1) Estimated on the basis of the bid and asked prices of the Class
A Common Stock on April 1, 1999, as reported on The Nasdaq
SmallCap Market.
The date of this Prospectus is , 199
<PAGE>
AVAILABLE INFORMATION
PHC has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under
the Securities Act of 1933, as amended (the "Act") with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to PHC and the
securities offered hereby, reference is hereby made to the Registration
Statement, and the exhibits and schedules thereto which may be inspected
without charge at the public reference facilities maintained at the principal
office of the Commission at 450 Fifth Street, N. W., Room 1024, Washington
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You may obtain information on
the operation of the public reference facilities by calling the Commission at
1-800-SEC-0330. Copies of such materials may be obtained upon written
request from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
also maintains an internet site that contains reports, proxy and information
statements and other information about PHC that is filed electronically at
http:\\WWW.SEC.GOV. Reference is made to the copies of any contracts or
other documents filed as exhibits to the Registration Statement.
PHC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities of the Commission at
450 Fifth Street, N.W., Washington, D.C. 10549. Copies of such material can
be obtained at prescribed rates from the Commission at such address. Such
reports, proxy statements and other information can also be inspected at the
Commission's regional offices at 7 World Trade Center, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661.
A copy of PHC's Annual Report on Form 10-KSB, as filed with the
Commission, is available upon request, without charge, by writing to PHC,
Inc., 200 Lake Street, Suite 102, Peabody, Massachusetts 01960, Attention:
Bruce A. Shear.
PHC intends to furnish its stockholders and holders of rights
exercisable for publicly traded securities of PHC with annual reports
containing audited financial statements and such other periodic reports as
PHC may from time to time deem appropriate or as may be required by law.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporated herein by reference and made a part of this Prospectus are
the following: (1) PHC's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1998 filed with the Commission on October 13, 1998: (2) PHC's
Quarterly Report on Form 10-QSB for the quarters ended September 30, 1998 and
December 31, 1998; and (3) the description of the Class A Common Stock, which
is registered under Section 12 of the Exchange Act, contained in PHC's
Registration Statement on Form 8-A dated December 17, 1993, and the amendment
thereto on Form 8-A/A dated March 2, 1994. All documents subsequently filed
by PHC with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby will be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained in any document
incorporated, by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in
the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding statement.
PHC will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy of the
information that is incorporated by reference herein. Requests for such
information should be directed to: PHC, Inc., 200 Lake Street, Suite 102,
Peabody, Massachusetts 01960, Attention: Bruce A. Shear. PHC's telephone
number is: (978) 536-2777.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and the Consolidated Financial Statements
(including the Notes attached to the Consolidated Financial Statements)
appearing elsewhere in this Prospectus or incorporated by reference into the
Prospectus. This Prospectus relates to the public offering that may be made
from time to time of up to 1,042,061 shares of Class A Common Stock. Of the
1,042,061 shares of Class A Common Stock offered under this Prospectus, (1)
99,697 were issued and 660,303 may be issued to the Selling Security Holders
pursuant to a price guarantee and in lieu of a promissory note in connection
with the conversion of their Series B Convertible Preferred Stock; and (2)
250,000 are issuable upon the conversion of convertible debentures. The
shares of Class A Common Stock issued to the Selling Security Holders at the
conversion price of the Convertible Preferred Stock have been previously
registered in Commission file number 333-59927 effective July 24, 1998.
As of March 2, 1999 the total number of outstanding shares of Class A
Common Stock was 5,530,206, the total number of outstanding Class B Common
Stock was 727,210, the total number of outstanding shares of Series B
Convertible Preferred Stock was 853, and the total amount of outstanding
convertible debentures was $500,000. As of April 1, 1999, the total number
of outstanding shares of Class A Common Stock upon the conversion of Series B
Convertible Preferred Stock and convertible debentures was 6,572,267.
The Class A Common Stock and PHC's Class B Common Stock, par value $.01
per share (the "Class B Common Stock"), are similar in all respects, except
that holders of Class B Common Stock have five votes per share and holders of
Class A Common Stock have one vote per share on all matters on which
stockholders may vote and that holders of the Class A Common Stock are
entitled to elect two members of PHC's board of directors and holders of the
Class B Common Stock are entitled to elect all the remaining members of the
board of directors. Subject to certain limitations, each share of Class B
Common Stock is convertible into one share of Class A Common Stock
automatically upon and sale or transfer thereof or at any time at the option
of the holder. The Class A Common Stock, the Class B Common Stock are
sometimes collectively referred to herein as the "Common Stock."
Each Share of Series B Preferred Stock is convertible, at the option of its
holder, into Class A Common Stock at 80% of the average closing bid price five
days prior to the conversion date but not less than $1.88 or more than $3.50 per
share. If the conversion price should calculate to be less than $1.88 the
difference is made up in the form of a Note from the Company. Preferred Stock
dividends have preference over any Common Stock Dividends declared and may be
paid in cash or Preferred Stock at the Company's option.
PHC
PHC is a national health care company specializing in the treatment of
substance abuse, which includes alcohol and drug dependency and related
disorders, and in the provision of psychiatric care. Through its six active
subsidiaries, PHC operates substance abuse treatment facilities in Utah and
Virginia, a psychiatric facility and five outpatient mental health clinics in
Michigan, two outpatient mental health clinics in Nevada and provides
management and administrative services to psychotherapy and psychological
practices in New York.
PHC provides health-related services to three distinct segments of the
population, PHC's substance abuse facilities provide specialized treatment
services to patients who typically have poor recovery prognoses and who are
prone to relapse. These services are offered in small specialty care
facilities (i.e., facilities designed to provide care to individuals who do
not require hospital care but who require some medical care), which permits
PHC to provide its clients with efficient and customized treatment without
the significant costs associated with the management and operation of general
acute care hospitals. PHC tailors these programs and services to
"safety-sensitive" industries and concentrates its marketing efforts on the
transportation, oil and gas exploration, heavy equipment, manufacturing, law
enforcement, gaming and health services industries. PHC's psychiatric facility
provides inpatient psychiatric care to children, adolescents and adults and
operates a partial hospitalization program. PHC's outpatient mental health
clinics provide services to employees of major employers, as well as to
managed care, Medicare and Medicaid clients. The psychiatric services are
offered in a larger, more traditional setting than PHC's substance abuse
facilities, enabling PHC to take advantage of economies of scale to provide
cost-effective treatment alternatives.
PHC believes that it has benefited from an increased awareness of the
need to make substance abuse treatment services accessible to the nation's
work force. For example, PHC treats employees who have been referred for
treatment as a result of compliance with Subchapter D of the Anti-Drug Abuse
Act of 1988 (commonly known as the Drug Free Workplace Act), which requires
employers who are Federal contractors or Federal grant recipients to
establish drug-free awareness programs which, among other things, inform
employees about available drug counseling; rehabilitation and employee
assistance programs. In addition, effective January 1, 1995, the Department
of Transportation implemented regulations which broaden the coverage and
scope of alcohol and drug testing for employees in "safety sensitive"
positions in the transportation industry.
PHC was organized as a Delaware corporation in 1976 under the name
American International Health Services, Inc. In 1980, PHC merged into an
inactive publicly held Massachusetts corporation and was the surviving
corporation in the merger. PHC changed its name to "PHC, Inc." as of
November 24, 1992. PHC is based in Massachusetts and is unaffiliated with an
inactive Minnesota corporation of the same name. From the time of its
organization in 1976 until 1992, PHC managed treatment programs for addictive
disorders in acute care hospitals located in as many as twelve states.
Additionally, in 1984 PHC began to operate its own free-standing treatment
facilities for addictive disorders. PHC does business under the trade names
"Pioneer Healthcare" and "Pioneer Behavioral Health." With the exception of
the services provided directly by PHC under the name Pioneer Development
Support Services, PHC operates as a holding company, providing
administrative, legal and programmatic support to its subsidiaries. PHC
plans to expand its operations through the acquisition or establishment of
additional substance abuse and inpatient psychiatric treatment facilities.
Through its subsidiaries, PHC currently operates two facilities which
provide treatment for substance abuse and addictive disorders: Highland Ridge
Hospital, located in Salt Lake City, Utah, ("Highland Ridge") and Mount Regis
Center, located in Salem, Virginia, near Roanoke ("Mount Regis"). PHC also
operates a psychiatric hospital, Harbor Oaks Hospital, located in New
Baltimore, Michigan, near Detroit ("Harbor Oaks"), five outpatient
psychiatric clinics in Michigan ("North Point-Pioneer"), and two outpatient
mental health clinics, Harmony Healthcare, located in Las Vegas, Nevada
("Harmony"). PHC also provides management and administrative services to
psychotherapy and psychological practices in New York through BSC-NY, Inc
("BSC"). Unless the context otherwise requires, references in this Prospectus
to "Pioneer" and "PHC" mean PHC, Inc. and its subsidiaries. PHC's executive
offices are located at 200 Lake Street, Suite 102, Peabody, MA 01960 and
its telephone number is (978) 536-2777.
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information in
this Prospectus, the following risk factors should be considered carefully
in evaluating whether to invest in the securities offered hereby.
Negative cash flow. During the fiscal quarter ended December 31, 1998
PHC recorded an extraordinary gain of $1,089,076 which was a result of the
partial liquidation of the net liabilities of the long term care center
formerly operated by a wholly owned subsidiary of PHC. PHC generated a Loss
before this Extraordinary Item of $912,060 for the first two fiscal quarters of
1999 and losses of $6,232,221 and $2,839,664 during fiscal years 1998 and
1997, respectively. There can be no assurance that PHC will not incur
additional losses in the future. As a result of significant losses in prior
years, as of June 30, 1998 PHC had an accumulated deficit of $10,923,597.
