<PAGE>
PHC, INC.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
TO OUR SHAREHOLDERS
Our fiscal year ended June 30, 2000, and the first quarter of fiscal 2001
has been an exciting and productive period for Pioneer Behavioral Health. This
annual letter is a welcome opportunity for me to review and update our progress,
and to share with you our confidence that Pioneer Behavioral Health is poised
for continued growth and consistent profitability.
Since we refocused on our core behavioral health operations, your company
is enjoying a turnaround that we believe is creating value for our shareholders
and recognition in the marketplace. We reached a very important milestone in
fiscal 2000, which was a return to profitability from our core business, and our
operating income was the highest in six years.
Income from operations prior to interest, taxes, depreciation, amortization
and Internet expenses rose to $1,139,318 for the fiscal year ended June 30, 2000
from $932,660 for the prior year. Revenue for the year rose to $20,378,760 from
$19,139,496 for the fiscal year ended June 30, 1999, a 6.5% increase.
Income from operations prior to our Internet company expenses was $749,314
for the fiscal year ended June 30, 2000 compared to a loss of $542,175 for the
prior year, an increase of $1,291,489. On a consolidated basis, we reported a
net loss of $1,577,145. Included in this net loss are expenses from our
Wellplace.com Internet subsidiary of $520,463 and $964,474 for non-cash
dividends and discounts on preferred stock.
Occupancy levels at our treatment facilities are high. We recently
announced a number of new contracts at our Harmony Healthcare and Pioneer
Pharmaceutical Research divisions that are just beginning to generate revenue,
and are expected to contribute to earnings for the current fiscal year.
Pioneer's Internet subsidiary recently launched its new website and changed
its name to Wellplace.com. This new site, along with the appointment of Joyce
Reitman as Chief Executive Officer, will also contribute greatly to enhancing
shareholder value during this fiscal year. The architecture and management team
is now in place to take Wellplace.com to the next level.
Several of the important developments in fiscal 2000 highlight the progress
we have made in our traditional businesses and the success of our newest
initiatives:
o In November 1999, we created three distinct operating units. Hospital and
Clinical Services; Harmony Healthcare; and our Internet subsidiary. We
believe this organizational structure rationalizes and defines our
principal businesses.
o Our managed healthcare division, Harmony Healthcare, which has become the
largest provider of behavioral health services to the gaming and
transportation industries, is experiencing profitable growth in its Las
Vegas operations. Harmony continues to sign new contracts, including the
Venetian hotel/casino, the Sahara Hotel and Casino, Aladdin hotel and
Casino and Arizona Charlie's Hotel and Casino. We have also signed a
contract with the Horseshoe Hotel and Casino and are expanding the
behavioral health services we provide to the Stratosphere Hotel and Casino.
Pioneer now provides services for 600,000 lives nationwide. The contract
with the Venetian soon to be Las Vegas' largest casino/hotel, provides a
full range of behavioral health services to Venetian employees and their
dependents, as do the contracts with the other properties.
o Our hospital division has converted Highland Ridge Hospital in Salt Lake
City to a psychiatric facility that is equipped to provide the full
spectrum of behavioral health services and increase its revenues. Our
strategy for Highland Ridge is to duplicate the success of our full-service
Michigan facility.
o We have launched Pioneer Pharmaceutical Research, a new company that is
integrating the research experience and skills of the psychiatrists and
clinicians in our national provider network with the research efforts of
the country's leading pharmaceutical companies and with other leading
behavioral healthcare providers. Pioneer is currently participating in
several projects with pharmaceutical companies.
o Our WellPlace.com subsidiary continues to generate positive feedback on its
web site and register steady gains in visits. An Internet Advisory Board
chaired by nationally known addiction specialist Dr. Howard Shaffer of the
Harvard Medical School is actively involved in developing content and
distance learning projects for the web site.
o Our critical incidence and employee assistance unit, PDS2, signed a
contract with the Utah Behavioral Health Network (UBHN) to offer support
services over its 24 hour-telephone hotline service. UBHN is comprised of
14 leading mental health and substance abuse providers in Utah.
We are especially excited about the long-term potential for WellPlace.com.
Our mission for WellPlace.com is to become the world leader in providing
behavioral health services over the Internet. In September 2000, we named Joyce
Reitman as CEO of WellPlace.com. Ms. Reitman, an experienced entrepreneur, has
been successful with three high technology ventures. She has also held financial
management positions with GE, Perkin-Elmer and Electronic Arrays.
This year we will take our Internet efforts to the next level, adding
interactive self care to our revenue model and bringing to WellPlace.com a CEO
who combines expertise in behavioral health issues with understanding of
business potential.
WellPlace.com has an infrastructure of products, services and technology in
place that competitors do not yet have, and which connect with our customers
through a last mile delivery system. We are positioned to be a major presence in
the $95 billion market for mental health services.
One of the keys to our continued growth is the expertise, experience and
depth of new and reassigned members of our management team, who will help our
reorganized company realize its potential:
o Michael Cornelison has been named executive vice president and chief
operating officer with responsibility for all Pioneer operating units.
o Robert Boswell, senior vice president, has relocated to Las Vegas to focus
on our growing managed care products and services, particularly for the
gaming and transportation industries.
The return to profitability we attained in our core business for fiscal
2000 has continued into the first quarter of this year. For the fiscal first
quarter ended September 30, 2000, income from operations, prior to interest,
taxes, depreciation, amortization, dividends and Internet expenses, rose to
$398,857 for the quarter, from $271,910 for the corresponding quarter of the
prior fiscal year. Revenue for the quarter was $5,286,498, up 20 percent from
revenue of $4,382,809 for the same period last year.
On a consolidated basis, Pioneer Behavioral Health reported a net loss of
$176,617, compared with a net loss of $59,952 for the prior year's quarter.
Included in the net loss is our Internet subsidiary's net loss totaling $238,862
compared with $58,985 for the same quarter last year.
Our reengineered business is enjoying revenue growth and earnings
improvement, reflecting gains in census and revenue for our inpatient treatment
facilities, growth in our Pioneer Pharmaceutical Research division and overall
positive recognition of behavioral health treatment programs. The October 2000
census for the company's inpatient treatment facilities was up 35 percent from
October, 1999, due in part to results of our effective marketing program.
WellPlace.com is now fully functioning and has begun contributing to the
company's revenues for the first time in the quarter ended Sept. 30, 2000. If
this trend continues, it will help reduce our operating loss for the current
quarter compared with the same quarter last year.
We have announced four agreements in recent months to offer new
WellPlace.com services, and we believe demand from consumers and professionals
for our online behavioral health education and treatment programs will continue
to grow.
We take seriously our obligations to our shareholders and the investment
community. To help us meet these obligations we have retained Porter, LeVay &
Rose, a national public relations firm, that has been introducing Pioneer
Behavioral Health to a broader cross-section of the financial community, news
media and other audiences and helping to heighten your company's visibility and
value.
On behalf of our management team, I thank you for your confidence in us,
and pledge to merit that confidence.
Sincerely,
/s/ Bruce A. Shear
President
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual report under section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended June 30, 2000
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to
Commission file number: 0-22916
PHC, INC.
(Name of small business issuer 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)
Issuer's telephone number: (978) 536-2777 (New area code)
Securities registered under Section 12(b) of the Act:
NONE.
Securities registered under Section 12(g) of the Act:
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
No Disclosure X
The issuer's revenues for the fiscal year ended June 30, 2000 were $20,378,760.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of September 15, 2000, was $4,421,446. (See
definition of affiliate in Rule 12b-2 of Exchange Act).
At September 15, 2000, 7,494,602 shares of the issuer's Class A Common Stock and
726,991 shares of the issuer's Class B Common Stock were outstanding.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT:
Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
Our company is a national health care company, which provides psychiatric
services primarily to individuals who have alcohol and drug dependency, related
disorders and to individuals in the gaming and trucking industry. We operate
substance abuse treatment facilities in Utah and Virginia, four outpatient
psychiatric facilities in Michigan, two outpatient psychiatric facilities in
Nevada, one outpatient psychiatric facility in Kansas and an inpatient
psychiatric facility in Michigan. We also provide management and administrative
services to psychotherapy and psychological practices in New York and operate a
website, Behavioralhealthonline.com, which provides education, training and
materials to behavioral health professionals.
Our company provides behavioral health services and products through
inpatient and outpatient facilities and online to behavioral health
professionals. Our substance abuse facilities provide specialized treatment
services to patients who typically have poor recovery prognoses and who are
prone to relapse. These services are offered in small specialty care facilities,
which permit us to provide our clients with efficient and customized treatment
without the significant costs associated with the management and operation of
general acute care hospitals. We tailor these programs and services to
"safety-sensitive" industries and concentrate our marketing efforts on the
transportation, oil and gas exploration, heavy equipment, manufacturing, law
enforcement, gaming and health services industries. Our psychiatric facility
provides inpatient psychiatric care and intensive outpatient treatment, referred
to as partial hospitalization, to children, adolescents and adults. Our
outpatient mental health clinics provide services to employees of major
employers, as well as to managed care, Medicare and Medicaid clients. The
psychiatric services are offered in a larger, more traditional setting than
PHC's substance abuse facilities, enabling PHC to take advantage of economies of
scale to provide cost-effective treatment alternatives.
The company treats employees who have been referred for treatment as a
result of compliance with Subchapter D of the Anti-Drug Abuse Act of 1988
(commonly known as the Drug Free Workplace Act), which requires employers who
are Federal contractors or Federal grant recipients to establish drug-free
awareness programs which, among other things, inform employees about available
drug counseling; rehabilitation and employee assistance programs. We also
provide treatment under the Department of Transportation implemented
regulations, which broaden the coverage and scope of alcohol and drug testing
for employees in "safety sensitive" positions in the transportation industry.
The company was incorporated in 1976 and is a Massachusetts corporation.
Our corporate offices are located at 200 Lake Street, Suite 102, Peabody, MA
01960 and our telephone number is (978) 536-2777.
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PSYCHIATRIC SERVICES INDUSTRY
Substance Abuse Facilities
Industry Background
The demand for substance abuse treatment services increased rapidly in the
last decade. The company believes that the increased demand is related to
clinical advances in the treatment of substance abuse, greater societal
willingness to acknowledge the underlying problems as treatable illnesses,
improved health insurance coverage for addictive disorders and chemical
dependencies and governmental regulation which requires certain employers to
provide information to employees about drug counseling and employee assistance
programs.
To contain costs associated with behavioral health issues in the 1980s,
many private payors instituted managed care programs for reimbursement, which
included pre-admission certification, case management or utilization review and
limits on financial coverage or length of stay. These cost containment measures
have encouraged outpatient care for behavioral problems, resulting in a
shortening of the length of stay and revenue per day in inpatient chemical abuse
facilities. The company believes that it has addressed these cost containment
measures by specializing in treating relapse-prone patients with poor prognoses
who have failed in other treatment settings. These patients require longer
lengths of stay and come from a wide geographic area. The company continues to
develop alternatives to inpatient care including partial day and evening
programs in addition to on site and off site outpatient programs.
The company believes that because of the apparent unmet need for certain
clinical and medical services, its strategy has been successful despite national
trends towards outpatient treatment, shorter inpatient stays and rigorous
scrutiny by managed care organizations.
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Company Operations
The company has been able to secure insurance reimbursement for longer-term
inpatient treatment as a result of its success with poor prognosis patients. The
company's two substance abuse facilities work together to refer patients to the
center that best meets the patient's clinical and medical needs. Each facility
caters to a slightly different patient population including high-risk,
relapse-prone chronic alcoholics, drug addicts, minority groups and dual
diagnosis patients (those suffering from both substance abuse and psychiatric
disorders). The company concentrates on providing services to insurers, managed
care networks and health maintenance organizations for both adults and
adolescents. The company's clinicians often work directly with managers of
employee assistance programs to select the best treatment facility possible for
their clients.
Each of the company's facilities operates a case management program for
each patient including a clinical and financial evaluation of a patient's
circumstances to determine the most cost-effective modality of care from among
outpatient treatment, detoxification, inpatient, day care, specialized relapse
treatment and others. In addition to any care provided at one of the company's
facilities, the case management program for each patient includes aftercare.
Aftercare may be provided through the outpatient services provided by a
facility. Alternatively, the company may arrange for outpatient aftercare, as
well as family and mental health services, through its numerous affiliations
with clinicians located across the country once the patient is discharged.
In general, the company does not accept patients who do not have either
insurance coverage or adequate financial resources to pay for treatment. Each of
the company's substance abuse facilities does, however, provide treatment free
of charge to a small number of patients each year who are unable to pay for
treatment, but who meet certain clinical criteria and who are believed by the
company to have the requisite degree of motivation for treatment to be
successful. In addition, the company provides follow-up treatment free of charge
to relapse patients who satisfy certain criteria. The number of patient days
attributable to all patients who receive treatment free of charge in any given
fiscal year is less than 5%.
The company believes that it has benefited from an increased awareness of
the need to make substance abuse treatment services accessible to the nation's
workforce. For example, Subchapter D of the Anti-Drug Abuse Act of 1988
(commonly known as The Drug Free Workplace Act), requires employers who are
Federal contractors or Federal grant recipients to establish drug free awareness
programs to inform employees about available drug counseling, rehabilitation and
employee assistance programs and the consequences of drug abuse violations. In
response to the Drug Free Workplace Act, many companies, including many major
national corporations and transportation companies, have adopted policies that
provide for treatment options prior to termination of employment.
Although the company does not provide federally approved mandated drug
testing, the company treats employees who have been referred to the company as a
result of compliance with the Drug Free Workplace Act, particularly from
companies that are part of the gaming industry as well as safety sensitive
industries such as railroads, airlines, trucking firms, oil and gas exploration
companies, heavy equipment companies, manufacturing companies and health
services.
HIGHLAND RIDGE - Highland Ridge is a 34-bed, freestanding alcohol and drug
treatment hospital, which the company has been operating since 1984. It is the
oldest facility dedicated to substance abuse in Utah. Highland Ridge is
accredited by the Joint Commission on Accreditation of Healthcare Organizations
("JCAHO") and is licensed by the Utah Department of Health. Highland Ridge is
recognized nationally for its excellence in treating substance abuse disorders.
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Most patients are from Utah and surrounding states. Individuals typically
access Highland Ridge's services through professional referrals, family members,
employers, employee assistance programs or contracts between the company and
health maintenance organizations located in Utah.
Highland Ridge was the first private for-profit hospital to address
specifically the special needs of chemically dependent women in Salt Lake
County. In addition, Highland Ridge has contracted with Salt Lake County to
provide medical detoxification services targeted to women. The hospital also
operates a specialized continuing care support group to address the unique needs
of women and minorities.
A pre-admission evaluation, which involves an evaluation of psychological,
cognitive and situational factors, is completed for each prospective patient. In
addition, each prospective patient is given a physical examination upon
admission. Diagnostic tools, including those developed by the American
Psychological Association, the American Society of Addiction Medicine and the
Substance Abuse Subtle Screening Inventory are used to develop an individualized
treatment plan for each client. The treatment regimen involves an
interdisciplinary team which integrates the twelve-step principles of self-help
organizations, medical detoxification, individual and group counseling, family
therapy, psychological assessment, psychiatric support, stress management,
dietary planning, vocational counseling and pastoral support. Highland Ridge
also offers extensive aftercare assistance at programs strategically located in
areas of client concentration throughout the United States. Highland Ridge
maintains a comprehensive array of professional affiliations to meet the needs
of discharged patients and other individuals not admitted to the hospital for
treatment.
Highland Ridge periodically conducts or participates in research projects.
Highland Ridge was the site of a recent research project conducted by the
University of Utah Medical School. The research explored the relationship
between individual motivation and treatment outcomes. The research was regulated
and reviewed by the Human Subjects Review Board of the University of Utah and
was subject to federal standards that delineated the nature and scope of
research involving human subjects. Highland Ridge benefited from this research
by expanding its professional relationships within the medical school community
and by applying the findings of the research to improve the quality of services
the company delivers.
In the spring of 1994, the company began to operate a crisis hotline
service under contract with a major transportation client. The hotline, Pioneer
Development Support Services, or PDS2 ("PDS2"), shown as Contract support
services on the accompanying income statement, is a national, 24-hour telephone
service, which supplements the services provided by the client's Employee
Assistance Programs. The services provided include information, crisis
intervention, critical incidents coordination, employee counselor support,
client monitoring, case management and health promotion. The hotline is staffed
by counselors who refer callers to the appropriate professional resources for
assistance with personal problems. Four major transportation companies
subscribed to these services as of June 30, 2000. This operation is physically
located in Highland Ridge Hospital, but a staff dedicated to PDS2 provides the
services. PDS2 is currently operated by the parent entity, PHC, Inc.
MOUNT REGIS - Mount Regis is a 25-bed, freestanding alcohol and drug
treatment center located in Salem, Virginia, near Roanoke. The company acquired
the center in 1987. It is the oldest of its kind in the Roanoke Valley. Mount
Regis is accredited by the JCAHO, and licensed by the Department of Mental
Health, Mental Retardation and Substance Abuse Services of the Commonwealth of
Virginia. In addition, Mount Regis operates Changes, a freestanding outpatient
clinic. The Changes clinic provides structured intensive outpatient treatment
for patients who have been discharged from Mount Regis and for patients who do
not need the formal structure of a residential treatment program. The program is
licensed by the Commonwealth of Virginia and approved for reimbursement by major
insurance carriers.
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Mount Regis Center's programs are sensitive to needs of women and
minorities. The majority of Mount Regis clients are from Virginia and
surrounding states. In addition, because of its relatively close proximity and
accessibility to New York, Mount Regis has been able to attract an increasing
number of referrals from New York-based labor unions. Mount Regis has
established programs that allow the company to better treat dual diagnosis
patients (those suffering from both substance abuse and psychiatric disorders),
cocaine addiction and relapse-prone patients. The multi-disciplinary case
management, aftercare and family programs are key to the prevention of relapse.
General Psychiatric Facilities
Introduction
The company believes that its proven ability to provide high quality,
cost-effective care in the treatment of substance abuse has enabled it to grow
in the related behavioral health field of psychiatric treatment. The company's
main advantage is its ability to provide an integrated delivery system of
inpatient and outpatient care. As a result of integration, the company is better
able to manage and track patients.
The company offers inpatient and partial hospitalization psychiatry
services through Harbor Oaks Hospital. The company also currently operates seven
outpatient psychiatric facilities.
The company's philosophy at these facilities is to provide the most
appropriate and efficacious care with the least restrictive modality of care. An
attending physician and a case manager with continuing oversight of the patient
as the patient receives care in different locations or programs handle case
management. The integrated delivery system allows for better patient tracking
and follow-up, and fewer repeat procedures and therapeutic or diagnostic errors.
Qualified, dedicated staff members take a full history on each new patient and
through test and evaluation procedures they provide a thorough diagnostic
write-up of the patient's condition. In addition a physician does a complete
physical examination for each new patient. This information allows the
caregivers to determine which treatment alternative is best suited for the
patient and to design an individualized recovery program for the patient.
Managed health care organizations, state agencies, physicians and patients
themselves refer patients to our facilities. These facilities have a patient
population ranging from children as young as 5 years of age to senior citizens.
The psychiatric facilities treat a larger percentage of female patients than the
substance abuse facilities.
HARBOR OAKS - The company acquired Harbor Oaks Hospital, a 64-bed
psychiatric hospital located in New Baltimore, Michigan, approximately 20 miles
northeast of Detroit, in September 1994. Harbor Oaks Hospital is licensed by the
Michigan Department of Commerce and it is accredited by JCAHO. Harbor Oaks
provides inpatient psychiatric care, partial hospitalization and outpatient
treatment to children, adolescents and adults. Harbor Oaks Hospital has serviced
clients from Macomb, Oakland and St. Clair Counties and has now expanded its
coverage area to include Wayne, Sanilac and Livingston Counties.
The company utilizes the Harbor Oaks facility as a mental health resource
to complement its nationally focused substance abuse treatment programs. Harbor
Oaks Hospital has a specialty program that treats substance abuse patients who
have a coexisting psychiatric disorder. This program provides an integrated
holistic approach to the treatment of individuals who have both substance abuse
and psychiatric problems. Both adults and adolescents can benefit from this
program.
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On February 10, 1997, Harbor Oaks Hospital opened an 8-bed adjudicated
residential unit serving adolescents with a substance abuse problem and a
co-existing mental disorder who have been adjudicated to have committed criminal
acts and who have been referred or required to undergo psychiatric treatment by
a court or family service agency. The patients in the program range from 13 to
18 years of age. The program provides patients with educational and recreational
activities and adult life functioning skills as well as treatment. Typically, a
patient is admitted to the unit for an initial period of 30 days to six months.
A case review is done for any patient still in the program at six months, and
each subsequent six-month period thereafter, to determine if additional
treatment is required. State authorization allowed the company to increase the
number of beds in the adjudicated residential unit to twelve on May 1, 1998 and
twenty on June 26, 1998.
HARMONY HEALTHCARE - Harmony Healthcare, which consists of two psychiatric
clinics in Nevada, provides outpatient psychiatric care to children, adolescents
and adults in the local area. Harmony also operates employee assistance programs
for railroads, health care companies and several large casino companies
including Boyd Gaming Corporation, the MGM Grand, the Mirage and Treasure Island
resorts with a rapid response program to provide immediate assistance 24 hours a
day. Harmony also provides outpatient psychiatric care and inpatient psychiatric
case management through a capitated rate behavioral health carve-out with
Pacific Care Insurance.
TOTAL CONCEPT EAP - Total Concept, an outpatient clinic located in Shawnee
Mission, Kansas, provides psychiatric and substance abuse treatment to children,
adolescents and adults and manages employee assistance programs for local
businesses, gaming, railroads and managed health care companies.
NORTH POINT-PIONEER, INC. - NPP consists of four psychiatric clinics in
Michigan. The clinics provide outpatient psychiatric and substance abuse
treatment to children, adolescents and adults operating under the name Pioneer
Counseling Center. The four clinics are located in close proximity to the Harbor
Oaks facility, which provides more efficient integration of inpatient and
outpatient services, a larger coverage area and the ability to share personnel
which results in cost savings.
BSC-NY, INC - BSC provides management and administrative services to
psychotherapy and psychological practices in the greater New York City
metropolitan area.
PIONEER PHARMACEUTICAL RESEARCH, INC. - PPR works with major manufacturers
of psychiatric pharmaceuticals to assist in the study of the effects of certain
FDA approved products in the treatment of specific mental illness. These studies
are conducted primarily though our facilities in Michigan, Harbor Oaks Hospital
and North Point-Pioneer with the permission and assistance of patients who are
in treatment.
Internet Operations
BEHAVIORAL HEALTH ON LINE, INC. - BHO designs, develops and maintains the
company's web site, Behavioralhealthonline.com. The web site when fully
operational will provide behavioral health professionals with the educational
tools required to keep them abreast of behavioral health breakthroughs and keep
individuals informed of current issues in behavioral health of interest to them.
The original site, Behavioralhealthonline.com, was launched in May 1999. The
company launched its new updated site Wellplace.com in September 2000 and
anticipates sales from its website to develop during the current fiscal year.
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<PAGE>
Operating Statistics
The following table reflects selected financial and statistical information
for all psychiatric services.
Year Ended June 30,
2000 1999
Inpatient
Net patient service
revenues $11,768,434 $10,491,517
Net revenues per
patient day (1) $403 $400
Average occupancy
rate (2) 65.1% 58.4%
Total number of
licensed beds
at end of period 123 123
Source of Revenues:
Private (3) 81.9% 81.5%
Government (4) 18.1% 18.5%
Partial
Hospitalization
and
Outpatient
Net Revenues:*
Individual $5,027,238 $ 5,356,008
Contract $1,880,168 $ 1,682,453
Sources of revenues:
Private 97.6% 98.9%
Government 2.4% 1.1%
Other Psychiatric
Services:
PDS2 (5) $ 653,930 $ 942,637
Practice Management (6) $1,048,990 $ 666,881
---------- -----------
* Net revenue for the Year ended June 30, 1999 includes revenue of $537,688 from
Pioneer Counseling of Virginia, which was closed in January 1999.
(1) Net revenues per patient day equals net patient service revenues divided by
total patient days.
(2) Average occupancy rates were obtained by dividing the total number of
patient days in each period by the number of beds available in such period.
(3) Private pay percentage is the percentage of total patient revenue derived
from all payors other than Medicare and Medicaid.
(4) Government pay percentage is the percentage of total patient revenue
derived from the Medicare and Medicaid programs.
(5) PDS2, Pioneer Development and Support Services, provides clinical support,
referrals management and professional services for a number of the
company's national contracts.
(6) Practice Management revenue is produced through BSC-NY and PHC, Inc.
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<PAGE>
Business Strategy
The company's objective is to become a leading national provider of
treatment services, specializing in substance abuse and psychiatric care.
The company focuses its marketing efforts on "safety-sensitive" industries.
This focus results in customized outcome oriented programs that the company
believes produce overall cost savings to the patients and/or client
organizations. The company intends to leverage experience gained from providing
services to customers in certain industries that it believes will enhance its
selling efforts within these certain industries.
Marketing and Customers
The company markets its substance abuse, inpatient and outpatient
psychiatric health services both locally and nationally, primarily to safety
sensitive industries, including transportation, oil and gas exploration, heavy
machinery and equipment, manufacturing and healthcare services. Additionally,
the company markets its services in the gaming industry both in Nevada and
nationally.
The company employs six individuals dedicated to marketing among the
company's facilities. Each facility performs marketing activities in its local
region. The National Marketing Director of the company coordinates the majority
of the company's national marketing efforts. In addition, employees at certain
facilities perform national marketing activities independent of the National
Marketing Director. The company, with the support of its owned integrated
outpatient systems and management services, continues to pursue more at-risk
contracts and outpatient, managed health care fee-for-service contracts. In
addition to providing excellent services and treatment outcomes, the company
will continue to negotiate pricing policies to attract patients for long-term
intensive treatment which meet length of stay and clinical requirements
established by insurers, managed health care organizations and the company's
internal professional standards.
The company's integrated system of comprehensive outpatient mental health
clinics and physician practices managed by the company complement the company's
inpatient facilities. These clinics and medical practices are strategically
located in Nevada, Virginia, Kansas City, Michigan, Utah and New York. They make
it possible for the company to offer wholly integrated, comprehensive, mental
health services for corporations and managed care organizations on an at-risk or
exclusive fee-for-service basis. Additionally, the company operates Pioneer
Development and Support Services (PDS2) located in the Highland Ridge facility
in Salt Lake City, Utah. PDS2 provides clinical support, referrals, management
and professional services for a number of the company's national contracts. It
gives the company the capacity to provide a complete range of fully integrated
mental health services.
