U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31,
1998.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
TO ___________
Commission file number 0-23524
PHC, INC.
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2601571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Lake Street, Suite 102, Peabody MA 01960
(Address of principal executive offices) (Zip Code)
978-536-2777
(Issuer's telephone number)
_______________________________________________________________________________
(Former Name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X No_ __
Applicable only to corporate issuers
Number of shares outstanding of each class of common equity, as of January 31,
1999:
Class A Common Stock 5,348,158
Class B Common Stock 727,210
Transitional Small Business Disclosure Format
(Check one):
Yes______ No X
<PAGE>
PHC, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1998 and June 30,
1998.
Condensed Consolidated Statements of Operations - Three months ended
December 31, 1998 and December 31, 1997; Six months ended December 31, 1998 and
December 31, 1997.
Condensed Consolidated Statements of Cash Flows - Six months ended December
31, 1998 and December 31, 1997.
Notes to Condensed Consolidated Financial Statements - December 31, 1998.
Item 2. Management's Discussion and Analysis of Plan of
Operation
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
PHC INC. AND SUBSIDIARIES (UNAUDITED)
CONSOLIDATED BALANCE SHEETS
Dec. 31 June 30
1998 1998
ASSETS
Current assets:
Cash & Cash Equivalents $ 512,801 $227,077
Accounts receivable, net of allowance
for bad debts of $3,505,310 at
Dec. 31, 1998, $ 3,488,029at June
30, 1998 6,580,315 7,441,972
Prepaid expenses 336,292 156,695
Other receivables and advances 333,932 127,064
Deferred Income Tax Asset 515,300 515,300
Other Receivables, related party 70,213 64,065
__________ __________
Total current assets 8,348,853 8,532,173
Accounts Receivable,noncurrent 610,000 685,000
Other receivables, noncurrent,
related party, net of allowance for
doubtful accounts of $382,000 Dec. 31,
1998 and June 30, 1998 3,453,836 2,941,402
Other Receivable 117,680 426,195
Property and equipment, net 2,096,815 2,128,273
Deferred income taxes 154,700 154,700
Deferred financing costs, net of
amortization of $25,195 at Dec. 31,
1998 and $18,065 at June 30, 1998 83,912 53,608
Goodwill, net of accumulated
amortization of $53,124 at Dec. 31,
1998 and $307,707 at June 30, 1998 1,787,741 2,011,613
Other assets 114,436 167,004
__________ _________
Total assets $16,767,973 $17,099,968
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,793,571 $2,346,213
Notes payable--related parties 220,000 159,496
Current maturities of long term debt 1,407,020 1,107,167
Revolving credit note 1,626,587 1,683,458
Current portion of obligations
under capital leases 67,408 67,492
Accrued Payroll, Payroll Taxes
and Benefits 484,573 729,194
Accrued expenses and other liabilities 1,048,828 1,004,763
Net current liabilities of
discontinued operations 1,232,394 1,232,394
Total Current liabilities 8,880,381 8,330,177
_________ _________
Long-term debt 2,468,276 2,850,089
Obligations under capital lease 79,778 93,747
Net long term liabilities of
discontinued operations 88,374 1,409,143
Convertible Debentures 500,000 --
__________ _________
Total noncurrent liabilities 3,136,428 4,352,979
__________ _________
Total liabilities 12,016,809 12,683,156
Stockholders' Equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized, 943
and 950 shares issued and
outstanding Dec. 31, 1998 and June
30, 1998 liquidation preference
($943,000 and 950,000 respectively) 9 10
Class A common stock, $.01 value;
20,000,000 shares authorized,
5,348,158 and 4,935,267
shares issued Dec. 98 and June 98
respectively 53,482 49,353
Class B common stock, $.01 par
value; 2,000,000 shares authorized,
727,210 and 727,328 issued
Dec. 98 and June 98 respectively,
convertible into one share of Class A
common stock 7,272 7,273
Additional paid-in capital 15,440,026 15,295,895
Treasury stock, 2,776 shares at
cost (12,122) (12,122)
Accumulated Deficit (10,737,503) (10,923,597)
____________ ___________
Total Stockholders' Equity 4,751,164 4,416,812
____________ ___________
Total Liabilities and
Stockholders' Equity $16,767,973 $ 17,099,968
____________ ___________
See Notes to Consolidated Financial Statements
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
December 31 December 31
1998 1997 1998 1997
Revenues:
Patient Care, net $ 4,552,961 $ 5,196,280 $ 9,264,803 $ 10,140,492
Management Fees 197,389 229,410 396,842 462,693
Total revenue 4,750,350 5,425,690 9,661,645 10,603,185
Operating expenses:
Patient care expenses 2,485,632 2,912,131 4,921,848 5,686,348
Provision for doubtful
accounts 788,130 515,471 1,144,320 999,249
Administrative expenses 1,868,655 2,392,919 3,774,572 4,627,498
Facility Closing Costs 304,994 -- 304,994 --
Highland Ridge Relocation
Expense 36,935 -- 36,935 --
_________ _________ _________ ___________
Total operating
expenses 5,484,346 5,820,521 10,182,669 11,313,095
_________ _________ _________ ___________
Income (loss) from
operations (733,996) (394,831) (521,024) (709,910)
_________ _________ _________ ___________
Interest income 129,366 102,951 238,748 200,598
Other income 34,578 52,499 38,920 121,749
Interest expense (342,008) (271,614) (628,696) (598,202)
__________ __________ __________ __________
Total other income
(expense) $ (178,064) $ (116,164) $ (351,028) $ (275,855)
_____________ ___________ ___________ __________
Loss before Provision
for Taxes (912,060) (510,995) (872,052) (985,765)
Provision for Income Taxes
(Benefit) -- -- 911 7,200
____________ __________ __________ _________
Loss from Continuing
Operations $ (912,060) $ (510,995) $ (872,963) $ (992,965)
_____________ ___________ ___________ _________
Discontinued Operations:
Income (Loss) from
Operations -- $ (585,038) -- $(1,021,706)
Income (Loss) before
Extraordinary Item $(912,060) $(1,096,033) $ (872,963) $(2,014,671)
Extraordinary Gain
(net of estimated taxes) $1,089,076 -- $1,089,076 --
__________ ___________ __________ ___________
Net Income (Loss) $ 177,016 $(1,096,033) $ 216,113 $(2,014,671)
__________ ____________ ___________ ____________
Basic Earnings (loss) per common share:
Loss from continuing
operations (.16) (.09) (.15) (.20)
Loss from discontinued
operations -- (.11) -- (.21)
Extraordinary Gain .19 -- .19 --
Total .03 (.20) .04 (.41)
Basic Weighted average number
of shares outstanding 5,896,659 5,404,251 5,778,239 4,924,479
Diluted Earnings (loss) per common share:
Loss from continuing
operations (.08) (.09) (.07) (.20)
Loss from discontinued
operations -- (.11) -- (.21)
Extraordinary Gain .10 -- .09 --
Total .02 (.20) .02 (.41)
Diluted Weighted average
number of shares
outstanding 11,182,581 5,404,251 11,064,161 4,924,479
See Notes to Consolidated Financial Statements
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended
December 31
1998 1997
Cash flows from operating activities:
Net income (loss) $ 216,113 $(2,014,671)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Non-Cash charge of net cash provided
(used) by discontinued operations (1,089,076) 372,498
Depreciation and amortization 161,785 225,932
Changes in:
Accounts Receivable 519,722 (311,684)
Prepaid expenses and other
current assets (179,597) 53,690
Other assets (58,117) 38,245
Accounts payable 447,358 1,039,614
Accrued expenses and other
liabilities (321,564) 250,385
___________ __________
Net cash used in operating activities (303,376) (345,991)
Cash flows from investing activities:
Acquisition of property and equipment (123,227) (41,045)
Disposition of property, equipment
and intangibles 341,929 --
Costs related to business acquisition -- (616,276)
__________ __________
Net cash used in investing activities 218,702 (657,321)
__________ __________
Cash flows from financing activities,
Revolving debt, net (56,871) (196,823)
Net debt activity.. (35,509) (181,373)
Deferred financing costs (7,202) --
Preferred stock dividends paid (30,020) --
Issuance of Common Stock. -- 594,540
Convertible debt 500,000 --
________ _________
Net cash provided by financing
activities 370,398 216,344
________ _________
NET INCREASE (DECREASE) IN CASH 285,724 (786,968)
Beginning cash balance 227,077 844,471
________ _________
ENDING CASH BALANCE. $ 512,801 $ 57,503
________ _________
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $562,046 $282,580
Income taxes 51,195 37,956
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of Debt to Common Stock $ -- $2,734,375
Conversion of Preferred Stock
to Common Stock 40,000 584,587
Stock issued for North Point -- 31,383
Acquisition
Stock issued for Harmony
Acquisition agreement 39,000 39,000
Stock issued for BSC share
price guarantee 120,116 --
Issuance of Preferred Stock in
lieu of cash for Dividends due $ 33,000 --
See Notes to Consolidated Financial Statements
<PAGE>
PHC, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 1998
Note A - The Company
PHC, Inc. (the "Company") 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 services. The Company currently operates two substance
abuse treatment facilities: Highland Ridge Hospital, located in Salt
Lake City, Utah, ("Highland Ridge"); and Mount Regis Center, located in
Salem, Virginia, near Roanoke ("Mount Regis") and eight psychiatric
facilities: Harbor Oaks Hospital ("Harbor Oaks"), a 64-bed psychiatric
hospital located in New Baltimore, Michigan; Harmony Healthcare
("Harmony Healthcare"), a provider of outpatient behavioral health
services in Las Vegas, Nevada; Total Concept EAP ("Total Concept"), a
provider of outpatient behavioral health services in Shawnee Mission,
Kansas;" and North Point-Pioneer, Inc. ("NPP") which operates five
outpatient behavioral health centers under the name Pioneer Counseling
Center in the greater Detroit metropolitan area. The Company also
operates BSC-NY, Inc. ("BSC") which provides management and
administrative services to psychotherapy and psychological practices in
the greater New York City metropolitan area. Additionally, BSC
provides billing and administrative services to the Company's Joint
Venture with Lexington Healthcare Group, Inc., Behavioral Rehab
Services of Connecticut, Inc.