Primarily due to significant losses, PHC has experienced negative cash flow
from operations in recent periods.
Need for additional financing. Although PHC has entered into various
accounts receivable funding facilities, (see the Consolidated Financial
Statements and related notes included or incorporated into this prospectus by
reference), there can be no assurance that PHC will be able to obtain any
additional required financing on terms acceptable to PHC. The inability to
obtain needed financing could have a material adverse effect on PHC's
financial condition, operations and business prospects and there can be no
assurance that PHC will be able to attain or maintain profitability in the
future. See Consolidated Financial Statements and related notes included or
incorporated into this prospectus by reference.
Lack of access to capital to achieve acquisition strategy. PHC intends to
expand its operations through the acquisition or establishment of additional
facilities, and may seek to obtain additional financing from various sources
including banks. PHC's plan to acquire additional facilities in the future
is highly dependent upon its access to capital, of which there can be no
assurance. See "Negative cash flow; Need for additional financing." If PHC
is unable to secure the necessary access to capital it will be unable to
acquire additional facilities which, in turn, will limit PHC's growth.
<PAGE>
Reimbursement by third-party payors; Concentration of receivable; Change in
service mix. Payment for substance abuse treatment is provided by private
insurance carriers and managed care organizations; payment for psychiatric
services is provided by private insurance carriers, managed care
organizations and the Medicare and the Medicaid programs. Changes in the
sources of PHC's revenues could significantly alter the profitability of
PHC's operations. In addition, PHC experiences greater delays in the
collection of amounts reimbursable by the Medicare and the Medicaid programs
than in the collection of amounts reimbursable by private insurers and
managed care organizations. Accordingly, a change in PHC's service mix could
have a material adverse effect on PHC as would an increase in the percentage
of PHC's patients who are insured by Medicare or Medicaid. In addition, cost
containment pressures from private insurers and the Medicare and the Medicaid
programs have begun to restrict the amount that PHC can charge for its
services. If a substantial number of private insurers and managed care
organizations were to adopt more restrictive reimbursement schedules and if
such schedules did not permit PHC to profitably provide substance abuse
treatment and other behavioral health care, PHC's business would be
materially adversely affected. Ten percent of revenues from continuing
operations for the quarter ended December 31, 1998 was related to Government
Payors. In addition, there can be no assurance that PHC's existing
facilities will continue to meet, or that proposed facilities will meet, the
requirements for reimbursement by third-party or governmental payors.
PHC had substantial receivables from Medicaid and Medicare of approximately
$353,440 excluding discontinued operations, at December 31, 1998, which would
constitute a concentration of credit risk should these agencies defer or be
unable to make reimbursement payments as due.
A number of substance abuse facilities in the New England area have closed
in recent years, purportedly in part because certain managed care
organizations are no longer willing to pay for inpatient treatment beyond
five or ten days, making it difficult for such facilities to remain in
operation. On May 31, 1998 PHC closed its Rhode Island facility which had
lost approximately $85,000 per month over the first nine months of fiscal
year 1998 due to the cost involved in operating in the heavy managed care
environment of Rhode Island. PHC has marketed, and intends to continue
marketing, its services to managed care organizations and insurance companies
that are willing to reimburse PHC for longer lengths of stay, particularly
with respect to those patients with severe substance abuse addictions.
However, if a growing number of managed care organizations and insurance
companies adopt policies which limit the length of stay for substance abuse
treatment, PHC's business would be materially adversely affected.
Reimbursement for substance abuse and psychiatric treatment from private
insurers is largely dependent on PHC's ability to substantiate the medical
necessity of treatment in accordance with varying requirements of different
insurance companies. The process of substantiating a claim often takes up to
four months and, as a result, PHC experiences significant delays in the
collection of amounts reimbursable by third-party payors which adversely
affects PHC's working capital condition. PHC's accounts receivable (net of
allowance for bad debts) were $7,190,315 at December 31, 1998 compared with
$8,126,972 at June 30, 1998 and $9,671,763 at June 30, 1997 excluding
discontinued operations. As PHC expands, PHC will be required to seek
payment from a larger number of payors and the amount of PHC's accounts
receivable will likely increase. The overall decrease in current accounts
receivable is due primarily to significant increases in allowance for
doubtful accounts which was $3,505,310 at December 1998 compared to
$3,488,029 at June 30, 1998 and $1,942,602 at June 30, 1997. This increase
is due to PHC's more aggressive reserve policy established in June 1997. If
the amount of receivables which eventually become uncollectible exceeds such
allowance, PHC could be materially adversely affected. In addition, any
decrease in PHC's ability to collect its accounts receivable or any further
delay in the collection of accounts receivable would have a material adverse
effect on PHC. See the Consolidated Financial Statements and notes related
thereto included herein or incorporated herein by reference.
As a general rule, PHC attempts not to accept patients who do not have
either insurance coverage or adequate financial resources to pay for
treatment. Each of PHC's substance abuse facilities does, however, provide
treatment free of charge to a small number of patients each year who are
unable to pay for treatment but who meet certain clinical criteria and who
are believed by PHC to have the requisite degree of motivation for treatment
to be successful. In addition, PHC provides follow-up treatment free of
charge to relapse patients who satisfy certain criteria. Most of PHC's
psychiatric patients are either covered by insurance or pay at least a
portion of treatment costs. The number of patient days attributable to all
patients who receive treatment free of charge in any given fiscal year is in
PHC's discretion and has been less than 5%.
Private insurers, managed care organizations and, to a lesser extent,
Medicaid and Medicare, are beginning to carve-out specific services,
including mental health and substance abuse services, and establish small,
specialized networks of providers for such services at fixed reimbursement
rates. Continued growth in the use of carve-out systems could materially
adversely affect PHC to the extent PHC is not selected to participate in such
smaller specialized networks or if the reimbursement rate is not adequate to
cover the cost of providing the service.
Acquisition and expansion risks. PHC intends to expand its business
through acquisition. The acquisitions will be in areas that will further
support the integrated delivery system in markets that PHC currently
services. There can be no assurance that PHC will be successful in
identifying appropriate acquisition opportunities or, if it does, that PHC
will be successful in acquiring such facilities or that the acquired
facilities will be profitable. The ability of PHC to acquire and develop
additional facilities will depend on a number of factors beyond the control
of PHC, including the availability of financing, the ability of PHC to obtain
necessary permits, licenses and approvals as well as the employment of
appropriate personnel to manage and staff the acquired facilities. Moreover,
the attendant risks of expansion could have a material adverse effect on
PHC's business. Start-up facilities could operate at a loss for a substantial
period of time following acquisition. The operating losses and negative cash
flow associated with start-up acquisitions could have a material adverse
effect on the profitability of PHC unless and until such facilities are fully
integrated with PHC's other operations and become profitable.
<PAGE>
Variable patient census. The patient census at PHC's substance abuse and
psychiatric facilities decreased from 58.8% to 51.7% occupancy from fiscal
year 1997 to fiscal year 1998 and increased to 66.6% for the six months ended
December 31, 1998. There can be no assurance that PHC will be able to
maintain sufficient capacity utilization or pricing in the future to ensure
profitability.
Acquisition program. PHC's acquisition program is directed by Bruce A.
Shear, a Director and the President and Chief Executive Officer of PHC, in
conjunction with other members of PHC's Board of Directors. As consideration
for any acquisition, in addition to the payment of cash (if any), PHC may
issue notes, common stock, preferred stock or other securities. Key
employees of acquired companies may become employees of PHC and may hold
management positions in PHC. PHC does not intend to seek stockholder
approval for any such acquisitions unless required by applicable law or
regulations. Accordingly, investors will be substantially dependent upon the
business judgment of management in making such acquisitions. PHC intends to
engage in a program to seek acquisitions in business areas related or
complementary to the present business of PHC and currently plans to acquire
one or more substance abuse facilities and/or psychiatric facilities. There
can be no assurance that PHC will be able to attract management to operate
any additional facilities or, if PHC cannot attract such management, that
PHC's current management will be able to devote a sufficient amount of time to
managing any additional facilities.
Seasonality and fluctuation in quarterly results. PHC experiences and
expects to continue to experience a decline in revenue in its fiscal quarters
ending December 31 primarily due to a seasonal decline in revenue from PHC's
substance abuse facilities during this period.
Regulation. PHC and the health care industry are subject to extensive
federal, state and local regulation with respect to licensure and conduct of
operations at existing facilities, construction of new facilities,
acquisition of existing facilities, the addition of new services, compliance
with physical plant safety and land use requirements, implementation of
certain capital expenditures and reimbursement for services rendered. Health
care facilities, including those operated by PHC, are subject to periodic
inspections by governmental authorities to ensure compliance with licensure
standards and to permit continued participation in third-party payor
reimbursement programs, including the Medicare and the Medicaid programs,
where applicable. Although, to the best of PHC's knowledge, all of PHC's
existing facilities are currently in compliance with all material
governmental requirements, there can be no assurance that PHC will be able to
obtain new licenses to effect its acquisition strategy or maintain its
existing licenses and reimbursement program participation approvals. It is
not possible to accurately predict the content or impact of future
legislation and regulations affecting the health care industry. PHC's
ability to develop or acquire new facilities is dependent upon its ability to
secure requisite certificates or determinations of need, licenses, permits
and reimbursement program participation approvals. If PHC is unable to
obtain required licenses and approvals for new projects, or if its existing
licenses or approvals are restricted, rescinded or revoked, its growth would
be limited and its business would be materially adversely affected.