The company has been successful in securing a number of national accounts
with a variety of corporations including: Boyd Gaming, Canadian Rail, Conrail,
CSX, the IUE, MCC, MGM, Station Casinos, Union Pacific Railroad, Union Pacific
Railroad Hospital Association, VBH, and others.
In addition to its direct patient care services, the company launched its
web site, Wellplace.com formerly Behavioralhealthonline.com, in May 1999.
Although many of the articles published on the web site are of interest to the
general public, the company's primary target market is the behavioral health
professional. When fully operational the site will not only provide information
and products to the behavioral health professional, but will also provide a time
and cost effective alternative for acquiring the professional educational units
required each year. Through its strategic alliance with Therapyrightnow.com the
company intends to provide online self-assessment tools for individuals seeking
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the anonymity of the web. The company's Internet Company also provides the added
benefit of web availability of information for various EAP contracts held and
serviced by those subsidiaries providing direct treatment services.
Competition
The company's substance abuse programs compete nationally with other health
care providers, including general and chronic care hospitals, both non-profit
and for-profit, other substance abuse facilities and short-term detoxification
centers. Some competitors have substantially greater financial resources than
the company. The company believes, however, that it can compete successfully
with such institutions because of its success in treating poor-prognosis
patients. The company will compete through its focus on such patients, its
willingness to negotiate appropriate rates and its capacity to build and service
corporate relationships.
The company's psychiatric facilities and programs compete primarily within
the respective geographic area serviced by them. The company competes with
private doctors, hospital-based clinics, hospital-based outpatient services and
other comparable facilities. The main reasons that the company competes well are
its integrated delivery and dual diagnosis programming. Integrated delivery
provides for more efficient follow-up procedures and reductions in length of
stay. Dual diagnosis programming provides a niche service for clients with a
primary mental health and a secondary substance abuse diagnosis. The company
developed its dual diagnosis service in response to demand from insurers,
employees and treatment facilities.
The company's Internet company competes with other medical web sites
internationally. Initial results of market research the company has done in the
area of behavioral health on the internet has indicated an overall receptiveness
and willingness to pay for the services the company intends to provide and the
methods the company intends employ to provide its internet services to
behavioral health professionals and the general public.
Revenue Sources and Contracts
The company has entered into relationships with numerous employers, labor
unions and third-party payors to provide services to their employees and members
for the treatment of substance abuse and psychiatric disorders. In addition, the
company admits patients who seek treatment directly without the intervention of
third parties and whose insurance does not cover these conditions in
circumstances where the patient either has adequate financial resources to pay
for treatment directly or is eligible to receive free care at one of the
company's facilities. The company's psychiatric patients either have insurance
or pay at least a portion of treatment costs. Free treatment provided each year
amounts to less than 5% of the company's total patient days.
Each contract is negotiated separately, taking into account the insurance
coverage provided to employees and members, and, depending on such coverage, may
provide for differing amounts of compensation to the company for different
subsets of employees and members. The charges may be capitated, or fixed with a
maximum charge per patient day, and, in the case of larger clients, frequently
result in a negotiated discount from the company's published charges. The
company believes that such discounts are appropriate as they are effective in
producing a larger volume of patient admissions. The company treats non-contract
patients and bills them on the basis of the company's standard per diem rates
and for any additional ancillary services provided to them by the company.
- 10 -
<PAGE>
Quality Assurance and Utilization Review
The company has established comprehensive quality assurance programs at all
of its facilities. These programs are designed to ensure that each facility
maintains standards that meet or exceed requirements imposed upon the company
with the objective of providing high-quality specialized treatment services to
its patients. To this end, the Joint Commission on Accreditation of Healthcare
Organizations ("JCAHO") survey and accredit the company's inpatient facilities
and the company's outpatient facilities comply with the standards of National
Commission Quality Assurance ("NCQA") although the facilities are not NCQA
certified. The company's professional staff, including physicians, social
workers, psychologists, nurses, dietitians, therapists and counselors, must meet
the minimal requirements of licensure related to their specific discipline, in
addition to each facility's own internal quality assurance criteria. The company
participates in the federally mandated National Practitioners Data Bank, which
monitors professional accreditation nationally.
In response to the increasing reliance of insurers and managed care
organizations upon utilization review methodologies, the company has adopted a
comprehensive documentation policy to satisfy relevant reimbursement criteria.
Additionally, the company has developed an internal case management system,
which provides assurance that services rendered to individual patients are
medically appropriate and reimbursable. Implementation of these internal
policies has been integral to the success of the company's strategy of providing
services to relapse-prone, higher acuity patients.
Government Regulation
The company's business and the development and operation of the company's
facilities are subject to extensive federal, state and local government
regulation. In recent years, an increasing number of legislative proposals have
been introduced at both the national and state levels that would effect major
reforms of the health care system if adopted. Among the proposals under
consideration are reforms to increase the availability of group health
insurance, to increase reliance upon managed care, to bolster competition and to
require that all businesses offer health insurance coverage to their employees.
The company cannot predict whether any such legislative proposals will be
adopted and, if adopted, what effect, if any, such proposals would have on the
company's business.
In addition, both the Medicare and Medicaid programs are subject to
statutory and regulatory changes, administrative rulings, interpretations of
policy, intermediary determinations and governmental funding restrictions, all
of which may materially increase or decrease the rate of program payments to
health care facilities. Since 1983, Congress has consistently attempted to limit
the growth of federal spending under the Medicare and Medicaid programs and will
likely continue to do so. Additionally, congressional spending reductions for
the Medicaid program involving the issuance of block grants to states is likely
to hasten the reliance upon managed care as a potential savings mechanism of the
Medicaid program. As a result of this reform activity the company can give no
assurance that payments under such programs will in the future remain at a level
comparable to the present level or be sufficient to cover the costs allocable to
such patients. In addition, many states, including the Commonwealth of
Massachusetts and the State of Michigan, are considering reductions in state
Medicaid budgets.
Health Planning Requirements
Some of the states in which the company operates, and many of the states
where the company may consider expansion opportunities, have health planning
statutes which require that prior to the addition or construction of new beds,
the addition of new services, the acquisition of certain medical equipment or
certain capital expenditures in excess of defined levels, a state health
planning agency must determine that a need exists for such new or additional
beds, new services, equipment or capital expenditures. These state determination
of need or certificate of need ("DoN") programs are designed to enable states to
participate in certain federal and state health related programs and to avoid
duplication of health services. DoN's typically are issued for a specified
maximum expenditure, must be implemented within a specified time frame and often
include elaborate compliance procedures for amendment or modification, if
needed. Several states, including the Commonwealth of Massachusetts, have
instituted moratoria on some types of DoN's or otherwise stated an intent not to
grant approvals for certain health services. Such moratoria may adversely affect
the company's ability to expand in such states, but may also provide a barrier
to entry to potential competitors.
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<PAGE>
Licensure and Certification
State regulatory authorities must license all of the company's facilities.
The company's Harbor Oaks facility is certified for participation as a provider
in the Medicare and Medicaid programs.
The company's initial and continued licensure of its facilities, and
certification to participate in the Medicare and Medicaid programs, depends upon
many factors, including accommodations, equipment, services, patient care,
safety, personnel, physical environment, the existence of adequate policies,
procedures and controls and the regulatory process regarding the facility's
initial licensure. Federal, state and local agencies survey facilities on a
regular basis to determine whether such facilities are in compliance with
governmental operating and health standards and conditions for participating in
government programs. Such surveys include review of patient utilization and
inspection of standards of patient care. The company has procedures in place to
ensure that its facilities are operated in compliance with all such standards
and conditions. To the extent these standards are not met, however, the license
of a facility could be restricted, suspended or revoked, or a facility could be
decertified from the Medicare or Medicaid programs.
Medicare Reimbursement
Currently the only facility of the company that receives Medicare
reimbursement is Harbor Oaks. For the fiscal year ended June 30, 2000 13.16% of
revenues for Harbor Oaks were derived from Medicare programs.
The Medicare program generally reimburses psychiatric facilities pursuant
to its prospective payment system ("PPS"), in which each facility receives an
interim payment of its allowable costs during the year which is later adjusted
to reflect actual allowable direct and indirect costs of services based upon the
submission of a cost report at the end of each year. However, current Medicare
payment policies allow certain psychiatric service providers an exemption from
PPS. In order for a facility to be eligible for exemption from PPS, the facility
must comply with numerous organizational and operational requirements.
PPS-exempt providers are cost reimbursed, receiving the lower of reasonable
costs or reasonable charges. The Medicare program fiscal intermediary pays a per
diem rate based upon prior year costs, which may be retroactively adjusted upon
the submission of annual cost reports.
The Harbor Oaks facility is currently PPS-exempt. The amount of its
cost-based reimbursement may be limited by the Tax Equity and Fiscal
Responsibility Act of 1982 ("TEFRA") and regulations promulgated under the Act.
Generally, TEFRA limits the amount of reimbursement a facility may receive to a
target amount per discharge, adjusted annually for inflation. The facility's
reasonable Medicare operating costs divided by Medicare discharges, plus a per
diem allowance for capital costs during its base year of operations determines
the target amount. It is not possible to predict the ability of Harbor Oaks to
remain PPS-exempt or to anticipate the impact of TEFRA upon the reimbursement
received by Harbor Oaks in future periods.
In order to receive Medicare reimbursement, each participating facility
must meet the applicable conditions of participation set forth by the federal
government relating to the type of facility, its equipment, its personnel and
its standards of medical care, as well as compliance with all state and local
laws and regulations. In addition, Medicare regulations generally require that
entry into such facilities be through physician referral. The company must offer
services to Medicare recipients on a non-discriminatory basis and may not
preferentially accept private pay or commercially insured patients.
Medicaid Reimbursement
Currently the only facility of the company that receives reimbursement
under any state Medicaid program is Harbor Oaks. A portion of Medicaid costs is
paid by states under the Medicaid program and the federal matching payments are
not made unless the state's portion is made. Accordingly, the timely receipt of
Medicaid payments by a facility may be affected by the financial condition of
the relevant state.
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<PAGE>
Harbor Oaks is a participant in the Medicaid program administered by the
State of Michigan. The company receives reimbursement on a per diem basis,
inclusive of ancillary costs. The state determines the rate and adjusts it
annually based on cost reports filed by the company.
Fraud and Abuse Laws
Various federal and state laws regulate the business relationships and
payment arrangements between providers and suppliers of health care services,
including employment or service contracts, and investment relationships. These
laws include the fraud and abuse provisions of the Medicare and Medicaid
statutes as well as similar state statutes (collectively, the "Fraud and Abuse
Laws"), which prohibit the payment, receipt, solicitation or offering of any
direct or indirect remuneration intended to induce the referral of patients, the
ordering, arranging, or providing of covered services, items or equipment.
Violations of these provisions may result in civil and criminal penalties and/or
exclusion from participation in the Medicare, Medicaid and other
government-sponsored programs. The federal government has issued regulations
that set forth certain "safe harbors," representing business relationships and
payment arrangements that can safely be undertaken without violation of the
federal Fraud and Abuse Laws. Failure to fall within a safe harbor does not
constitute a per se violation of the federal fraud and abuse laws. The company
believes that its business relationships and payment arrangements either fall
within the safe harbors or otherwise comply with the Fraud and Abuse Laws.
Employees
As of September 15, 2000, the company had 315 employees of which 6 were
dedicated to marketing, 88 (25 part time) to finance and administration and 221
(110 part time) to patient care. All of the company's 315 employees are leased
from Inovis, formerly International Personnel Resources, LTD. ("IPR"), a
national employee-leasing firm. The company has elected to lease its employees
to provide more favorable employee health benefits at lower cost than would be
available to the company as a single employer and to eliminate certain
administrative tasks which otherwise would be imposed on the management of the
company. The agreement provides that Inovis will administer payroll, provide for
compliance with workers' compensation laws, including procurement of workers'
compensation insurance and administering claims, and procure and provide
designated employee benefits. The company retains the right to reject the
services of any leased employee and Inovis has the right to increase its fees at
any time upon thirty days' written notice or immediately upon any increase in
payroll taxes, workers' compensation insurance premiums or the cost of employee
benefits provided to the leased employees.
The company believes that it has been successful in attracting skilled and
experienced personnel. Competition for such employees is intense, however and
there can be no assurance that the company will be able to attract and retain
necessary qualified employees in the future. None of the company's employees are
covered by a collective bargaining agreement. The company believes that its
relationships with its employees are good.
Insurance
Each of the company's facilities maintains separate professional liability
insurance policies. Mount Regis, Harbor Oaks, Harmony Healthcare, Total Concept,
NPP and BSC have coverage of $1,000,000 per claim and $3,000,000 in the
aggregate. In addition to this coverage Harbor Oaks maintains an umbrella policy
of $1,000,000. Highland Ridge has limits of $1,000,000 per claim and $6,000,000
in the aggregate. In addition, these entities maintain general liability
insurance coverage in similar amounts.
The parent company maintains $1,000,000 of directors and officers'
liability insurance coverage, general liability coverage of $1,000,000 per claim
and $2,000,000 in aggregate and an umbrella policy of $1,000,000. The company
believes, based on its experience, that its insurance coverage is adequate for
its business and that it will continue to be able to obtain adequate coverage.
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<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
Executive Offices
The company's executive offices are located in Peabody, Massachusetts. The
company's new lease agreement in Peabody covers approximately 4,800 square feet
for a 60-month term, which expires September 17, 2004. The current annual
payment under the lease is $76,800 and increases to $88,896 in the final year.
The company believes that this facility will be adequate to satisfy its needs
for the foreseeable future.
Behavioral Health Online, Inc.
The Internet company's offices are located adjacent to the company's
executive offices in Peabody, Massachusetts. The lease agreement covers
approximately 2,400 square feet for a 54-month term, which expires September 17,
2004. The current annual payment under the lease is $38,400 and increases to
$44,448 in the final year. The company believes that this facility will be
adequate to satisfy its needs for the foreseeable future.
Highland Ridge Hospital
The Highland Ridge premises consist of approximately 24,000 square feet of
space occupying the majority of first floor of a two-story hospital owned by
Valley Mental Health. The lease is for a five-year agreement, which provides for
monthly rental payments of approximately $15,750, which included housekeeping
and maintenance provided by the landlord for the first six months, and includes
changes in rental payments each year based on increases or decreases in the CPI.
In July 1999 the facility began paying approximately $6,500 additional per month
each month for housekeeping and maintenance. The lease in its current form would
expire December 31, 2004, and includes an option to renew for an additional five
years. The company believes that these premises are adequate for its current and
anticipated needs.
Mount Regis Center
The company owns the Mount Regis facility, which consists of a three-story
wooden building located on an approximately two-acre site in a residential
neighborhood. The building consists of over 14,000 square feet and is subject to
a mortgage in the approximate amount of $445,000. The facility is used for both
inpatient and outpatient services. The company believes that these premises are
adequate for its current and anticipated needs.
Psychiatric Facilities
The company owns or leases premises for each of its psychiatric
facilities. Harmony, Total Concept, NPP and BSC each lease their premises. The
company believes that each of these premises is leased at fair market value and
could be replaced without significant time or expense if necessary. The company
believes that all of these premises are adequate for its current and anticipated
needs.
The company owns the building in which Harbor Oaks operates, which is a
single story brick and wood frame structure comprising approximately 32,000
square feet situated on an approximately three acre site. The company has a
$2,752,000 mortgage on this property. The company believes that these premises
are adequate for its current and anticipated needs.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
As a consequence of Franvale's bankruptcy and subsequent receivership, a
number of claims have been asserted against the Company or may be asserted
against the Company in the future. To date, such claims are as follows:
The Commonwealth of Massachusetts named Franvale, the Company and Bruce
Shear as party defendants in the Commonwealth receivership action, C.A. No.
98-2783 in the Superior Court, Suffolk County. On June 28, 1999, the Superior
Court entered a judgment of dismissal, dismissing the case without prejudice and
without costs, as of September 16, 1998. The Company understands that the
facility has been closed, all patients transferred and that the Commonwealth
receiver has resigned.
The Commonwealth of Massachusetts may institute a claim seeking to recover
any expenses incurred but not recovered by the Commonwealth as a consequence of
Franvale's receivership. The Commonwealth has a receivership statute that allows
the Commonwealth to seek indemnification for receivership expenses from
"licensee[s], persons responsible for the affairs of the licensee, or the
owner." Under Commonwealth law, the Commonwealth could seek to hold the Company
liable as a "licensee" or "a person responsible for the affairs of the licensee
[Franvale]." Management believes that there are defenses to any such claim. At
this time the potential claim does not appear to be a material issue, however,
the Company understands that Franvale's collectible accounts receivable are far
in excess of the operating expenses and the receiver's fees that were incurred
during the receivership.
On or about September 14, 1998, the Company and its wholly owned
subsidiary, Franvale, were each served with document subpoenas in connection
with an on-going investigation of Franvale being conducted by the Massachusetts
Medicaid Fraud Control Unit. The focus of the investigation appears to be the
quality of patient care provided by Franvale during the period of early 1997
until the facility was placed into receivership in June 1998. The Company has
cooperated fully with the investigation including the production of documents.
While no specific dollar demand has yet been asserted by the state, the Attorney
General's office has indicated that a payment will be required to settle this
action. Preliminary negotiations between the Company and the State are under
way.
On or about May 15, 2000, the company was served with a subpoena by the
United States Attorney for the District of Massachusetts. The subpoena
requested, inter alia, patient and financial records relating to Franvale
Nursing and Rehabilitation Center for the period of 1995 through 1998. The
company is fully cooperating with the investigation and currently is engaged in
collecting the requested documents for production to the Government.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the company's security holders
during the fourth quarter of the fiscal year ended June 30, 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The company's Units, Class A Common Stock and Class A Warrants have been
traded on the NASDAQ National Market under the symbols "PIHCU," "PIHC" and
"PIHCW," respectively, since the company's initial public offering which was
declared effective on March 3, 1994. There is no public trading market for the
company's Class B Common Stock. The following table sets forth, for the periods
indicated, the high and low sale price of the company's Class A Common Stock, as
reported by NASDAQ.
1999
First Quarter $ 2 $ .625
Second Quarter $ 1.0625 $ .5625
Third Quarter $ 1.75 $ .8125
Fourth Quarter $ 1.46875 $ .8125
2000
First Quarter $ 1.3125 $ .3125
Second Quarter $ 1.3125 $ .5625
Third Quarter $ 3.50 $ .688
Fourth Quarter $ 2.094 $ 1.00
2001
First Quarter (through $ 1.375 $ .625
September 15, 2000)
On September 15, 2000, the last reported sale price of the Class A Common
Stock was $.66. On September 15, 2000 there were 444 holders of record of the
company's Class A Common Stock and 311 holders of record of the company's Class
B Common Stock.
DIVIDEND POLICY
The company has never paid any cash dividends on its Common Stock. While
there are currently no restrictions on the company's ability to pay dividends,
the company anticipates that in the future, earnings, if any, will be retained
for use in the business or for other corporate purposes, and it is not
anticipated that cash dividends in respect of Common Stock will be paid in the
foreseeable future. Any decision as to the future payment of dividends will
depend on the results of operations and financial position of the company and
such other factors as the company's Board of Directors, in its discretion, deems
relevant.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following is a discussion and analysis of the financial condition and
results of operations of the company for the years ended June 30, 2000 and 1999.
It should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere herein. During fiscal year 1999 Pioneer
Counseling of Virginia, Inc. was closed. See "Psychiatric Service Industry -
Operating Statistics" in Part One, Item One of this report for further detail.
Overview
The company presently provides health care services through two substance
abuse treatment centers, a psychiatric hospital and seven outpatient psychiatric
centers (collectively called "treatment facilities"). The company's revenue for
providing behavioral health services through these facilities is derived from
contracts with managed care companies, Medicare, Medicaid, state agencies,
railroads, gaming industry corporations and individual clients. The
profitability of the company is largely dependent on the level of patient census
and the payor mix at these treatment facilities. Patient census is measured by
the number of days a client remains overnight at an inpatient facility or the
number of visits or encounters with clients at out patient clinics. Payor mix is
determined by the source of payment to be received for each client being
provided billable services. The company's administrative expenses do not vary
greatly as a percentage of total revenue but the percentage tends to decrease
slightly as revenue increases. The company's most recent addition, Behavioral
Health Online, Inc., is a provider of behavioral health information and
education through its web site. Revenues from the web site are expected to be
derived from behavioral health professionals for educational units required by
professional standards, sponsorships and advertising for behavioral health
suppliers and the sale of books, tapes and other behavioral health related items
to behavioral health professionals and other consumers. The company signed a
letter of intent with an e-health company in September 2000, which if completed,
will bring with it advanced technology and proven wellness programs to the
company's website.
The healthcare industry is subject to extensive federal, state and local
regulation governing, among other things, licensure and certification, conduct
of operations, audit and retroactive adjustment of prior government billings and
reimbursement. In addition, there are ongoing debates and initiatives regarding
the restructuring of the health care system in its entirety. The extent of any
regulatory changes and their impact on the company's business is unknown.
Managed care has had a profound impact on the company's operations, in the form
of shorter lengths of stay, extensive certification of benefits requirements and
reduced payment for services.
Results of Operations
Years Ended June 30, 2000 and 1999
The company experienced an increase in profitability from its continuing
operations. Gross revenues increased by 6.5% to $20,378,760 for the year ended
June 30, 2000 from $19,139,496 for the year ended June 30, 1999. This increase
in total revenue resulted in an increase in income from operations of $818,048
for the year ended June 30, 2000 over the year ended June 30, 1999. The company
experienced continued progress on its return to profitability for its operating
facilities excluding the Internet company, which is still in the startup phase
of operations and incurred expenses of $483,004. The company increased income
from operations excluding the Internet company by $1,291,489 to $749,314 for the
year ended June 30, 2000 compared to a loss from operations of $542,175 for the
year ended June 30, 1999. The company reduced its net loss before dividends by
$741,415 for the fiscal year ended June 30, 2000 compared to June 30, 1999. The
company also continued to divest itself of operations and contracts operating at
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<PAGE>
a loss. The company reduced rent expense by approximately $70,000 and related
insurance expense by an additional $25,000 through the closing of two clinic
locations in Michigan and changing locations to less expensive more appealing
sites for the Utah and New York operations.
Patient care expenses increased by approximately $180,000 due to the
increase in patient census at our inpatient facilities for the year ended June
30, 2000. Pharmacy costs increased approximately 25% to $245,300 for the year
ended June 30, 2000 from $196,300 for the year ended June 30, 1999; laboratory
fees expense increased approximately 64% to $218,800 for the year ended June 30,
2000 from $133,000 for the year ended June 30, 1999; and food expense increased
approximately 30% to $289,700 for the year ended June 30, 2000 from $300,600 for
the year ended June 30, 1999. We continue to closely monitor the ordering of
hospital supplies, laboratory services and pharmaceutical supplies but these
expenses all relate directly to the number of days of inpatient services we
provide and are expected to increase with higher patient census (see "Operating
Statistics" Part I, Item 1).
Total administrative expenses for all facilities increased 3.6% to
$8,144,582 for the year ended June 30, 2000 from $7,865,013 for the year ended
June 30, 1999. This increase in administrative expense is due largely to the
startup costs related to the Internet Company. Excluding the Internet company,
total consultant fees decreased approximately $299,000 while payroll expenses
increased $240,000 as a result of the more efficient use of salaried employees'
time and the reduction in the use of non-employee consultants for services.
Although administrative expenses increased 3.6% to $8,144,582 for the year ended
June 30, 2000 from $7,865,013 for the year ended June 30, 1999, this amount
includes BHO expenses, which increased to approximately $483,000 for the year
ended June 30, 2000 from $9,500 for the year ended June 30, 1999. All of the
costs related to the Internet company will be administrative costs since no
direct patient care services will be provided. The company continues to evaluate
operations looking for less expensive alternatives to provide the same quality
service.
Interest expense decreased 33.4% to $837,706 for the year ended June 30,
2000 from $1,258,314 for the year ended June 30, 1999. Primarily due to interest
expense incurred on debt of the management company to the former owners and the
value of warrants issued with debt renewal in the year ended June 30 1999 with
no corresponding interest expense in the year ended June 30, 2000.
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<PAGE>
The environment the company operates in today makes collection of
receivables, particularly older receivables, more difficult than in previous
years. Accordingly, the company has increased staff, standardized some
procedures for collecting receivables and instituted a more aggressive
collection policy, which has resulted in an overall decrease in its accounts
receivable. In response to today's healthcare environment, the company's
collection policy calls for earlier contact with insurance carriers with regard
to payment, use of fax and registered mail to follow-up or resubmit claims and
earlier employment of collection agencies to assist in the collection process.
Our collectors also seek assistance through every legal means, including the
State insurance commissioner's office, when appropriate, to collect claims. This
early concentration on claim collection allows facility staff to become aware of
minor billing errors early and correct them before the claim can be denied for
timely and accurate submission. Any valid claims denied due to billing errors on
the part of the company which require write-off are charged to bad debt expense
in the period the account is written off. Any invalid claims result in a charge
against revenue not reserves. An amount is recorded as a contractual adjustment
only if an agreement with the insurance carrier is on file before the patient is
admitted. Although the company's receivables have decreased, the company
continues to reserve for bad debts based on managed care denials and past
difficulty in collections. Changing conditions in healthcare required the
company to reevaluate its methods for determining collectability. The growth of
managed care has negatively impacted reimbursement for behavioral health
services with a higher rate of denials requiring higher reserves. The collection
difficulties experienced are due to the denial of claims that had been
previously approved. Managed care companies frequently deny claims although
authorization for treatment is on file. The company has limited success in
challenging these denials. Accordingly, the company has adopted a more
aggressive reserve policy to reserve amounts sooner to address these changing
conditions in the healthcare environment.
Total net patient care revenue from all facilities, increased 6.5% to
$18,675,840 for the year ended June 30, 2000 from $17,529,978 for the year ended
June 30, 1999. This increase in revenue is due primarily to the increase in
census at our inpatient facilities. Net inpatient care revenue from psychiatric
services increased 12% to $11,768,434 for the fiscal year ended June 30, 2000
compared to $10,491,517 for the year ended June 30, 1999 and net partial
hospitalization and outpatient care revenue decreased 2% to $6,907,406 for the
year ended June 30, 2000 from $7,038,461 for the year ended June 30, 1999.