In May, 1998 the Company closed Good Hope Center, a substance
abuse treatment facility located in West Greenwich, Rhode Island ("Good
Hope") and entered into an agreement terminating the lease for the
facility. In June, 1998 the Company's sub acute long-term care
facility, Franvale Nursing and Rehabilitation Center ("Franvale"), in
Braintree, Massachusetts was closed in a State Receivership action
which was precipitated when the Franvale facility instituted a
proceeding under Chapter 11 of the Federal Bankruptcy Code. The net
assets and liabilities of this facility are shown as discontinued
operations on the accompanying financial statements.
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended December 31,
1998 are not necessarily indicative of the results that may be expected
for the year ending June 30, 1999. The accompanying financial
statements should be read in conjunction with the June 30, 1998
consolidated financial statements and footnotes thereto included in the
Company's 10-KSB filed on October 13, 1998.
Note C - Subsequent Events
In January, 1999 the Company closed it's remaining outpatient
facility in Salem, Virginia and is currently negotiating the sale of
the property held by Pioneer Counseling of Virginia, Inc. The
accompanying financial statements reflect the write down of $304,994 of
the intangible assets of Pioneer Counseling of Virginia, Inc. and
operating losses of $122,358 for the quarter ended December 31, 1998.
Note D - Extraordinary Gain
During the quarter ended December 31, 1998 the Company recognized
an extraordinary gain of $1,089,076 which resulted from the partial
liquidation of the assets and liabilities of the Franvale Nursing and
Rehabilitation Center whose parent company, Quality Care Centers of
Massachusetts, Inc., filed for bankruptcy protection under Chapter 7 of
the Federal Bankruptcy Code on October 5, 1998. This gain represents
approximately one half of the total expected realizable gain. The
balance of the gain will be recognized when the bankruptcy case is
final and all legal fees and claims against PHC, Inc. have been
resolved.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
PHC, INC. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Net patient care revenue decreased 12.4% to $4,552,961 for the
three months ended December 31, 1998 from $5,196,280 for the three
months ended December 31, 1997 and 8.6% to $9,264,803 for the six
months ended December 31, 1998 from $10,140,492 for the six months
ended December 31, 1997. This decrease in revenue is due primarily to
the close of the Rhode Island facility in May, 1998 and the phase out
and close of the Pioneer Counseling of Virginia operations.
Patient care expenses decreased 14.7% to $2,485,632 for the three
months ended December 31, 1998 from $2,912,131 for the three months
ended December 31, 1997 and 13.5% to $4,921,848 for the six months
ended December 31, 1998 from $5,686,348 for the six months ended
December 31, 1997. This decrease in expenses is a result of the
continued reengineering of all subsidiaries. Administrative expenses
have also decreased 21.9% to $1,868,655 for the three months ended
December 31, 1998 from $2,392,919 for the three months ended December
31, 1997 and 18.4% to $3,774,572 for the six months ended December 31,
1998 from $4,627,498 for the six months ended December 31, 1997. This
decrease in expenses is also a result of the reengineering and
streamlining of all operations. The Company continues to view
receivables most conservatively by increasing it's provision for
doubtful accounts by 52.9% to $788,130 for the three months ended
December 31, 1998 from $515,471 for the three months ended December 31,
1997 and 14.5% to $1,144,320 for the six months ended December 31, 1998
from $999,249 for the six months ended December 31, 1997.
During the quarter ended December 31, 1998 the Company recognized
an extraordinary gain of $1,089,076 which resulted from the partial
liquidation of the assets and liabilities of the Franvale Nursing and
Rehabilitation Center whose parent company, Quality Care Centers of
Massachusetts, Inc., filed for bankruptcy protection under Chapter 7 of
the Federal Bankruptcy Code on October 5, 1998. This gain represents
approximately one half of the total expected realizable gain. The
balance of the gain will be recognized when the bankruptcy case is
final and all legal fees and claims against PHC, Inc. have been
resolved.
Liquidity and Capital Resources
A significant factor in the liquidity and cash flow of the
Company is the timely collection of its accounts receivable. Net
accounts receivable from patient care decreased during the quarter
ended December 31, 1998 by 11.5%, approximately $861,000. This is a
result of increased collection activity and more aggressive bad debt
write offs and higher reserve accounts. The Company continues to
closely monitor its accounts receivable balances and is working to
reduce amounts due consistent with growth in revenues.
During the quarter ended December 31, 1998 the former owners of
Behavioral Stress Centers, Inc., now BSC-NY, Inc., were issued 304,097
shares of PHC, Inc. Class A Common Stock as part of the price guarantee
provided by their earn-out consideration for the year ended October 31,
1997.
During the quarter ended December 31, 1998 the Company issued
$500,000 in 12% convertible debentures to private investors in order to
retire older more costly debt. These debentures are convertible in
$1,000.00 increments for 500 shares of PHC, Inc. Class A Common Stock
and expire December 2, 2004.
The Company believes that it has the necessary liquidity and
capital resources and contingent funding commitments to sustain
existing operations for the foreseeable future. The Company also
intends to expand its operations through the acquisition or
establishment of additional treatment facilities. The Company's
expansion plans will be dependent upon obtaining adequate financing as
such opportunities arise.
<PAGE>
Year 2000 Compliance
The Company has been unable to reach an agreement with its
Information Systems Vendor to upgrade its current accounts receivable
software to accommodate a four digit year and bill, track and age
receivables accordingly. The Company is currently pursuing other
software packages which are already year 2000 compliant and in the
interim has contacted each facilities' fiscal intermediaries requesting
an extension of time beyond the HCFA April 5, 1999 deadline for year
2000 compliance. The Company has also contracted with another company
to provide case management software which is year 2000 compliant. This
software has already been installed at Pioneer Development and Support
Services in Utah and is currently being modified to meet the needs of
Harmony Healthcare in Nevada. The Company has already upgraded network
software at some locations and is currently upgrading hardware to
accommodate the software upgrade at all other locations.