In addition, both the Medicare and Medicaid programs are subject to
statutory and regulatory changes, administrative rulings, interpretations of
policy, intermediary determinations and governmental funding restrictions,
all of which may materially increase or decrease the rate of program payments
to health care facilities. Since 1983, Congress has consistently attempted
to limit the growth of federal spending under the Medicare and Medicaid
programs. Currently, Congress and the President contemplate plans to reduce
Medicare spending over the next ten years. Preliminary indications suggest
that, in addition to increased costs to beneficiaries, the plan would attempt
to impose a disproportionate share of the burdens of reform upon health care
providers. Additionally, proposed congressional spending reductions for the
Medicaid program, possibly involving the issuance of block grants to states,
is likely to hasten the reliance upon managed care as a potential savings
mechanism of the Medicaid program. The Commonwealth of Massachusetts has
already implemented a mental health/substance abuse managed care program for
its Medicaid population, which, in general, has increased administrative
oversight and reduced revenues for mental health/substance abuse providers.
As a result of this reform activity PHC can give no assurance that payments
under such programs will in the future remain at a level comparable to the
present level or be sufficient to cover the costs allocable to such
patients. In addition, many states, including the Commonwealth of
Massachusetts and the State of Michigan, are considering reductions in state
Medicaid budgets.
Control of PHC by Bruce A. Shear. The holders of PHC's Class B Common
Stock are entitled to five votes per share on any matter requiring
stockholder action, and the holders of the Class A Common Stock are entitled
to one vote per share, except with respect to the election of directors. The
holders of the Class A Common Stock are entitled to elect two members to
PHC's five-member Board of Directors and the holders of the Class B Common
Stock are entitled to elect the remaining directors. Assuming no exercise of
any options or warrants and no conversion of any debentures or Preferred
Stock, at March 15, 1999 the holders of the Class B Common Stock beneficially
own 11.62% of PHC's Common Stock, but have 39.7% of the total voting power.
Bruce A. Shear and his affiliates own and control 11.8% of the Common Stock,
but hold 37.4% of the total voting power.
Dependence upon attraction and retention of key personnel; Potential
staffing shortages. PHC is highly dependent on the principal members of its
management and professional staff, particularly Bruce A. Shear, PHC's
President and Chief Executive Officer, Robert H. Boswell, PHC's Executive
Vice President and the other members of PHC's management. Although PHC has
obtained insurance in the amount of $1,000,000 on the life of Mr. Shear,
which would pay PHC $1,000,000 in the event of Mr. Shear's death, the loss of
any key person would have a material adverse effect on PHC's business. In
addition, PHC's success will depend, in large part, on its ability to attract
and retain highly qualified personnel, particularly skilled health care
personnel. PHC faces competition for such personnel from governmental
agencies, health care providers and other companies. PHC has not to date
experienced substantial difficulty in hiring appropriate personnel to staff
its facilities. However, if there were a shortage of trained health care
personnel in the geographic markets in which PHC conducts or proposes to
conduct its business, such shortages could increase PHC's operating costs and
limit its expansion opportunities. There can be no assurance that PHC will
be successful in hiring or retaining the personnel it requires for continued
growth. Similarly, if PHC acquires additional facilities, there can be no
assurance that it will be able to attract management to operate such
facilities or, if it cannot attract such management, that PHC's current
management will be able to devote a sufficient amount of time to managing
such additional facilities.
Competition. The health care business is highly competitive and subject to
excess capacity. PHC's competitors include both not-for-profit and
for-profit hospitals, health care companies specializing in substance abuse
and psychiatric services, many of which have substantially greater resources
than PHC.
Reliance on key clients. PHC has entered into relationships with large
employers, health care institutions and labor unions to provide treatment for
psychiatric disorders, chemical dependency and substance abuse in conjunction
with employer-sponsored employee assistance programs. The employees of such
institutions may be referred to PHC for treatment, the cost of which is
reimbursed on a per diem or per capita basis. Although none of these large
employers, health care institutions or labor unions accounts for 10% or more
of PHC's consolidated revenues, the loss of any of these key clients would
require PHC to expend considerable effort to replace patient referrals and
would result in revenue losses to PHC and attendant loss in income.
Possible Nasdaq delisting. PHC has been informally advised by the staff of
Nasdaq that an issuance of stock by PHC at a significant discount to market
would likely result in a review by Nasdaq of PHC's continued listing. From time
to time PHC does issue stock at a discount to market. Although PHC believes
that the pricing of the securities issued by PHC at a discount to market from
time to time is not significant enough to result in a Nasdaq review of PHC's
listing, there can be no assurance that asdaq will not conduct such a review,
or otherwise take action to delist the Class A Common Stock. PHC would oppose
such action through all reasonable administrative and judicial means.
Although PHC's Class A Common Stock is listed on Nasdaq, there can be no
assurance that PHC will meet the criteria for continued listing of securities
on Nasdaq. These continued listing criteria include that (1) PHC maintain at
least $2,000,000 in total assets and $1,000,000 in capital and surplus, (2)
the minimum bid price of the Class A Common Stock be $1.00 per share or the
market value of the freely tradable Class A Common Stock ("public float") be
at least $1,000,000 and the value of its capital and surplus be at least
$2,000,000, (3) there be at least 100,000 shares in PHC's public float with
a market value of at least $200,000, (4) there be at least two active market
makers in the Class A Common Stock and (5) PHC's Stock be held by at least
300 holders.
Furthermore, Nasdaq's Board of Directors has recently voted to revise the
listing standards for the SmallCap Market. Such proposed changes would
require that for two of the last three years, PHC must maintain at least
$2,000,000 in net tangible assets, or at least $35,000,000 in market
capitalization, or at least 500,000 shares in PHC's public float with a
market value of at least $1,000,000. The criteria relating to bid price,
market makers and shareholders would not be changed by this proposal.
Currently, PHC meets these new criteria, but there can be no assurances that
it will continue to meet such criteria.
If PHC becomes unable to meet such criteria and is delisted from Nasdaq,
trading, if any, in the Class A Common Stock would thereafter be conducted in
the over-the-counter market in the so-called "pink sheets" or, if then
available, on the National Association of Securities Dealers Inc.'s
"Electronic Bulletin Board". As a result, an investor would likely find it
more difficult to dispose of, or to obtain accurate quotations as to the
value of, PHC's securities.
Risk of low-priced stocks. If PHC's securities were delisted from Nasdaq,
they may become subject to Rule 15g-9 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which imposes additional sales
practice requirements on broker-dealers which sell such securities to persons
other than established customers and 'accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes
exceeding $200,000 or $300,000 together with their spouses). For
transactions covered by this Rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, such Rule may
affect the ability of broker-dealers to sell PHC's securities and may affect
the ability of purchasers in this offering to sell any of the securities
acquired hereby in the secondary market.
Possible effect of "Penny Stock" rules on liquidity for PHC's securities.
The Commission has adopted regulations which define a "penny stock" to be any
equity security that has a market price (as therein defined) of less than
$5.00 per share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. As of March 2, 1999 the closing price of
PHC's stock as reported on Nasdaq was $1.125. For any transaction involving a
penny stock, unless exempt, the rules require delivery, prior to any
transaction in a penny stock, of a disclosure schedule prepared by the
Commission relating to the penny stock market. Disclosure is also required to
be made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to PHC's
securities if such securities are listed on the Nasdaq National Market
System, are otherwise listed on Nasdaq and have certain price and volume
information provided on a current and continuing basis, or if PHC meets
certain minimum net tangible assets or average revenue criteria. While PHC
currently meets these criteria, there can be no assurance that PHC's
securities will continue to qualify for exemption from these restrictions. In
any event, even if PHC's securities were exempt from such restrictions, PHC
would remain subject to Section 15(b)(6) of the Exchange Act, which gives the
Commission the authority to prohibit any person that is engaged in unlawful
conduct while participating in a distribution of penny stock from associating
with a broker-dealer or participating in a distribution of penny stock, if
the Commission finds that such a restriction would be in the public interest.
If PHC's securities were subject to the rules on penny stocks, the market
liquidity for PHC's securities would be materially adversely affected.
Dividends. PHC has not paid any cash dividends on common stock since its
inception and does not anticipate paying cash dividends on common stock in
the foreseeable future. PHC has a series of Preferred Stock outstanding
which would preclude PHC from paying dividends on Common Stock until all
Preferred Stock dividends have been paid.
Possible adverse effects of authorization of preferred stock. PHC's
Restated Articles of Organization authorize the issuance of 1,000,000 shares
of Preferred Stock on terms which may be fixed by PHC's Board of Directors
without further stockholder action. The terms of any series of Preferred
Stock, which may include priority claims to assets and dividends and special
voting rights, could adversely affect the rights of holders of the Common
Stock. The issuance of the Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions, financing transactions
and other corporate transactions, could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, capital stock of PHC. On March 18, 1998 PHC issued 950 shares of
Convertible Preferred Stock for $950,000, convertible for Class A Common
Stock at 80% of the average closing bid price five days prior to the
conversion date but not less than $1.88 or more than $3.50 per share, and
Warrants to purchase 49,990 shares of PHC Class A Common Stock for $2 5/16
per share. As of December 31, 1998, 40 shares of Preferred Stock were
converted and, as a result of the conversion and related conversion
agreements, 52,206 shares of Class A Common Stock were issued.
Thin float. The average weekly trading volume of PHC's Class A Common
Stock for the period from July 1, 1998 to December 31, 1998 was 154,098
shares. There can be no assurance that the weekly trading volume will remain
at the same level or decline. As a result of the thin float in PHC's stock,
a small number of transactions can result in significant swings in the market
price of PHC's stock, and it may be difficult for stockholders to dispose of
PHC's stock in a timely way at a desirable market price.
<PAGE>
RECENT DEVELOPMENTS
Until January 15, 1999 PHC operated an outpatient clinic in Salem,
Virginia through its subsidiary Pioneer Counseling of Virginia, Inc.