Revenues from Practice Management and Pioneer Development and Support Services
("PDS2") increased 5.8% to $1,702,920 for the year ended June 30, 2000 from
$1,609,518 for the year ended June 30, 1999. All revenues reported above and in
the accompanying statement of operations are shown net of estimated contractual
adjustments and charity care provided. When payment is made, if the contractual
adjustment is found to have been understated or overstated appropriate
adjustments are made in the period the payment is received in accordance with
the AICPA Audit and Accounting Guide for Health Care Organizations.
Liquidity and Capital Resources
The company used cash in operations of $720,377 for the year ended June 30,
2000. Expenses related to a decrease in net liabilities of discontinued
operations of $537,860, an increase in accounts receivable of $146,037 and a
decrease in accounts payable accounted for the majority of the cash used in
operations. During the year the company also used cash in investing in the
website development and the purchase of furniture and equipment totaling
$149,357. The company met these cash flow needs and the prior years cash flow
needs through accounts receivable financing and by issuing debt and equity
securities as follows:
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<PAGE>
DATE TRANSACTION NUMBER PROCEEDS MATURITY TERMS STATUS
TYPE OF DATE
SHARES
-------------------------------------------------------------------------------
8/98 Note Payable - $100,000 on demand 12% outstanding
Related Party annual
interest
rate
12/98 Convertible $500,000 12/02/2004 12% outstanding
Debentures annual
interest
convertible
at $2.00
in
$1,000
increments
8/99 Extension of $310,000 12/31/99 $45,000 on outstanding
existing over signing
line Note plus prime
Payable plus 2.25%
annual
interest
rate
11/99 Revolving term $979,000 11/30/2001 prime plus outstanding
Note maximum ($579,000 5% annual
advance paid off interest
$1,000,000. existing rate plus
Secured by a debt 1% annual
Restated and commitment
Mortgage on the $400,000 fee
Michigan advanced
property and for
Guarantees of working
the Parent capital)
Company and its
Chief Executive
Officer.
05/00 Term Note $500,000 05/26/2002 prime outstanding
$500,000 plus 5%
Secured by a annual
restated interest
mortgage on rate
the Michigan plus 1%
property and annual
guarantees of commitment
the parent fee
company and
its Chief
Executive
officer
06/00 Issue series C 136,000 $1,000,000 06/28/2003 8% outstanding
preferred stock dividend
paid
semi-annually
- 19 -
<PAGE>
The company also met certain obligations through the issuance of stock,
stock options and warrants totaling approximately $194,000 and $280,000 for the
year ended June 30, 2000 and 1999, respectively.
The company is in the process of negotiating an equity placement of
$5,000,000 for the Internet company to supplement cash flow and support the
growth of the Internet company. There can be no assurances that the company will
be successful with its endeavors to raise this equity. Without this equity
placement the company will need to curtail or delay the Internet company growth.
A significant factor in the liquidity and cash flow of the company is the
timely collection of its accounts receivable. Current accounts receivable from
patient care, net of allowance for doubtful accounts remained relatively stable
at $6,286,490 on June 30, 2000 from $6,343,227 at June 30, 1999. This stability
in accounts receivable is due to increased staff, standardization of some
procedures for collecting receivables and a more aggressive collection policy.
The increased staff has allowed the company to concentrate on current accounts
receivable and resolve any problem issues before they become uncollectable. The
company's collection policy calls for earlier contact with insurance carriers
with regard to payment, use of fax and registered mail to follow-up or resubmit
claims and earlier employment of collection agencies to assist in the collection
process. Our collectors will also seek assistance through every legal means,
including the State insurance commissioner's office, when appropriate, to
collect claims. At the same time, the company continues to closely monitor
reserves for bad debt based on potential insurance denials and past difficulty
in collections. In February 2000 the company renewed its accounts receivable
funding revolving credit agreement with Heller Healthcare Finance, Inc. on
behalf of three of its subsidiaries. This agreement provides funding of up to
$2,500,000 based on outstanding receivables. The outstanding balance on this
receivables financing on June 30, 2000 was approximately $1,555,000. The company
also has an outstanding mortgage with Heller Healthcare Finance for
approximately $1,300,000, which has a balloon payment of the balance due in
March 2001. The company intends to renew this loan.
The company believes that it has sufficient financing available to sustain
existing operations for the foreseeable future. The company also intends to
renew the expansion of its existing operations through new product lines and
expansion of contracts. The company will also expand through its web site
operations offering the behavioral health professional goods and services unique
and specific to their needs for a fee.
The liquidation of the assets and liabilities of Franvale may result in a
non-cash financial statement gain. In the quarter ended December 31, 1998 the
company was relieved of the HUD mortgage of approximately $6,741,000 and
surrendered the underlying assets amounting to approximately $4,329,000. The
recognition of the gain has been deferred until final resolution of all
contingent liabilities.
- 20 -
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
AT PAGE
Index F-1 Report of independent certified public accountants F-2 Consolidated
balance sheets F-3 Consolidated statements of operations F-4 Consolidated
statements of changes in stockholders' equity F-5 Consolidated statements of
cash flows F-6, F-7 Notes to consolidated financial statements F-8 - F27
F-1
- 21 -
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
PHC, Inc.
Peabody, Massachusetts
We have audited the accompanying consolidated balance sheets of PHC, Inc. and
subsidiaries as of June 30, 2000 and 1999 and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PHC,
Inc. and subsidiaries at June 30, 2000 and 1999 and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As explained in Note A, the company changed its method of accounting for
organization costs in the year ended June 30, 2000.
BDO Seidman, LLP
Boston, Massachusetts
September 15, 2000
- 22 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30,
2000 1999
------------------------
ASSETS (Notes C and D) Current assets:
Cash and cash equivalents $ 551,713 $ 381,170
Accounts receivable, net of allowance
for doubtful accounts of $2,850,470
and $3,647,848 at June 30, 2000 and 1999,
respectively (Note A) 6,286,490 6,343,227
Prepaid expenses 120,481 101,865
Other receivables and advances 148,554 334,155
Deferred income tax asset (Note F) 459,280 459,280
Other receivables, related party 77,500 53,517
---------- ----------
Total current assets 7,644,018 7,673,214
Accounts receivable, noncurrent 642,000 595,000
Other receivables, noncurrent, related party, net of
allowance for doubtful accounts of $1,125,054
and $782,000 at June 30, 2000 and
1999, respectively (Notes A and K) 3,239,456 2,908,113
Other receivables (Note A) 95,214 109,165
Property and equipment, net (Notes A, B and D) 1,327,630 1,483,319
Deferred income tax asset (Note F) 154,700 154,700
Deferred financing costs, net of amortization of
$87,555 and $64,041 at June 30, 2000 and
1999, respectively 46,554 45,067
Goodwill, net of accumulated amortization of
$296,907 and $116,900 at June 30, 2000 and
1999, respectively (Note A) 2,588,834 1,761,075
Other assets (Note A) 149,403 78,338
---------- ----------
Total assets $15,887,809 $14,807,991
---------- ----------
LIABILITIES
Current liabilities:
Accounts payable $1,717,362 $1,832,750
Notes payable - related parties (Note E) 200,000 200,000
Current maturities of long-term debt (Note C) 1,622,239 1,286,318
Revolving credit note (Note C) 1,555,149 1,669,830
Current portion of obligations under capital
leases(Note D) 45,482 60,815
Accrued payroll, payroll taxes and benefits 416,111 333,955
Accrued expenses and other liabilities (Note K) 1,798,400 1,459,290
Net liabilities of discontinued operations
(Notes A and I) 1,884,234 2,422,094
---------- ----------
Total current liabilities 9,238,977 9,265,052
Long-term debt, less current maturities (Note C) 2,508,715 1,730,230
Obligations under capital leases (Note D) 12,808 51,657
Convertible debentures (Note C and J) 500,000 500,000
------------ -- ----------
Total liabilities $12,260,500 $11,546,939
Commitments and contingent liabilities
(Notes D, G, H, I, J and K)
STOCKHOLDERS' EQUITY (Notes C, H, J and K) Convertible Preferred stock, $.01 par
value;
1,000,000 shares authorized:
Series B 813
shares issued and outstanding June 30, 1999,
stated value $1,000 per share, liquidation
preference, $813,000 -- 8
Series C 136,000 shares issued and outstanding
June 30, 2000, stated value $10
per share, liquidation preference, $1,360,000 1,360 --
Class A common stock, $.01 par value; 20,000,000
shares authorized, 7,019,608 and
5,612,930 shares issued June 30,2000 and 1999,
respectively 70,196 56,129
Class B common stock, $.01 par value; 2,000,000 shares
authorized, 726,991 and 727,210
issued and outstanding June 30, 2000 and 1999,
respectively, convertible into one share
of Class A common stock 7,270 7,272
Additional paid-in capital 17,895,162 15,967,176
Treasury stock, 2,776 common shares at cost
June 30, 2000 and 1999 (12,122) (12,122)
Accumulated deficit (14,334,557) (12,757,411)
------------ ------------
Total stockholders' equity 3,627,309 3,261,052
Total liabilities and stockholde$s' equity $15,887,809 $14,807,991
------------ ------------
See accompanying notes to consolidated financial statements F-3
- 23 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Year Ended June 30,
2000 1999
---------------------------
Revenues:
Patient care, net (Note A) $18,675,840 $17,529,978
Management fees (Note K) 1,048,990 666,881
Contract support services 653,930 942,637
------------ -----------
Total revenues 20,378,760 19,139,496
Operating expenses:
Patient care expenses 9,293,499 9,113,572
Cost of contract support services 545,176 529,510
Provision for doubtful accounts 2,129,193 2,183,139
Administrative expenses 8,144,582 7,865,013
------------ -----------
Total operating expenses 20,112,450 19,691,234
------------ -----------
Income (loss) from operations 266,310 (551,738)
------------ -----------
Other income (expense):
Interest income 18,853 451,271
Interest expense (837,706) (1,258,314)
Other income, net 91,712 64,129
------------ -----------
Total other expense, net (727,141) (742,914)
------------ -----------
Loss before income taxes and change in
accounting principle (460,831) (1,294,652)
Income taxes (Note F) 79,390 59,434
------------ -----------
Loss before change in accounting principle (540,221) (1,354,086)
Change in accounting principle (Note A) (72,450) --
------------ -----------
Net loss (612,671) (1,354,086)
Dividends (Note J) (964,474) (142,110)
------------ -----------
Loss applicable to common shareholders $(1,577,145) $(1,496,196)
Basic and diluted loss per common share (Note A):
Loss before change in accounting principle $(.22) $(.25)
Change in accounting principle (.01) --
Net Loss $(.23) $(.25)
------------ -----------
Basic and diluted weighted average
number of shares outstanding 6,916,598 6,008,263
------------ -----------
See accompanying notes to consolidated financial statements F-4
- 24 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Consolidated Statements of Changes In Stockholders' Equity (See Notes A, C, H,
J, K and N)
Class A Class B
Common Stock Common Stock Preferred Stock
Shares Amount Shares Amount Shares Amount
Balance -June 30,
1998 4,935,267 $49,353 727,328 $7,273 950 $10
Costs related to
private placement
Conversion of
preferred stock 248,129 2,481 (190) (3)
Price guarantee shares 304,097 3,041
Issuance of warrants
for services
Issuance of shares
with consulting
agreement 56,470 564
Issuance of shares
with earn out
agreement 53,374 534
Issuance of employee
stock purchase
plan shares 15,475 155
Issuance of warrants
for financing
Conversion from class
B to class A 118 1 (118) (1)
Dividends on preferred
stock 53 1
Net Loss- year ended
June 30, 1999 ________________________________________________________
Balance June 30, 1999 5,612,930 56,129 727,210 7,272 813 8
Costs related to
private placements
Issuance of preferred
stock in lieu of
cash dividends 18 0
Conversion of
preferred stock
and related
dividends 1,295,732 12,957 (831) (8)
Shares issued for
employee bonuses 20,450 205
Issuance of warrants
for services
Issuance of shares
with consulting
agreement 68,572 686
Issuance of employee
stock purchase
plan shares 12,330 123
Issuance of warrants
for debt and equity
financings
Conversion from class
B to class A 219 2 (219) (2)
Dividends on
preferred stock
Issuance of shares on
exercise of employee
options 9,375 94
Issuance of series C
preferred stock at
a discount 136,000 1,360
Net Loss - year ended
June 30, 2000 __________________________________________________________
Balance June 30, 2000 7,019,608 $70,196 726,991 $7,270 136,000 $1,360
See accompanying notes to consolidated financial statements.
- 25 -
<PAGE>
PHC, INC. AND SUBSIDIARIES (con't)
Consolidated Statements of Changes In Stockholders' Equity (See Notes A, C, H,
J, K and N)
Additional
Paid-in Treasury Shares Accumulated
Capital Shares Amount Deficit Total
------------------------------------------------------
Balance - June 30, 1998 $15,485,895 2,776 $(12,122) $(11,261,215) $4,269,194
Costs related to
private placement (56,565) (56,565)
Conversion of
preferred stock 91,959 (92,569) 1,868
Price guarantee shares 117,076 120,117
Issuance of warrants for
services 108,354 108,354
Issuance of shares
with consulting
agreement 38,436 39,000
Issuance of shares
with earn out
agreement 59,513 60,047
Issuance of employee
stock purchase plan
shares 18,261 18,415
Issuance of warrants for
financing 51,248 51,248
Conversion from class
B to class A
Dividends on
preferred stock 52,999 (49,541) 3,460
Net Loss-year ended
June 30, 1999 (1,354,086) (1,354,086)
------------------------------------------------------
Balance - June 30,
1999 15,967,176 2,776 (12,122) (12,757,411) 3,261,052
Costs related to
private placements (210,689) (210,689)
Issuance of preferred
stock in lieu of
cash dividends 18,000 (18,000) 0
Conversion of
preferred stock
and related
dividends 553,755 (566,703) 0
Shares issued for
employee bonuses 25,491 25,696
Issuance of warrants for
services 69,775 69,775
Issuance of shares
with consulting
agreement 38,314 39,000
Issuance of employee
stock purchase plan
shares 13,947 14,071
Issuance of warrants for
debt and equity
financings 49,128 (14,963) 34,165
Conversion from class
B to class A 0
Dividends on
preferred stock (4,809) (4,809)
Issuance of shares on
exercise of employee
Options 11,625 11,719
Issuance of series C
preferred stock at a
discount 1,358,640 (360,000) 1,000,000
Net Loss - year ended
June 30, 2000 (612,671) (612,671)
-----------------------------------------------------------
Balance June 30, 2000 $17,895,162 2,776 $(12,122) $(14,334,557)$3,627,309
See accompanying notes to consolidated financial statements
F-5
- 26 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Year Ended June 30,
2000 1999
-------------------------------
Cash flows from operating activities:
Net loss $(612,671) $(1,354,086)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 429,091 325,764
Compensatory stock options and stock
and warrants issued for obligations 182,707 279,719
Changes in:
Accounts receivable (146,037) 1,188,745
Prepaid expenses and other current
assets (18,616) (141,713)
Other assets (25,369) 912,718
Accounts payable (115,388) (513,463)
Accrued expenses and other liabilities 123,766 59,288
Net liabilities of discontinued
operations (537,860) (219,443)
------------ ------------
Net cash(used in) provided by
operating activities (720,377) 537,529
Cash flows from investing activities:
Acquisition of property and equipment
and intangibles (103,661) (115,254)
Website Development costs (45,696) --
------------ ------------
Net cash used in investing
activities (149,357) (115,254)
------------ ------------
Cash flows from financing activities:
Borrowing (repayment) revolving debt, net (114,681) 13,628
Proceeds from borrowings 1,870,050 485,829
Principal payments on long-term
debt (1,509,826) (1,274,969)
Deferred financing costs (1,487) --
Preferred stock dividends (4,809) (7,681)
Issuance of preferred stock at a
discount 1,000,000 15,011
Cost related to preferred stock issuance (210,689) --
Issuance of Commpn Stock 11,719 --
Convertible debt -- 500,000
------------ ------------
Net cash provided by (used in)
financing activities 1,040,277 (268,182)
Net increase in cash and cash equivalents 170,543 154,093
Cash and cash equivalents, beginning of year 381,170 227,077
Cash and cash equivalents, end of year $551,713 $381,170
Supplemental cash flow information: Cash paid during the period for:
Interest $ 852,421 $1,227,628
Income taxes $ 114,890 $189,027
See accompanying notes to consolidated financial statements F-6
- 27 -
<PAGE>
Supplemental disclosures of noncash investing and financing activities:
Debt incurred in earn-out agreement $997,500 $ --
Conversion of preferred stock 831,000 190,000
Preferred stock discount 360,000 --
Issuance of Preferred Stock in lieu of cash for
dividends due 18,000 53,000
Dividend on conversion of preferred stock to
common stock 566,703 81,429
Stock issued for acquisitions and earn-out
agreement -- 60,047
Capital leases -- 25,010
Warrant Valuations -- 159,602
See accompanying notes to consolidated financial statements F-7
- 28 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE A - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and consolidation:
PHC, Inc. and its wholly owned subsidiaries (the "company") is a national health
care company specializing in behavioral health services including the treatment
of substance abuse, which includes alcohol and drug dependency and related
disorders and the provision of psychiatric services. The company also provides
management, administrative and online behavioral health services. The company
primarily operates under three business segments:
1. Behavioral health treatment services, including two substance abuse
treatment facilities: Highland Ridge Hospital, located in Salt Lake City,
Utah; and Mount Regis Center, located in Salem Virginia, and eight
psychiatric treatment locations which include Harbor Oaks Hospital, a
64-bed psychiatric hospital located in New Baltimore, Michigan and seven
outpatient behavioral health locations (two in Las Vegas, Nevada operating
as Harmony Healthcare, one in Shawnee Mission, Kansas operating as Total
Concept and four locations operating as Pioneer Counseling Center in the
Detroit, Michigan metropolitan area);
2. Behavioral health administrative services, including delivery of
management, administrative and help line services. PHC, Inc. provides
management and administrative services for its behavioral health treatment
subsidiaries and BSC-NY, Inc., a subsidiary of PHC, Inc., provides
management services on behalf of physician owned behavioral health
practices in the greater New York City metropolitan area. Pioneer
Development and Support Services ("PDSS") provides help line services
primarily through contracts with major railroads. Pioneer Pharmaceutical
Research, Inc. facilitates drug studies under contract with pharmaceutical
manufacturers; and
3. Behavioral health online services, which includes behavioral health
education, training and products for the behavioral health professional,
through its website wellplace.com formerly known as
behavioralhealthonline.com.
Until January 1999, the company operated Pioneer Counseling of Virginia, Inc.
("PCV'), an 80% owned subsidiary which provided outpatient services through a
physicians practice. On October 5, 1998 Quality Care Centers of Massachusetts,
Inc., which operated the company's long term care facility, Franvale Nursing and
Rehabilitation Center, filed for protection under the Chapter 7 Bankruptcy code.
All financial information for Franvale is reported in the accompanying financial
statements as discontinued operations. The liquidation of the assets and
liabilities of Franvale may result in a non-cash financial statement gain. Net
liabilities of discontinued operations were $1,884,234 and $2,422,094 at June
30, 2000 and June 30, 1999, respectively. This amount decreased in 2000 due to
payment of legal costs related to the closure. The recognition of the gain has
been deferred until final resolution of all contingent liabilities.
Reclassifications
Certain amounts in the June 30, 1999 consolidated financial statements have been
reclassified to conform with the June 30, 2000 presentation.
F-8
- 29 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE A - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenues and accounts receivable:
Patient care revenues and accounts receivable are recorded at established
billing rates or at the amount realizable under agreements with third-party
payors, including Medicaid and Medicare. Revenues under third-party payor
agreements are subject to examination and contractual adjustment, and amounts
realizable may change due to periodic changes in the regulatory environment.
Provisions for estimated third party payor settlements are provided in the
period the related services are rendered. Differences between the amounts
provided and subsequent settlements are recorded in operations in the year of
settlement. The provision for contractual allowances is deducted directly from
revenue and the net revenue amount is recorded as accounts receivable. The
allowance for doubtful accounts does not include the contractual allowances.
Medicaid reimbursements are currently based on established rates depending on
the level of care provided and are adjusted prospectively. Medicare
reimbursements are currently based on provisional rates that are adjusted
retroactively based on annual cost reports filed by the company with Medicare.
The company's cost reports to Medicare are routinely audited on an annual basis.
The company periodically reviews its provisional billing rates and provides for
estimated Medicare adjustments. The company believes that adequate provision has
been made in the financial statements for any adjustments that might result from
the outcome of Medicare audits.
Long-term assets include accounts receivable non current, other receivables, non
current, related party and other receivables. Accounts receivable, non current
consists of amounts due from former patients for service. This amount represents
amounts collectable under supplemental payment agreements, arranged by the
company's collection agencies, entered into because of the patients' inability
to pay under normal payment terms. All of these receivables have been extended
beyond their original due date. Accounts of former patients that do not comply
with these supplemental payment agreements are written off. Other receivables
non current-related party is the amount due from a related professional
corporation net of the related allowance for doubtful accounts. This amount
consists of the balance due of funds advanced to the professional corporation
for acquisition costs, management fees, working capital and interest on the
advanced funds (see discussion regarding BSC-NY, Inc. in Note K).
Charity care amounted to approximately $149,000 and $242,000 for the years ended
June 30, 2000 and 1999, respectively. Patient care revenue is stated net of
charity care in the accompanying statements of operations.
Estimates and assumptions:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash equivalents:
Cash equivalents are short-term highly liquid investments with maturities of
less than three months, when purchased.
F-9
- 30 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE A - THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and equipment:
Property and equipment are stated at cost. Depreciation is provided over the
estimated useful lives of the assets using accelerated and straight-line
methods. The estimated useful lives are as follows:
Estimated
Assets Useful Life
-----------------------------------------
Buildings 39 years
Furniture and equipment 3 through 10 years
Motor vehicles 5 years
Leasehold improvements Term of lease
Other assets:
Other assets are primarily deposits and deferred expenses.
Organization Costs (Change in accounting principle)
During 2000, all unamortized organization costs related to the acquisition of
businesses have been written off as required by the American Institute of
Certified Public Accounts Statement of Position 98-2 "Reporting the Costs of
Start-up Activities".
Goodwill, net of accumulated amortization:
The excess of the purchase price over the fair market value of net assets
acquired is being amortized on a straightline basis over twenty years.
Impairment of long-lived assets:
During the year ended June 30, 1999 the company wrote off the carrying value of
goodwill for Pioneer Counseling of Virginia, Inc., approximately $305,000, and
wrote down the remaining balance of accounts receivable for the facility of
approximately $43,000. The above write-downs were considered necessary due to
the closing of facilities. The assets had no ongoing value or were written-down
to their net realizable value. Write-downs in the carrying value of goodwill and
property and equipment are charged to depreciation and amortization expense,
which is included in administrative expenses in the company's statements of
operations. Write-downs in accounts receivable were charged to the provision for
doubtful accounts in the accompanying statements of operations.
In accordance with Statement of Financial Accounting Standard (SFAS) No. 121,
long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. For purposes of evaluating the recoverability of long-lived assets,
the recoverability test is performed using undiscounted net cash flows related
to the long-lived assets. The amount of the impairment losses recognized is
measured as the amount by which the carrying amount of the asset exceeds the
fair value of the asset.
F-10
- 31 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE A-THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and diluted loss per share:
The loss per share is computed by dividing the loss applicable to common
shareholders, net of dividends charged directly to retained earnings, by the
weighted average number of shares of common stock outstanding for each fiscal
year. No common stock equivalents have been included in the calculation of
diluted loss per share because their effect would be anti-dilutive.
Net liabilities of discontinued operations
Net liabilities of discontinued operations relates to the Franvale closure in
1998 and consists of the following:
June 30,
2000 1999
-------------------------
Debt forgiveness and reserve for
contingencies $2,641,537 $2,641,537
Less legal and other expenses incurred
to date 757,303 219,443
Net liabilities of discontinued
operations $1,884,234 $2,422,094
The recognition of gain, if any, has been deferred until final resolution of all
contingent liabilities related to the discontinued operations.
Fair value of financial instruments:
The carrying amounts of cash, trade receivables, other current assets, accounts
payable, notes payable and accrued expenses approximate fair value based on
their short-term maturity and prevailing interest rates.
F-11
- 32 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE A-THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-based compensation:
The company accounts for its employee stock-based compensation under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". In
October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation", SFAS No. 123 establishes a
fair-value-based method of accounting for stock-based compensation plans. The
company adopted the disclosure only alternative, which requires disclosure of
the pro forma effects on loss and loss per share as if SFAS No. 123 had been
adopted, as well as certain other information.
All of the company's employees are employed under leasing arrangements. The
company believes that its leased employees meet the common law definition of
employee and therefore qualify as employees for purposes of applying SFAS No.
123. The company's employee leasing arrangement meets the employee definition
requirements under FASB Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation".