The Company is currently in the process of contacting each third
party payor of accounts receivable, landlords, financial institutions,
major suppliers of essential products and utilities to request the
status of their year 2000 compliance.
To date the Company has expended approximately $46,000 on items
relating to the year 2000 issues and anticipates approximately $170,000
in additional expenses relating to the upgrade of Company's computer
and telephone systems.
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on December
23, 1998.In addition to the election of directors (with regards to
which (I) proxies were solicited pursuant to Regulation 14A under the
Securities and Exchange Act of 1934, as amended, (II) there was no
solicitation in opposition to the management's nominees as listed on
the proxy statement, and (III) all of such nominees were elected), the
stockholders ratified the selection by the Board of Directors of BDO
Seidman, LLP as the Company's independent auditors for the fiscal year
ending June 30, 1999.
The stockholders also voted to amend the 1993 Employee Stock
Purchase and Option Plan to increase the number of shares of Class A
Common Stock available for issuance thereunder from 400,000 to
1,000,000 shares.
Item 6. Exhibits
Exhibit No. Description
4.20 12% Convertible Debenture by and between PHC, Inc., and
Dean & Co., dated December 3, 1998 in the amount of
$500,000.
4.21 Securities Purchase Agreement for 12% Convertible
Debenture by and between PHC, Inc. and Dean & Co., a
Wisconsin nominee partnership for Common Stock.
4.22 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.
4.23 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.
4.24 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.
10.67 Amendment to Overline Letter Agreement pursuant to the
Loan and Security Agreement by and among HCFP Funding,
Inc., and PHC of Michigan, Inc., PHC of Utah, Inc.,
PHC of Virginia, Inc., PHC of Rhode Island, Inc., and
Pioneer Counseling of Virginia, Inc. dated June 8,
1998 extending the maturity date from November 10,
1998 to May 10, 1999.
10.68 The Overline Letter agreement pursuant to the Loan and
Security Agreement by and among HCFP Funding, Inc.,
and PHC of Michigan, Inc., PHC of Utah, Inc., PHC of
Virginia, Inc., PHC of Rhode Island, Inc., and Pioneer
Counseling of Virginia, Inc. dated as of February 18,
1998 extending the maturity date from November 10,
1998 to May 10, 1999
10.69 Financial Advisory and Consultant Agreement by and
between National Securities Corporation and PHC, Inc.
dated 01/05/99
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHC, Inc. Registrant
Date: February 12, 1999 /s/ Bruce A. Shear
President
Chief Executive Officer
Date: February 12, 1999 /s/ Paula C. Wurts
Controller
Assistant Treasurer
<PAGE>
EXHIBIT INDEX DESCRIPTION
27 Financial Data Schedule
4.20 12% Convertible Debenture by and between PHC, Inc., and Dean & Co.,
dated December 3, 1998 in the amount of $500,000.
4.21 Securities Purchase Agreement for 12% Convertible Debenture by and
between PHC, Inc. and Dean & Co., a Wisconsin nominee partnership for
Common Stock.
4.22 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.
4.23 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.
4.24 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.
10.67 Amendment to Overline Letter Agreement pursuant to the Loan and
Security Agreement by and among HCFP Funding, Inc., and PHC of
Michigan, Inc., PHC of Utah, Inc., PHC of Virginia, Inc., PHC of Rhode
Island, Inc., and Pioneer Counseling of Virginia, Inc. dated June 8,
1998 extending the maturity date from November 10, 1998 to May 10,
1999.
10.68 The Overline Letter agreement pursuant to the Loan and Security
Agreement by and among HCFP Funding, Inc., and PHC of Michigan, Inc.,
PHC of Utah, Inc., PHC of Virginia, Inc., PHC of Rhode Island, Inc.,
and Pioneer Counseling of Virginia, Inc. dated as of February 18, 1998
extending the maturity date from November 10, 1998 to May 10, 1999.
10.69 Financial Advisory and Consultant Agreement by and between National
Securities Corporation and PHC, Inc. dated 01/05/99.
<PAGE>
<PAGE>
Exhibit 4.20
THIS SECURITY AND THE SECURITIES TO BE ISSUED UPON ITS CONVERSION HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MANY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO REGISTRATION UNDER
THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
APPLICABLE STATE SECURITIES LAWS.
December 3, 1998 U.S. $500,000
PHC, INC.
12% CONVERTIBLE DEBENTURE
DUE December 2, 2004
FOR VALUE RECEIVED, PHC, Inc., a Massachusetts corporation (the "Company"),
promises to pay, Dean & Co., a Wisconsin nominee partnership, and its successors
and assigns (the "Holder"), the principal sum of Five Hundred Thousand United
States Dollars (U.S. $500,000) on December 2, 2004, (the "Maturity Date") and to
pay interest on the principal sum outstanding at the rate of 12% per annum due
and payable quarterly. Accrual of interest shall commence on the first Business
Day to occur after the date hereof and shall continue until payment in full of
the principal sum has been made or duly provided for. The interest so payable
will be paid to the person in whose name this Debenture is registered on the
records of the Company regarding registration and transfers of this Debenture
(the "Debenture Register"); provided, however, that the Company's obligation to
a transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions hereof. The
principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Debenture Register of the Company as designated in writing by the Holder
hereof from time to time. The Company will pay the principal of and all accrued
and unpaid interest due upon this Debenture on the Maturity Date, without
deduction or withholding, to the Holder of this Debenture as of the tenth day
prior to Maturity Date and addressed to such Holder at the last address
appearing on the Debenture Register.
This Debenture is subject to the following additional provisions:
1. The Company shall not withhold from any payments of principal of, and
interest on, this Debenture any amounts whatsoever.
2. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and
applicable state securities laws. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Company's Debenture Register
as the owner hereof for the purpose of receiving payment as herein provided and
all other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
<PAGE>
3. Subject to the limitations imposed by Section 7(c) of this Debenture,
the Holder of this Debenture is entitled, at any time, at its option to convert
(the "Conversion Option") all or a portion of the original principal amount and
all accrued and unpaid interest (the "Outstanding Amount") of this Debenture
into units (the "Units"). Each Unit shall consist of Five Hundred (500) fully
paid and non-assessable shares of Class A common stock, $.01 par value, of the
Company (the "Common Stock") at a conversion price (the "Conversion Price") of
$1,000 per Unit.
4. Conversions of this Debenture shall be effectuated by surrendering this
Debenture (with a copy, by facsimile or courier) to the Company with the Form of
Conversion Notice (attached hereto as Exhibit A) executed by the Holder of this
Debenture evidencing such Holder's intention to convert this Debenture or a
specified portion (as above provided) hereof, and accompanied, if required by
the Company, by proper assignment hereof in blank. No fractions or scrip
representing fractions of Units will be issued on conversion, but the Holder
shall be entitled to a cash payment equal to $1,000 multiplied by the fraction
of a Unit to which the Holder would otherwise be entitled to but for this
sentence. The date on which notice of conversion is given shall be deemed to be
the date on which the Holder has delivered this Debenture, with the conversion
notice duly executed, to the Company, or if earlier, the date set forth in such
notice of conversion if the Debenture is received by the Company within three
(3) Business Days thereafter.
5. No provision of this Debenture shall alter or impair the obligation of
the Company, which is absolute and unconditional, to pay the principal of, and
redemption premium (if any) and interest on, this Debenture at the time, place
and rate, and in the coin or currency, herein prescribed.