("PCV"). In a letter agreement dated March 3, 1999 Dr. Mukesh Patel and Dr.
Himanshu Patel agreed to sign over to PHC, Inc. the shares of PCV owned by
them in exchange for their release from any corporate liability. On March
15, 1999 PHC sold the real estate owned by PCV and is currently in the
process of liquidating all other assets of PCV.
In February, 1999 PHC discontinued providing services through Behavioral
Rehab Services of Connecticut, Inc. a Joint Venture with Lexington Healthcare
Group. PHC was unable to attract and retain qualified individuals to manage
the contracts of the Connecticut operation.
In March, 1999 PHC launched a preview of its website,
"Behavioralhealthonline.com". PHC intends to provide Behavioral Health
related goods and services through the internet and anticipates offering
limited items by the end of this fiscal year.
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the shares of Class A Common Stock that may
be offered and sold from time to time by the Selling Security. The information
contained in the following table is based on PHC's records and on information
provided by PHC's transfer agent as of March 2, 1999. The information may have
changed since the date that the information was provided to PHC. None of the
Selling Security Holders has had any position, office or any material
relationship with PHC or any of its predecessors or affiliates during the past
three years.
Name of Selling Number of Number of Shares
Security Holder Shares of Number of of Class A
Class A Shares of Common Stock
Common Stock Class A Owned After the
Owned Before Common Stock Offering
the Offering Offered
Augustine Fund (1) 429,316(2) 429,316(2) 0
ProFutures (1) 1,042,942(3) 1,042,942(3) 0
J. Mauldin (1) 220,985(4) 220,985(4) 0
G. Halbert (1) 334,480(5) 334,480(5) 0
Dean and Company (6) 250,000 250,000 0
(1) Includes shares of Class A Common Stock issuable on conversion of the
Series B Convertible Preferred Stock (the "Convertible Preferred Stock").
In March 1998 PHC issued a total of 950 shares of Convertible Preferred Stock
as follows: 200 shares to Augustine Fund; 500 shares to ProFutures; 150
shares to G. Halbert and 100 shares to J. Mauldin. The Convertible Preferred
Stock is convertible into Class A Common Stock of PHC at a conversion price
which is 80% of the average closing bid price five days prior to the
conversion date. PHC is obligated to issue the Selling Security Holder a
promissory Note for the difference between $1.88 (the "Minimum Conversion
Price") and the market price of Class A Common Stock (the "Price
Guarantee"). The Price Guarantee was later revised to allow PHC to issue
Class A Common Stock in lieu of the promissory note. The number of shares of
Class A Common Stock to be issued in lieu of the promissory note is
determined by dividing (a) the aggregate spread between the Minimum
Conversion Price and the market price on the conversion date by (b) the fair
market value of the Class A Common Stock on the conversion date.
This Prospectus includes an aggregate of 99,697 issued and 660,303 unissued
shares of Class A Common Stock - a total of 792,061. The 792,061 figure is
an assumed figure of the total number of shares of Class A Common Stock that
need to be issued to the Selling Security Holders in connection with the
Price Guarantee and in lieu of promissory notes based on a market price of
$1.125 as of March 2, 1999.
The shares of Class A Common Stock issued to the Selling Security Holders at
the conversion price of the Convertible Preferred Stock have been previously
registered in Registration #333-59927, effective July 24, 1998.
(2) Includes 429,316 shares of Class A Common Stock held by Augustine Fund as
of March 2, 1999 as follows: (1) 258,867 shares of Class A Common Stock
issuable upon conversion of 177 Shares of Convertible Preferred Stock; and
(2) 170,449 shares of Class A Common Stock which were issued or may be issued
to Augustine Fund in connection with the Price Guarantee and in lieu of a
promissory note, as set forth in footnote 1 above. Of the 170,449 shares of
Class A Common Stock which were issued or may be issued in connection with
the Price Guarantee, 25,449 shares are issued and 145,000 are unissued. Of
the 429,316 shares of Class A Common Stock held by Augustine Fund, 170,449
shares are being registered under this Registration Statement and 258,867 have
been previously registered in Registration #333-59927, effective July 24,
1998.
(3) Includes 1,042,942 shares of Class A Common Stock held by ProFutures as
of March 2, 1999 as follows: (1) 634,330 shares of Class A Common Stock are
issuable upon conversion of 417 shares of Convertible Preferred Stock; and
(2) 408,612 shares of Class A Common Stock which were issued or may be issued
to ProFutures in connection with the Price Guarantee and in lieu of a
promissory note, as set forth in footnote 1 above. Of the 408,612 shares of
Class A Common Stock which were issued or may be issued in connection with
the Price Guarantee, 74,248 shares are issued and 334,364 are unissued. Of
the 1,042,942 shares of Class A Common Stock held by ProFutures, 408,612
shares are being registered under this Registration Statement and 634,330 have
been previously registered in Registration #333-59927, effective July 24, 1998.
(4) Includes 220,985 shares of Class A Common Stock held by J. Mauldin as of
March 2, 1999 as follows: (1) 136,985 shares of Class A Common Stock issuable
upon conversion of 103 shares of Convertible Preferred Stock; and (2) 84,000
shares of Class A Common Stock which were issued or may be issued to J.
Mauldin in connection with the Price Guarantee and in lieu of a promissory
note, as set forth in footnote 1 above. Of the 220,985 shares of Class A
Common Stock held by J. Mauldin, 84,000 shares are being registered under this
Registration Statement and 136,985 have been previously registered in
Registration #333-59927, effective July 24, 1998.
(5) Includes 334,480 shares of Class A Common Stock held by G. Halbert as of
March 2, 1999 as follows: (1) 205,480 shares of Class A Common Stock
issuable upon conversion of 156 shares of Convertible Preferred Stock; (2)
129,000 shares of Class A Common Stock which were issued or may be issued to
G. Halbert in connection with the Price Guarantee and in lieu of a promissory
note, as set forth in footnote 1 above. Of the 334,480 shares of Class A
Common Stock held by G. Halbert, 129,000 shares are being registered under
this Registration Statement and 205,480 have been previously registered in
Registration #333-59927, effective July 24, 1998.
(6) In December 1998 PHC issued to Dean and Company $500,000 in 12%
convertible debentures, which are convertible into 250,000 shares of Class A
Common Stock at a price of $2.00 per share. The closing bid price of the
Class A Common Stock was $1.125 as of March 2, 1999.
PLAN OF DISTRIBUTION
Any or all of the Class A Common Stock offered hereby may be sold from
time to time to purchasers directly by a Selling Security Holder.
Alternatively, a Selling Security Holder may from time to time offer any or
all of the Class A Common Stock in or through underwriters, dealers, brokers
or other agents. In addition, the Selling Security Holders and/or any
underwriter, broker, dealer or other agent may engage in hedging transactions
with respect to the Class A Common Stock. In connection with such
transactions, shares of Class A Common Stock offered hereby may be delivered
to cover any short positions resulting from such transactions. PHC will
receive no proceeds from the sale of the Class A Common Stock offered hereby.
The Class A Common Stock offered hereby may be sold from time to time
in one or more transactions at a fixed offering price, which may be changed,
or at varying prices determined at the time of sale or at negotiated prices.
Such prices will be determined by a Selling Security Holder or by agreement
between a Selling Security Holder and its underwriters, dealers, brokers or
other agents.
Any underwriters, dealers, brokers or other agent to or through whom
Class A Common Stock offered hereby is sold may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from a
Selling Security Holder and/or purchasers of Class A Common Stock for whom
they may act as agent or to whom they may sell as principal, or both (which
compensation to a particular underwriter, broker, dealer or other agent might
be in excess of customary commissions). In addition, a Selling Security
Holder and any such underwriters, dealers, brokers or other agents may be
deemed to be underwriters under the Securities Act, and any profits on the
sale of Class A Common Stock by them and any discounts, commissions or
concessions received by any of such persons may be deemed to be underwriting
discounts and commissions under the Securities Act. Those who act as
underwriter, broker, dealer or other agent in connection with the sale of the
Class A Common Stock will be selected by a Selling Security Holder and may
have other business relationships with PHC and its subsidiaries or affiliates
in the ordinary course of business. PHC cannot presently estimate the amount
of any such discounts, commissions or concessions. PHC knows of no existing
arrangements between the Selling Security holders and any underwriter,
dealer, broker or other agent.
At any time a particular offer of Class A Common Stock is made by a
Selling Security Holder, if required, a Prospectus Supplement will be
distributed which will set forth the identity of, and certain information
relating to, such Selling Security Holder, the aggregate amounts of Class A
Common Stock being offered and the terms of the offering, including the name
or names of any underwriters, dealers, brokers or other agents, any
discounts, commissions and other items constituting compensation from such
Selling Security Holder and any discounts, commissions or concessions allowed
or reallowed or paid to dealers. Such Prospectus Supplement and, if
necessary, a post-effective amendment to the Registration Statement of which
this Prospectus is a part will be filed with the Commission to reflect the
disclosure of additional information with respect to the distribution of the
Class A Common Stock.
To comply with certain states securities laws, if applicable, the
Class A Common Stock offered hereby may be sold in such state only through
brokers or dealers. In addition, in certain states the Class A Common Stock
may not be sold unless it has been registered or qualified for sale in such
state on an exemption from registration or qualification is available and
complied with.