Income tax:
The company follows the liability method of accounting for income taxes, as set
forth in SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 prescribes an
asset and liability approach which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of the assets and
liabilitites. The company's policy is to record a valuation allowance against
deferred tax assets unless it is more likely than not that such assets will be
realized in future periods. The company considers estimated future taxable
income or loss and other available evidence when assessing the need for its
deferred tax valuation allowance.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
June 30,
2000 1999
--------------------------
Land $ 69,259 $ 69,259
Buildings 1,136,963 1,136,963
Furniture and equipment 929,762 868,722
Motor vehicles 62,292 41,444
Leasehold improvements 379,981 358,207
----------- -----------
2,578,257 2,474,595
Less accumulated depreciation and
amortization 1,250,627 991,276
----------- -----------
$1,327,630 $1,483,319
----------- -----------
F-12
- 34 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE C - NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt is summarized as follows:
June 30,
2000 1999
------------------
Note payable with interest at 9% requiring monthly
payments of $1,150 through May 2001. $ 11,323 $23,509
9% mortgage note due in monthly installments of $4,850,
including interest through July 1, 2012, when the
remaining principal balance is payable. 445,567 462,814
Term mortgage note payable with interest only payments
through March 1998 principal due in monthly principal installments of $13,333
through February 2001. A balloon payment of approximately $1,300,000 plus
interest is due March 2001, interest at prime plus 5%(14.5% at June 30, 2000)
collateralized by all
assets of PHC of Michigan, Inc. (PHM) 1,273,333 1,433,333
Term mortgage note payable with interest only payments
through October 2000 principal due in monthly
installments of $10,000 beginning November 2000
through October 2002. The note bears interest at
prime plus 5% (14.5% at June 30, 2000) collateralized
by all assets of PHC of Michigan, Inc. and may be
renewed at the end of two years. 978,657 --
Term mortgage note payable with interest only payments
through October 2001 principal due in monthly
installments of $41,667 beginning November 2001
through September 2002. The final principal payment
of approximately $42,000 is due October 2002. The
note bears interest at prime plus 5%(14.5% at June 30,
2000)collateralized by all assets of PHM and may
be renewed at the end of two years. 500,000 --
Note Payable issued in conjunction with the final earn-out
on the BSC-NY, Inc. acquisition due in monthly
installments of $11,567 including interest at 11%
through July 2005 (see Note K). 532,000 --
Note Payable issued in conjunction with the final earn-out
on the BSC-NY, Inc. acquisition due in monthly
installments of $3,653 including interest at 11% through
July 2005 (see Note K). 168,000 --
Note Payable due in monthly installments of $7,192 including
interest at 9% through through March 2001. 62,363 --
Note Payable due in monthly installments of $429
including interest at 8.69% through through May 2004. 17,248 --
Note Payable due in monthly installments of $5,088
including interest at 9% through through October 2002. 142,463 --
F-13
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<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE C - NOTES PAYABLE AND LONG-TERM DEBT (CON'T)
Long-term debt is summarized as follows (continued):
June 30,
2000 1999
--------------
Note payable bearing interest at prime plus 3.5%, paid
in full November 1999 -- 324,730
Note payable due in monthly installments of $7,633, paid
in full October 1999 -- 29,785
Note payable due in monthly installments of $2,378, paid
in full October 1999 -- 9,278
Note payable due in monthly installments of $21,506, paid
in full June 2000 -- 261,802
Note payable due in monthly installments of $26,131, paid
in full June 2000 -- 471,297
----------- ----------
Total 4,130,954 3,016,548
Less current maturities 1,622,239 1,286,318
----------- ----------
Noncurrent maturities $2,508,715 $1,730,230
----------- ----------
Maturities of long-term debt are as follows as of June 30, 2000:
Year Ending
June 30, Amount
------------ ----------
2001 $1,622,239
2002 1,597,439
2003 184,583
2004 182,167
2005 197,642
Thereafter 346,884
------------
$4,130,954
-----------
The company has a revolving credit note under which a maximum of $2,500,000 may
be outstanding at any time. At June 30, 2000 the outstanding balance was
$1,555,149. Advances are made based on a percentage of accounts receivable and
principal is payable upon receipt of proceeds of the accounts receivable.
Interest is payable monthly at prime plus 2.25% (11.75% at June 30, 2000). The
agreement is automatically renewable for one-year periods unless terminated by
either party. Upon expiration, all remaining principal and interest is due. The
notes are collateralized by substantially all of the assets of the company's
subsidiaries and guaranteed by PHC.
F-14
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<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE C - LONG-TERM DEBT (CONTINUED)
On December 7, 1998 the company issued the principal sum of $500,000 of
convertible debentures with interest at 12% per annum that are due on December
2, 2004. Interest is payable quarterly. The debentures and any unpaid interest
are convertible into shares of common stock at the rate of $1,000 for 500 shares
of common stock, which equates to $2.00 per share of common stock. The traded
market price of the company's common stock at the date of issuance of the
convertible debentures was $1.188 per share and accordingly there was no
beneficial conversion feature. The holders of the debentures have the right to
put all or any portion of the debentures to the company at the original purchase
price plus unpaid interest upon 30 days written notice beginning December 3,
2001. The company has the right to call the debentures upon the same terms as
above. If called, the holders of the debentures then have 20 days from the date
of written notice to exercise their conversion privilege as to any debentures
not then already converted.
NOTE D - CAPITAL LEASE OBLIGATION
At June 30, 2000, the company was obligated under various capital leases for
equipment providing for monthly payments of approximately $4,000 for fiscal 2000
and terms expiring from July 2000 through July 2003.
The carrying value of assets under capital leases included in property and
equipment is as follows:
June 30,
2000 1999
-----------------------
Equipment and improvements $167,857 $528,820
Less accumulated amortization (100,714) (259,564)
---------- ----------
$ 67,143 $269,256
---------- ----------
Future minimum lease payments under the terms of the capital lease agreements
are as follows at June 30, 2000:
Year Ending
June 30,
------------
2001 $ 48,269
2002 9,726
2003 2,821
2004 235
----------
Total future minimum lease payments 61,051
Less amount representing interest 2,761
----------
Present value of future minimum
lease payments 58,290
Less current portion
45,482
----------
Long-term obligations under
capital lease $ 12,808
----------
F-15
- 37 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE E - NOTES PAYABLE - RELATED PARTIES
Related party debt is summarized as follows: June 30,
2000 1999
-----------------
Notes payable, Tot Care, Inc., company owned by the
President and principal stockholder, interest at 12%
and payable on demand 100,000 100,000
Note payable, President and principal stockholder,
interest at 12% payable on demand 100,000 100,000
------- -------
Total $200,000 $200,000
NOTE F - INCOME TAXES
The company has the following deferred tax assets included in the accompanying
balance sheets:
Year Ended
June 30,
2000 1999
-------------------------
Temporary differences attributable to:
Allowance for doubtful accounts $1,350,000 $1,546,000
Facility Closing Costs 17,000 198,000
Depreciation 125,000 237,000
Other 22,980 85,980
Operating loss carryforward 1,874,000 1,542,000
----------- ------------
Total deferred tax asset 3,388,980 3,608,980
Less:
Valuation allowance (2,775,000) (2,995,000)
Subtotal 613,980 613,980
Current portion (459,280) (459,280)
----------- ------------
Long-term portion $ 154,700 $ 154,700
The company had no deferred tax liabilities at June 30, 2000 and 1999.
Income tax expense is as follows:
Year Ended
June 30,
2000 1999
-------------------------
Current income taxes $ 79,390 $ 59,434
----------- ------------
F-16
- 38 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE F - INCOME TAXES (CONTINUED)
Reconciliations of the statutory U.S. Federal income taxes based on a rate of
34% to actual income taxes is as follows:
Year Ended
June 30,
2000 1999
------------------------
Income tax benefit at statutory rate $ (235,300) $ (440,200)
State income taxes, net of federal
benefit 52,400 39,000
Decrease in valuation allowance 220,000 388,000
Increase due to nondeductible items,
primarily penalties and travel and
entertainment expenses 21,000 37,000
Other 21,290 35,634
---------- ------------
$ 79,390 $ 59,434
At June 30, 2000 the company had a net operating loss carryforward amounting to
approximately $5,200,000. The Company's Federal net operating loss carryforward
are subject to review and possible adjustment by the Internal Revenue Service
and are subject to certain limitations in the event of cumulative changes in the
ownership interest of significant stockholders over a three-year period in
excess of 50%. The Federal carryforward expires beginning in 2011 through 2020.
The company anticipates that it will have sufficient taxable income in future
fiscal years to realize its net deferred tax assets existing as of June 30,
2000. During 1999 and 1998, the company has closed three facilities that
contributed the most significantly to its past losses, the Franvale Nursing and
Rehabilitation Center, the Good Hope Center and the Pioneer Counseling of
Virginia clinics. The company has also implemented procedures to improve the
operating efficiency of its remaining centers. The company also anticipates that
it will have a gain on the final disposition of all contingent liabilities of
its closed Franvale facility (see Note I).
NOTE G - COMMITMENTS AND CONTINGENT LIABILITIES
Operating leases:
The company leases office and treatment facilities, furniture and equipment
under operating leases expiring on various dates through September 2004. Rent
expense for the years ended June 30, 2000 and 1999 was approximately $714,000
and $784,000, respectively. Rent expense includes certain short term rentals.
Minimum future rental payments under noncancelable operating leases, having
remaining terms in excess of one year as of June 30, 2000 are as follows:
Year Ending
June 30, Amount
----------- ---------
2001 $ 549,814
2002 493,914
2003 475,179
2004 323,220
2005 62,795
-----------
$1,904,922
----------
F-17
- 39 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
Litigation:
Various legal proceedings, claims and investigations of a nature considered
normal to its business operations are pending against the company. The most
significant of these matters are described below.
In September 1998, the company and Franvale were each served with subpoenas in
connection with an on-going investigation of Franvale being conducted by the
Attorney General of the Commonwealth of Massachusetts. The focus is the quality
of patient care provided by Franvale during the period of early 1997 until the
facility was placed into receivership in June 1998. The company is cooperating
fully with the investigation and currently is engaged in producing documents
requested in the subpoenas. The company does not believe that it has violated
any laws and does not believe that any monetary payments required in connection
with this matter will be material to the financial position or results of
operations of the company.
In addition, the Commonwealth of Massachusetts may institute a claim against
PHC, Inc. to recover expenses incurred as a consequence of Franvale's
receivership. The company believes that it has valid defenses to any such claim
and, in any event, it believes that there will be adequate assets remaining in
Franvale to satisfy any receivership expenses.
On or about May 15, 2000, the company was served with a subpoena by the United
States Attorney for the District of Massachusetts. The subpoena requested, inter
alia, patient and financial records relating to Franvale Nursing and
Rehabilitation Center for the period of 1995 through 1998. The Company is fully
cooperating with the investigation and currently is engaged in collecting the
requested documents for production to the Government.
NOTE H - STOCK PLANS
[1] Stock plans:
The company has three stock plans: a stock option plan, an employee stock
purchase plan and a nonemployee directors' stock option plan.
The stock option plan provides for the issuance of a maximum of 1,000,000
shares of Class A common stock of the company pursuant to the grant of
incentive stock options to employees or nonqualified stock options to
employees, directors, consultants and others whose efforts are important
to the success of the company. Subject to the provisions of this plan, the
compensation committee of the Board of Directors has the authority to
select the optionees and determine the terms of the options including: (i)
the number of shares, (ii) option exercise terms, (iii) the exercise or
purchase price (which in the case of an incentive stock option will not be
less than the market price of the Class A common stock as of the date of
grant), (iv) type and duration of transfer or other restrictions and (v)
the time and form of payment for restricted stock upon exercise of
options.
The employee stock purchase plan provides for the purchase of Class A
common stock at 85 percent of the fair market value at specific dates, to
encourage stock ownership by all eligible employees. A maximum of 150,000
shares may be issued under this plan.
F-18
- 40 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE H - STOCK PLANS (CONTINUED)
The non-employee directors' stock option plan provides for the grant of
nonstatutory stock options automatically at the time of each annual
meeting of the Board. Through June 30, 2000, options for 29,500 shares
were granted under this plan. A maximum of 50,000 shares may be issued
under this plan. Each outside director is granted an option to purchase
2,000 shares of Class A common stock at fair market value on the date of
grant, vesting 25% immediately and 25% on each of the first three
anniversaries of the grant.
In February 1997, all 95,375 shares underlying the then outstanding
employee stock options were repriced to the current market price, using
the existing exercise durations. In September 1998, all 21,875 options due
to expire, were extended for an additional five years. Also in September
1998, all 183,875 shares underlying the then outstanding employee stock
options were repriced to the current market price, using the existing
exercise durations.
Under the above plans, at June 30, 2000, 320,250 shares were available for
future grant or purchase.
The company had the following activity in its stock option plans for
fiscal 2000 and 1999:
Weighted-
Number Average
of Exercise Price
Shares Per Share
-------- --------------
Option plans:
Balance - June 30, 1998 375,375 $3.32
Granted 218,500 $1.21
Cancelled (71,000) $1.95
Repriced Options
Original (183,875) $2.96
Repriced 183,875 $1.25
--------- ----------
Balance - June 30, 1999 522,875 $2.02
Granted 271,000 $1.23
Cancelled (2,000) $1.25
Exercised (9,375) $1.25
--------- ----------
Balance - June 30, 2000 782,500 $1.46
--------- ----------
[2] Stock-based compensation:
Options for 448,750 shares were exercisable as of June 30, 2000 at exercise
prices ranging from $.81 to $6.63 and a weighted average exercise price of
approximately $1.58 per share with a weighted average remaining contractual
life of approximately three years. Options for 252,000 shares were
exercisable as of June 30, 1999 at exercise prices ranging from $1.03 to
$6.63 and a weighted-average exercise price of approximately $1.73 per
share, with a weighted-average remaining contractual life of approximately
three years.
F-19
- 41 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE H - STOCK PLANS (CONTINUED)
Options to purchase 782,500 shares of class A common stock were
outstanding at June 30, 2000 at exercise prices ranging from $.81 to $6.63
per share and have a weighted-average exercise price of approximately
$1.46 per share, with a weighted-average remaining contractual life of
approximately four years.
The company has adopted the disclosure only provisions of SFAS No. 123,
but applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans. There was no compensation
expense recognized in 2000 or 1999. If the company had elected to
recognize compensation cost for the plans based on the fair value at the
grant date for awards granted, consistent with the method prescribed by
SFAS No. 123, loss per share would have been changed to the pro forma
amounts indicated below:
Year Ended
June 30,
2000 1999
--------------------------------
Net loss applicable
to common
shareholders As reported $ (1,577,145) $(1,496,196)
Pro forma (1,727,259) (1,595,475)
Net loss per share As reported (.23) (.25)
Pro forma (.25) (.27)
The fair value of the company's stock options used to compute pro forma loss and
loss per share disclosures is the estimated present value at grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions for 2000 and 1999: dividend yield of 0%; expected volatility of 30%;
a risk-free interest rate of 9.5% and 6.5% respectively; and an expected holding
period of five years.
The per share weighed average grant date fair value of options granted during
the years ended June 30, 2000 and 1999 was $.55 and $.48, respectively.
F-20
- 42 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE I - DISCONTINUED OPERATIONS
On May 26, 1998, PHC, Inc.'s wholly owned subsidiary, Quality Care, which
operated Franvale filed for reorganization under Chapter 11. On May 29, 1998,
the Bankruptcy Court terminated the Chapter 11 proceeding determining that there
was no likelihood of reorganization since the prospective acquirer of the
facility was now imposing certain terms unacceptable to all interested parties
and that the transfer of patients and liquidation of assets could be as readily
effectuated in a state court receivership under the aegis of the Massachusetts
Health Care Statutes and accordingly dismissed the Chapter 11 case. On June 1,
1998, a receiver was appointed to transfer the patients and close the facility
expeditiously. The company has recorded the losses of Franvale through May 31,
1998.
The company's Bankruptcy Attorney was notified that effective September 30, 1998
the patient care receivership for Quality Care had been terminated. On October
5, 1998, in response to the termination of the State Receivership, the company
filed for protection under Chapter 7.
Although the full extent of the financial impact on PHC, Inc. cannot be
determined at this time, the management of PHC, Inc. does not believe that the
liquidation of the assets and liabilities of Quality Care will have a
substantial negative impact on PHC's financial position or the results of
operations. The company was subject to a guarantee signed by PHC, Inc. for
furniture and equipment purchased by Quality Care during the fiscal year ended
June 30, 1996. The company has come to an agreement with the leasing company and
is currently making monthly payments of $5,088, which includes interest of 9%,
in settlement of this obligation. The liquidation of the assets and liabilities
of Franvale may result in a non-cash financial statement gain. In the quarter
ended December 31, 1998, the company was relieved of the HUD mortgage of
approximately $6,741,000 and surrendered the underlying assets amounting to
approximately $4,329,000. The net liabilities of discontinued operations
amounted to $1,884,234 at June 30, 2000. The recognition of the gain has been
deferred until final resolution of all contingent liabilities. As of June 30,
2000 and 1999 the company paid approximately $538,000 and $220,000,
respectively, in costs related to record transfer and litigation surrounding the
close of Franvale. As of June 30, 2000 the bankruptcy remains open and
management cannot predict a final date of closure at this time.
NOTE J - CERTAIN CAPITAL TRANSACTIONS
In addition to the outstanding options under the company's stock plans (Note H),
the company has the following options and warrants outstanding at June 30, 2000:
Date of Number of Exercise Expiration
Issuance Description Shares Price Date
-------------------------------------------------------------------------------
03/10/1994 IPO Warrants
Equity transaction 1,792,862 $5.73 per March 2001
shares share
11/01/1996 Warrant for debt placement
service $125,000 value charged
to interest interest
expense over term of debt 25,000 $2.00 per October
shares share 2001
02/18/1997 Warrant for investor relation
services $1.210 value passed as 3,559 $1.39 per February
an adjustment shares share 2002
F-21
- 43 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE J - CERTAIN CAPITAL TRANSACTIONS (CONTINUED)
Date of Number of Exercise Expiration
Issuance Description Shares Price Date
-------------------------------------------------------------------------------
3/03/1997 Consultant warrant for investor
relations $16,306 value passed as 40,000 $1.00 per March 2002
an adjustment shares share
09/17/1998 Consultant warrant for investor
relations $12,776 value passed as 40,000 $1.00 per March 2002
an adjustment shares share
03/31/1997 Warrants issued as registration
penalty on Convertible debenture
$46,375 value charged to interest 150,000 $2.00 per March 2002
expense over term of debentures shares share
06/04/1997 Warrants issued with preferred
stock placement. Equity 50,000 $2.75 per June 2000
transaction shares share
06/01/1997 Warrants issued for investment
banker services $193,748 value 150,000 $2.08 per May 2002
charged to professional fees shares share
09/19/1997 Private Placement warrants with
common stock issuance. Equity 86,207 $2.90 per Sept 2002
transaction shares share
03/10/1998 Warrants issued as a penalty
for late registration of private
placement shares. Equity 3,000 $2.90 per March 2003
transaction shares share
03/10/1998 Warrants issued as additional
interest on debt $48,809 value
charged to interest expense 52,500 $2.00 per March 2003
over term of loan shares share
03/19/1998 Warrants issued with preferred
stock private placement Equity 49,990 $2.31 per March 2001
transaction shares share
07/10/1998 Warrants issued with extension
of debt $28,740 value charged to
interest expense over term 52,500 $1.56 per July 2003
of loan shares share
07/10/1998 Warrants issued with extension
of debt as price guarantee $14,779
value charged to interest expense 20,000 $1.32 per July 2003
over term of loan shares share
12/31/1998 Warrants issued with convertible
debenture $9,240 value charged to
professional fees over term of 25,000 $.93 per Dec 2004
debentures shares share
12/31/1998 Warrants issued for convertible
debentures finders fee $25,873 value
charged to professional fees over 60,000 $.93 per Dec 2003
term of debentures shares share
12/31/1998 Warrants issued for convertible
debentures finders fee $3,696
value charged to professional 10,000 $1.71 per Dec 2003
fees over term of debentures shares share
12/31/1998 Warrants issued for convertible
debentures finders fee $3,246
value charged to professional 15,000 $1.32 per Dec 2003
fees over term of debentures shares share
12/01/1998 Warrants issued for convertible
debentures finders fee $1,302
value charged to professional 10,000 $.93 per Dec 2003
fees over term of debentures shares share
01/01/1999 Warrants issued for convertible
debentures finders fee $3,696
value charged to professional 10,000 $.93 per Jan 2004
fees over term of debentures shares share
02/01/1999 Warrants issued for convertible
debentures finders fee 3,696
value charged to professional 10,000 $.93 per Feb 2004
fees over term of debentures shares share
03/01/1999 Warrants issued for convertible
debentures finders fee $3,696
value charged to professional 10,000 $.93 per Mar 2004
fees over term of debentures shares share
04/01/1999 Warrants issued for convertible
debentures finders fee $3,696
value charged to professional 10,000 $.93 per Apr 2004
fees over term of debentures shares share
05/01/1999 Warrants issued for convertible
debentures finders fee $3,696
value charged to professional 10,000 $.93 per May 2004
fees over term of debentures shares share
06/01/1999 Warrants issued for convertible
debentures finders fee $3,696
value charged to professional 10,000 $.93 per June 2004
fees over term of debentures shares share
01/05/1999 Warrants issued for investment
banker services $18,100 value
charged to professional fees 37,500 $1.28 per Jan 2004
over service period shares share
04/05/1999 Warrants issued for investment
banker services $18,100 value
charged to professional fees 37,500 $1.29 per Apr 2004
over service period shares share
F-22
- 44 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE J - CERTAIN CAPITAL TRANSACTIONS (CONTINUED)
Date of Number of Exercise Expiration
Issuance Description Shares Price Date
-------------------------------------------------------------------------------
02/23/1999 Consultant warrant for investor
relations $1,307 value charged to 3,000 $1.09 per Feb 2004
professional fees shares share
04/21/1999 Consultant warrant for web site
development services $1,547 value 5,000 $1.50 per Apr 2004
charged to professional fees shares share
05/18/1999 Consultant warrant for web site
advisory services $1,848 value 5,000 $. 93 per Apr 2004
charged to professional fees shares share
04/21/1999 Warrant issued for management
consultant services $1,547 value 5,000 $.93 per Apr 2004
charged to professional fees shares share
05/18/1999 Warrant issued for management
consultant services $370 value 1,000 $.93 per May 2004
charged to professional fees shares share
07/01/1999 Warrants issued for convertible
debentures finders fee $5,745
value charged to professionalfees 10,000 $.93 per July 2004
over term of debentures shares share
08/01/1999 Warrants issued for convertible
debentures finders fee $4,187
value charged to professional 10,000 $.93 per Aug 2004
fees over term of debentures shares share
07/05/1999 Warrants for investment banker
services $12,944 value charged to
professional fees over service 37,500 $1.30 per July 2004
period shares share
10/05/1999 Warrants for investment banker
services $6,042 value charged to
professional fees over service 37,500 $1.30 per Oct 2004
period shares share
03/31/2000 Warrants issued for services
$10,000 value charged to website 10,000 $1.50 per Mar 2005
development shares share
05/26/2000 Warrants issued as additional
interest on debt $33,264 value 60,000 $1.50 per May 2005
charged to interest expense shares share
06/28/2000 Warrants issued with preferred
stock placement. Equity 125,000 $3.00 per June 2005
transaction shares share
06/28/2000 Warrants issued with preferred
stock placement. Equity 85,499 $1.60 per June 2005
transaction shares share
Warrants issued for services or in connection with debt are valued at fair value
at grant date using the Black-Scholes pricing model and charged to operations
consistent with the underlying reason the warrants were issued. Charges to
operations in connection with these warrants amounted to approximately $72,000
and $160,000 in fiscal 2000 and 1999 respectively.
In February 1998, the company received $950,000 in exchange for the issuance of
Series B convertible preferred stock and warrants to purchase 49,990 shares of
Class A common stock. The warrants are exercisable at $2.31 per share and expire
in 2001. The number of shares of Class A common stock into which the preferred
stock may be converted is equal to 80% of the closing bid price of the Class A
common stock as reported by NASDAQ for the five trading days immediately
preceding the conversion which resulted in a deemed dividend of $190,000 in
fiscal 1998. Cumulative preferred dividends are at the rate of $60 per share per
year, payable quarterly. Dividends are payable in cash or in shares of preferred
stock at $1,000 per share. For the year ended June 30, 2000 and 1999 dividends
on the series B preferred stock amounted to $22,809 and $42,110 respectively.
During the fiscal year ended June 30, 2000 and 1999 the company issued 18 and 53
shares of series B preferred stock,
F-23
- 45 -
<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE J - CERTAIN CAPITAL TRANSACTIONS (CONTINUED)
respectively, in payment of dividends in lieu of cash. The series B convertible
preferred stock agreement carries with it a $2.00 minimum conversion price
guarantee. If the actual computed conversion price is lower than the minimum
conversion price, the company was originally required to issue a promissory note
for the difference between the market value of the shares to be issued at the
conversion price and at the minimum conversion price. Subsequent to the issuance
of the preferred stock, the company obtained the right to issue either shares of
common stock or promissory notes for the "price guarantee" differential. As of
June 30, 2000 all series B convertible preferred has been converted into shares
of class A common stock which resulted in a dividend charge of $566,703 for the
year ended June 30, 2000.
In December 1998, the company issued $500,000 in 12% convertible debentures to
private investors. These debentures require quarterly interest payments and are
convertible in $1,000 increments for 500 shares of PHC, Inc. class A common
stock. In conjunction with this debt placement the company has issued warrants
to purchase 10,000 shares of PHC, Inc. class A common stock at $2.00 per share,
15,000 shares of PHC, Inc. class A common stock at $1.50 per share and 175,000
shares of PHC, Inc. class A common stock at $1.00 per share.
On March 26, 1998 the company issued 227,347 shares of the company's Class A
Common Stock to the former owners of Behavioral Stress Centers, Inc. now BSC-NY,
Inc. in full payment for the earn-out due to be paid to them for the year ended
October 31, 1997 resulting in additional goodwill. Of the 227,347 shares issued
127,924 were issued in lieu of cash and were subject to a price guarantee of
$2.35, payable in shares. Under the price guarantee the company issued an
additional 304,097 shares of Common Stock in the quarter ended December 31,
1998. The value of the guarantee shares issued was recorded as interest expense.
On June 28, 2000 the company issued 136,000 shares of series C 8% convertible
preferred stock at a discount for $1,000,000, which resulted in a dividend
charge of $360,000 for the year ended June 30, 2000. In conjunction with this
transaction the company also issued a warrant to purchase 125,000 shares of
class A common stock which resulted in a dividend of 14,963 in the year ended
June 30, 2000. The investor was required to purchase an additional 34,000 shares
of series C preferred stock as provided in the agreement for $250,000. This
additional purchase of 34,000 shares was completed in August 2000.
Each share of preferred stock may be converted at any time, in whole or in part,
for the number of shares of common stock calculated by multiplying the number of
shares of preferred stock to be converted by the stated value of $10.00, plus
accrued and unpaid dividends and divided by the applicable conversion price. The
conversion price is equal to the lesser of 125% of the closing bid price for the
Common Stock on the closing date of the agreement (subject to adjustment for any
stock-split or stock combination to occur after the date of the agreement) and
97% of the market price (the arithmetic mean of the closing bid prices of the
common stock as reported on Nasdaq for the five consecutive trading days on
which the lowest closing bid prices are reported during any valuation period) on
the date of conversion; provided that any unconverted preferred stock remaining
211 days after the closing date may be converted at a conversion price per share
of common stock equal to 94% of the market price; provided, further, that any
unconverted preferred stock remaining 271 days after the closing date may be
converted at a conversion price per share of common stock equal to 91% of the
market price; and provided, further, that if the common stock is delisted off
F-24
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<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE J - CERTAIN CAPITAL TRANSACTIONS (CONTINUED)
Nasdaq for any reason, then any remaining unconverted preferred stock may be
converted at a conversion price per share of common stock equal to 50% of the
market price. At the company's option, the amount of accrued and unpaid
dividends as of the date of a conversion (whether or not earned or declared,
whether or not there were funds legally available for the payment of dividends
and whether or not a dividend payment due date has occurred since the last
dividend payment) shall not be subject to conversion but instead may be paid in
cash as of the conversion date; if the company elects to convert the amount of
such accrued and unpaid dividends at the conversion date into common stock, the
common stock issued to the investor shall be valued at the applicable conversion
price.