6. The Company hereby expressly waives demand and presentation for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, bringing of suit and diligence in taking
any action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
7. This Debenture is subject to prepayment in accordance with the following
provisions:
(a) Required Prepayment Upon Change of Control or a Material Change in the
Company's Business. Upon the occurrence of any transaction involving a Change of
Control of the Company or an action or a series of actions by the Company out of
ordinary course of the behavioral healthcare business which would have a
Material Adverse Effect on the Company, without the prior written consent of the
Holder, the Company shall within thirty (30) Business Days after notice
requiring such prepayment from the Holder, prepay the principal amount of the
Debenture in full, plus accrued interest thereon to the date of prepayment. The
Company shall give the Holder written notice of a transaction involving a Change
in Control of the Company or an action or a series of actions by the Company out
of the ordinary course of the behavioral healthcare business which would have a
Material Adverse Effect on the Company, not later than twenty (20) Business Days
prior to the stockholders' meeting called to approve such transaction, or twenty
(20) Business Days prior to the closing of such transaction, whichever is
earlier, and shall also notify the Holder in writing of the final approval of
such transaction.
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(b) Put Rights.
(i) Subject to the limitations hereinafter set forth, the Holder shall have
the right at any time, and from time to time, during the period beginning on
December 3, 2001 and ending on the Maturity Date, at its option, upon written
notice to the Company, to require the Company to purchase all or a portion of
this Debenture (any such right being herein called a "Put Right"). The price to
be paid to the Holder upon the exercise of a Put Right shall be an amount equal
to the portion of the principal amount of the Debenture the Holder requires the
Company to purchase plus any accrued interest as of the date of the exercise of
a Put Right (the "Put Right").
(ii) The exercise of Put Rights shall take place on the thirtieth (30th)
Business Day following the date of the notice exercising such Put Right is given
to the Company, unless another date is mutually agreed upon by the Company and
the Holder (the "Put Closing Date"). Payment of the Put Price payable by the
Company on the Put Closing Date shall be made by the Company as follows: (x) by
the payment of a lump sum cash payment in immediately available funds on the Put
Closing Date in an amount equal to the Put Price; or (y) by the payment of ten
(10) consecutive equal monthly installments of the Put Price plus interest on
the portion of the principal amount of this Debenture the Company is required to
purchase at a per annum rate of 12% (each, a "Put Installment Payment") with the
first Put Installment Payment being due and payable thirty (30) Business Days
from the Put Closing Date.
(iii) The Put Prices and each Put Installment Payment pursuant to the
exercises of Put Rights shall be determined and calculated in accordance with
paragraphs (i) and (ii) of this subsection 7(b) by the Company's regularly
engaged independent accountants. The Company shall cause such accountants to
deliver to the Company and the Holder, not later than fifteen (15) Business Days
prior to each Put Closing Date, a written statement, signed by such accountants,
setting forth in reasonable detail the respective prices and the calculation
thereof and stating that such calculation was based on the books and records of
the Company and was made and delivered pursuant to this subsection 7(b).
(c) Call Rights.
(i) Subject to the limitations hereinafter set forth, the Company shall
have the right at any time, and from time to time, during the period beginning
on December 3, 2001 and ending on the Maturity Date, at its option, upon written
notice to the Company, to purchase all or any portion of the Debenture (any such
right being herein called a "Call Right"). The price to be paid to the Holder
upon the exercise of a Call Right shall be an amount equal to 101% of the
portion of the principal amount of the Debenture being purchased plus any
accrued interest as of the date of the exercise of a Call Right (the "Call
Price").
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<PAGE>
(ii) The Holder shall have twenty (20) Business Days from the date of the
notice exercising a Call Right (a "Call Notice") is given to the Holder to
exercise its Conversion Right with respect to all or a portion of the portion of
the principal amount of this Debenture the Company desires to purchase. If the
Holder does not exercise its Conversion Right with respect to the entire portion
of the principal amount of the Debenture the Company desires to purchase, the
exercise of Call Rights shall take place on the thirtieth (30th) Business Days
following the date of the Call Notice, unless another date is mutually agreed
upon by the Company and the Holder (the "Call Closing Date"). The Call Price
payable by the Company on the Call Closing Date shall be reduced by the portion
of the principal amount of this Debenture converted into Units by the Holder
within twenty (20) Business Days from the date of the Call Notice. Payment of
the Call Price payable by the Company on the Call Closing Date shall be made by
the Company as follows: (x) by the payment of a lump sum cash payment in
immediately available funds on the Call Closing Date in an amount equal to the
Call Price; or (y) by the payment of ten (10) consecutive equal monthly
installments of the Call Price plus interest on the portion of the principal
amount of this Debenture being purchased by the Company on the Call Closing Date
at a per annum rate of 12% (each, a "Call Installment Payment") with the first
Put Installment Payment being due and payable thirty (30) Business Days from the
Put Closing Date.
(iii) The Call Prices and each Call Installment Payment pursuant to the
exercises of Call Rights shall be determined and calculated in accordance with
paragraphs (i) and (ii) of this subsection 7(c) by the Company's regularly
engaged independent accountants. The Company shall cause such accountants to
deliver to the Company and the Holder, not later than fifteen (15) Days prior to
each Call Closing Date, a written statement, signed by such accountants, setting
forth in reasonable detail the respective prices and the calculation thereof and
stating that such calculation was based on the books and records of the Company
and was made and delivered pursuant to this subsection 7(c).
8. The Company agrees to pay all costs and expenses, including reasonable
attorney's fees, which may be incurred by Holder in collecting any amount due
under this Debenture.
9. Upon the occurrence of an Event of Default (as defined below), the
Holder may, at the Holder's option, and without further notice, declare all
amounts payable under this Debenture, including the unpaid principal balance of
this Debenture plus accrued interest thereon, immediately due and payable, and
exercise any or all other rights and remedies available under this Debenture or
applicable law. An "Event of Default" shall mean any one or more of the
following events (a) the Company's failure to pay when due any payment of
principal or interest or any other sum required to be paid under this Debenture
within ten (10) Business Days any such sums are due and payable; (b) any
dissolution of the Company; (c) the appointment of a receiver, conservator or
liquidator of or for the Company, whether voluntary or, in respect of an
appointment which is not dismissed within thirty (30) Business Days thereafter,
involuntary; (d) a general assignment for the benefit of the Company's
creditors; or (e) the filing of a voluntary petition in bankruptcy or the
approval of an involuntary petition in bankruptcy, with respect to the Company,
or the filing of an involuntary petition in bankruptcy with respect to the
Company which is not dismissed within sixty (60) Business Days after its filing.
4
<PAGE>
10. The following terms shall have the respective meanings ascribed to them
herein:
"Business Day" shall mean any 24-hour day beginning at 12:01 a.m.
prevailing Eastern time on which banks are required to be open to carry on their
normal business in the Commonwealth of Massachusetts and on which the wire
transfer system of the Federal Reserve is operational.
"Change in Control" means (i) the acquisition of the Company by another
entity or individual by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation but, excluding any merger effected exclusively for the purpose of
changing the domicile of the Company or a merger of the Company with a wholly
owned subsidiary of the Company that does not result in any change in beneficial
ownership of the Company), (ii) a sale of all or substantially all of the assets
of the Company or (iii) any transaction or series of related transactions
involving the sale, transfer or assignment of more than fifty percent (50%) of
the voting power of the Company.
"Material Adverse Effect" means, with respect to the Company, any event,
change or effect, or series of related effects, which (i) has an impact upon the
financial condition, business or results of operations of the Company in excess
of $100,000 and (ii) impairs the ability of the Company to consummate the
transactions contemplated by this Debenture.
11. In case any provision of this Debenture is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Debenture will not in any way be affected or
impaired thereby.
12. This Debenture shall be governed by, and construed in accordance with
the laws of the Commonwealth of Massachusetts.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
PHC, INC.
Dated: December 3, 1998 By: /s/ Bruce A. Shear
Title: President
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert $ _________ of the
above Debenture into Units of PHC, Inc. (the "Company") according to the
conditions set forth in the Debenture, as of the date written below.
__________________________
Date of Conversion*
__________________________
Applicable Conversion Price
__________________________
Principal Amount Converted
__________________________
Units Issuable on Conversion
__________________________
DEAN AND COMPANY
By: ______________________________
Name:
Title:
* The original Debenture and Notice of Conversion must be received by the
Company by the third Business Day following the Date of Conversion.
1
H-\WP\HOME\PHC\EXHIBIT.