<PAGE>
INDEMNIFICATION FOR SECURITIES ACT VIOLATIONS
Section 6 of PHC's Restated Articles of Organization provides, in part,
that PHC shall indemnify its directors, trustees, officers, employees and
agents against all liabilities, costs and expenses, including but not limited
to amounts paid in satisfaction of judgments, in settlement or as fines and
penalties, and counsel fees, reasonably incurred by such person in connection
with the defense or disposition of or otherwise in connection with or
resulting from any action, suit or proceeding in which such director or
officer may be involved or with which he may be threatened, while in office
or thereafter, by reason of his actions or omissions in connection with
services rendered directly or indirectly to PHC during his term of office,
such indemnification to include prompt payment of expenses in advance of the
final disposition of any such action, suit or proceeding.
In addition, the Restated Articles of Organization of PHC, under
authority of the Business Corporation Law of The Commonwealth of
Massachusetts, contain a provision eliminating the personal liability of a
director to PHC or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (1) for any breach of the
director's duty of loyalty to PHC or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, or (3) for any transaction from which the director
derived an improper personal benefit. The foregoing provision also is
inapplicable to situations wherein a director has voted for, or assented to
the declaration of, a dividend, repurchase of shares' distribution or the
making of a loan to an officer or director, in each case where the same
occurs in violation of applicable law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of PHC
pursuant to the foregoing provisions, or otherwise, PHC has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by PHC of expenses incurred or paid by a
director, officer or controlling person of PHC in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, PHC
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE>
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for
PHC by Arent Fox Kintner Plotkin & Kahn, Washington, DC.
EXPERTS
The financial statements of PHC for the year ended June 30, 1997 have
been audited by Richard Eisner & Company, LLP., independent certified public
accountants, as set forth in their report thereon, and are incorporated by
reference herein in reliance upon such report given upon the authority of
said firm as experts in accounting and auditing.
The financial statements of PHC for the year ended June 30, 1998 have
been audited by BDO Seidman, LLP., independent certified public accountants,
as set forth in their report thereon, and are incorporated by reference
herein in reliance upon such report given upon the authority of said firm as
experts in accounting and auditing.
<PAGE>
No dealer, salesman or any other
person has been authorized to give
any information or to make any
representations other than those
contained in this Prospectus in PHC, INC.
connection with the offering made
hereby, and, if given or made, PIONEER BEHAVIORAL HEALTH
such information or
representations must not be relied
upon as having been authorized by
PHC. This Prospectus does not 1,042,061 Shares of Class A
constitute an offer to sell or a Common Stock
solicitation of an offer to buy,
by any person in any jurisdiction
in which it is unlawful for such
person to make such offer or
solicitation. Neither the
delivery of this Prospectus nor
any offer, solicitation or sale
made hereunder shall under any
circumstances create any
implication that the information
herein contained is correct as of
any time subsequent to the date of
the Prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary 7
Risk Factors
Negative cash flow 9
Need for additional
financing 9
Lack of access to capital
to achieve acquisition
strategy 9
Reimbursement by third-party
payors; Concentration of
receivable; Change in
service mix 10
Acquisition and expansion
risks 11
Variable patient census 12
Acquisition program 12
Seasonality and
fluctuation in
quarterly results 12
Regulation 12
Control of PHC by Bruce A.
Shear 13
Dependence upon attraction
and retention of key
personnel; Potential
staffing shortages 13
Competition 14
Reliance on key clients 14
Possible Nasdaq delisting 14
Risk of low-priced stocks 15
Possible effect of "Penny
Stock" rules on liquidity
for PHC's securities 15
Dividends 16
Possible adverse effects
of authorization of
preferred stock 16
Thin float 16
Recent Developments 17
Selling Security holders 18-19
Plan of Distribution 20-21
Indemnification for
Securities Act Violations 22
Legal Matters 23 PROSPECTUS
Experts 23 April 1999
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
It is estimated that the following expenses will be incurred in connection
with the proposed offering hereunder.
SEC Registration Fee $ 276.30
NASDAQ Registration Fee $ 7,500.00
Legal Fees and Expenses $ 8,500.00
Accounting Fees and Expenses $ 7,000.00
Miscellaneous $ 723.70
Total $ 24,000.00
The Registrant will bear all expenses shown above.
Item 15. Indemnification of Directors and Officers.
Section 6 of the Registrant's Restated Articles of Organization
provides, in part, that the Registrant shall indemnify its directors,
trustees, officers, employees and agents against all liabilities, costs and
expenses, including but not limited to amounts paid in satisfaction of
judgments, in settlement or as fines and penalties, and counsel fees,
reasonably incurred by such person in connection with the defense or
disposition of or otherwise in connection with or resulting from any action,
suit or proceeding in which such director or officer may be involved or with
which he may be threatened, while in office or thereafter, by reason of his
actions or omissions in connection with services rendered directly or
indirectly to the Registrant during his term of office, such indemnification
to include prompt payment of expenses in advance of the final disposition of
any such action, suit or proceeding.
In addition, the Restated Articles of Organization of the Registrant,
under authority of the Business Corporation Law of The Commonwealth of
Massachusetts, contain a provision eliminating the personal liability of a
director to the Registrant or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Registrant or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or (3) for any
transaction from which the director derived an improper personal benefit.
The foregoing provision also is inapplicable to situations wherein a director
has voted for, or assented to the declaration of, a dividend, repurchase of
shares, distribution, or the making of a loan to an officer or director, in
each case where the same occurs in violation of applicable law.
<PAGE>
Item 16. Exhibits.
Exhibit Index
Exhibit No. Description
4.1 Form of Warrant Agreement. (Filed as exhibit 4.1 to PHC's Registration
Statement on March 2, 1994).
4.2 Form of Unit Purchase Option. (Filed as exhibit 4.4 to PHC's Registration
Statement on March 2, 1994).
4.3 Form of warrant issued to Robert A. Naify, Marshall Naify, Sarah M.
Hassanein and Whitney Gettinger. (Filed as exhibit 4.6 to PHC's
Registration Statement on Form 3 dated March 12, 1996. Commission file
number 333-71418).
4.4 Warrant Agreement by and among PHC, American Stock Transfer & Trust Company
and AmeriCorp Securities, Inc. executed in connection with the Private
Placement. (Filed as exhibit 4.8 to PHC's Registration Statement on Form 3
dated March 12, 1996. Commission file number 333-71418).
4.5 Warrant Agreement issued to Alpine Capital Partners, Inc. to purchase
25,000 Class A Common shares dated October 7, 1996. (Filed as exhibit 4.15
to PHC's Current Report on Form 8-K, filed with the Securities and Exchange
Commission November 5, 1996. Commission file number 0-23524).
4.6 Warrant Agreement issued to Barrow Street Research, Inc. to purchase 3,000
Class A Common shares dated February 18, 1997. (Filed as exhibit 4.17 to
PHC's Registration Statement on Form SB-2 dated April 15, 1997. Commission
file number 333-25231).
4.7 Consultant Warrant Agreement by and between PHC, Inc., and C.C.R.I.
Corporation dated March 3, 1997 to purchase 160,000 shares Class A Common
Stock. (Filed as an exhibit to PHC's Registration Statement on Form SB-2
dated April 15, 1997. Commission file number 333-25231).
4.8 Warrant Agreement by and between PHC, Inc. and ProFutures Special Equities
Fund, L.P. for 50,000 shares of Class A Common Stock dated 6/4/97. (Filed
as exhibit 4.22 to PHC's Registration Statement on Form SB-2 dated April
15, 1997. Commission file number 333-25231).
4.9 Warrant Agreement by and between PHC, Inc. and ProFutures Special Equities
Fund, L.P. for up to 86,207 shares of Class A Common Stock dated 09/19/97.
(Filed as exhibit 4.25 to PHC's report on Form 10KSB, filed with the
Securities and Exchange Commission on October 14, 1997. Commission file
number 0-23524).
4.10 Transfer from Seacrest Capital Securities of PHC, Inc. and securities to
Summit Capital Limited dated 12/19/97. (Filed as exhibit 4.26 to PHC's
report on Form 10KSB, filed with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-23524).
<PAGE>
Exhibit No. Description
4.11 Warrant Agreement by and between PHC, Inc. and ProFutures Special Equities
Fund, LP for 3,000 shares of Class A Common Stock. (Filed as exhibit 4.27
to PHC's Current Report on Form 8-K, filed with the Securities and Exchange
Commission on April 29, 1998. Commission file number 0-23524).
4.12 Subscription Agreements and Warrants for Series B Convertible Preferred
Shares and Warrants by and between PHC, Inc., ProFutures Special Equities
Fund, L.P., Gary D. Halbert, John F. Mauldin and Augustine Fund, L.P. dated
March 16, 1998. (Filed as exhibit 4.28 to PHC's Current Report on Form 8-K,
filed with the Securities and Exchange Commission on April 29, 1998.
Commission file number 0-23524).
4.13 Warrant to purchase up to 52,500 shares of Class A Common Stock by and
between PHC, Inc., and HealthCare Financial Partners, Inc. dated March 10,
1998. (Filed as exhibit 4.16 to PHC's Registration Statement on Form SB-2
dated July 24, 1998. Commission file number 333-59927).
4.14 Warrant to purchase up to 52,500 shares of Class A Common Stock by and
between PHC, Inc., and HealthCare Financial Partners, Inc. dated July 10,
1998. (Filed as exhibit 4.15 to PHC's Registration Statement on Form SB-2
dated July 24, 1998. Commission file number 333-59927).
4.15 Warrant Agreement by and between Joan Finsilver and PHC, Inc. dated
07/31/98 for 60,000 shares common stock. (Filed as exhibit 4.16 to PHC's
report on 10KSB filed with the Securities and Exchange Commission on
October 13, 1998. Commission file number 0-23524. Replaces exhibit 4.23 to
PHC's report on Form 10KSB. Filed with the Securities and Exchange
Commission on October 14, 1997. Commission file number 0-23524).