Under existing dilution agreements with other stockholders the issuance of
common stock under agreements other than the employee stock purchase and option
plans will increase the number of shares issuable and decrease the exercise
price of certain of the above warrant agreements based on the difference between
the then current market price and the price at which the new common stock is
being issued. The dilutive effect of transactions through June 30, 2000 are
reflected in the table above.
NOTE K - ACQUISITIONS
In September 1996, the company purchased the assets of seven outpatient
behavioral health centers located in Michigan ("NPP"). The centers were
purchased for $532,559 and 15,000 shares of Class A common stock of PHC, Inc.
valued at $5.04 per share. The company borrowed $900,000 (see Note C) to finance
the purchase and to provide working capital for the centers. As of June 2000
this note has been paid in full.
On November 1, 1996, BSC-NY, Inc. ("BSC"), merged with Behavioral Stress
Centers, Inc., a provider of management and administrative services to
psychotherapy and psychological practices in the greater New York City
Metropolitan Area. In connection with the merger, the company advanced 150,000
shares of PHC, Inc. Class A common stock and funds to Rubenfaer Physician
Services, P.C. formerly Shliselberg Physician Services, P.C., and formerly
Perlow Physicians, P.C., ("Rubenfaer"), which were in turn issued to the former
owners of Behavioral Stress Centers, Inc. to acquire the assets of the medical
practices previously serviced by BSC. At June 30, 2000 Rubenfaer owed the
company $4,364,510 which includes some acquisition costs, management fees,
working capital advances and interest on the advances net of repayments. Total
interest charged to Rubenfaer by the company was $378,768 for the year ended
June 30, 1999. No interest was charged during the year ended June 30, 2000. The
company expects these amounts to be paid in full; however, in consideration of
the period of time expected for repayment, the level of Rubenfaer's cash flow
and the changing healthcare environment, the company established reserves
related to these receivables. During fiscal 1998 the company established a
reserve against this receivable in the amount of $382,000. The company increased
the reserve to $782,000 in the fiscal year ended June 30, 1999 and approximately
$1,125,000 in the fiscal year ended June 30, 2000. It is expected that
collections will be received over the next several years and accordingly, these
amounts have been classified as noncurrent related party receivables on the
company's balance sheet. The company has no ownership interest in Rubenfaer.
F-25
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<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE K - ACQUISITIONS (CONTINUED)
The merger agreement requires additional purchase price to be paid by BSC to the
former owners of Behavioral Stress Centers, Inc. for the three years following
the merger date. The additional purchase price is based on the income of BSC
before taxes and is to be paid in PHC stock, at market value up to $200,000 and
the balance, if any, in cash. On March 26, 1998 the company issued 227,347
shares of the company's Class A Common Stock to the former owners of Behavioral
Stress Centers, Inc. now BSC-NY, Inc. in full payment for the earn-out due to be
paid to them for the year ended October 31, 1997 resulting in additional
goodwill. Of the 227,347 shares issued 127,924 were issued in lieu of cash and
were subject to a price guarantee of $2.35, payable in shares. Under the price
guarantee the company issued an additional 304,097 shares of Common Stock in the
fiscal year ended June 30, 1999. The value of the guarantee shares issued was
recorded as interest expense.
In August 2000 the company reached an agreement with the former owners on the
terms and amount of the final earn out payment. This payment was made in the
form of Notes totaling $700,000 and 414,815 shares of class A common stock,
valued at $297,500, which was recorded as additional goodwill. This agreement
was effective May 2000 and is reflected in the accompanying consolidated
financial statements. Accrued expenses includes $297,500 at June 30, 2000, which
reflects the obligation for the 414,815 shares issued in August 2000.
BSC also entered into a management agreement with Rubenfaer whereby management
fees are required of Rubenfaer on a monthly basis over a five-year period with
an automatic renewal for an additional five-year period. The management fee was
calculated at 25% of the total monthly expenses of Rubenfaer and effective
November 1, 1999 the management agreement was amended to provide for a
management fee equal to the expenses of BSC-NY, Inc. plus $10,000 per month.
Summary, unaudited financial information for Rubenfaer as of and for the year
ended June 30, 2000 is as follows:
Total assets $ 3,531,721
Stockholder's deficit $ (1,125,054)
Net revenue $ 3,139,254
Net loss $ (343,141)
NOTE L - FOURTH QUARTER ADJUSTMENTS
The company reversed approximately $405,000 in the fourth quarter of interest
income charged to Rubenfaer Physician Services, P. C. due to the P.C.'s limited
available cash flow.
F-26
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<PAGE>
PHC, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000 and 1999
NOTE M - BUSINESS SEGMENT INFORMATION
The company's behavioral health treatment services have similar economic
characteristics, services, patients and clients. Accordingly, all behavioral
health treatment services are reported on an aggregate basis under one
segment. The company's segments are more fully described in Note A above.
Residual Income and expenses from closed facilities are included in the
administrative services segment. The following summarizes the company's
segment data:
<TABLE>
<S> <C> <C> <C> <C> <C>
BEHAVIORAL HEALTH
TREATMENT ADMINISTRATIVE ONLINE
SERVICES SERVICES SERVICES ELIMINATIONS TOTAL
--------------------------------------------------------
2000
Revenues - external
customers $18,675,840 $ 1,702,920 0 0 $20,378,760
Revenues -
intersegment 0 $ 1,819,000 $ 9,669 $ (1,828,669) 0
Segment profit (loss) $ 1,690,314 $(1,818,723) $(484,262) 0 $ (612,671)
Total assets $ 9,524,005 $27,608,700 $ 63,200 $(21,308,096) $ 15,887,809
Capital expenditures $ 41,593 $ 38,785 $ 68,979 0 $ 149,357
Depreciation &
amortization $ 233,064 $ 114,082 $ 9,495 0 $ 356,641
Change in
accounting principle
(amortization) $ 54,700 $ 16,418 $ 1,332 0 $ 72,450
1999
Revenues - external
customers $16,992,290 $ 2,147,206 0 0 $ 19,139,496
Revenues -
intersegment 0 $ 1,716,000 0 $ (1,716,000) 0
Segment profit
(loss) $ 742,798 $(2,087,321) $ (9,563) 0 $(1,354,086)
Total assets $10,062,022 $23,862,255 0 $(19,116,286) $ 14,807,991
Capital expenditures $ 101,384 $ 13,870 0 0 $ 115,254
Depreciation &
amortization $ 219,426 $ 106,338 0 0 $ 325,764
</TABLE>
NOTE N - SUBSEQUENT EVENTS
On August 24, 2000 the company entered into a letter of agreement through its
Internet subsidiary, Behavioral Health Online, Inc. (BHO) to purchase all of the
outstanding stock of TherapyRightNow.com in exchange for a minority ownership
interest in Behavioral Health Online, Inc. This transaction is set to occur no
later than October 31, 2000 if certain contingencies are met.
TherapyRightNow.com is an internet company with proven technology and wellness
programs which will be used on the BHO website upon completion of the
transaction.
F-27
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<PAGE>
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and officers of the company as of June 30, 2000 are as
follows:
Name Age Position
---- --- --------
Bruce A. Shear 45 Director, President and Chief Executive
Officer
Robert H. Boswell 51 Senior Vice President
Paula C. Wurts 51 Controller, Treasurer and Assistant Clerk
Gerald M. Perlow, M.D. (1)(2) 62 Director and Clerk
Donald E. Robar (1)(2) 63 Director
Howard W. Phillips 70 Director
William F. Grieco (1) 46 Director
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
All of the directors hold office until the annual meeting of stockholders
next following their election, or until their successors are elected and
qualified. The Compensation Committee reviews and sets executive compensation.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board. There are no family relationships among any of the
directors or officers of the company.
Information with respect to the business experience and affiliations of the
directors and officers of the company is set forth below.
BRUCE A. SHEAR has been President, Chief Executive Officer and a Director
of the company since 1980 and Treasurer of the company from September 1993 until
February 1996. From 1976 to 1980 he served as Vice President, Financial Affairs,
of the company. Mr. Shear has served on the Board of Governors of the Federation
of American Health Systems for over ten years. Mr. Shear received an M.B.A. from
Suffolk University in 1980 and a B.S. in Accounting and Finance from Marquette
University in 1976.
ROBERT H. BOSWELL has served as the Senior Vice President of the company
since February 1999 and as executive vice president of the company from 1992 to
1999. From 1989 until the spring of 1994 Mr. Boswell served as the Administrator
of the company's Highland Ridge Hospital facility where he is based. Mr. Boswell
is principally involved with the company's substance abuse facilities. From 1981
until 1989, he served as the Associate Administrator at the Prevention Education
Outpatient Treatment Program--the Cottage Program, International. Mr. Boswell
graduated from Fresno State University in 1975 and from 1976 until 1978 attended
Rice University's doctoral program in philosophy. Mr. Boswell is a Board Member
of the National Foundation for Responsible Gaming and the Chair for the National
Center for Responsible Gaming.
PAULA C. WURTS has served as the Controller of the company since 1989, as
Assistant Clerk since January 1996, as Assistant Treasurer from 1993 until April
2000 when she became Treasurer. Ms. Wurts served as the company's Accounting
Manager from 1985 until 1989. Ms. Wurts received an Associate's degree in
Accounting from the University of South Carolina in 1980, a B.S. in Accounting
from Northeastern University in 1989 and passed the examination for Certified
Public Accountants. She received a Master's Degree in Accounting from Western
New England College in 1996.
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<PAGE>
GERALD M. PERLOW, M.D. has served as a Director of the company since May
1993 and as Clerk since February 1996. Dr. Perlow is a retired cardiologist who
practiced medicine in Lynn, Massachusetts, and has been Associate Clinical
Professor of Cardiology at the Tufts University School of Medicine since 1972.
Dr. Perlow is a Diplomat of the National Board of Medical Examiners and the
American Board of Internal Medicine (with a subspecialty in cardiovascular
disease) and a Fellow of the American Heart Association, the American College of
Cardiology and the American College of Physicians. From 1987 to 1990, Dr. Perlow
served as the Director, Division of Cardiology, at AtlantiCare Medical Center in
Lynn, Massachusetts. From October 30, 1996 to March 1, 1997, Dr. Perlow served
as President and Director of Rubenfaer Physician Services, P.C. formerly Perlow
Physicians, P.C. which has a management contract with BSC. Dr. Perlow currently
holds no ownership interest in Rubenfaer Physician Services, P.C. Dr. Perlow
received compensation of $8,333 for the period. Dr. Perlow served as a
consultant to Wellplace.com, formerly Behavioralhealthonline.com, in fiscal year
2000 and has been a contributing journalist to Wellplace.com since 1999. Dr.
Perlow received a B.A. from Harvard College in 1959 and an M.D. from Tufts
University School of Medicine in 1963.
DONALD E. ROBAR has served as a Director of the company since 1985 and as
the Treasurer from February, 1996 until April 2000. He served as the Clerk of
the company from 1992 to 1996. Dr. Robar has been a professor of Psychology
since 1961, most recently at Colby-Sawyer College in New London, New Hampshire.
Dr. Robar received an Ed.D. from the University of Massachusetts in 1978, an
M.A. from Boston College in 1968 and a B.A. from the University of Massachusetts
in 1960.
HOWARD W. PHILLIPS has served as a Director of the company since August 27,
1996 and has been employed by the company as a public relations specialist since
August 1, 1995. From 1982 until October 31, 1995, Mr. Phillips was the Director
of Corporate Finance for D. H. Blair Investment Corp. From 1969 until 1981, Mr.
Phillips was associated with Oppenheimer & Co. where he was a partner and
Director of Corporate Finance. From 1995 until 1999 Mr. Phillips served as a
member of the Board of Directors of Food Court Entertainment Network, Inc., an
operator of shopping mall television networks, and Telechips Corp., a
manufacturer of visual phones.
WILLIAM F. GRIECO has served as a Director of the company since February
18, 1997. Since August 1999 Mr. Grieco has been a self-employed law consultant.
From November 1995 to July 1999 he served as Senior Vice President and General
Counsel for Fresenius Medical Care North America. From 1989 until November of
1995, Mr. Grieco was a partner at Choate, Hall & Stewart. Mr. Grieco received a
BS from Boston College in 1975, an MS in Health Policy and Management from
Harvard University in 1978 and a JD from Boston College Law School in 1981.
Compliance With Section 16(A) Of The Exchange Act
Based on a review of Forms 3 and 4 furnished to the company, all directors,
officers and beneficial owners of more than ten percent of any class of equity
securities of the company registered pursuant to Section 12 of the Securities
Exchange Act filed on a timely basis reports required by Section 16(a) of the
Exchange Act during the most recent fiscal year.
ITEM 10. Executive compensation. Employment agreements
The company has not entered into any employment agreements with its
executive officers. The company owns and is the beneficiary on a $1,000,000 key
man life insurance policy on the life of Bruce A. Shear.
Executive Compensation
Three executive officers of the company received compensation in the 2000
fiscal year, which exceeded $100,000. The following table sets forth the
compensation paid or accrued by the company for services rendered to these
executives in fiscal year 2000, 1999 and 1998:
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<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
Long Term
Annual Compensation Compensation
Awards
(a) (b) (c) (d) (e) (g)
Name and Other Securities (i)
Principal Annual Underlying All Other
Position Year Salary Bonus Compensation Options/SARs Compensation
($) ($) ($) (#) ($)
-------------------------------------------------------------------------------------------
Bruce A. Shear 2000 $300,195(1) -- $10,159(2) 50,000 $22,517
President and 1999 $300,195(1) -- $ 7,940(3) 50,000 $21,622
Chief Executive 1998 $309,167(1) -- $ 9,813(4) 50,000 $51,256
Officer
Robert H. Boswell 2000 $116,000 $32,200 $12,846(5) 26,666 $14,261
Senior Vice 1999 $111,083 $ 800 $ 7,955(6) 65,000 $29,753
President 1998 $102,750 -- $ 7,836(7) 15,000 $14,149
Paula C. Wurts 2000 $ 90,800 $13,500 $ 9,642(8) 33,334 $17,263
Controller, Treasurer 1999 $ 85,883 -- $ 8,950(9) 20,000 $ 9,055
And Assistant Clerk 1998 $ 77,700 -- $ 8,547(10) 10,000 $ 9,720
</TABLE>
(1)Although the Board of Director authorized base salary effective July 1, 1995
is $310,000 base salary was drawn as listed above.
(2)This amount represents $3,383 contributed by the company to the company's
Executive Employee Benefit Plan on behalf of Mr. Shear, $4,837 in premiums
paid by the company with respect to life insurance for the benefit of Mr.
Shear and $1,938 personal use of a company car held by Mr. Shear.
(3)This amount represents $2,791 contributed by the company to the company's
Executive Employee Benefit Plan on behalf of Mr. Shear, $2,792 in premiums
paid by the company with respect to life insurance for the benefit of Mr.
Shear and $2,357 personal use of a company car held by Mr. Shear.
(4)This amount represents $2,791 contributed by the company to the company's
Executive Employee Benefit Plan on behalf of Mr. Shear $4,768 in premiums
paid by the company with respect to life insurance for the benefit of Mr.
Shear, and $2,254 personal use of a company car held by Mr. Shear.
(5)This amount represents a $6,000 automobile allowance, $952 contributed by the
company to the company's Executive Employee Benefit Plan on behalf of Mr.
Boswell, $3,000 in relocation expenses paid to Mr. Boswell and $2,894 in
benefit derived from the purchase of shares through the employee stock
purchase plan.
(6)This amount represents a $6,000 automobile allowance, $357 contributed by the
company to the company's Executive Employee Benefit Plan on behalf of Mr.
Boswell, $704 in other benefits paid by the company on behalf of Mr. Boswell
and $894 in benefit derived from the purchase of shares through the employee
stock purchase plan.
(7)This amount represents a $6,000 automobile allowance, $408 contributed by the
company to the company's Executive Employee Benefit Plan on behalf of Mr.
Boswell, $408 in other benefits paid by the company on behalf of Mr. Boswell
$115 in Class A Common Stock issued to employees and $905 in benefit derived
from the purchase of shares through the employee stock purchase plan.
(8)This amount represents a $4,800 automobile allowance, $3,878 contributed by
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<PAGE>
the company to the company's Executive Employee Benefit Plan on behalf of Ms.
Wurts and $964 in benefit derived from the purchase of shares through the
employee stock purchase plan.
(9)This amount represents a $4,800 automobile allowance, $3,940 contributed by
the company to the company's Executive Employee Benefit Plan on behalf of Ms.
Wurts and $210 in benefit derived from the purchase of shares through the
employee stock purchase plan.
(10) This amount represents a $4,650 automobile allowance, $3,250 contributed by
the company to the company's Executive Employee Benefit Plan on behalf of Ms.
Wurts, $115 in Class A Common Stock issued to employees and $532 in benefit
derived from the purchase of shares through the employee stock purchase plan.
COMPENSATION OF DIRECTORS
Directors who are employees of the company receive no compensation for services
as members of the Board. Directors who are not employees of the company receive
$2,500 stipend per year and $1,000 for each Board meeting they attend. In
addition, directors of the company are entitled to receive certain stock option
grants under the company's Non-Employee Director Stock Option Plan (the
"Director Plan").
COMPENSATION COMMITTEE
The Compensation Committee consists of Mr. Donald Robar and Dr. Gerald Perlow.
The compensation Committee met once during fiscal 2000. Mr. Shear does not
participate in discussions concerning, or vote to approve, his salary.
OPTION PLANS
Stock Plan
The Board of Directors adopted the company's Stock Plan on August 26, 1993 and
the stockholders of the company approved the plan on November 30, 1993. The
Stock Plan provides for the issuance of a maximum of 300,000 shares of the Class
A Common Stock of the company pursuant to the grant of incentive stock options
to employees and the grant of nonqualified stock options or restricted stock to
employees, directors, consultants and others whose efforts are important to the
success of the company.
The Board of Directors administers the Stock Plan. Subject to the provisions of
the Stock Plan, the Board of Directors has the authority to select the optionees
or restricted stock recipients and determine the terms of the options or
restricted stock granted, including: (i) the number of shares, (ii) option
exercise terms, (iii) the exercise or purchase price (which in the case of an
incentive stock option cannot be less than the market price of the Class A
Common Stock as of the date of grant), (iv) type and duration of transfer or
other restrictions and (v) the time and form of payment for restricted stock and
upon exercise of options. Generally, an option is not transferable by the option
holder except by will or by the laws of descent and distribution. Also,
generally, no option may be exercised more than 60 days following termination of
employment. However, in the event that termination is due to death or
disability, the option is exercisable for a period of one year following such
termination.
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<PAGE>
During the fiscal year ended June 30, 2000, the company issued additional
options to purchase 271,000 shares of Class A Common Stock under the 1993 Stock
Plan at a price per share ranging from $.81 to $1.50. Generally, options are
exercisable upon grant for 25% of the shares covered with an additional 25%
becoming exercisable on each of the first three anniversaries of the date of
grant. One hundred thousand of the options issued during the current fiscal year
were issued with immediate vesting of 50% and the balance vested in year five of
the ten year life of the options.
A total of 9,375 options were exercised at $1.25 each during the fiscal year
ended June 30, 2000. No options were exercised during the fiscal year ended June
30, 1999.
On November 17, 1997 the Board of Directors voted to amend the 1993 Stock Plan
to increase the number of shares of Class A Common Stock available for issuance
under the plan from 300,000 shares to 400,000 shares. The Stockholders approved
this amendment at the annual meeting on December 26, 1997. On September 15, 1998
the Board of Directors voted to amend the 1993 Stock Plan to increase the number
of shares of Class A Common Stock available for issuance under the plan from
400,000 shares to 1,000,000 shares. The Stockholders approved this amendment at
the annual meeting on December 23, 1998.
Employee Stock Purchase Plan
On October 18, 1995, the Board of Directors voted to provide employees who work
in excess of 20 hours per week and more than five months per year rights to
elect to participate in an Employee Stock Purchase Plan (the "Plan") which
became effective February 1, 1996. The price per share shall be the lesser of
85% of the average of the bid and ask price on the first day of the plan period
or the last day of the plan period. A total of 52,000 shares of class A common
stock have been issued under this plan since the first offering which began on
February 1, 1997 through the latest completed offering which ended in January
2000. Eighteen employees are participating in the current offering period under
the plan, which began on February 1, 2000 and will end on January 31, 2001.
On November 17, 1997 the Board of Directors voted to amend The Plan to increase
the number of shares of Class A Common Stock available for issuance under the
plan from 100,000 shares to 150,000 shares. The Stockholders approved this
amendment to the plan at the annual meeting on December 26, 1997.
Non-Employee Director Stock Plan
The Board of Directors adopted the company's Non-Employee Director Stock Plan
(the "Director Plan") on October 18, 1995. The Stockholders of the company
approved the plan on December 15, 1995. Non-qualified options to purchase a
total of 30,000 shares of Class A Common Stock are available for issuance under
the Director Plan.
The Board of Directors or a committee of the Board administers the Director
Plan. Under the Director Plan, each director of the company who was a director
at the time of adoption of the Director Plan and who was not a current or former
employee of the company received an option to purchase that number of shares of
Class A Common Stock as equals 500 multiplied by the years of service of such
director as of the date of the grant. At the first meeting of the Board of
Directors subsequent to each annual meeting of stockholders, each non-employee
director is granted under the Director Plan an option to purchase 2,000 shares
of the Class A Common Stock of the company. The option exercise price is the
fair market value of the shares of the company's Class A Common Stock on the
date of grant. The options are non-transferable and become exercisable as
follows: 25% immediately and 25% on each of the first, second and third
anniversaries of the grant date. If an optionee ceases to be a member of the
Board of Directors other than for death or permanent disability, the unexercised
portion of the options, to the extent unvested, immediately terminate, and the
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<PAGE>
unexercised portion of the options which have vested lapse 180 days after the
date the optionee ceases to serve on the Board. In the event of death or
permanent disability, all unexercised options vest and the optionee or his or
her legal representative has the right to exercise the option for a period of
180 days or until the expiration of the option, if sooner.
On February 18, 1997, the company issued options to purchase 6,000 shares of
Class A Common Stock under the Director Plan at an exercise price of $3.50 per
share. On January 22, 1998, the company issued options to purchase 6,000 shares
of Class A Common Stock under the Director Plan at an exercise price of $2.06.
On February 23, 1999, the company issued options to purchase 6,000 shares of
Class A Common Stock under the Director Plan at an exercise price of $1.03. On
December 28, 1999, the company issued options to purchase 6, 000 shares of class
A common stock under the Director Plan at an exercise price of $.81. As of June
30, 2000, none of the options issued had been exercised.
On November 17, 1997 the Board of Directors voted to amend the Director Plan to
increase the number of shares of Class A Common Stock available for issuance
under the plan from 30,000 shares to 50,000 shares. The Stockholders approved
the amendment to the plan at the annual meeting on December 26, 1997.
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<PAGE>
The following table provides information about options granted to the named
executive officers during fiscal 2000 under the company's Stock Plan, Employee
Stock Purchase Plan and Non-Employee Director Stock Plan.
Individual Grants
(a) (b) (c) (d) (e)
Number of % of
Securities Total
Underlying Options/SARs Exercise or
Options/SARs Granted Base Expiration
Name Granted (#) to Price Date
Employees ($/Share)
in Fiscal
Year
-------------------------------------------------------------------------------
Bruce A. Shear 50,000 18.5% $1.00 2/10/2010
Robert H. Boswell 16,666 6.1% $1.00 2/10/2010
10,000 3.7% $1.50 4/25/2005
Paula C. Wurts 23,334 8.6% $1.00 2/10/2010
10,000 3.7% $1.50 4/25/2005
All Directors and
Officers as a
group (7 Persons) 158,000 58.3% $.81-$1.50 12/23/2004-
2/10/2010
The following table provides information about options exercised by the named
executive officers during fiscal 1999 and the number and value of options held
at the end of fiscal 1999.
(a) (b) (c) (d) (e)
Number of
Securities Value of
Shares Underlying Unexercised
Acquired Unexercised In-the-Money
Name on Value Options/SARs Options/SARs at
Exercise Realized at FY-End (#) FY-End ($)
(#) ($) Exercisable/ Exercisable/
Unexercisable Unexercisable
-------- -------- ------------- -------------
Bruce A. Shear -- -- 87,500/62,500 $5,250/$5,250
Robert H. Boswell -- -- 88,583/51,483 $1,583/$1,583
Paula C. Wurts -- -- 49,417/31,667 $2,216/$2,216
All Directors and
Officers as a
group (7 persons) -- -- 312,000/206,650 $10,450/$11,970
In February 1997, all 95,375 shares underlying the then outstanding employee
stock options were repriced to the current market price, using the existing
exercise durations. In September 1998, all 21,875 options due to expire, were
extended for an additional five years. Also in September 1998, all 183,875
shares underlying the then outstanding employee stock options were repriced to
the current market price, using the existing exercise durations.
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<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
shares of the company's Class A Common Stock and Class B Common Stock (the only
classes of common stock of the company currently outstanding) as of August 31,
2000 by each person known by the company to beneficially own more than 5% of any
class of the company's voting securities, each director of the company, each of
the named executive officers as defined in 17 CFR 228.402(a)(2) and all
directors and officers of the company as a group. Unless otherwise indicated
below, to the knowledge of the company, all persons listed below have sole
voting and investment power with respect to their shares of Common Stock, except
to the extent authority is shared by spouses under applicable law. In preparing
the following table, the company has relied on the information furnished by the
persons listed below:
Name and Address Amount and Percent
of Beneficial Owner Nature of
Title of Class of Beneficial Class
Owner (11)
-------------------------------------------------------------------------------
Class A Common Stock Gerald M. Perlow 43,553(1) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Donald E. Robar 40,053(2) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Bruce A. Shear 111,533(3) 1.5%
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Robert H. Boswell 120,191(4) 1.6%
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
Howard W. Phillips 28,053(5) *
P. O. Box 2047
East Hampton, NY 11937
William F. Grieco 38,053(6) *
115 Marlborough Street
Boston, MA 02116
Paula C. Wurts 67,868(7) *
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
All Directors and 449,304(8) 6.0%
Officers as a
Group
(7 persons)
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<PAGE>
Name and Address Amount and Percent
of Beneficial Owner Nature of
Title of Class of Beneficial Class
Owner (11)
-------------------------------------------------------------------------------
Class B Common Stock
(9) Bruce A. Shear 671,259(10) 92.3%
c/o PHC, Inc.