<PAGE>
Exhibit 4.21
SECURITIES PURCHASE AGREEMENT
PHC, Inc.
200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Gentlemen:
The undersigned hereby agrees to purchase that certain 12% Convertible
Debenture issued by PHC, Inc. (the "Company") in the principal amount of
$500,000 with a maturity date of December 2, 2004, attached hereto and
incorporated herein by reference (the "Debenture") and that certain Warrant to
purchase a maximum of Twenty-Five Thousand (25,000) shares of the class A common
stock of the Company, attached hereto and incorporated herein by reference (the
"Warrant") (the Warrant and the Debenture shall be hereinafter referred to
collectively as the "Securities").
Section 1. The Securities
The Company is offering to sell the Securities to the undersigned for
$500,000 (the "Purchase Price") payable in full in cash or by available wired
funds upon the execution and delivery of this Securities Purchase Agreement.
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR UNDER STATE SECURITIES LAWS AND IS BEING OFFERED AND
SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH LAWS. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
Section 2. Purchase of the Securities
The undersigned hereby agrees to purchase the Securities and is tendering
herewith cash or available wired funds to the Company in payment of the Purchase
Price.
Section 3. Undersigned's Representations and Warranties
The undersigned represents, warrants, and covenants to the Company that:
(i) The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of the investment in the Company.
<PAGE>
(ii) The undersigned is acquiring the Securities for its own account, for
investment and not with a view to the distribution thereof within the meaning of
the Act.
(iii) The undersigned understands that (a) the Securities have not been,
and will not be, registered under the Act, and (b) the Securities may not be
transferred unless the disposition thereof is registered under the Act or exempt
from such registration and the undersigned provides the Company with an opinion
of counsel satisfactory to the Company to the effect that the sale, transfer,
assignment, offer, pledge or distribution for value of the Securities will not
result in a violation of the Act or any applicable Blue Sky law or similar laws
effecting the sale of securities.
(iv) The undersigned is (a) an accredited investor as defined under Rule
501(a) of Regulation D of the Act, (b) has had opportunities to ask questions of
the officers of the Company and (c) has received all information as it has
deemed necessary or appropriate as a prudent investor knowledgeable in
evaluating the purchase of securities similar to the Securities with similar
investment risks attendant to the purchase of the Securities.
Section 4. Applicable Law
This Securities Purchase Agreement and all rights hereunder shall be
governed by, and interpreted in accordance with, the laws of the Commonwealth
of Massachusetts without reference to any conflict of laws.
IN WITNESS WHEREOF, the undersigned has executed this Securities Purchase
Agreement to purchase the Securities on this ______ day of ______, 1998.
Dean & Co., a Wisconsin nominee partnership
By: _____________________________________
Name: _____________________________________
Title: ______________________________________
<PAGE>
ACCEPTANCE
The foregoing offer is hereby accepted this 3rd day of December, 1998.
PHC, Inc.
By: /s/ Bruce A. Shear
President
H:\HIRSCHB\WP\HOME\PHC\secagmt.wpd
<PAGE>
Exhibit 4.22
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 25,000 shares of Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires December 31, 2004
THIS CERTIFIES THAT, for value received, Dean & Co., a Wisconsin nominee
partnership, is entitled to subscribe for and purchase a maximum of Twenty Five
Thousand (25,000) 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 December 31, 1998.
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 December 31, 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: ____________________________
Bruce A. Shear, President
Date: December 3, 1998
<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 4.23
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 37,500 shares of the Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires January 5, 2004
THIS CERTIFIES THAT, for value received, National Securities Corporation 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 $1.45 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 January 5,
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 January 5, 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: January 5, 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 4.24
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 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 December 1, 2003
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 December 1, 1998.
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 December 1, 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: December 1, 1998
<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>
THE SECURITIES REPRESENTED BY THIS WARRANT (AND THE SECURITIES ISSUABLE UPON 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 January 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 January 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 January 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 may 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: January 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>
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 15,000 shares of the Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires December 31, 2003
THIS CERTIFIES THAT, for value received, Hubbard Company, Inc., and/or its
designees 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 $1.50 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 December 31,
1998.
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 December 31, 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: December 31, 1998
<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>
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 15,000 shares of the Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires December 31, 2003
THIS CERTIFIES THAT, for value received, Hubbard Company, Inc., and/or its
designees 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 $2.00 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 December 31,
1998.
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 December 31, 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: December 31, 1998
<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>
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 50,000 shares of the Class A Common
Stock, $.01 par value, of PHC, Inc.
WARRANT TO PURCHASE
SHARES OF CLASS A COMMON STOCK
Expires December 31, 2003
THIS CERTIFIES THAT, for value received, Hubbard Company, Inc., and/or its
designees 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 $2.00 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 December 31,
1998.
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 December 31, 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: December 31, 1998
<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>
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 December 31, 2003
THIS CERTIFIES THAT, for value received, Hubbard Company, Inc. 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 December 31, 1998.
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 December 31, 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: December 31, 1998
<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>
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 February 1, 2004
THIS CERTIFIES THAT, for value received, Hubbard Company, Inc. 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 February 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 February 1, 1999.
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 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 10.67
November 10, 1998
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Attention: Bruce A. Shear, President
Re: Amendment to Overline Letter Agreement dated June 8, 1998
("Overline Facility") pursuant to the Loan and Security Agreement
dated February 18, 1998 (the "Loan Agreement") by and among PHC OF
MICHIGAN, INC., PHC OF UTAH, INC., PHC OF VIRGINIA, INC., PHC OF
RHODE ISLAND, INC., and PIONEER COUNSELING OF VIRGINIA, INC.
(collectively, "Borrower") and by HCFP FUNDING, INC. ("Lender")
Gentlemen:
Borrower has requested that the maturity date of the Overline Facility be
extended from November 10, 1998 to May 10, 1999. Lender is willing to so extend
the Maturity Date on the conditions set forth in this Letter Agreement.
1. Borrower acknowledges that the current balance of the Overline Facility
is Two Hundred Thousand and 00/100 Dollars ($200,000.00)
2. On each of February 10, 1999, March 10, 1999 and April 10, 1999,
Borrower agrees to make a principal payment of Fifty Thousand and 00/100
Dollars ($50,000.00) (each, a "Required Payment"). On May 10, 1999 (the
"Maturity Date"), Borrower agrees to make a balloon principal payment of Fifty
Thousand and 00/100 Dollars plus any other unpaid principal.
3. If Borrower does not make a Required Payment when due, then Lender, at
its sole option and in the exercise of its sole discretion, may (a) declare an
immediate Event of Default under the Loan Agreement, or (b) for each missed
Required Payment, transfer to the principal balance of the Overline Facility the
amount of Fifty Thousand and 00/100 Dollars from the principal balance of the
Secured Bridge Note made by PHC, Inc. in favor of HCFP Funding II, Inc., an
affiliate of Lender, dated as of March 10, 1998 (as the note has been or may be
amended from time to time, the "Bridge Note"). If Lender chooses option (b),
then PHC, Inc. agrees to execute such amendments to the Bridge Note and such
other documents and instruments as may be necessary to consummate the transfer
of the principal.
4. Concurrently with the execution of this Letter Agreement, Borrower will
pay to Lender an extension fee of Seventeen Thousand Five Hundred and 00/100
Dollars ($17,500.00).
Corporate Office
2 Wisconsin Circle, 4th Floor o Chevy Chase, Maryland 20815
Tel: 301.961.1640 - Fax: 301.664.9860 - www.hcfp.com
<PAGE>
PHC, Inc.
November 10, 1998
Page 2
5. Borrower and Bruce A. Shear acknowledge that the Unconditional Guaranty
of Payment and Performance executed by Mr. Shear in favor of Lender relating to
the Overline Obligations remains in full force and effect.
6. Except as specifically modified by this Letter Agreement, the Overline
Facility, the Loan Agreement, and all other Loan Documents, shall remain in full
force and effect, and are hereby ratified and confirmed.