4.16 Warrant Agreement by and between Brean Murray and Company and PHC, Inc.
dated 07/31/98 for 90,000 shares common stock. (Filed as exhibit 4.17 to
PHC's report on 10KSB filed with the Securities and Exchange Commission on
October 13, 1998. Replaces exhibit 4.23 to PHC's report on Form 10KSB,
filed with the Securities and Exchange Commission on October 14, 1997.
Commission file number 0-23524).
4.17 Warrant Agreement by and between HealthCare Financial Partners, Inc. and
its subsidiaries (collectively ("HCFP") and PHC, Inc. dated July 10, 1998
Warrant No. 3 for 20,000 shares of Class A Common Stock. (Filed as exhibit
4.18 to PHC's report on Form 10KSB, filed with the Securities and Exchange
Commission on October 14, 1997. Commission file number 0-23524).
4.18 Warrant Guaranty Agreement for Common Stock Purchase Warrants issuable by
PHC, Inc. dated August 14, 1998 for Warrants No 2 and No. 3. (Filed as
exhibit 4.19 to PHC's report on Form 10KSB, filed with the Securities and
Exchange Commission on October 14, 1997. Commission file number 0-23524).
<PAGE>
Exhibit No. Description
4.19 12% Convertible Debenture by and between PHC, Inc., and Dean & Co., dated
December 3, 1998 in the amount of $500,000. (Filed as exhibit 4.20 to PHC's
report on Form 10QSB dated February 12, 1999. Commission file number
0-23524).
4.20 Securities Purchase Agreement for 12% Convertible Debenture by and between
PHC, Inc. and Dean & Co., a Wisconsin nominee partnership for Common Stock.
(Filed as exhibit 4.21 to PHC's report on Form 10QSB dated February 12,
1999. Commission file number 0-23524).
4.21 Warrant Agreement to purchase up to 25,000 shares of Class A Common Stock
by and between PHC, Inc., and Dean & Co., dated December 3, 1998. (Filed as
exhibit 4.22 to PHC's report on Form 10QSB dated February 12, 1999.
Commission file number 0-23524).
4.22 Warrant Agreement by and between PHC, Inc., and National Securities
Corporation dated January 5, 1999 to purchase 37,500 shares of Class A
Common Stock. (Filed as exhibit 4.23 to PHC's report on Form 10QSB dated
February 12, 1999. Commission file number 0-23524).
4.23 Warrant Agreements by and between PHC, Inc., and George H. Gordon for
10,000 shares, 15,000 shares, 5,000 shares, 5,000 shares, 50,000 shares and
10,000 shares of Class A Common Stock dated December 31, 1998; 5,000 shares
of Class A Common Stock dated December 1, 1998; 10,000 shares of Class A
Common Stock dated January 1, 1999; and 10,000 shares of Class A Common
Stock dated February 1, 1999. (Filed as exhibit 4.24 to PHC's report on
Form 10QSB dated February 12, 1999. Commission file number 0-23524).
*4.24 Warrant Agreement by and between PHC, Inc., and Barrow Street Research
for 3,000 shares of Class A Common Stock dated February 23, 1999.
*4.25 Warrant Agreement by and between PHC, Inc., and George H. Gordon for
10,000 shares of Class A Common Stock dated March 1, 1999.
*4.26 Agreement dated April 5, 1999 modifying the payment terms on the price
guarantee associated with the Series B Convertible Preferred Stock.
*5.1 Opinion of Arent Fox Kintner Plotkin & Kahn, PPLC.
16.1 Letter on Change in Independent Public Accountants. (Filed as an exhibit to
PHC's report on Form 10KSB, filed with the Securities and Exchange
Commission on September 28, 1994 and as exhibit 16.1 in PHC's Current
Report on Form 8-K, filed with the Securities and Exchange Commission.
(Commission file number 0-23524 on April 29, 1998).
21.1 List of Subsidiaries. (Filed as an exhibit to PHC's Registration Statement
on Form SB-2 dated July 24, 1998. Commission file number 333-59927).
*23.1 Consent of Independent Auditors.
<PAGE>
*23.2 Consent of Independent Auditors.
*23.3 Consent of Arent Fox Kintner Plotkin & Kahn, PPLC Included in exhibit 5.1.
*24.1 Power of Attorney: included on signature page.
*27 Financial Data Schedule
*99.1 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
* Indicates exhibits filed herewith.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Peabody, State of Massachusetts.
PHC, INC.
Date: April 13, 1999 By: /s/ Bruce A. Shear
President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Bruce A.
Shear his or her true and lawful attorney-in fact and agent, each acting alone,
with full power of substitution and resubstitution, for him or her in his or her
name, place and stead, in any and all capacities, to sign any or all Amendments
(including post-effective Amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing appropriate or necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE(S) DATE
/s/ Bruce A. Shear President, Chief April 13, 1999
Executive Officer
and Director
(principal
executive officer)
/s/ Paula C. Wurts Controller April 13, 1999
Assistant Treasurer
(principal
financial and
accounting officer)
/s/ Gerald M. Perlow Director April 13, 1999
/s/ Donald E. Robar Director April 13, 1999
/s/ Howard Phillips Director April 13, 1999
/s/ William F. Grieco Director April 13, 1999
<PAGE>
Exhibit 5.1
Arent Fox
1050 Connecticut Avenue, NW
Washington, DC 20036-5339
Arnold R. Westerman
Tel: 202/857-6243
Fax: 202/857-6395
[email protected]
http://www.arentfox.com
April 12, 1999
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Gentlemen:
We have acted as counsel for PHC, Inc., a Massachusetts corporation
("PHC"), with respect to PHC's Registration Statement on Form S-3, filed by PHC
with the Securities and Exchange Commission (the "Commission") in connection
with the registration under the Securities Act of 1933 as amended, of 1,042,061
shares of the Class A Common Stock, par value $.01 per share (the "Class A
Common Stock") of PHC, (1) 250,000 of which are issuable by PHC upon the
conversion of Convertible Debentures, (2) 99,697 of which were issued in lieu of
a Note in conjunction with the conversion of Convertible Preferred Stock, and
(3) 660,303 additional shares of Class A Common Stock which may be issued in
lieu of Notes upon conversion of the Convertible Preferred Stock.
On the basis of such investigation as we have deemed necessary, we are of
the opinion that the 1,042,061 shares of PHC Class A Common Stock to be sold by
PHC will be legally issued, fully paid and non-assessable when sold in
accordance with the transactions described in the Registration Statement and as
specified therein.
We hereby consent to the filing of this opinion as an exhibit to such
Registration Statement and to the reference to our firm in the Registration
Statement. In giving this consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the general rules and regulations
thereunder.
Very truly yours,
/s/ ARENT FOX KINTNER PLOTKIN & KAHN
Arent Fox Kintner Plotkin & Kahn
New York, NY - McLean, VA - Bethesda, MD - Budapest, Hungary - Jeddah, Kingdom
of Saudi Arabia
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of PHC, Inc. ("PHC") of our report dated September 18, 1998 on
the consolidated financial statements of PHC for the year ended June 30, 1998
appearing in PHC's Annual Report on Form 10-KSB for the year ended June 30,
1998.
BDO Siedman, LLP
Boston, Massachusetts
April 7, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of PHC, Inc. ("PHC") of our report dated September 19,
1997 on the consolidated financial statements of PHC for the year ended June
30, 1997 appearing in PHC's Annual Report on Form 10-KSB for the year ended
June 30, 1998.
Richard A. Eisner, LLP
New York, NY
March 31, 1999
<PAGE>
Exhibit 4.24
THE SECURITIES REPRESENTED BY THIS WARRANT (AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR ANY STATE SECURITIES STATUTE. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT
OF 1933 AND ANY APPLICABLE STATE SECURITIES STATUTE, OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE THEREUNDER.
Shares Issuable Upon Exercise: Up to 3,000 shares of the Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires February 23, 2003
THIS CERTIFIES THAT, for value received, Barrow Street Research is
entitled to subscribe for and purchase that number of shares (the "Shares")
of the fully paid and nonassessable Class A Common Stock, $.01 par value,
(the "Class A Common Stock") of PHC, Inc., a Massachusetts corporation (the
"Company"), for a price of $1.20 per Share (the "Warrant Price"), subject to
the provisions and upon the terms and conditions hereinafter set forth. 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
Incorporation 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 February 23, 1999.
1. Term. Subject to the provisions of this Warrant, the purchase
right represented by this Warrant is exercisable, in whole or in part, at any
time and from time to time from and after the Grant Date and prior to
February 23, 2003.
Notwithstanding anything to the contrary contained herein, neither
this Warrant nor any rights hereunder may be transferred or assigned except
to an Assignee who is an "accredited investor" within the meaning of
Regulation D of the General Rules and Regulations of the Securities Act of
1933.
2. Method of Exercise. The purchase right represented by this Warrant
may be exercised by the holder hereof, in whole or in part and from time to
time, by either, at the election of this holder, (a) the surrender of the
Warrant (with the notice of exercise form attached hereto as Exhibit A-1 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 then applicable Warrant Price multiplied by the number of shares then
being purchased or (b) if in connection with a registered public offering of
the Company's securities (provided that such offering includes the shares),
the surrender of this Warrant (with the notice of exercise form attached
hereto as Exhibit A-2 duly executed) at the principal office of the Company
together with notice of arrangements reasonably satisfactory to the Company
and any underwriter, in the case of an underwritten registered public
offering, for payment to the Company either by certified or bank check or by
wire transfer of from the proceeds of the sale of Shares to be sold by the
holder in such public offering of an amount equal to the then applicable
Warrant Price per Share multiplied by the number of Shares then being
purchased. The person or persons in whose name(s) any certificate(s)
representing Shares which shall be issuable upon exercise of this Warrant
shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately
prior to the close of business on the date or dates upon which this Warrant
is exercised and the then applicable Warrant Price paid. In the event of any
exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon
as possible and in any event within ten (10) days of receipt of such notice
and payment of the then applicable Warrant Price and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of
the Shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof as soon as possible
and in any event within such ten-day period.