200 Lake Street
Peabody, MA 01960
All Directors and 671,259 92.3%
Officers as a Group
(7 persons)
* Less than 1%.
1. Includes 26,000 shares issuable pursuant to currently exercisable stock
options or stock options which will become exercisable within sixty days,
having an exercise price range of $.81 to $6.63 per share.
2. Includes 29,500 shares issuable pursuant to currently exercisable stock
options or stock options which will become exercisable within sixty days,
having an exercise price range of $.81 to $6.63 per share.
3. Includes 100,000 shares of Class A Common Stock issuable pursuant to
currently exercisable stock options, having an exercise price range of
$1.00 to $2.63 per share.
4. Includes an aggregate of 103,583 shares of Class A Common Stock issuable
pursuant to currently exercisable stock options at an exercise price range
of $1.00 to $1.50 per share.
5. Includes 20,500 shares issuable pursuant to currently exercisable stock
options having an exercise price range of $.81 to $3.50 per share.
6. Includes 20,500 shares of Class A Common Stock issuable pursuant to
currently exercisable stock options, having an exercise price range of $.81
to $3.50 per share.
7. Includes 54,417 shares of Class A Common Stock issuable pursuant to
currently exercisable stock options, having an exercise price range of
$1.00 to $1.50 per share.
8. Includes an aggregate of 354,500 shares issuable pursuant to currently
exercisable stock options. Of those options, 5,500 have an exercise price
of $6.63 per share, 10,000 have an exercise price of $5.00 per share,
26,000 have an exercise price of $3.50 per share, 50,000 have an exercise
price of $2.63 per share, 4,500 have an exercise price of $2.06 per share,
10,000 have an exercise price of $1.50 per share, 160,000 have an exercise
price of $1.25 per share, 12,500 have an exercise price of $1.20 per share,
25,000 have an exercise price of $1.17 per share, 4,000 have an exercise
price of $1.03 per share, 45,000 have an exercise price of $1.00 per share
and 2,000 have an exercise price of $.81 per share.
9. Each share of class B common stock is convertible into one share of class A
common stock automatically upon any sale or transfer or at any time at the
option of the holder.
10. Includes 56,369 shares of class B common stock pledged to Steven J. Shear
of 2 Addison Avenue, Lynn, Massachusetts 01902, Bruce A. Shear's brother,
to secure the purchase price obligation of Bruce A. Shear in connection
with his purchase of his brother's stock in the company in December 1988.
In the absence of any default under this obligation, Bruce A. Shear retains
full voting power with respect to these shares.
11. Represents percentage of equity of class, based on numbers of shares listed
under the column headed "Amount and Nature of Beneficial Ownership". Each
share of Class A Common Stock is entitled to one vote per share and each
share of Class B Common Stock is entitled to five votes per share on all
matters on which stockholders may vote (except that the holders of the
Class A Common Stock are entitled to elect two members of the company's
Board of Directors and holders of the Class B Common Stock are entitled to
elect all the remaining members of the company's Board of Directors).
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<PAGE>
By virtue of the fact that class B shareholders have the right to elect
three of the five members of the Board of Directors and Mr. Shear owns 92% of
the class B shares, Mr. Shear has the right to elect the nominees and therefore
control the Board of Directors.
Based on the number of shares listed under the column headed "Amount and
Nature of Beneficial Ownership," the following persons or groups held the
following percentages of voting rights for all shares of common stock combined
as of August 31, 2000:
Bruce A. Shear ............................30.96%
All Directors and Officers as a Group
(7 persons).............................33.23%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
Related Party Indebtedness
For approximately the last twelve years, Bruce A. Shear, a director and the
President and Chief Executive Officer of the company, and persons affiliated and
associated with him have made a series of unsecured loans to the company and its
subsidiaries to enable them to meet ongoing financial commitments. The
borrowings generally were entered into when the company did not have financing
available from outside sources and, in the opinion of the company, were entered
into at market rates given the financial condition of the company and the risks
of repayment at the time the loans were made. As of June 30, 2000, the company
owed an aggregate of $200,000 to related parties.
During the period ended June 30, 2000, the company paid Mr. Shear and
affiliates approximately $28,500 in principal and accrued interest under various
notes. As of June 30, 2000, the company owed Bruce A. Shear $100,000 on a
promissory note, which is dated August 13, 1998, bears interest at the rate of
12% per year and is payable on demand and Tot Care, Inc., an affiliate of Bruce
A. Shear, $100,000 on promissory notes dated May 28, 1998 and June 9, 1998 which
bear interest at the rate of 12% per year and are payable on demand.
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<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibit No. Description
3.1 Restated Articles of Organization of the Registrant, as amended.
(Filed as exhibit 3.1 to the company's Registration Statement on
March 2, 1994).
3.1.1 Articles of Amendment filed with the Commonwealth of
Massachusetts. (Filed with the 10-QSB dated May, 1997).
3.2 By-laws of the Registrant, as amended. (Filed as exhibit 3.2 to the
company's Post-Effective Amendment No. 2 on Form S-3 to
Registration Statement on Form SB-2 under the Securities Act of
1933 dated November 13, 1995. Commission file number 333-71418).
3.3 Certificate of Vote of Directors establishing a Series of a Class
of stock. (Filed with the SB-2/A dated June 3, 1997.
4.1 Form of Warrant Agreement. (Filed as exhibit 4.1 to the company's
Registration Statement on March 2, 1994).
4.2 Form of Unit Purchase Option. (Filed as exhibit 4.4 to the
company's Registration Statement on March 2, 1994).
4.3 Warrant issued to Robert A. Naify, Marshall Naify, Sarah M.
Hassanein and Whitney Gettinger. (Filed as exhibit 4.6 to the
company's Registration Statement on Form 3 dated March 12, 1996.
Commission file number 333-71418).
4.5 Warrant Agreement issued to Alpine Capital Partners, Inc. to
purchase 25,000 Class A Common shares dated October 7, 1996. (Filed
as exhibit 4.15 to the company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission November 5, 1996.
Commission file number 0-22916).
4.6 Warrant Agreement issued to Barrow Street Research, Inc. to
purchase 3,000 Class A Common shares dated February 18, 1997.
(Filed as exhibit 4.17 to the company's Registration Statement on
Form SB-2 dated April 15, 1997. Commission file number 333-25231).
4.7 Consultant Warrant Agreement by and between PHC, Inc., and C.C.R.I.
Corporation dated March 3, 1997 to purchase 160,000 shares Class A
Common Stock. (Filed as an exhibit to the company's Registration
Statement on Form SB-2 dated April 15, 1997. Commission file number
333-25231).
4.8 Warrant Agreement by and between PHC, Inc. and ProFutures Special
Equities Fund, L.P. for 50,000 shares of Class A Common Stock
dated 6/4/97. (Filed as exhibit 4.22 to the company's
Registration Statement on Form SB-2 dated April 15, 1997.
Commission file number 333-25231).
4.9 Warrant Agreement by and between PHC, Inc. and ProFutures Special
Equities Fund, L.P. for up to 86,207 shares of Class A Common Stock
dated 09/19/97. (Filed as exhibit 4.25 to the company's report on
Form 10-KSB, filed with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-22916).
4.10 Transfer from Seacrest Capital Securities of PHC, Inc. and
securities to Summit Capital Limited dated 12/19/97. (Filed as
exhibit 4.26 to the company's report on Form 10-KSB, filed with
the Securities and Exchange Commission on October 14, 1997.
Commission file number 0-22916).
4.11 Warrant Agreement by and between PHC, Inc. and ProFutures Special
Equities Fund, LP for 3,000 shares of Class A Common Stock. (Filed
as exhibit 4.27 to the company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission on April 29, 1998.
Commission file number 0-22916).
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<PAGE>
Exhibit No. Description
4.12 Subscription Agreements and Warrants for Series B Convertible
Preferred Shares and Warrants by and between PHC, Inc., ProFutures
Special Equities Fund, L.P., Gary D. Halbert, John F. Mauldin and
Augustine Fund, L.P. dated March 16, 1998. (Filed as exhibit 4.28
to the company's Current Report on Form 8-K, filed with the
Securities and Exchange Commission on April 29, 1998. Commission
file number 0-22916).
4.13 Warrant to purchase up to 52,500 shares of Class A Common Stock by
and between PHC, Inc., and HealthCare Financial Partners, Inc.
dated March 10, 1998. (Filed as exhibit 4.16 to the company's
Registration Statement on Form SB-2 dated July 24, 1998.
Commission file number 333-59927).
4.14 Warrant to purchase up to 52,500 shares of Class A Common Stock by
and between PHC, Inc., and HealthCare Financial Partners, Inc.
dated July 10, 1998. (Filed as exhibit 4.15 to the company's
Registration Statement on Form SB-2 dated July 24, 1998.
Commission file number 333-59927).
4.15 Warrant Agreement by and between Joan Finsilver and PHC, Inc. dated
07/31/98 for 60,000 shares common stock. (Filed as exhibit 4.16 to
the company's report on 10-KSB filed with the Securities and
Exchange Commission on October 13, 1998. Commission file number
0-22916. Replaces exhibit 4.23 to the company's report on Form
10-KSB. Filed with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-22916).
4.16 Warrant Agreement by and between Brean Murray and Company and PHC,
Inc. dated 07/31/98 for 90,000 shares common stock. (Filed as
exhibit 4.17 to the company's report on 10-KSB filed with the
Securities and Exchange Commission on October 13, 1998. Replaces
exhibit 4.23 to the company's report on Form 10-KSB, filed with the
Securities and Exchange Commission on October 14, 1997. Commission
file number 0-22916).
4.17 Warrant Agreement by and between HealthCare Financial Partners,
Inc. and its subsidiaries (collectively "HCFP"). and PHC, Inc.
dated July 10, 1998 - Warrant No. 3 for 20,000 shares of Class A
Common Stock. (Filed as exhibit 4.18 to the company's report on
Form 10-KSB, filed with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-22916).
4.18 Warrant Guaranty Agreement for Common Stock Purchase Warrants
issuable by PHC, Inc. dated August 14, 1998 for Warrants No 2 and
No. 3. (Filed as exhibit 4.19 to the company's report on Form
10-KSB, filed with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-22916).
4.19 12% Convertible Debenture by and between PHC, Inc., and Dean &
Co., dated December 3, 1998 in the amount of $500,000. (Filed as
exhibit 4.20 to the company's report on Form 10-QSB dated February
12, 1999. Commission file number 0-22916).
4.20 Securities Purchase Agreement for 12% Convertible Debenture by and
between PHC, Inc. and Dean & Co., a Wisconsin nominee partnership
for Common Stock. (Filed as exhibit 4.21 to the company's report
on Form 10-QSB dated February 12, 1999. Commission file number
0-22916).
4.21 Warrant Agreement to purchase up to 25,000 shares of Class A
Common Stock by and between PHC, Inc., and Dean & Co., dated
December 3, 1998. (Filed as exhibit 4.22 to the company's report
on Form 10-QSB dated February 12, 1999. Commission file number
0-22916).
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<PAGE>
Exhibit No. Description
4.22 Warrant Agreement by and between PHC, Inc., and National Securities
Corporation dated January 5, 1999 to purchase 37,500 shares of
Class A Common Stock. (Filed as exhibit 4.23 to the company's
report on Form 10-QSB dated February 12, 1999. Commission file
number 0-22916).
4.23 Warrant Agreements by and between PHC, Inc., and George H. Gordon
for 10,000 shares, 15,000 shares, 5,000 shares, 5,000 shares,
50,000 shares and 10,000 shares of Class A Common Stock dated
December 31, 1998; 5,000 shares of Class A Common Stock dated
December 1, 1998; 10,000 shares of Class A Common Stock dated
January 1, 1999; and 10,000 shares of Class A Common Stock dated
February 1, 1999. (Filed as exhibit 4.24 to the company's report on
Form 10-QSB dated February 12, 1999. Commission file number
0-22916).
4.24 Warrant Agreement by and between PHC, Inc., and Barrow Street
Research for 3,000 shares of Class A Common Stock dated February
23, 1999. (Filed as exhibit 4.24 to the company's Registration
Statement on Form S-3 dated April 13, 1999. Commission file number
333-76137).
4.25 Warrant Agreement by and between PHC, Inc., and George H. Gordon
for 10,000 shares of Class A Common Stock dated March 1, 1999.
(Filed as exhibit 4.25 to the company's Registration Statement on
Form S-3 dated April 13, 1999. Commission file number 333-76137).
4.26 Warrant Agreement by and between PHC, Inc., and George H. Gordon
for 10,000 shares of Class A Common Stock dated April 1, 1999.
(Filed as exhibit 4.26 to the company's Registration Statement on
Form S-3 dated April 13, 1999. Commission file number 333-76137).
4.27 Warrant Agreement by and between PHC, Inc., and George H. Gordon
for 10,000 shares of Class A Common Stock dated May 1, 1999. (Filed
as exhibit 4.27 to the company's Registration Statement on Form S-3
dated May 14, 1999. Commission file number 0-22916).
4.28 Warrant Agreements by and between PHC, Inc., and George H. Gordon
for 10,000 shares of Class A Common Stock dated April 1, 1999.
(Filed as exhibit to the company's report on Form 10-KSB dated
October 13, 1999. Commission file number 0-22916).
4.29 Warrant Agreements by and between PHC, Inc., and George H. Gordon
for 10,000 shares of Class A Common Stock dated July 1, 1999.
(Filed as exhibit to the company's report on Form 10-KSB dated
October 13, 1999. Commission file number 0-22916).
4.30 Warrant Agreements by and between PHC, Inc., and George H. Gordon
for 10,000 shares of Class A Common Stock dated August 1, 1999.
(Filed as exhibit to the company's report on Form 10-KSB dated
October 13, 1999. Commission file number 0-22916).
4.31 Warrant to purchase up to 37,500 shares of Class A Common Stock by
and between PHC, Inc., and National Securities Corporation dated
April 5, 1999. (Filed as exhibit to the company's report on Form
10-KSB dated October 13, 1999. Commission file number 0-22916).
4.32 Warrant to purchase up to 37,500 shares of Class A Common Stock by
and between PHC, Inc., and National Securities Corporation dated
July 5, 1999. (Filed as exhibit to the company's report on Form
10-KSB dated October 13, 1999. Commission file number 0-22916).
4.33 Subscription Agreement and Warrants Series B Convertible Preferred
Shares and Warrants by and between PHC, Inc., ProFutures Special
Equities Fund, L.P., Gary D. Halbert, John F. Mauldin and
Augustine Fund, L.P. dated March 16, 1998. (Filed as exhibit to
the company's report on Form 10-KSB dated October 13, 1999.
Commission file number 0-22916).
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<PAGE>
Exhibit No. Description
4.34 Warrant to purchase 40,000 shares of Class A Common Stock by and
between PHC, Inc. and CCRI, Inc. and Warrant to purchase 40,000
shares of Class A Common Stock by and between PHC, Inc. and M&K
Partners both dated 3/3/97; replaces warrant for 160,000 shares
dated 3/3/97 by and between PHC, Inc. and CCRI, Inc. (Filed as
exhibit to the company's report on Form 10-QSB filed with the
Securities and Exchange Commission on May 11, 2000. Commission file
0-22916).0-22916).
4.35 Certificate of Designation of Series C Convertible Preferred Stock
of PHC, Inc. adopted by the Board of Directors on June 15, 2000 and
June 26, 2000. (Filed as exhibit to the company's Registration
Statement on Form S-3 dated July 14, 2000. Commission file number
333-41494).
4.36 Common Stock Purchase Warrant by and between PHC, Inc. and The
Shaar Fund Ltd. dated June 28, 2000. (Filed as exhibit to the
company's Registration Statement on Form S-3 dated July 14, 2000.
Commission file number 333-41494).
*4.37 Common Stock Purchase Warrant by and between PHC, Inc. and Heller
Healthcare Finance, Inc. for 60,000 shares of Class A Common
Stock.
10.1 1993 Stock Purchase and Option Plan of PHC, Inc., as amended
December 26, 1997. (Filed as exhibit 10.1 to the company's
Post-Effective Amendment No. 2 on Form S-3 to Registration
Statement on Form SB-2 under the Securities Act of 1933 dated
November 13, 1995. Commission file number 333-71418).
10.2 Warrant Agreement for Bridge financing with List of bridge
investors holding warrant agreements and corresponding numbers of
bridge units for which warrant is exercisable. (Filed as exhibit
10.6 to the company's Registration Statement on Form SB-2 dated
March 2, 1994. Commission file number 33-71418).
10.3 Lease Agreement between Palmer-Wells Enterprises and AIHS, Inc. and
Edwin G. Brown, dated September 23, 1983, with Addendum dated March
23, 1989, and Renewal of Addendum dated April 7, 1992. (Filed as
exhibit 10.14 to the company's Registration Statement on Form SB-2
dated March 2, 1994. Commission file number 33-71418).
10.4 Note of PHC of Virginia, Inc. in favor of Himanshu S. Patel and
Anna H. Patel, dated April 1, 1995, in the amount of $10,000.
(Filed as exhibit 10.29 to the company's annual report on Form
10-KSB. Filed with the Securities and Exchange on October 2,
1995. Commission file number 0-22916).
10.5 Note of PHC of Virginia, Inc. in favor of Mukesh P. Patel and
Falguni M. Patel, dated April 1, 1993, in the amount of $10,000.
(Filed as exhibit 10.30 to the company's Registration Statement on
Form SB-2 dated March 2, 1994. Commission file number 333-71418).
10.6 Deed of Trust Note of Mount Regis Center Limited Partnership in
favor of Douglas M. Roberts, dated July 28, 1987, in the amount of
$560,000, guaranteed by PHC, Inc., with Deed of Trust executed by
Mount Regis Center, Limited Partnership of even date. (Filed as
exhibit 10.33 to Form SB-2 dated March 2, 1994). Assignment and
Assumption of Limited Partnership Interest, by and between PHC of
Virginia Inc. and each assignor dated as of June 30, 1994. (Filed
as exhibit 10.57 to Form 10-KSB on September 28, 1994).
10.7 Security Agreement Note of PHC of Virginia, Inc. in favor of Mount
Regis Center, Inc., dated July 28, 1987, in the amount of $90,000,
guaranteed by PHC, Inc., with Security Agreement, dated July
1987. (Filed as exhibit 10.34 to the company's Registration
Statement on Form SB-2 dated March 2, 1994. Commission file
number 333-71418).
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<PAGE>
Exhibit No. Description
10.8 Copy of Note of Bruce A. Shear in favor of Steven J. Shear, dated
December 1988, in the amount of $195,695; Pledge Agreement by and
between Bruce A. Shear and Steven J. Shear, dated December 15,
1988; Stock Purchase Agreement by and between Steven J. Shear and
Bruce A. Shear, dated December 1, 1988. (Filed as exhibit 10.52 to
the company's Registration Statement on Form SB-2 dated March 2,
1994. Commission file number 333-71418).
10.9 Lease Agreement by and between Conestoga Corp. and PHC, Inc.,
dated July 11, 1994. (Filed as exhibit 10.69 to the company's
annual report on Form 10-KSB, filed with the Securities and
Exchange Commission on September 28, 1994. Commission file number
0-22916).
10.10 Renewal of Lease Addendum between Palmer Wells Enterprises and PHC
of Utah, Inc., executed February 20, 1995. (Filed as exhibit
10.73 to the company's annual report on Form 10-KSB, filed with
the Securities and Exchange on October 2, 1995. Commission file
number 0-22916)
10.11 1995 Employee Stock Purchase Plan. (Filed as exhibit 10.74 to the
company's Post-Effective Amendment No. 2 on Form S-3 to
Registration Statement on Form SB-2 under the Securities Act of
1933 dated November 13, 1995. Commission file number 333-71418.
As amended on Form S-8 dated March 12, 1999. Commission File
number 333-74373).
10.12 1995 Employee Stock Purchase Plan. (Filed as exhibit 10.74 to the
company's Post-Effective Amendment No. 2 on Form S-3 to
Registration Statement on Form SB-2 under the Securities Act of
1933 dated November 13, 1995. Commission file number 333-71418.
As amended on Form S-8 dated March 12, 1999. Commission File
number 333-74373).
10.13 1995 Non-Employee Director Stock Option Plan. (Filed as exhibit
10.75 to the company's Post-Effective Amendment No. 2 on Form S-3
to Registration Statement on Form SB-2 under the Securities Act of
1933 dated November 13, 1995. Commission file number 333-71418. As
amended on Form S-8 dated March 12, 1999. Commission File number
333-74373).
10.14 Loan and Security Agreement of PHC of Nevada, Inc., in favor of
LINC Anthem Corporation, dated November 7, 1995. (Filed as exhibit
10.76 to the company's Form 10-KSB, filed with the Securities and
Exchange Commission on October 4, 1996.)
10.15 Secured Promissory Note in the amount of $750,000 by and between
PHC of Nevada, Inc. and LINC Anthem Corp. (Filed as exhibit 10.77
to the company's Form 10-KSB, filed with the Securities and
Exchange Commission on October 4, 1996.)
10.16 Stock Pledge by and between PHC, Inc. and Linc Anthem
Corporation. (Filed as exhibit 10.81 to the company's report on
Form 10-KSB, filed with the Securities and Exchange Commission on
September 28, 1994. )
10.17 Custodial Agreement by and between LINC Anthem Corporation and PHC,
Inc. and Choate, Hall and Stewart dated July 25, 1996. (Filed as
exhibit 10.85 to the company's quarterly report on Form 10-QSB,
filed with the Securities and Exchange Commission on February 25,
1997. Commission file number 0-22916).
10.18 Loan and Security Agreement by and between Northpoint-Pioneer Inc.
and LINC Anthem Corporation dated July 25, 1996. (Filed as exhibit
10.86 to the company's quarterly report on Form 10-QSB, filed with
the Securities and Exchange Commission on December 5, 1996.
Commission file number 0-22916).
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<PAGE>
Exhibit No. Description
10.19 Corporate Guaranty by PHC, Inc., PHC of Rhode Island, Inc., PHC of
Virginia, Inc., PHC of Nevada, Inc. and LINC Anthem Corporation
dated July 25, 1996 for North Point-Pioneer, Inc. (Filed as
exhibit 10.87 to the company's quarterly report on Form 10-QSB,
filed with the Securities and Exchange Commission on December 5,
1996. Commission file number 0-22916).
10.20 Stock Pledge and Security Agreement by and between PHC, Inc. and
LINC Anthem Corporation. (Filed as exhibit 10.88 to the company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on December 5, 1996. Commission file number
0-22916).
10.21 Secured Promissory Note of North Point-Pioneer, Inc. in favor of
LINC Anthem Corporation dated July 25, 1996 in the amount of
$500,000. (Filed as exhibit 10.89 to the company's quarterly report
on Form 10-QSB, filed with the Securities and Exchange Commission
on December 5, 1996. Commission file number 0-22916).
10.22 Lease Agreement by and between PHC, Inc. and 94-19 Associates dated
October 31, 1996 for BSC-NY, Inc. (Filed as exhibit 10.90 to the
company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on December 5, 1996. Commission
file number 0-22916).
10.23 Note by and between PHC Inc. and Yakov Burstein in the amount of
$180,000. (Filed as exhibit 10.91 to the company's quarterly report
on Form 10-QSB, filed with the Securities and Exchange Commission
on December 5, 1996. Commission file number 0-22916).
10.24 Note by and between PHC, Inc. and Irwin Mansdorf in the amount of
$570,000. (Filed as exhibit 10.92 to the company's quarterly report
on Form 10-QSB, filed with the Securities and Exchange Commission
on December 5, 1996. Commission file number 0-22916).
10.25 Employment Agreement by and between BSC-NY, Inc. and Yakov Burstein
dated November 1, 1996. (Filed as exhibit 10.93 to the company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on December 5, 1996. Commission file number
0-22916).
10.26 Consulting Agreement by and between BSC-NY, Inc. and Irwin Mansdorf
dated November 1, 1996. (Filed as exhibit 10.94 to the company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on December 5, 1996. Commission file number
0-22916).
10.27 Agreement and Plan of Merger by and among PHC, Inc., BSC-NY, Inc.,
Behavioral Stress Centers, Inc., Irwin Mansdorf, and Yakov
Burstein dated October 31, 1996. (Filed as exhibit 10.95 to the
company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on December 5, 1996. Commission
file number 0-22916).
10.28 Employment Agreement by and between Perlow Physicians, P.C. and
Yakov Burstein dated November 1, 1996. (Filed as exhibit 10.98 to
the company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on December 5, 1996. Commission
file number 0-22916).
10.29 Agreement for Purchase and Sale of Assets by and between Clinical
Associates and Clinical Diagnostics and PHC, Inc., BSC-NY, Inc.,
Perlow Physicians, P.C., Irwin Mansdorf, and Yakov Burstein dated
October 31, 1996. (Filed as exhibit 10.99 to the company's
quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on December 5, 1996. Commission file number
0-22916).
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<PAGE>
Exhibit No. Description
10.30 Consulting Agreement by and between Perlow Physicians, P.C. and
Irwin Mansdorf dated November 1, 1996. (Filed as exhibit 10.100 to
the company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on December 5, 1996. Commission
file number 0-22916).
10.31 Mortgage by and between PHC of Michigan, Inc. and HCFP Funding Inc.
dated January 13, 1997 in the amount of $2,000,000. (Filed as
exhibit 10.106 to the company's quarterly report on Form 10-QSB,
filed with the Securities and Exchange Commission on February 25,
1997 Commission file number 0-22916).
10.32 Employment Agreement for Dr. Himanshu Patel; Employment Agreement
for Dr. Mukesh Patel; and Fringe Benefit Exhibit for both of the
Patels' Employment Agreements. (Filed as exhibit 10.107 to the
company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on February 25, 1997.
Commission file number 0-22916).
10.33 Unconditional Guaranty of Payment and performance by and between
PHC, Inc. in favor of HCFP. (Filed as exhibit 10.112 to the
company's quarterly report on Form 10-QSB, filed with the
Securities and Exchange Commission on February 25, 1997. Commission
file number 0-22916).
10.34 Amendment number 1 to Loan and Security Agreement dated May 21,
1996 by and between PHC of Utah, Inc. and HCFP Funding providing
collateral for the PHC of Michigan, Inc. Loan and Security
Agreement. (Filed as exhibit 10.113 to the company's quarterly
report on Form 10-QSB, filed with the Securities and Exchange
Commission on February 25, 1997 Commission file number 0-22916).
10.35 Employment Agreement by and between Perlow Physicians P.C. and
Nissan Shliselberg, M.D. dated March, 1997. (Filed as exhibit
10.114 to the company's Registration Statement on Form SB-2 dated
April 15, 1997. Commission file number 333-25231).