The execution, delivery and effectiveness of this Letter Agreement shall
not, except as expressly provided in this Letter Agreement, operate as a waiver
of any right, power or remedy of Lender, nor constitute a waiver of any
provision of the Loan Agreement, or any other documents, instruments and
agreements executed or delivered in connection with the Loan Agreement.
If the foregoing terms are acceptable to Borrower, please sign this Letter
Agreement where indicated and return it to Lender.
Very truly yours,
HCFP FUNDING, INC.
By: _____________________________
Name:
Title:
EACH OF THE UNDERSIGNED AGREES TO THE TERMS SET FORTH ABOVE AS OF THIS 10th
DAY OF NOVEMBER, 1998.
PHC, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
[SIGNATURES CONTINUED]
H:\WP\LEGAL\CLIENTS\PHCINC\Overline2ext.wpd
<PAGE>
PHC, Inc.
November 10, 1998
Page 3
PHC OF MICHIGAN, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
PHC OF UTAH, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
PHC OF VIRGINIA, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
PHC OF RHODE ISLAND, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
[SIGNATURES CONTINUED]
H:\WP\LEGAL\CLIENTS\PHCINC\Overline2ext.wpd
<PAGE>
PHC, Inc.
November 10, 1998
Page 4
PIONEER COUNSELING OF VIRGINIA, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
H-\WP\LEGAL\CLIENTS\PHCINC\Overline2ext.wpd
<PAGE>
Exhibit 10.67
November 10, 1998
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Attention: Bruce A. Shear, President
Re: Amendment to Overline Letter Agreement dated June 8, 1998
("Overline Facility") pursuant to the Loan and Security Agreement
dated February 18, 1998 (the "Loan Agreement") by and among PHC OF
MICHIGAN, INC., PHC OF UTAH, INC., PHC OF VIRGINIA, INC., PHC OF
RHODE ISLAND, INC., and PIONEER COUNSELING OF VIRGINIA, INC.
(collectively, "Borrower") and by HCFP FUNDING, INC. ("Lender")
Gentlemen:
Borrower has requested that the maturity date of the Overline Facility be
extended from November 10, 1998 to May 10, 1999. Lender is willing to so extend
the Maturity Date on the conditions set forth in this Letter Agreement.
1. Borrower acknowledges that the current balance of the Overline Facility
is Two Hundred Thousand and 00/100 Dollars ($200,000.00)
2. On each of February 10, 1999, March 10, 1999 and April 10, 1999,
Borrower agrees to make a principal payment of Fifty Thousand and 00/100
Dollars ($50,000.00) (each, a "Required Payment"). On May 10, 1999 (the
"Maturity Date"), Borrower agrees to make a balloon principal payment of Fifty
Thousand and 00/100 Dollars plus any other unpaid principal.
3. If Borrower does not make a Required Payment when due, then Lender, at
its sole option and in the exercise of its sole discretion, may (a) declare an
immediate Event of Default under the Loan Agreement, or (b) for each missed
Required Payment, transfer to the principal balance of the Overline Facility the
amount of Fifty Thousand and 00/100 Dollars from the principal balance of the
Secured Bridge Note made by PHC, Inc. in favor of HCFP Funding II, Inc., an
affiliate of Lender, dated as of March 10, 1998 (as the note has been or may be
amended from time to time, the "Bridge Note"). If Lender chooses option (b),
then PHC, Inc. agrees to execute such amendments to the Bridge Note and such
other documents and instruments as may be necessary to consummate the transfer
of the principal.
4. Concurrently with the execution of this Letter Agreement, Borrower will
pay to Lender an extension fee of Seventeen Thousand Five Hundred and 00/100
Dollars ($17,500.00).
Corporate Office
2 Wisconsin Circle, 4th Floor o Chevy Chase, Maryland 20815
Tel: 301.961.1640 - Fax: 301.664.9860 - www.hcfp.com
<PAGE>
PHC, Inc.
November 10, 1998
Page 2
5. Borrower and Bruce A. Shear acknowledge that the Unconditional Guaranty
of Payment and Performance executed by Mr. Shear in favor of Lender relating to
the Overline Obligations remains in full force and effect.
6. Except as specifically modified by this Letter Agreement, the Overline
Facility, the Loan Agreement, and all other Loan Documents, shall remain in full
force and effect, and are hereby ratified and confirmed.
The execution, delivery and effectiveness of this Letter Agreement shall
not, except as expressly provided in this Letter Agreement, operate as a waiver
of any right, power or remedy of Lender, nor constitute a waiver of any
provision of the Loan Agreement, or any other documents, instruments and
agreements executed or delivered in connection with the Loan Agreement.
If the foregoing terms are acceptable to Borrower, please sign this Letter
Agreement where indicated and return it to Lender.
Very truly yours,
HCFP FUNDING, INC.
By: _____________________________
Name:
Title:
EACH OF THE UNDERSIGNED AGREES TO THE TERMS SET FORTH ABOVE AS OF THIS 10th
DAY OF NOVEMBER, 1998.
PHC, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
[SIGNATURES CONTINUED]
H:\WP\LEGAL\CLIENTS\PHCINC\Overline2ext.wpd
<PAGE>
PHC, Inc.
November 10, 1998
Page 3
PHC OF MICHIGAN, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
PHC OF UTAH, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
PHC OF VIRGINIA, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
PHC OF RHODE ISLAND, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
[SIGNATURES CONTINUED]
H:\WP\LEGAL\CLIENTS\PHCINC\Overline2ext.wpd
<PAGE>
PHC, Inc.
November 10, 1998
Page 4
PIONEER COUNSELING OF VIRGINIA, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
President
H-\WP\LEGAL\CLIENTS\PHCINC\Overline2ext.wpd
<PAGE>
Exhibit 10.68
HealthCare Financial
P A R T N E R S
November 10, 1998
Mr. Bruce Shear
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Re: The Overline Letter Agreement dated as of June 8, 1998 (as it has
been amended, the "Overline Facility") entered into pursuant to the
Loan and Security Agreement dated February 18, 1998 (the "Loan
Agreement") by and among PHC OF MICHIGAN, INC., PHC OF UTAH, INC.,
PHC OF VIRGINIA, INC., PHC OF RHODE ISLAND, INC., and PIONEER
COUNSELING OF VIRGINIA, INC. (collectively, "Borrower") and HCFP
FUNDING, INC. ("Funding"), and the Secured Bridge Note dated as of
March 10, 1998 (as it has been amended, the "Term Note" made by
PHC, INC. in favor of HCFP FUNDING II, INC. ("Funding II" )
Dear Bruce:
This letter is a follow-up to the telephone conference of this morning with
Richard Dine. The Maturity Date for the Overline Facility and the Term Note was
November 10, 1998. We have furnished to you, and you have signed, Amendment No.
2 to Secured Term Note (the "Term Amendment"), which extends the Maturity Date
of the Term Loan until May 10, 1999 in consideration of Borrower's payment of an
extension fee of $17,500.00. We have also furnished to you, but you have not
signed, the Overline Letter Agreement Amendment (the "Overline Amendment"),
which would extend the Maturity Date of the Overline Loan until May 10, 1999 in
consideration of Borrower's payment of an extension fee of $17,500.00. You have
not signed the Overline Amendment for the stated reason that you do not believe
that Borrower should pay a separate $17,500.00 fee for the extension of the
Maturity Date of the Overline Loan.
As the Maturity Date for the Overline Loan has passed while the Overline
Loan remains outstanding, an Event of Default has occurred under the Overline
Letter Agreement and under the Loan Agreement. To cure this Event of Default,
Funding is today charging to the revolving line of credit an extension fee of
$17,500.00. Once the extension fee has been so paid, the Maturity Date for the
Overline Loan shall be May 10, 1999.
H:\WP\LEGAL\CLIENTS\PHCINC\NovemberFee.wpd
Corporate Office
2 Wisconsin Circle, 4th Floor o Chevy Chase, Maryland 20815
Tel: 301.961.1640 o Fax: 301.664.9860 - www.hcfp.com
<PAGE>
Mr. Bruce Shear
PHC, Inc.