3. Stock Fully Paid; Reservation of Shares. All shares that may be
issued upon the exercise of the rights represented by this Warrant will upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within which
the rights represented by the Warrant may be exercised, the Company will at
all times have authorized and reserved for the purpose of issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient
number of shares of Class A Common Stock to provide for the exercise of the
rights represented by this Warrant.
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:
4.1 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 Warrant Agreement (in form and substance reasonably satisfactory to the
Holder) providing that the Holder of this Warrant 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 4.1. The provisions of this Section
4.1 shall similarly apply to successive reclassifications and changes.
4.2 Subdivision or Combination of Shares. If the Company at any
time while this Warrant 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.
4.3 Stock Dividends. If the Company at any time while this
Warrant 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 4.1 and 4.2), 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 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 shall be appropriately adjusted.
4.4 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 Article 4 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.
4.5 Notices of Record Date. In the event of any taking 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, 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.
4.6 Adjustment to Number of Shares and Warrant Price Based on
Dilutive Issuance. If and whenever the Company should issue shares of its
Class A Common Stock at a price per share less than the average of the
closing of the bid and asked prices for such Class A Common Stock for the
last trading day immediately prior to the issuance of such shares (other than
shares issued pursuant to an employee benefit plan including Class A Common
Stock issued or issuable to the officers or employees or directors of or
consultants to the Company and approved by a disinterested majority of the
directors of the Company), then the Warrant Price shall be adjusted by
dividing (1) the sum of (A) the total number of shares of Class A Common
Stock outstanding immediately prior to such issuance multiplied by the then
effective Warrant Price and (B) the value of the consideration received by
the Company upon such issuances as determined by the Board of Directors by
(2) the total number of shares of Class A Common Stock outstanding
immediately after such issuance. The holder of the Warrant shall thereafter
be entitled to purchase, at the Warrant Price resulting from such adjustment,
the number of Shares (calculated to the nearest whole share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment
by the number of shares issuable upon the exercise hereof immediately prior
to such adjustment and dividing the product thereof by the Warrant Price
resulting from such adjustment. For the purpose of this paragraph (d) the
issuance of securities convertible into or exercisable for the Class A Common
Stock shall be deemed the issuance of the number of shares of Class A Common
Stock into which such securities are convertible or for which such securities
are exercisable, and the consideration received for such securities shall be
deemed to include the minimum aggregate amount payable upon conversion or
exercise of such securities expire unexercised, the Warrant Price of Shares
issuable upon the exercise hereof shall be readjusted accordingly.
5. Notice of Adjustments. Whenever the Warrant Price or number of
Shares shall be adjusted pursuant to the provisions hereof, the Company shall
within thirty (30) days of such adjustments deliver a certificate signed by
its chief financial officer to the registered holder(s) hereof setting forth
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Warrant Price after giving effect to such adjustment.
6. Fractional Shares. No fractional Shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
7. Compliance with Securities Act, Disposition of Shares.
7.1 Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, reconfirms the representations made by the Purchaser in
a letter agreement with the Company as of the date hereof (the "Letter
Agreement") and agrees to the placement of a restrictive transfer legend on
this Warrant and the certificates representing the shares.
7.2 Disposition of Warrants and Shares. With respect to any
offer, sale or other disposition of this Warrant or any Shares acquired
pursuant to the exercise of this Warrant prior to registration of this
Warrant or such Shares, the holder hereof and each subsequent holder of this
Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of
such holder's counsel, if reasonably requested by the Company (and, in such
case, such counsel and opinion must be reasonably acceptable to the Company),
to the effect that such offer, sale or other disposition my be effected
without registration or qualification (under the Securities Act of 1933 (the
"Act") as then in effect or any federal or state law then in effect) and
indicating whether or not under the Act certificates for this Warrant or such
Shares to be sold or otherwise disposed of require any restrictive legend as
to applicable restrictions on transferability in order to insure compliance
with the Act. Each certificate representing this Warrant or the Shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as
to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent
in connection with the foregoing restrictions.
8. Rights as Shareholders. No holder of the Warrant, as such, shall
be entitled to vote or receive dividends or be deemed the holder of Shares or
any other securities of the Company which may at any time be issuable on the
exercise thereof for any purpose, nor shall anything contained herein, be
construed to confer upon the holder of this Warrant, as such any of the
rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings (except as otherwise provided in
Section 4.5 of this warrant), or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as
provided herein.
9. Representations and Warranties. This Warrant is issued and
delivered on the basis of the following:
9.1 Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be valid and
binding obligation of the Company enforceable in accordance with its terms;
and
9.2 Shares. The Shares have been duly authorized and
reserved for issuance by the Company and when issued and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable.
10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall
be delivered in the manner set forth in the Letter Agreement.
12. Binding Effect of Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger of consolidation, and all of
the obligations of the Company relating to the Shares issuable upon the
exercise of this Warrant shall be as set forth in the Letter Agreement, the
Company's Charter and the Company's by-laws (each as amended from time to
time) and shall survive the exercise and termination of this Warrant and all
of the covenants and agreements herein and in such other documents and
instruments of the Company shall inure to the benefit of the successors and
assigns of the holder hereof. The Company will, at the time of the exercise
of this Warrant, in whole or in part, upon request of the holder hereof but
at the Company's expense, acknowledge in writing its continuing obligation to
the holder hereof in respect of any rights (including without limitation, any
right to registration of the Shares) to which the holder hereof shall
continue to be entitled after such exercise in accordance with this Warrant;
provided that the failure of the holder hereof to make any such request shall
not affect the continuing obligation of the Company to the holder hereof in
respect of such rights.
13. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that upon receipt of evidence reasonable satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificates and, in the case of any such loss, theft or destruction,
upon receipt of an indemnity reasonable satisfactory to the Company, or in
the case of any such mutilation upon surrender and cancellation of such
Warrant or stock certificate, the Company will make and deliver a new Warrant
or stock certificate, or like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant or stock certificate.
14. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
15. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the Commonwealth of Massachusetts.
PHC, INC.
By: /s/ Bruce A. Shear, President
Date: February 23, 1999
<PAGE>
Exhibit A-1
Notice of Exercise
To:
1. The undersigned hereby elects to purchase _______ Shares of PHC,
Inc. pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase 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 Section 7 of the Warrant, 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 not present intention of distributing or reselling such
shares.
_______________________________
Signature
_________________
Date
<PAGE>
Exhibit A-2
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement of Form S _____________, filed ______________, ______ the
undersigned hereby elects to purchase Shares of the Company (or such lesser
number of Shares as may be sold on behalf of the undersigned at the Closing)
pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a
certificate representing the Shares being so purchased.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $ _________________ of, if less, the
net proceeds due the undersigned from the sales of Shares in the aforesaid
public offering. If such net proceeds are less than the purchase price for
such Shares, the undersigned agrees to deliver the difference to the Company
prior to the Closing.
_______________________________
Signature
_________________
Date
warrants.dot
<PAGE>
Exhibit 4.25
THE SECURITIES REPRESENTED BY THIS WARRANT (AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, OR ANY STATE SECURITIES STATUTE. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT
OF 1933 AND ANY APPLICABLE STATE SECURITIES STATUTE, OR UNLESS AN EXEMPTION
FROM REGISTRATION IS AVAILABLE THEREUNDER.
Shares Issuable Upon Exercise: Up to 10,000 shares of the Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires March 1, 2004
THIS CERTIFIES THAT, for value received, George H. Gordon is
entitled to subscribe for and purchase that number of shares (the "Shares")
of the fully paid and nonassessable Class A Common Stock, $.01 par value,
(the "Class A Common Stock") of PHC, Inc., a Massachusetts corporation (the
"Company"), for a price of $1.00 per Share (the "Warrant Price"), subject to
the provisions and upon the terms and conditions hereinafter set forth. 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
Incorporation 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 March 1, 1999.
1. Term. Subject to the provisions of this Warrant, the purchase
right represented by this Warrant is exercisable, in whole or in part, at any
time and from time to time from and after the Grant Date and prior to March
1, 2004.
Notwithstanding anything to the contrary contained herein, neither
this Warrant nor any rights hereunder may be transferred or assigned except
to an Assignee who is an "accredited investor" within the meaning of
Regulation D of the General Rules and Regulations of the Securities Act of
1933.
2. Method of Exercise. The purchase right represented by this Warrant
may be exercised by the holder hereof, in whole or in part and from time to
time, by either, at the election of this holder, (a) the surrender of the
Warrant (with the notice of exercise form attached hereto as Exhibit A-1 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 then applicable Warrant Price multiplied by the number of shares then
being purchased or (b) if in connection with a registered public offering of
the Company's securities (provided that such offering includes the shares),
the surrender of this Warrant (with the notice of exercise form attached
hereto as Exhibit A-2 duly executed) at the principal office of the Company
together with notice of arrangements reasonably satisfactory to the Company
and any underwriter, in the case of an underwritten registered public
offering, for payment to the Company either by certified or bank check or by
wire transfer of from the proceeds of the sale of Shares to be sold by the
holder in such public offering of an amount equal to the then applicable
Warrant Price per Share multiplied by the number of Shares then being
purchased. The person or persons in whose name(s) any certificate(s)
representing Shares which shall be issuable upon exercise of this Warrant
shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately
prior to the close of business on the date or dates upon which this Warrant
is exercised and the then applicable Warrant Price paid. In the event of any
exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon
as possible and in any event within ten (10) days of receipt of such notice
and payment of the then applicable Warrant Price and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of
the Shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be issued to the holder hereof as soon as possible
and in any event within such ten-day period.