10.36 Option and Indemnity Agreement by and between PHC, Inc. and Nissan
Shliselberg, M.D. dated February, 1997. (Filed as exhibit 10.115
to the company's Registration Statement on Form SB-2 dated April
15, 1997. Commission file number 333-25231).
10.37 Secured Term Note by and between PHC of Michigan, Inc. and
Healthcare Financial Partners - Funding II, L.P. in the amount of
$1,100,000 dated March, 1997. (Filed as exhibit 10.116 to the
company's Registration Statement on Form SB-2 dated April 15,
1997. Commission file number 333-25231).
10.38 Mortgage between PHC of Michigan, Inc. and Healthcare Financial
Partners - Funding II, L.P. in the amount of $1,100,000 dated
March, 1997 for Secured Term Note. (Filed as exhibit 10.117 to
the company's Registration Statement on Form SB-2 dated April 15,
1997. Commission file number 333-25231).
10.39 Submission of Lease between PHC, Inc. and Conestoga Corporation
dated 11/09/95 for space at 200 Lake Street, Suite 101b, Peabody,
MA 01960. (Filed as exhibit 10.119 to the company's Registration
Statement on Form SB-2 dated April 15, 1997. Commission file number
333-25231).
10.40 Master Equipment Lease Agreement by and between PHC, Inc. and LINC
Capital Partners dated March 18, 1997 in the amount of $200,000.
(Filed as exhibit 10.121 to the company's Registration Statement on
Form SB-2 dated April 15, 1997. Commission file number 333-25231).
10.41 Agreement between Family Independence Agency and Harbor Oaks
Hospital effective January 1, 1997. (Filed as exhibit 10.122 to
the company's report on Form 10-KSB, with the Securities and
Exchange Commission on October 14, 1997. Commission file number
0-22916)
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<PAGE>
Exhibit No. Description
10.42 Master Contract by and between Family Independence Agency and
Harbor Oaks Hospital effective January 1, 1997. (Filed as exhibit
10.122 to the company's report on Form 10-KSB, filed with the
Securities and Exchange Commission on October 14, 1997.
Commission file number 0-22916)
10.43 Deed, Deed of Trust and Deed Trust Note in the amount of $540,000
by and between Dillon and Dillon Associates and Pioneer Counseling
of Virginia, Inc. (Filed as exhibit 10.124 to the company's report
on Form 10-KSB, filed with the Securities and Exchange Commission
on October 14, 1997. Commission file number 0-22916)
10.44 Financial Advisory Agreement, Indemnification Agreement and
Warrant by and between Brean Murray & Company and PHC, Inc. dated
06/01/97. (Filed as exhibit 10.125 to the company's report on
Form 10-KSB, filed with the Securities and Exchange Commission on
October 14, 1997. Commission file number 0-22916)
10.45 Secured Term Note; Mortgage; Environmental Indemnity; Agreement
Guaranty by PHC, Inc.; and Amendment No. 2 Loan and Security
Agreement by and between Healthcare Financial; and PHC of Michigan,
Inc. dated December, 1997. (Filed as exhibit 10.129 to the
company's Registration Statement on Form SB-2 dated January 8,
1997. Commission file number 333-25231).
10.46 First Amendment to Sale and Purchase Agreement by and between LINC
Financial Services, Inc., LINC Finance Corporation VII and PHC of
Rhode Island dated January 20, 1995 and Sale and Purchase Agreement
dated March 6, 1995. (Filed as exhibit 10.132 to the company's
10-QSB dated February 17, 1998).
10.47 Agreement by and between PHC, Inc., and Irwin Mansdorf and Yakov
Burstein dated March 2, 1998. (Filed as exhibit 10.135 to the
company's Current Report on Form 8-K, filed with the Securities and
Exchange Commission. Commission file number 0-22916 on April 29,
1998).
10.48 Secured Bridge Loan to be made to PHC, Inc. by HCFP Funding II,
Inc. in the amount of $350,000 dated March 10, 1998. (Filed as
exhibit 10.136 to the company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission. Commission file
number 0-22916 on April 29, 1998).
10.49 First Amendment to Mortgage between PHC of Michigan, Inc. and HCFP
Funding, Inc. (Filed as Exhibit 10.137 to the company's 10-QSB
filed on May 15, 1998. Commission file number 0-22916).
10.50 Secured Unconditional Guaranty of Payment and performance by and
between BSC-NY, Inc. and HCFP Funding II, Inc. in the amount of
$350,000. (Filed as exhibit 10.58 to the company's Registration
Statement on Form SB-2 dated July 24, 1998. Commission file
number 333-59927).
10.51 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. (Filed as exhibit 10.59 to
the company's Registration Statement on Form SB-2 dated July 24,
1998. Commission file number 333-59927).
10.52 Credit Line Deed of Trust by and between PHC of Virginia, Inc.,
and HCFP Funding II, Inc. dated July, 1998. (Filed as exhibit
10.60 to the company's Registration Statement on Form SB-2 dated
July 24, 1998. Commission file number 333-59927).
10.53 Amendment No. 1 to Secured Bridge Note dated July 10, 1998 by and
between PHC, Inc. and HCFP Funding II, Inc. (Filed as exhibit
10.61 to the company's Registration Statement on Form SB-2 dated
July 24, 1998. Commission file number 333-59927).
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<PAGE>
Exhibit No. Description
10.54 Promissory Note for $50,000 dated May 18, 1998 by and between PHC,
Inc. and Tot Care, Inc. (Filed as exhibit 10.62 to the company's
Registration Statement on Form SB-2 dated July 24, 1998.
Commission file number 333-59927).
10.55 Promissory Note for $50,000 dated June 9, 1998 by and between PHC,
Inc. and Tot Care, Inc. (Filed as exhibit 10.63 to the company's
Registration Statement on Form SB-2 dated July 24, 1998.
Commission file number 333-59927).
10.56 Letter Agreement dated May 31, 1998 by and between NMI Realty, Inc.
and PHC of Rhode Island, Inc. to terminate the Lease and Option
Agreement entered into March 16, 1994. (Filed as exhibit 10.64 to
the company's Registration Statement on Form SB-2 dated July 24,
1998. Commission file number 333-59927).
10.57 Amendment No. 1 to Loan and Security Agreement in the amount of
$4,000,000.00 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. (Filed as exhibit 10.65 to the company's
report on Form 10-KSB dated October 13, 1998. Commission file
number 0-22916).
10.58 Promissory Note by and between PHC, Inc. and Bruce A. Shear dated
August 13, 1998, in the amount of $100,000. (Filed as exhibit
10.66 to the company's report on Form 10-QSB dated November 3,
1998. Commission file number 0-22916).
10.59 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. (Filed as exhibit 10.67 to the company's report on
Form 10-QSB filed with the Securities and Exchange Commission on
February 12, 1999. Commission file number 0-22916).
10.60 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. (Filed as exhibit 10.68 to the company's
Registration Statement on Form 10-QSB dated 12, 1999. Commission
file number 0-22916).
10.61 Financial Advisory and Consultant Agreement by and between
National Securities Corporation and PHC, Inc. dated 01/05/99
(Filed as exhibit 10.69 to the company's report on Form 10-QSB
dated February 12, 1999. Commission file number 0-22916).
10.62 Agreement for Purchase and Sale of Pioneer Counseling of Virginia,
Inc. to Dr. Mukesh Patel and Dr. Himanshu Patel dated February 15,
1999. (Filed as exhibit 10.62 to the company's Registration
Statement on Form 10-QSB filed with the Securities and Exchange
Commission on May 14, 1999. Commission file number 0-22916).
10.63 This amendment no. 2 to secured bridge note (the "Amendment") is
hereby entered into as of the 10th day of May 1999 by and among
PHC, INC., a Massachusetts corporation ("Borrower"), and HCFP
FUNDING II, INC., a Delaware corporation ("Lender"). (Filed as an
exhibit to the company's report on Form 10-KSB dated October 13,
1999. Commission file number 0-22916).
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<PAGE>
Exhibit No. Description
10.64 Seller's Settlement Statement related to the sale of the real
estate owned by Pioneer Counseling of Virginia, Inc. dated March
15, 1999. (Filed as exhibit 10.64 to the company's report on Form
10-QSB filed with the Securities and Exchange Commission on May 14,
1999. Commission file number 0-22916).
10.65 This amendment no. 2 to secured bridge note (the "Amendment") is
hereby entered into as of the 10th day of May 1999 by and among
PHC, INC., a Massachusetts corporation ("Borrower"), and HCFP
FUNDING II, INC., a Delaware corporation ("Lender"). (Filed as an
exhibit to the company's report on Form 10-KSB dated October 13,
1999. Commission file number 0-22916).
10.66 Loan and Security Agreement by and between Heller Healthcare
Finance, Inc. f/k/a 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 August 11, 1999.
(Filed as an exhibit to the company's report on Form 10-KSB dated
October 13, 1999. Commission file number 0-22916).
10.67 Amendment number 3 to Secured Bridge Note dated May 10, 1999 by and
between PHC, Inc. and HCFP (Filed as exhibit to the company's
report on Form 10-KSB, filed with the Securities and Exchange
Commission on October 13, 1999. Commission file number 0-22916).
10.68 Promissory Note by and between PHC, Inc. and Mellon US Leasing
Corporation dated November, 1999, in the amount of $160,000. (Filed
as exhibit 10.68 to the company's report on Form 10-QSB dated
November 15, 1999.
10.69 Secured Term Loan for $1,000,000 by and between PHC of Michigan,
Inc and Heller Finance, Inc., which includes Secured Term Note
from Borrower; Restated Mortgage by and between Borrower and
Lender; Guaranty of Term Loan by PHC, Inc.; Secured Guaranty of
Term Loan by BSC-NY, Inc.; Guaranty of Term Loan by Bruce A. Shear
and Letter Agreement. (Filed as exhibit to the company's report
on Form 10-QSB, filed with the Securities and Exchange Commission
on February 14, 2000. Commission file 0-22916).
10.70 Amendment number 1 to Loan and Security Agreement dated February
17, 2000 by and between PHC of Michigan, Inc., PHC, of Utah, Inc.,
PHC of Virginia, Inc., PHC of Rhode Island, Inc. and Pioneer
Counseling of Virginia, Inc. and Heller Healthcare Finance, Inc.,
f/k/a HCFP Funding in the amount of $2,500,000. (Filed as exhibit
to the company's report on Form 10-QSB filed with the Securities
and Exchange Commission on May 11, 2000. Commission file 0-22916).
10.71 Secured Term Note by and between PHC of Michigan, Inc. and Heller
Healthcare Finance, Inc. in the amount of $500,000 dated May 26,
2000. (Filed as exhibit to the company's Registration Statement
on Form S-3 dated July 14, 2000. Commission file number
333-41494).
10.72 Registration Rights Agreement by and between PHC, Inc. and The
Shaar Fund Ltd. Dated June 28, 2000. (Filed as exhibit to the
company's Registration Statement on Form S-3 dated July 14, 2000.
Commission file number 333-41494).
10.73 Release Notice by and between PHC, Inc. and The Shaar Fund Ltd.
Dated June 28, 2000. (Filed as exhibit to the company's
Registration Statement on Form S-3 dated July 14, 2000.
Commission file number 333-41494).
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<PAGE>
Exhibit No. Description
10.74 Escrow Instruction by and between PHC, Inc.; The Shaar Fund Ltd.
And Cadwalader, Wickersham & Taft (an Escrow Agent) dated June 28,
2000. (Filed as exhibit to the company's Registration Statement
on Form S-3 dated July 14, 2000. Commission file number
333-41494).
10.75 Securities Purchase Agreement by and between PHC, Inc. and The
Shaar Fund Ltd. Dated June 28, 2000 to purchase 125,000 shares of
Class A Common Stock. (Filed as exhibit to the company's
Registration Statement on Form S-3 dated July 14, 2000.
Commission file number 333-41494).
*10.76 Promissory Note for $532,000 dated May 30, 2000 by and between
PHC, Inc. and Irwin J. Mansdorf, Ph.D.
*10.77 Promissory Note for $168,000 dated May 30, 2000 by and between
PHC, Inc. and Yakov Burstein, Ph.D.
*10.78 Settlement Agreement and Mutual Releases by and between PHC, Inc.
and Yakov Burstein, Ph.D. and Irwin J. Mansdorf, Ph.D. dated May
30, 2000.
*10.79 Restated mortgage for $3,100,000 by and between PHC of Michigan,
Inc. and Heller Finance, Inc., which includes Secured
Unconditional Guaranty of Payment and Performance by PHC, Inc.;
Secured Unconditional Guaranty of Payment and Performance by
BSC-NY, Inc.; Secured Unconditional Guaranty of Payment and
Performance by Bruce A. Shear and Amended and Restated
Cross-Collateralization and Cross-Default 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 Heller Healthcare Finance, Inc.
("Lender").
16.1 Letter on Change in Independent Public Accountants. (Filed as an
exhibit to the company's report on Form 10-KSB, filed with the
Securities and Exchange Commission on September 28, 1994 and as
exhibit 16.1 in the company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission. (Commission file
number 0-22916 on April 29, 1998).
21.1 List of Subsidiaries. (Filed as an exhibit to the company's
Registration Statement on Form SB-2 dated July 24, 1998. Commission
file number 333-59927).
23.1 Consent of Independent Auditors.
* Filed herewith
(b) REPORTS ON FORM 8-K.
The company filed no reports on Form 8-K during the quarter ended June 30,
2000.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHC, INC.
Date: September 29, 2000 By: /s/ Bruce A. Shear
Bruce A. Shear, President
and
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, the following
persons on behalf of the registrant and in the capacities and on the dates
indicated have signed this report below.
SIGNATURE TITLE(s) Date
-------------------- -------------------------- ------------------
/s/ Bruce A. Shear President, Chief Executive
Bruce A. Shear Officer and Director September 29, 2000
(principal executive
officer)
/s/ Paula C. Wurts Controller and
Paula C. Wurts Treasurer (principal
financial September 29, 2000
and accounting officer)
/s/ Gerald M. Perlow
Gerald M. Perlow Director September 29, 2000
/s/ Donald E. Robar
Donald E. Robar Director September 29, 2000
/s/ Howard Phillips
Howard Phillips Director September 29, 2000
/s/ William F. Grieco
William F. Grieco Director September 29, 2000
- 71 -
<PAGE>
Exhibit 4.37
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR
THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 60,000
CLASS A COMMON STOCK PURCHASE WARRANT
To Purchase Class A Common Stock of
PHC, Inc.
THIS IS TO CERTIFY THAT Heller Healthcare Finance, Inc., or
registered assigns, is entitled, at any time from the Closing Date (as
hereinafter defined) to the Expiration Date (as hereinafter defined), to
purchase from PHC, Inc., a Massachusetts corporation (the "COMPANY"), 60,000
shares of Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, at a purchase price per share equal to
$1.50, subject to adjustment as provided herein, all on the terms and conditions
and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Class A Common Stock Purchase Warrant (this
"WARRANT"), the following terms shall have the respective meanings set forth
below:
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
Commonwealth of Massachusetts.
"CLOSING DATE" is May 26, 2000.
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other federal
securities laws.
"COMMON STOCK" shall mean (except where the context otherwise
indicates) the Class A Common Stock, par value $.01 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.2.
"CURRENT MARKET PRICE" shall mean on any date of determination the
closing bid price of a Common Stock on such day as reported on Nasdaq; PROVIDED,
if such security bid is not listed or admitted to trading on the Nasdaq National
Market ("NASDAQ"), as reported on the principal national security exchange or
quotation system on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
securities exchange or quotation system, the closing bid price of such security
on the over-the-counter market on the day in question as reported by Bloomberg
LP, or a similar generally accepted reporting service, as the case may be.
"CURRENT WARRANT PRICE" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date, as set forth in the
first paragraph hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"EXERCISE PERIOD" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXPIRATION DATE" shall mean May 25, 2005.
"FUNDAMENTAL CORPORATE CHANGE" shall have the meaning set forth in
Section 4.2.
"HOLDER" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"MARKET PRICE" per Common Stock means the average of the closing bid
prices of the Common Stock as reported on the Nasdaq for the twenty trading days
immediately preceding the date on which this Warrant is exercised.
"OTHER PROPERTY" shall have the meaning set forth in Section 4.2.
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"RESTRICTED COMMON STOCK" shall mean shares of Common Stock which
are, or which upon their issuance on their exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"TRANSFER" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"TRANSFER NOTICE" shall have the meaning set forth in Section 9.2.
"WARRANT PRICE" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price.
"WARRANT STOCK" shall mean the shares of Common Stock purchased by
the holders of the Warrants upon the exercise thereof.
"WARRANTS" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE
From and after the Closing Date and until 5:00 p.m., New York time,
on the Expiration Date, Holder may exercise this Warrant, on any Business Day,
for all or any part of the number of shares of Common Stock purchasable
hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 200 Lake Street, Suite 102,
Peabody, MA 01960, or at the office or agency designated by the Company pursuant
to Section 12, (i) a written notice of Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, (ii) to the extent such exercise is not being effected through a
Cashless Exercise, payment of the Warrant Price in cash or wire transfer or
cashier's check drawn on a United States bank and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as EXHIBIT A, duly executed by Holder or its agent or
attorney. Upon receipt of the items referred to in clauses (i), (ii) and (iii)
above, the Company shall, as promptly as practicable, and in any event within
five Business Days thereafter, execute or cause to be executed and deliver or
cause to be delivered to Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise. The
stock certificate or certificates so delivered shall be, to the extent possible,
in such denomination or denominations as Holder shall request in the notice and
shall be registered in the name of Holder or, subject to Section 9, such other
name as shall be designated in the notice. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to Section 2.2 prior to the issuance of such
shares have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired this Warrant (or part hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of the
Warrant Price shall be made, at the option of the Holder, (i) by payment of the
Warrant Price in cash or by wire transfer or cashier's check drawn on a United
States bank, (ii) through a net exercise without payment of the Warrant Price in
cash by providing notice to the Company of the Holder's election to receive a
number of shares of Common Stock in a Cashless Exercise equal to the product of
(1) the number of shares for which such Warrant is exercisable with payment in
cash of the Warrant Price and (2) the Cashless Exercise Ratio or (iii) by any
combination of clauses (i) and (ii). For purposes of this Warrant, the "CASHLESS
EXERCISE RATIO" shall equal a fraction, the numerator of which is the Current
Market Price per share of the Common Stock on the date of exercise, less the
Current Warrant Price as of the date of exercise, and the denominator of which
is the Current Market Price per share of the Common Stock on the date of
exercise. An exercise of a Warrant in accordance with clause (ii) above is
herein called a "CASHLESS EXERCISE." Following a Cashless Exercise, this Warrant
shall be canceled in all respects with regard to (a) the number of shares of
Common Stock issued in accordance with the Cashless Exercise PLUS (b) the number
of shares used as consideration for the Cashless Exercise. 2.2 PAYMENT OF TAXES
AND CHARGES
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issuance or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
2.3 FRACTIONAL SHARES
The Company shall not be required to issue a fractional share of Common
Stock upon exercise of any Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, such fraction shall
be adjusted to a full share of Common Stock.
2.4 CONTINUED VALIDITY
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder) shall continue to be
entitled with respect to such shares to all rights to which it would have been
entitled as Holder under Sections 9, 10 and 14 of this Warrant. The Company
will, at the time of exercise of this Warrant, in whole or in part, upon the
request of Holder, acknowledge in writing, in form reasonably satisfactory to
Holder, its continuing obligation to afford Holder all such rights; PROVIDED,
HOWEVER, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 TRANSFER
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of EXHIBIT B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if properly
assigned in compliance with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
3.2 DIVISION AND COMBINATION
Subject to Section 9, this Warrant may be divided or combined with other
Warrants upon presentation thereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Sections 3.1 and 9, as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
3.3 EXPENSES
The Company shall prepare, issue and deliver at its own expense (other than
transfer taxes) the new Warrants or Warrants under this Section 3. 3.4
MAINTENANCE OF BOOKS
The Company agrees to maintain, at its aforesaid office or agency, books
for the registration and the registration of transfer of the Warrants.
4. ADJUSTMENTS
4.1 ADJUSTMENT BASED ON CURRENT MARKET PRICE
In the event that on the date on which the Holder exercises this Warrant
the Current Market Price of the Common Stock is less than $2.50 per share, such
holder shall have the right to receive an additional number of shares of Common
Stock under this Warrant equal to a number not less than the product of (1)
60,000, or if the Warrant is exercised in part, the number of shares for which
such Warrant is exercised on the date of exercise, and (2) the Adjustment Ratio.
For purposes of this Warrant, the "ADJUSTMENT RATIO" shall equal a fraction, the
numerator of which is $2.50 less the Market Price, and the denominator of which
is the Market Price per share of the Common Stock on the date of exercise.
4.2 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF
ASSETS
In case the Company shall reorganize its capital, reclassify its capital
stock, consolidate or merge with or into another Person (where the Company is
not the survivor or where there is a change in or distribution with respect to
the Common Stock of the Company), or sell, convey, transfer or otherwise dispose
of all or substantially all its property, assets or business to another Person,
or effectuate a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of (each, a "FUNDAMENTAL
CORPORATE CHANGE") and, pursuant to the terms of such Fundamental Corporate
Change, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, such number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property as is receivable upon or as a result of such Fundamental
Corporate Change by a holder of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such Fundamental Corporate
Change. In case of any such Fundamental Corporate Change, the successor or
acquiring corporation (if other than the Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 4. For purposes of this Section
4.2, "COMMON STOCK OF THE SUCCESSOR OR ACQUIRING CORPORATION" shall include
stock of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 4.2 shall similarly apply to successive Fundamental Corporate Change.
5. NOTICES TO HOLDER
5.1 NOTICE OF ADJUSTMENTS
Whenever the number of shares of Common Stock for which this Warrant is
exercisable shall be adjusted pursuant to Section 4.2, the Company shall
forthwith prepare a certificate to be executed by the chief financial officer of
the Company setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated, specifying
the number of shares of Common Stock for which this Warrant is exercisable and
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. The Company
shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14.2. The Company shall keep at its office or
agency designated pursuant to Section 12 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by Holder. 5.2 NOTICE OF CORPORATE ACTION
If at any time: (a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or (b) there shall be any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger of the Company with,
or any sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation; or (c)
there shall be a voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and (b)
use its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form satisfactory to
Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all times reserve and
keep available for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable and not subject to preemptive rights.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto,
as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
The Company will not at any time, except upon dissolution, liquidation or
winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred, hypothecated
or assigned before satisfaction of the conditions specified in this Section 9,
which conditions are intended to ensure compliance with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any Warrant Stock.
Holder, by acceptance of this Warrant, agrees to be bound by the provisions of
this Section 9. 9.1 RESTRICTIVE LEGEND (a) Holder, by accepting this Warrant and
any Warrant Stock agrees that this Warrant and the Warrant Stock issuable upon
exercise hereof may not be assigned or otherwise transferred unless and until
(i) the Company has received an opinion of counsel for Holder that such
securities may be sold pursuant to an exemption from registration under the
Securities Act or (ii) a registration statement relating to such securities has
been filed by the Company and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall bear a legend
as follows until such securities have been sold pursuant to an effective
registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
(b) Except as otherwise provided in this Section 9, the Warrant shall be stamped
or otherwise imprinted with a legend in substantially the following form:
"THIS CLASS A COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND
REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS CLASS A COMMON STOCK
PURCHASE WARRANT."
9.2 NOTICE OF PROPOSED TRANSFERS
Prior to any Transfer or attempted Transfer of any Warrants or any shares
of Restricted Common Stock, the Holder shall give ten days' prior written notice
(a "TRANSFER NOTICE") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(a), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in Section 9.1(b), unless in the
opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act. Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice from the
Company under this Section 9.2 that such opinion is reasonably satisfactory.
9.3 REGISTRATION OF SHARES.
From and after the first public sale of shares of the Company's Common
Stock pursuant to an effective registration statement under the Securities Act,
after the expiration of any applicable underwriter lock-up period, the Holder
shall have the right to have the Warrant Stock registered for resale on a Form
S-3 Registration Statement in the event the Company is eligible to file a Form
S-3 (or any successor form).
9.4 TERMINATION OF RESTRICTIONS
Notwithstanding the foregoing provisions of Section 9, the restrictions
imposed by this Section upon the transferability of the Warrant Stock and the
Restricted Common Stock and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant Stock or Restricted Common Stock (i) when
and so long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the Company shall
have received an opinion of counsel reasonably satisfactory to it that such
shares may be transferred without registration thereof under the Securities Act.
Whenever the restrictions imposed by this Section shall terminate as to any
share of Restricted Common Stock, as hereinabove provided, the holder thereof
shall be entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive legend
set forth in Section 9.1(a). 9.5 LISTING ON SECURITIES EXCHANGE
If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during the Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such information as
may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity reasonably satisfactory to it (it being understood that
the written agreement of the Holder shall be sufficient indemnity), and in case
of mutilation upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to Holder; PROVIDED, in
the case of mutilation no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
14. MISCELLANEOUS
14.1 NONWAIVER AND EXPENSES
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails to
make, when due, any payments provided for hereunder, or fails to comply with any
other provision of this Warrant, the Company shall pay to Holder such amounts as
shall be sufficient to cover any costs and expenses including, without
limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any amounts due pursuant hereto or
in otherwise enforcing any of its rights, powers or remedies hereunder.
14.2 NOTICE GENERALLY
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(a) if to the Company, to:
PHC, Inc.
200 Lake Street, Suite 102
Peabody, MA 01960
Attention: Bruce A. Shear
(978) 536-2777
(978) 536-2677 (fax)
with a copy to:
Arnold R. Westerman, Esquire
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, NW
Washington, DC 20036
(202) 857-6243
(202) 857-6395 (fax)
<PAGE>
(b) if to the Holder, to:
Heller Healthcare Finance, Inc.
2 Wisconsin Circle, 4th floor
Chevy Chase, MD 20815
Attention: Keith Reuben
(301) 347-3138
(301) 664-9860 (Fax)
with a copy to:
Heller Healthcare Finance, Inc.
2 Wisconsin Circle, 4th Floor
Chevy Chase, MD 20815
Attention: Richard Dine
(301) 664-9877
(301) 664-9860 (fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2. 14.3 REMEDIES.