November 25, 1998
Page 2
The revolving line of credit is also being charged today for the $17,500.00
extension fee for the Term Loan, as authorized by the Term Amendment.
Lender hereby reserves any and all rights and remedies to which Lender is
entitled under the Revolving Loan Documents, the Term Loan Documents, applicable
law and in equity. Additional events may have occurred which, if uncured within
applicable cure periods, would constitute Events of Default. Lender hereby
reserves the right to declare any such events as Events of Default at any time
in the future. Any failure to specify such events in this letter shall in no way
constitute a waiver of an Event of Default resulting from such events.
If you would like to come in and meet with me and others who are
responsible for the PHC account, please let me or Richard know. We would be
happy to meet with you. In the meantime, if you have any questions, please call
me at (301) 664-9850.
Very truly yours,
HCFP FUNDING, INC.
By: /s/ Michael G. Gardullo
Vice President and Senior Credit Officer
HCFP FUNDING II, INC.
By: /s/ Michael G. Gardullo
Vice President and Senior Credit Officer
H:\WP\LEGAL\CLIENTS\PHCINC\NovemberFee.wpd
<PAGE>
Exhibit 10.69
NationalSecurities
C 0 R P 0 R A T I 0 N
Member Chicago Stock Exchange - Member National Association of
Securities Dealers, Inc.
FINANCIAL ADVISORY AND CONSULTING AGREEMENT
This agreement ("Agreement") is made and entered into this fifth day of
January, 1999 between PHC Inc., a Massachusetts corporation (the "Company"),
and National Securities Corporation (the "Consultant").
In consideration of and for the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Purpose. The Company hereby retains the Consultant on a
non-exclusive basis during the term specified to render consulting advice to
the Company relating to financial and similar matters, upon the terms and
conditions as set forth herein.
2. Terms and Consideration. This Agreement shall be effective for a
period of twelve months commencing on the date first written above (the
"Engagement Period"); provided, however, that this Agreement may be
terminated by either party after sixty (60) days upon 30 days' prior written
notice. The Company shall pay Consultant a non-refundable fee of $750 upon
the execution of this Agreement and monthly thereafter on the 1st day of each
month during which this Agreement is in effect. Additionally, the Company
shall issue to Consultant 150,000 common stock purchase warrants (the
"Warrants") in four (4) equal installments of 37,500 each, with the first
installment due upon the execution of this Agreement and successive
installments due in 90 day increments thereafter, unless this Agreement is
terminated. The Warrants shall be exercisable for a period of five years
from issuance at the market price of the Company's common stock at the
execution of this Agreement. The Warrants shall contain customary terms,
including, but not limited to, demand and piggyback registration rights, and
cashless exercise provisions.
3. Duties of Consultant. During the term of this Agreement, the
Consultant will provide the Company with such regular and customary
consulting advice as is reasonably requested by the Company, provided that
the Consultant shall not be required to undertake duties not reasonably
within the scope of the consulting advisory services contemplated by this
Agreement. In performance of these duties, the Consultant shall provide the
Company with the benefits of its best judgment and efforts and prior to
disseminating any written information regarding the Company, the Consultant
shall permit the Company to review such information with respect to its
factual accuracy. It is understood and acknowledged by the parties that the
value of the Consultant's advice is not measurable in any quantitative
manner, and that the Consultant shall not be obligated to spend any specific
amount of time doing so. The Consultant's duties may include, but not
necessarily be limited to:
A. Providing sponsorship and exposure in connection with the
dissemination of corporate information regarding the Company to the
investment community at large.
B. Assisting in the Company's financial public relations, including
discussions between the Company and the financial community.
C. Advice regarding the financial structure of the Company and its
divisions or subsidiaries or any programs and projects, as such issues relate
to the public market for the Company's equity securities.
875 N. Michigan Ave., Suite 1560,
Chicago, IL 60611
Phone 312-751-8833 Fax 312-751-0769
<PAGE>
PHC Inc.
Financial Advisory and Consulting Agreement
01/05/99
Page 2 of 7
D. Rendering advice with respect to any acquisition program of the
Company, as such program relates to the public market for the Company's
equity securities.
E. Rendering advice regarding the public market for the Company's
securities and the timing and structure of any future public offering or
private placement of the Company's equity securities.
4. Relationships with others. The Company acknowledges that the
Consultant or its affiliates is in the business of providing financial
service and consulting advice (of all types contemplated by this Agreement)
to others. Nothing herein contained shall be construed to limit or restrict
the Consultant in conducting such business with respect to others, or in
rendering such advise to others. In connection with the rendering of
services hereunder, Consultant has been or will be furnished with
confidential information concerning the Company including, but not limited
to, financial statements and information, cost and expense data, production
data, trade secrets, marketing and customer data, and such other information
not generally obtained from public or published information or trade
sources. Such information shall be deemed "Confidential Material" and,
except as specifically provided herein, shall not be disclosed by Consultant
without prior written consent of the Company. In the event Consultant is
required by applicable law or legal process to disclose any of the
Confidential Material, it is agreed that Consultant will deliver to the
Company prompt notice of such requirement prior to disclosure of same to
permit the Company to seek an appropriate protective order and/or waive
compliance of this provision. If, in the absence of a protective order or
receipt of written waiver, Consultant is nonetheless, in the written opinion
of counsel, compelled to disclose any Confidential Material, Consultant may
do so without liability hereunder provided that notice of such prospective
disclosure is delivered to the Company prior to actual disclosure. Following
the termination of this Agreement, Consultant shall deliver to the Company
all Confidential Material.
5. Consultant's Liability. Since National shall be acting on behalf
of the Company, the Company agrees to indemnify National in accordance with
the provisions of Annex A hereto, which is incorporated by reference and made
a part hereof.
6. Expenses. The Company, upon receipt of appropriate supporting
documentation, shall reimburse the Consultant for any and all reasonable
out-of-pocket expenses incurred in connection with services provided to the
Company, subject to prior approval of the Company.
7. Merger & Acquisition Advisory Services. If the Company consummates
an acquisition of or merger with another business (a "Business Combination"),
during the Engagement Period, with another business introduced by the
Consultant or the Consultant advised the Company with regard to the business
combination, then the Consultant's compensation with respect to any Business
Combination shall be subject to an additional engagement letter to be
executed by the parties hereto at such time as is appropriate.
<PAGE>
PHC Inc.
Financial Advisory and Consulting Agreement
01/05/99
Page 3 of 7
8. Sales or Distributions of Securities. If the Consultant assists
the Company in the sale or distribution of securities, the Consultant shall
receive fees and other forms of compensation subject to an additional
engagement letter to be executed by the parties hereto at such time as is
appropriate. In addition, the Consultant shall have a right of First Refusal
to manage any such public offering of, or act as placement agent in the
private placement of, the Company's securities during the Engagement Period.
Such public offering or private placement, undertaken by the Consultant on
behalf of the Company, shall be subject to an additional engagement letter to
be executed by the parties hereto at such time as is appropriate.
9. Limitation Upon the Use of Advice and Services.
(a) No person or entity, other than the Company or any of its
subsidiaries or directors or officers of each of the foregoing, shall be
entitled to make use of or rely upon the advice of the Consultant to be given
hereunder, and the Company shall not transmit such advice to, or encourage or
facilitate the use or reliance upon such advice by others without the prior
consent of the Consultant.
(b) It is clearly understood that the Consultant, for services
rendered under this Agreement, makes no commitment whatsoever as to recommend
or advise its clients to purchase the securities of the Company. Research
reports that may be prepared by the Consultant will, when and if prepared, be
based solely on the merits, and independent judgment of analysts of the
Consultant.
(c) It is clearly understood that the Consultant, for services
rendered under this Agreement, makes no commitment whatsoever to make a
market in any of the Company's securities on any stock exchange or in any
electronic marketplace. Any decision by Consultant to make a market in any
of the Company's securities shall be based solely on the independent judgment
of Consultant's traders and related supervisory personnel.