3. Stock Fully Paid; Reservation of Shares. All shares that may be
issued upon the exercise of the rights represented by this Warrant will upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within which
the rights represented by the Warrant may be exercised, the Company will at
all times have authorized and reserved for the purpose of issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient
number of shares of Class A Common Stock to provide for the exercise of the
rights represented by this Warrant.
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:
4.1 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 Warrant Agreement (in form and substance reasonably satisfactory to the
Holder) providing that the Holder of this Warrant 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 4.1. The provisions of this Section
4.1 shall similarly apply to successive reclassifications and changes.
4.2 Subdivision or Combination of Shares. If the Company at any
time while this Warrant 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.
4.3 Stock Dividends. If the Company at any time while this
Warrant 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 4.1 and 4.2), 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 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 shall be appropriately adjusted.
4.4 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 Article 4 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.
4.5 Notices of Record Date. In the event of any taking 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, 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.
4.6 Adjustment to Number of Shares and Warrant Price Based on
Dilutive Issuance. If and whenever the Company should issue shares of its
Class A Common Stock at a price per share less than the average of the
closing of the bid and asked prices for such Class A Common Stock for the
last trading day immediately prior to the issuance of such shares (other than
shares issued pursuant to an employee benefit plan including Class A Common
Stock issued or issuable to the officers or employees or directors of or
consultants to the Company and approved by a disinterested majority of the
directors of the Company), then the Warrant Price shall be adjusted by
dividing (1) the sum of (A) the total number of shares of Class A Common
Stock outstanding immediately prior to such issuance multiplied by the then
effective Warrant Price and (B) the value of the consideration received by
the Company upon such issuances as determined by the Board of Directors by
(2) the total number of shares of Class A Common Stock outstanding
immediately after such issuance. The holder of the Warrant shall thereafter
be entitled to purchase, at the Warrant Price resulting from such adjustment,
the number of Shares (calculated to the nearest whole share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment
by the number of shares issuable upon the exercise hereof immediately prior
to such adjustment and dividing the product thereof by the Warrant Price
resulting from such adjustment. For the purpose of this paragraph (d) the
issuance of securities convertible into or exercisable for the Class A Common
Stock shall be deemed the issuance of the number of shares of Class A Common
Stock into which such securities are convertible or for which such securities
are exercisable, and the consideration received for such securities shall be
deemed to include the minimum aggregate amount payable upon conversion or
exercise of such securities expire unexercised, the Warrant Price of Shares
issuable upon the exercise hereof shall be readjusted accordingly.
5. Notice of Adjustments. Whenever the Warrant Price or number of
Shares shall be adjusted pursuant to the provisions hereof, the Company shall
within thirty (30) days of such adjustments deliver a certificate signed by
its chief financial officer to the registered holder(s) hereof setting forth
in reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the
Warrant Price after giving effect to such adjustment.
6. Fractional Shares. No fractional Shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
7. Compliance with Securities Act, Disposition of Shares.
7.1 Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, reconfirms the representations made by the Purchaser in
a letter agreement with the Company as of the date hereof (the "Letter
Agreement") and agrees to the placement of a restrictive transfer legend on
this Warrant and the certificates representing the shares.
7.2 Disposition of Warrants and Shares. With respect to any
offer, sale or other disposition of this Warrant or any Shares acquired
pursuant to the exercise of this Warrant prior to registration of this
Warrant or such Shares, the holder hereof and each subsequent holder of this
Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of
such holder's counsel, if reasonably requested by the Company (and, in such
case, such counsel and opinion must be reasonably acceptable to the Company),
to the effect that such offer, sale or other disposition my be effected
without registration or qualification (under the Securities Act of 1933 (the
"Act") as then in effect or any federal or state law then in effect) and
indicating whether or not under the Act certificates for this Warrant or such
Shares to be sold or otherwise disposed of require any restrictive legend as
to applicable restrictions on transferability in order to insure compliance
with the Act. Each certificate representing this Warrant or the Shares thus
transferred (except a transfer pursuant to Rule 144) shall bear a legend as
to the applicable restrictions on transferability in order to ensure
compliance with the Act, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent
in connection with the foregoing restrictions.
8. Rights as Shareholders. No holder of the Warrant, as such, shall
be entitled to vote or receive dividends or be deemed the holder of Shares or
any other securities of the Company which may at any time be issuable on the
exercise thereof for any purpose, nor shall anything contained herein, be
construed to confer upon the holder of this Warrant, as such any of the
rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings (except as otherwise provided in
Section 4.5 of this warrant), or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as
provided herein.
9. Representations and Warranties. This Warrant is issued and
delivered on the basis of the following:
9.1 Authorization and Delivery. This Warrant has been duly
authorized and executed by the Company and when delivered will be valid and
binding obligation of the Company enforceable in accordance with its terms;
and
9.2 Shares. The Shares have been duly authorized and
reserved for issuance by the Company and when issued and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable.
10. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall
be delivered in the manner set forth in the Letter Agreement.
12. Binding Effect of Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger of consolidation, and all of
the obligations of the Company relating to the Shares issuable upon the
exercise of this Warrant shall be as set forth in the Letter Agreement, the
Company's Charter and the Company's by-laws (each as amended from time to
time) and shall survive the exercise and termination of this Warrant and all
of the covenants and agreements herein and in such other documents and
instruments of the Company shall inure to the benefit of the successors and
assigns of the holder hereof. The Company will, at the time of the exercise
of this Warrant, in whole or in part, upon request of the holder hereof but
at the Company's expense, acknowledge in writing its continuing obligation to
the holder hereof in respect of any rights (including without limitation, any
right to registration of the Shares) to which the holder hereof shall
continue to be entitled after such exercise in accordance with this Warrant;
provided that the failure of the holder hereof to make any such request shall
not affect the continuing obligation of the Company to the holder hereof in
respect of such rights.
13. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that upon receipt of evidence reasonable satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificates and, in the case of any such loss, theft or destruction,
upon receipt of an indemnity reasonable satisfactory to the Company, or in
the case of any such mutilation upon surrender and cancellation of such
Warrant or stock certificate, the Company will make and deliver a new Warrant
or stock certificate, or like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant or stock certificate.
14. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
15. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the Commonwealth of Massachusetts.
PHC, INC.
By: /s/ Bruce A. Shear, President
Date: March 1, 1999
<PAGE>
Exhibit A-1
Notice of Exercise
To:
1. The undersigned hereby elects to purchase _______ Shares of PHC,
Inc. pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase 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 Section 7 of the Warrant, 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 not present intention of distributing or reselling such
shares.
_______________________________
Signature
_________________
Date
<PAGE>
Exhibit A-2
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement of Form S _____________, filed ______________, ______ the
undersigned hereby elects to purchase Shares of the Company (or such lesser
number of Shares as may be sold on behalf of the undersigned at the Closing)
pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a
certificate representing the Shares being so purchased.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $ _________________ of, if less, the
net proceeds due the undersigned from the sales of Shares in the aforesaid
public offering. If such net proceeds are less than the purchase price for
such Shares, the undersigned agrees to deliver the difference to the Company
prior to the Closing.
_______________________________
Signature
_________________
Date
warrants.dot
<PAGE>
Exhibit 4.26
(PHC, Inc. Letterhead and Logo)
April 12, 1999
Marty Anderson
Golden Eye Asset Management
14275 W. Braemore Close
Green Oaks IL 60048
Dear Marty:
As a follow up to our previous conversation, the Registration Statement is
complete and can be filed today. In the final review by our counsel last
week, they determined that we needed a signed waiver by each of the Investors
authorizing shares to be issued in lieu of the Note as called for in the
individual Subscription Agreements. Therefore, please have each party sign
this letter acknowledging that PHC, Inc. is authorized to issue shares in
lieu of Note as provided for in the Subscription Agreements dated March 13,
1998 between the parties referenced below.
Very truly yours,
/s/ Bruce A. Shear
President
ACCEPTANCE:
_______________________________ /s/ John F. Mauldin
ProFutures Special Equities Fund,
L.P.
By: ProFutures Fund Management, Inc. Augustine Fund, LP.
General Partner, Gary D.
Halbert, President /s/ Thomas F. Duszynski
% Augustine Capital
Managaement, Inc., GP
/s/ Gary D. Halbert
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income incorporated
by reference into Form S-3.
</LEGEND>
<CIK> 0000915127
<NAME> PHC, Inc
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 512,801
<SECURITIES> 0
<RECEIVABLES> 10,085,625
<ALLOWANCES> 3,505,310
<INVENTORY> 0
<CURRENT-ASSETS> 8,348,853
<PP&E> 3,022,479
<DEPRECIATION> 925,664
<TOTAL-ASSETS> 16,767,973
<CURRENT-LIABILITIES> 8,880,381
<BONDS> 0
0
9
<COMMON> 60,754
<OTHER-SE> 4,690,401
<TOTAL-LIABILITY-AND-EQUITY> 16,767,973
<SALES> 0
<TOTAL-REVENUES> 9,661,645
<CGS> 0
<TOTAL-COSTS> 10,182,669
<OTHER-EXPENSES> 628,696
<LOSS-PROVISION> 1,144,320
<INTEREST-EXPENSE> 628,696
<INCOME-PRETAX> (872,052)
<INCOME-TAX> 911
<INCOME-CONTINUING> (872,963)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,089,076
<CHANGES> 0
<NET-INCOME> 216,113
<EPS-PRIMARY> .04
<EPS-DILUTED> .02
</TABLE>