(d) Use of the Consultant's name in annual reports or any other
report of the Company or releases by the Company must have the prior approval
of the Consultant unless the Company is required by law to include
Consultant's name in such annual reports, other report or release of the
Company, in which event Consultant will be furnished with copies of such
annual reports or other reports or releases using Consultant's name in
advance of publication by the Company.
10. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is deemed unlawful or invalid for
any reason whatsoever, such unlawfulness or invalidity shall not affect the
validity of this Agreement.
<PAGE>
PHC Inc.
Financial Advisory and Consulting Agreement
01/05/99
Page 4 of 7
11. Miscellaneous.
(a) Any notice or other communication between parties hereto shall
be sufficiently given if sent by certified or registered mail, postage
prepaid, or faxed and confirmed if to the Company, addressed to it at PHC
Inc., 200 Lake ST, Suite 102, Peabody, MA 01960, or if to the Consultant,
addressed to it at National Securities Corporation, 1001 Fourth Avenue, Suite
2200, Seattle, Washington 98154. Such notice or other communication shall be
deemed to be given on the date of receipt.
(b) If the Consultant shall cease to do business, the provisions
hereof relating to duties of the Consultant and compensation by the Company
as it applies to the Consultant shall thereupon cease to be in effect, except
for the Company's obligation of payment for services rendered prior thereto.
This Agreement shall survive any merger of, acquisition of, or acquisition by
the Consultant and after any such merger or acquisition shall be binding upon
the Company and the corporation surviving such merger or acquisition.
(c) This Agreement embodies the entire agreement and understanding
between the Company and the Consultant and supersedes any and all
negotiations, prior discussions and preliminary and prior agreements and
understandings related to the central subject matter hereof
(d) This agreement has been duly authorized, executed and
delivered by and on behalf of the Company and the Consultant.
(e) This Agreement shall be construed and interpreted in
accordance with the laws of the State of Washington, without giving effect to
conflicts of laws.
(f) There is no relationship of partnership, agency, employment,
franchise or joint venture between the parties. Neither party has the
authority to bind the other or incur any obligation on its behalf.
(g) This Agreement and the rights hereunder may not be assigned by
either party (except by operation of law) and shall be binding upon and inure
to the benefit of the parties and their respective successors, assigns and
legal representatives.
<PAGE>
PHC Inc.
Financial Advisory and Consulting Agreement
01/05/99
Page 5 of 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
PHC Inc.
By: /s/ Bruce A. Shear
Title: Chairman and CEO
National Securities Corporation
By: /s/ Steven A. Rothstein
Title: Chairman
<PAGE>
PHC Inc.
Financial Advisory and Consulting Agreement
01/05/99
Page 6 of 7
ANNEX A
INDEMNIFICATION
Recognizing that transactions of the type contemplated in this
engagement sometimes result in litigation and that National Securities
Corporation's ("National") role is advisory, PHC Inc., (the "Company") agrees
to indemnify and hold harmless National, its affiliates and their respective
officers, directors, employees, agents and controlling persons (collectively,
the "Indemnified Parties"), from and against any put-of-pocket losses,
claims, damages and liabilities payable to any independent third party, joint
or several, related to or arising in any manner out of any transaction,
proposal or any other matter (collectively, the "Matters") contemplated by
the engagement of National hereunder, and will promptly reimburse the
Indemnified Parties for all reasonable out-of-pocket expenses (including
reasonable fees and expenses of legal counsel) as incurred in connection with
the investigation of, preparation for, or defense of any pending or
threatened claim related to or arising in any manner out of any Matter
contemplated by the engagement of National hereunder, or any action or
proceeding arising therefrom (collectively, "Proceedings"), whether or not
such Indemnified Party is a formal party to any such Proceeding.
Notwithstanding the foregoing, the Company shall not be liable in respect of
any losses, claims, damages, liabilities or expenses that a court of
competent jurisdiction shall have determined by final judgment resulted
solely from the gross negligence or willful misconduct of any Indemnified
Party or a breach of this agreement. The Company further agrees that it will
not, without the prior written consent of National (which consent shall not
be unreasonably withheld, settle compromise or consent to the entry of any
judgment in any pending or threatened Proceeding in respect of which
indemnification may be sought hereunder (whether or not National or any
Indemnified Party is an actual or potential party to such Proceeding), unless
such settlement, compromise or consent includes an unconditional release of
National and each other Indemnified Party hereunder from all liability
arising out of such Proceeding.
National agrees to comply with all applicable Federal and State
securities laws and, except for independent research reports prepared by
National for which the Company has no responsibility, that it will only
distribute or disseminate written information regarding the Company approved
in writing by the Company.
The Company agrees that if any indemnification or reimbursement sought
pursuant to this letter were for any reason not to be available to any
Indemnified Party or insufficient to hold it harmless as and to the extent
contemplated by this letter, then the Company shall contribute to the amount
paid or payable by such Indemnified Party in respect of losses, claims,
damages and liabilities in such proportion as is appropriate to reflect the
relative benefits to the Company and its stockholders on the one hand, and
National on the other, in connection with the Matters to which such
indemnification or reimbursement relates or, if such allocation is not
permitted by applicable law, not only such relative benefits but also the
relative faults of such parties as well as any other equitable
considerations. It is hereby agreed that the relative benefits to the
Company and/or its stockholders and to National with respect to National's
engagement shall be deemed to be in the same proportion as (i) the total
value paid or received or to be paid or received by the Company and/or its
stockholders pursuant to the Matters (whether or not consummated) for which
National is engaged to render services bears to (ii) the fees paid to
National in connection with such engagement. In no event shall the
Indemnified Parties contribute or otherwise be liable for an amount in excess
of the aggregate amount of fees actually received by National pursuant to
such engagement (excluding amounts received by National as reimbursement of
the expenses).
<PAGE>
PHC Inc.
Financial Advisory and Consulting Agreement
01/05/99
Page 7 of 7
The Company further agrees that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
the Company for or in connection with National's engagement hereunder except
for losses, claims, damages, liabilities or expenses that a court of
competent jurisdiction shall have determined by final judgment resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party or a breach of this agreement. The indemnity, reimbursement and
contribution obligations of the Company shall be in addition to any liability
which the Company may otherwise have and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company or an Indemnified Party.
Promptly after receipt of any claim, or the commencement of any action,
the appropriate party will, if a claim in respect thereof is to be made under
this Indemnification Agreement, notify the other party of the claim or
commencement of such action; provided, however, that the obligations of any
indemnifying party shall not be conditioned upon receipt of such notice,
except to the extent that the indemnifying party is actually prejudiced by
such failure to give notice. In case any such action or claim is brought, the
indemnifying party will be entitled to participate therein and, to the extent
that it so wishes, to assume the defense thereof, with counsel reasonably
satisfactory to the Indemnified Party. After notice from the indemnifying
party to the Indemnifying Party of the indemnifying party's election to so
assume the defense thereof, the indemnifying party will not be liable to the
Indemnified Party for indemnification as provided in this Agreement for any
legal fees, disbursement of counsel or other costs and expenses subsequently
incurred in connection with the defense of any claim or action.; provided.,
however., that the Indemnified Party shall have the right to employ separate
counsel if, in the reasonable judgment of its counsel., it is advisable for
it to be represented by separate counsel, and in such event, the reasonable
legal fees of such separate counsel shall be paid by the indemnifying party.
The indemnity, reimbursement and contribution provisions set forth herein
shall remain operative and in full force and effect regardless of (i) any
withdrawal, termination or consummation of or failure to initiate or
consummate any Matter referred to herein, (ii) any investigation made by or
on behalf of any party hereto or any person controlling (within the meaning
of Section 15 of the Securities Act of 1933 as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended) any party hereto, (iii) any
termination or the completion or expiration of this letter of National's
engagement and (iv) whether or not National shall, or shall not be called
upon to, render any formal or informal advice in the course of such
engagement.
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
Exhibit Number Document
27 Financial Data Schedule
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the
consolidated balance sheet and the consolidated statement of income
filed as part of the report on Form 10-QSB and is qualified in its
entirety by reference to such report on Form 10-QSB.
</LEGEND>
<CIK> 0000915127
<NAME> PHC, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.000
<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>