Holder in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under Section 9 of this Warrant. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of Section 9 of this Warrant and hereby agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate. 14.4 SUCCESSORS AND ASSIGNS
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
Holder and the successors of the Company and the successors and assigns of
Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and, with respect to Section 9 hereof,
holders of Warrant Stock, and shall be enforceable by any such Holder or holder
of Warrant Stock. 14.5 AMENDMENT
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
14.6 SEVERABILITY
Wherever possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant. 14.7 HEADINGS
The headings used in this Warrant are for the convenience of reference only
and shall not, for any purpose, be deemed a part of this Warrant. 14.8 GOVERNING
LAW
This Warrant shall be governed by the laws of the Commonwealth of
Massachusetts, without regard to the provisions thereof relating to conflicts of
law.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Dated: June 9, 2000
PHC, INC.
By:____________________________________
/s/ Bruce A. Shear_________________
Name: Bruce A. Shear
Title: Chief Executive Officer
Attest:
By: /s/ Paula C. Wurts _______________________________________
Name: Paula C. Wurts
Title: Assistant Secretary
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of __________ shares of Class A Common Stock of PHC,
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Class A Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
whose address is
and, if such shares of Class A Common Stock shall not include all of the shares
of Class A Common Stock issuable as provided in this Warrant, that a new Warrant
of like tenor and date for the balance of the shares of Class A Common Stock
issuable hereunder be delivered to the undersigned.
(Name of Registered Owner)
(Signature of Registered Owner)
(Street Address)
-------------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this
subscription must correspond with the
name as written upon the face of the
within Warrant in every particular,
without alteration or enlargement or any
change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Class A Common Stock set forth below:
No. of Shares of
NAME AND ADDRESS OF ASSIGNEE CLASS A COMMON
STOCK
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of PHC, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:
-----------------------------------
(Print Name)
-----------------------------------
(Signature)
-----------------------------------
(Print Name of Witness)
-----------------------------------
(Witness's Signature)
NOTICE: The signature on this assignment
must correspond with the name as written
upon the face of the within Warrant in
every particular, without alteration or
enlargement or any change whatsoever.
<PAGE>
Exhibit 10.76
RESTATED MORTGAGE
$3,100,000.00
MORTGAGOR: PHC OF MICHIGAN, INC.
MORTGAGEE: HELLER HEALTHCARE FINANCE, INC.
May 26, 2000
Prepared by and after recording, return to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis & Foster, P.C.
1000 Michigan National Tower
Lansing, MI 48933
<PAGE>
RESTATED MORTGAGE
THIS INSTRUMENT ("MORTGAGE") WITNESSES: That PHC OF MICHIGAN, INC., a
Massachusetts corporation having its principal place of business at 200 Lake
Street, Suite 102, Peabody, Massachusetts 01960, as "MORTGAGOR", and HELLER
HEALTHCARE FINANCE, INC., a Delaware corporation having its principal office at
2 Wisconsin Circle, 4th Floor, Chevy Chase, Maryland 20815, as "MORTGAGEE".
R E C I T A L S
A. This Mortgage amends and restates in its entirety that certain Restated
Mortgage made by Mortgagor in favor of Mortgagee, which was recorded in the
official records of the Macomb County, Michigan registrar of deeds at Liber Page
on , 1999 (the "ORIGINAL MORTGAGE"). The Mortgage secures the obligations of
Mortgagor (i) under that certain Secured Term Note in the original principal
amount of One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00)
made by Mortgagor in favor of Mortgagee's predecessor-in-interest and dated
March 12, 1997 (the "MARCH TERM NOTE"); (ii) under that certain Secured Term
Note in the original principal amount of Five Hundred Thousand and No/100
Dollars ($500,000) made by Mortgagor in favor of Mortgagee's
predecessor-in-interest and dated December 9, 1997 (the "DECEMBER TERM NOTE");
and (iii) under that certain Secured Term Note made by Mortgagor in favor of
Mortgagee dated as November , 1999 in an original principal amount of One
Million and No/100 Dollars ($1,000,000.00) (the "NOVEMBER TERM NOTE" and
collectively with the March Term Note and the December Term Note, the "ORIGINAL
TERM NOTES"). The Original Term Notes are still outstanding. The succession of
Mortgagee is described in the recitals of the Original Mortgage.
B. Mortgagor is executing a Secured Term Note in favor of Mortgagee dated as of
even date with this Mortgage in an original principal amount of Five Hundred
Thousand and No/100 Dollars ($500,000.00) (the "MAY TERM NOTE" and collectively
with the Original Term Notes, the "TERM NOTES"). Mortgagee requires that the
obligations of Mortgagor under the May Term Note be secured by the premises (as
defined below) and Mortgagor has agreed to execute this Mortgage to evidence
Mortgagee's security interest.
NOW, THEREFORE, for value received, Mortgagor mortgages and warrants to
Mortgagee the property situated in the City of New Baltimore, County of Macomb,
and State of Michigan, with a street address of 35031 23 Mile Road, New
Baltimore, Michigan 48047, and legally described as shown on the attached
EXHIBIT "A"; together with the easements, rights-of-way, licenses, privileges,
hereditaments, and appurtenances belonging to the property, and all the rents,
issues, leases, and profits, the interest of Mortgagor in the property, either
at law or in equity, all buildings, structures, and improvements, and all
fixtures located in, on, or affixed to the property, and used or usable in
connection with the operation of the property (all of the above-stated property
are collectively referred to in this Mortgage as the "premises").
This Mortgage is given to secure the following:
(a) payment of the indebtedness evidenced by the March Term Note;
(b) payment of the indebtedness evidenced by the December Term Note;
(c) payment of the indebtedness evidenced by the November Term Note;
(d) payment of the indebtedness evidenced by the May Term Note
(e) payment by Mortgagor to Mortgagee of all sums expended or advanced by
Mortgagee pursuant to any term or provision of this Mortgage;
(f) performance of the covenants, conditions, and agreements contained in this
Mortgage and in the Term Notes and in any other documents securing the
indebtedness shown above;
(g) all other indebtedness and obligations of Mortgagor currently or
subsequently owing to Mortgagee, including but not limited to all future
advances under this Mortgage or on the Term Notes, loan agreements,
security agreements, pledge agreements, assignments, mortgages, leases,
guarantees, and any other agreements, instruments, or documents previously
or subsequently signed by Mortgagor, whether the indebtedness or
obligations are direct or indirect, absolute or contingent, primary or
secondary, or related or unrelated to the premises or the transaction of
which this Mortgage is a part, and any and all partial or full extensions
or renewals of this indebtedness or other indebtedness and obligations (all
of the foregoing are collectively referred to as the "INDEBTEDNESS").
Mortgagor warrants, covenants, and agrees that:
1. TITLE. Mortgagor is seized of the premises, in fee simple. Mortgagor had
the right and power to mortgage and warrant the premises as set forth in
this Mortgage. The premises are free from all liens and encumbrances except
easements and restrictions of record disclosed in __________________ Title
Commitment No. _______ dated ______________, relating to the premises.
Mortgagor will defend the premises against all claims and demands.
2. PAYMENT OF INDEBTEDNESS. Mortgagor will pay all indebtedness when due,
including the principal and interest, as provided in the Term Notes.
3. TAXES AND ASSESSMENTS. Until the indebtedness is fully satisfied, Mortgagor
will pay all taxes, assessments, and other similar charges and encumbrances
levied on the premises before they become delinquent, and will promptly
deliver to Mortgagee, without demand, receipts showing the payment.
4. TAX AND INSURANCE ESCROW. On request, at the option of Mortgagee, Mortgagor
will pay to Mortgagee monthly, in addition to each monthly payment required
by this Mortgage or under the Term Notes, a sum equivalent to one-twelfth
of the amount estimated by Mortgagee to be sufficient to enable Mortgagee
to pay, at least 30 days before they become due, all taxes, assessments,
and other similar charges levied against the premises, and all insurance
premiums on any policy or policies of insurance required by this Mortgage.
The additional payments may be commingled with the general funds of
Mortgagee, and no interest shall be payable on those payments. On demand by
Mortgagee, Mortgagor will deliver and pay over to Mortgagee any additional
sums necessary to make up any deficiency in the amount necessary to enable
Mortgagee to fully pay when due any of the preceding items. In the event of
any default by Mortgagor in performing any of the terms of this Mortgage,
Mortgagee may apply against the indebtedness, in the manner that Mortgagee
may determine, any funds of Mortgagor then held by Mortgagee under this
paragraph.
5. CHANGE OF LAW. If, after the date of this Mortgage, any statute or
ordinance is passed that changes in any way the laws now in force for the
taxation of mortgages or mortgaged debts or the manner in which those taxes
are collected, so as to affect this Mortgage or the interest of Mortgagee,
the whole of the principal sum secured by this Mortgage, with all interest
and charges, if any, at the option of Mortgagee, shall become due and
payable.
6. INSURANCE. Mortgagor will procure, deliver to, and maintain for the benefit
of Mortgagee during the term of this Mortgage:
(a) a policy of hazard insurance, providing an all-risk extended
coverage endorsement, in an amount equal to the highest replacement
value of the premises;
(b) a policy of comprehensive public liability insurance insuring
against bodily injury, with a coverage limit of at least $3,000,000,
and against property damage, with a coverage limit of at least
$3,000,000, from any accident or occurrence with respect to the
premises.
All policies of insurance required by this paragraph shall be in a
form, with companies, and in amounts acceptable to Mortgagee, and shall
contain a mortgagee endorsement clause acceptable to Mortgagee, with loss
payable to Mortgagee. Mortgagor will pay when due the premiums on any
policy of insurance required by Mortgagee, and will deliver to Mortgagee
renewals of all policies at least 10 days before their expiration date(s).
Duplicates of all policies shall be delivered to Mortgagee.
In the event of any loss or damage to the premises, Mortgagor will
give immediate written notice to Mortgagee, and Mortgagee may then make
proof of the loss or damage, if it is not promptly made by Mortgagor. All
proceeds of insurance shall be payable to Mortgagee, and any affected
insurance company is authorized and directed to make payment directly to
Mortgagee. Mortgagee is authorized to settle, adjust, or compromise any
claims for loss, damage, or destruction under any policy of insurance.
7. MAINTENANCE AND REPAIR. Mortgagor will not cause or permit the commission
of waste on the premises and will keep the premises in good condition and
repair. No building or other improvement on the premises shall be removed,
demolished, or materially altered without the prior written consent of
Mortgagee. Mortgagor will comply with all laws, ordinances, regulations,
and orders of all public authorities having jurisdiction over the premises.
If the premises, in the sole judgment of Mortgagee, require inspection or
repair, Mortgagee may enter upon the premises and inspect and/or repair the
premises as Mortgagee may deem advisable, and may take other action as
Mortgagee may deem appropriate to preserve the premises. Mortgagor will pay
when due all charges for utilities or services contracted for by Mortgagor.
8. ENVIRONMENTAL MATTERS. No use, exposure, release, generation, manufacture,
storage, treatment, transportation or disposal of Hazardous Material (as
defined) has occurred or is occurring on or from the property. All
Hazardous Material used, treated, stored, transported to or from, generated
or handled on the property has been disposed of on or off the property by
or on behalf of Borrower in a lawful manner. There are no underground
storage tanks present on or under the property. No other environmental,
public health or safety hazards exist with respect to the property.
"Hazardous Material" means any substances defined or designated as
hazardous or toxic waste, hazardous or toxic material, hazardous or toxic
substance, or similar term, by any environmental statute, rule or
regulation or any federal, state or local governmental authority.
9. WASTE. The failure of Mortgagor to meet its maintenance obligations or to
pay any taxes assessed against the premises or any insurance premium on
policies covering any property located on the premises shall constitute
waste as provided by MCLA 600.2927, MSA 27A.2927, and shall entitle
Mortgagee to appoint a receiver of the property for the purpose of
preventing the waste. The receiver may collect the rents and income from
the premises.
10. CONDEMNATION. If the premises, or any part, are taken under the power of
eminent domain, the entire award, to the full extent of the indebtedness,
shall be paid to Mortgagee. Mortgagee is empowered in the name of Mortgagor
to receive and give acquittance for any award, whether it is joint or
several. However, Mortgagee shall not be held responsible for failing to
collect any award.
11. MORTGAGEE EXPENSES. If Mortgagor fails to meet any of its obligations under
this mortgage, Mortgagee shall have the right, but not the obligation, to
perform in the place of Mortgagor. If Mortgagee incurs or expends any sums,
including reasonable attorney fees, whether or not in connection with any
action or proceeding, to (a) sustain the lien of this Mortgage or its
priority, (b) protect or enforce any of Mortgagee's rights, (c) recover any
part of the indebtedness, (d) meet an obligation of Mortgagor under this
mortgage, or (e) collect insurance or condemnation proceeds, then those
sums shall become immediately due and payable by Mortgagor with interest at
the default rate set forth in the Term Notes from the date of Mortgagee's
payment until paid by Mortgagor. The sums expended in this manner by
Mortgagee shall be secured by this Mortgage and be a lien on the premises
prior to any right, title, or interest on the premises attaching or
accruing subsequent to the lien of this Mortgage.
12. ASSIGNMENT OF CONTRACTS AND LICENSES. Mortgagor assigns to Mortgagee, as
further security for payment of the indebtedness, Mortgagor's interest in
all agreements, contracts (including any contracts for the lease or sale of
the premises), licenses, and permits affecting the premises. The assignment
shall not be construed as a consent by Mortgagee to any agreement,
contract, license or permit so assigned, or to impose any obligations on
Mortgagee. Mortgagor shall not cancel, amend, permit, or cause a default or
termination of any of the agreements, contracts, licenses, and permits used
in conjunction with the operation of the premises without the written
approval of Mortgagee.
13. ASSIGNMENT OF RENTS AND LEASES. As additional security for the payment of
the indebtedness, Mortgagor assigns and transfers to Mortgagee, pursuant to
1953 PA 210, as amended by 1966 PA 151 (MCLA 554.231 et seq., MSA
26.1137(1) et seq.), all the rents, profits, and income under all leases,
occupancy agreements, or arrangements upon or affecting the premises
(including any extensions or amendments) now in existence or coming into
existence during the period this Mortgage is in effect. This assignment
shall run with the land and be good and valid as against Mortgagor and
those claiming under or through Mortgagor. This assignment shall continue
to be operative during foreclosure or any other proceedings to enforce this
Mortgage. If a foreclosure sale results in a deficiency, this assignment
shall stand as security during the redemption period for the payment of the
deficiency. This assignment is given only as collateral security and shall
not be construed as obligating Mortgagee to perform any of the covenants or
undertakings required to be performed by Mortgagor in any leases.
In the event of default in any of the terms or covenants of this
Mortgage, Mortgagee shall be entitled to all of the rights and benefits of
MCLA 554.231B.233, MSA 26.1137(1)B(3) and 1966 PA 151, and Mortgagee shall
be entitled to collect the rents and income from the premises, to rent or
lease the premises on the terms that it may deem best, and to maintain
proceedings to recover rents or possession of the premises from any tenant
or trespasser.
Mortgagee shall be entitled to enter the premises for the purpose of
delivering notices or other communications to the tenants and occupants.
Mortgagee shall have no liability to Mortgagor as a result of those acts.
Mortgagee may deliver all of the notices and communications by ordinary
first-class U.S. mail.
If Mortgagor obstructs Mortgagee in its efforts to collect the rents
and income from the premises or unreasonably refuses or neglects to assist
Mortgagee in collecting the rent and income, Mortgagee shall be entitled
to appoint a receiver for the premises and the income, rents, and profits,
with powers that the court making the appointment may confer.
Mortgagor shall at no time collect advance rent in excess of one
month under any lease pertaining to the premises, and Mortgagee shall not
be bound by any rent prepayment made or received in violation of this
paragraph. Mortgagee shall not have any obligation to collect rent or to
enforce any other obligations of any tenant or occupant of the premises to
Mortgagor. No action taken by Mortgagee under this paragraph shall cause
Mortgagee to become a "mortgagee in possession."
14. PERFORMANCE OF LEASES. Mortgagor shall observe and perform all obligations
contained in any lease affecting the premises. Mortgagor shall not default
in performing any of the obligations imposed on Mortgagor by any lease;
such a default gives the lessee the right to terminate or cancel the lease
or offset against rentals. Upon request, Mortgagor shall furnish to
Mortgagee a statement, in any reasonable detail that Mortgagee may
request, of all leases relating to the premises and executed counterparts
of any and all leases.
15. RECORDS. With respect to the premises and its operations, Mortgagor shall
keep proper books in accordance with generally accepted accounting
principles consistently applied. Mortgagee shall have the right to examine
the books at reasonable times as Mortgagee may elect. Upon request,
Mortgagor shall furnish to Mortgagee within sixty (60) days after the end
of each calendar year, a financial statement of Mortgagor for the calendar
year, in reasonable detail and stating in comparative form the figures as
of the end of the previous calendar year, including statements of income
and expense relating to operations of the premises, certified by an
independent certified public accountant acceptable to Mortgagee. In
addition, Mortgagor shall furnish to Mortgagee, in a form acceptable to
Mortgagee, interim financial statements that Mortgagee may request,
certified by Mortgagor.
16. WAIVER. If Mortgagee (a) grants any extension of time with respect to the
payment of any part of the indebtedness, (b) takes other or additional
security for the payment of the indebtedness, (c) waives or fails to
exercise any right granted by this Mortgage or the Term Notes, (d) grants
any release on any part of the security held for the payment of the
indebtedness, or (e) amends any of the terms and provisions of this
Mortgage or the Term Notes, that act or omission shall not release
Mortgagor under any covenant of this Mortgage or the Term Notes, nor
preclude Mortgagee from exercising any right or power granted, nor impair
the lien or priority of this Mortgage.
17. USE OF PREMISES. Mortgagor shall not make, or permit, without the prior
written consent of Mortgagee, (a) any use of the premises for any purpose
other than that for which they are now used; (b) any alterations of the
buildings, improvements, and fixtures located on the premises; (c) any
purchase, lease of, or agreement for any fixtures to be placed on the
premises under which title is reserved in the vendor. Mortgagor shall
execute and deliver documents that may be requested by Mortgagee to confirm
the lien of this Mortgage on any fixtures, machinery, and equipment.
18. EVENTS OF DEFAULT. The occurrences listed below shall be deemed events of
default and shall entitle Mortgagee, at its option and without notice
except as required by law, to exercise any one or any combination of
remedies under this Mortgage or permitted by law:
(a) the failure by Mortgagor to (i) make any payment when due under the
Term Notes, or (ii) to perform any of the other terms, covenants, or
conditions of this Mortgage within a period of ten (10) days after
written notice from Mortgagee of Mortgagor's failure to perform an
obligation;
(b) the institution of foreclosure or other proceedings to enforce any
junior lien or encumbrance on the premises;
(c) the appointment by a court of a receiver or trustee of Mortgagor or
for any property of Mortgagor;
(d) a decree by a court adjudicating Mortgagor a bankrupt or insolvent, or
for the sequestration of any of Mortgagor's property;
(e) the filing of a petition in bankruptcy by or against Mortgagor under
the federal Bankruptcy Code or any similar statute that is in effect;
(f) an assignment by Mortgagor for the benefit of creditors or a written
admission by Mortgagor of the inability to pay debts generally as they
become due;
(g) the failure to comply with all of the terms and covenants of any
leases or other agreements, documents, or restrictions that now
encumber, affect, or pertain to the premises;
(h) Mortgagor, without the written consent of Mortgagee, sells, conveys,
or transfers the premises, any interest in the premises, or any rents
or profits from the premises, or causes or allows any mortgage, lien,
or other encumbrance, or any writ of attachment, garnishment,
execution, or other legal process to be placed on the premises, or any
part of the premises is transferred by operation of law;
(i) all or any part of the premises is damaged or destroyed by fire or
other casualty, regardless of insurance coverage, or is taken by power
of eminent domain.
19. DEFAULT REMEDIES. Upon the occurrence of any event of default of this
mortgage, Mortgagee shall have the option, in addition to and not in lieu
of all other rights and remedies provided by law, to do any or all of the
following:
(a) Without notice, except as expressly required by law, to declare the
principal sum secured by the Mortgage, together with all interest and
all other sums secured by this mortgage, to be immediately due and
payable; to demand any installment payment due under the Term Notes;
and to institute any proceedings that Mortgagee deems necessary to
collect and otherwise to enforce the indebtedness and obligations
secured by this Mortgage and to protect the lien of this Mortgage.
(b) Commence foreclosure proceedings against the premises pursuant to
applicable laws. Mortgagee's commencement of a foreclosure shall be
deemed an exercise by Mortgagee of its option to accelerate the due
date of all sums secured by this Mortgage. Mortgagor grants to
Mortgagee, in the event of the occurrence of an event of default, the
power to sell the premises at public auction by advertisement, without
notice or hearing, except as required by Michigan statutes.
(c) To enter into peaceful possession of the premises and/or to receive
the rent, income, and profits, and to apply those in accordance with
paragraph 13.
Mortgagor acknowledges having been advised that Mortgagee believes
that the value of the security covered by this Mortgage is
inextricably intertwined with the effectiveness of the management,
maintenance, and general operation of the premises, and that
Mortgagee would not make the loan secured by this Mortgage unless it
could be assured that it would have the right to take possession of
the premises in order to manage, control management, and enjoy the
income, rents, and profits, immediately upon default by Mortgagor,
notwithstanding that foreclosure proceedings may not have been
instituted, or are pending, or that the redemption period may not
have expired. Accordingly, Mortgagor knowingly and voluntarily
waives all right to possession of the premises from and after the
date of default, upon demand for possession by Mortgagee.
20. SALE OF PREMISES AS A WHOLE OR IN PARCELS. Upon any foreclosure sale of the
premises, the premises may be sold either as a whole or in parcels, as
Mortgagee may elect, and if in parcels, to be divided as Mortgagee may
elect, or, at the election of Mortgagee, the premises may be offered first
in parcels and then as a whole, with the offer producing the highest price
for the entire property to prevail.
21. ASSIGNMENT. Mortgagor shall not make a conveyance of any interest in the
premises. A "conveyance" of Mortgagor's interest in the premises shall
include without limitation any voluntary or involuntary disposition or
dilution of legal or beneficial title to the premises by any means. If
ownership of the premises, or any part, becomes vested in a person other
than Mortgagor (with or without Mortgagee's consent), Mortgagee may,
without notice to Mortgagor, deal with the successors in interest with
reference to this Mortgage or the Term Notes without in any way releasing
or otherwise affecting Mortgagor's liability under the Term Notes and
Mortgage.
22. APPLICATION OF PROCEEDS. In the event of the payment to Mortgagee, pursuant
to this mortgage, of any rents or profits, or proceeds of any insurance or
condemnation award, or proceeds from the sale of the premises upon
foreclosure, Mortgagee shall have the right to apply the rents, profits, or
proceeds, in amounts and proportions that Mortgagee shall, in its sole
discretion, determine, against the cost and expenses incurred by Mortgagee
in exercising its rights under this mortgage, payment of the interest and
principal due under the Term Notes, payment of any other portion of the
indebtedness, and payment of expenses incurred in preserving the premises.
Application by Mortgagee of any proceeds toward the last maturing
installments of principal and interest to become due under the Term Notes
shall not excuse Mortgagor from making the regularly scheduled payments due
under the Term Notes and this mortgage, nor shall the application reduce
the amount of the payments. In the event of the payment of proceeds as a
result of an insurance or condemnation award, Mortgagee shall have the
right, but not the obligation, to require all or part of the proceeds of
any insurance or condemnation award to be used to restore any part of the
premises damaged or taken by reason of the occurrence which gave rise to
the payment of the proceeds.
CAUTION: PARAGRAPH 23 CONTAINS A WAIVER OF
IMPORTANT LEGAL RIGHTS
23. WAIVER OF RIGHTS. This Mortgage contains a power of sale which permits
Mortgagee to cause the premises to be sold in the event of a default.
Mortgagee may elect to cause the premises to be sold by advertisement
rather than pursuant to court action, and Mortgagor voluntarily and
knowingly waives any right Mortgagor may have by virtue of any applicable
constitutional provision or statute to any notice or court hearing prior to
the exercise of the power of sale, except as may be expressly required by
the Michigan statute governing foreclosures by advertisement. In addition,
Mortgagor knowingly and voluntarily waives any right Mortgagor may have to
remain in possession of the premises or to collect any rents or income
therefrom during the pendency of any foreclosure proceedings and during any
applicable redemption period. Also, paragraphs 18 and 21 above entitle
Mortgagee to require immediate payment of the balance of the indebtedness
in full if the premises are sold or otherwise transferred. By execution of
this mortgage, Mortgagor represents and acknowledges that the meaning and
consequences of these paragraphs have been discussed as fully as desired by
Mortgagor with Mortgagor's legal counsel.
24. ENVIRONMENTAL MATTERS. Mortgagor agrees to indemnify Mortgagee against, and
hold it harmless from, all obligations and liabilities relating to the
premises arising out of claims made or suits brought for investigation,
study, remedial work, monitoring, or other costs and expenses arising from
or associated with response to any environmental matters, including but not
limited to any (a) water pollution, air pollution, noise, odor, spills,
leaks, or inadvertent discharges, emissions, or releases, or the
generation, transportation, storage, treatment, or disposal of solid waste,
including hazardous waste, hazardous substances, pollutants and
contaminants; (b) injury, sickness, disease, or death of any person; or (c)
damage to any property, regardless of whether the cause of the injury or
damage occurred before or after the date of this Mortgage. Mortgagor
further agrees that Mortgagee shall have no liability for any environmental
contamination associated with Mortgagor's business or the premises, and
that any involvement of Mortgagee with Mortgagor's business to protect its
security interest in the premises shall not constitute Mortgagor as an
"owner or operator" of Mortgagor's business for purposes of determining
environmental liability. In any event, if Mortgagee becomes obligated, by
judicial or administrative judgment or settlement of a claim, to pay any
amounts for response to any environmental contamination associated or
connected with Mortgagor's business or the premises, any payment by
Mortgagee shall be deemed additional indebtedness secured by the lien of
this mortgage, shall be immediately due and payable to Mortgagee, and shall
bear interest until paid at the default interest rate specified in the Term
Notes.
25. COVENANTS RUN WITH LAND. All of the terms and covenants of this Mortgage
shall run with the land and shall be binding on and inure to the benefit of
the respective legal representatives and successors of the parties.
26. RELEASE OF MORTGAGE. If Mortgagor pays to Mortgagee the money required by
the Term Notes, in the manner and at the times provided in the Term Notes,
and all other sums of the indebtedness payable by Mortgagor to Mortgagee,
and keeps and performs the terms, covenants, and agreements of Mortgagor
with Mortgagee, then this Mortgage shall be satisfied, and Mortgagee shall
release the Mortgage.
27. NOTICE. All notices, demands, and requests required or permitted to be
given to Mortgagor or by law shall be deemed delivered when deposited in
the United States mail, with postage prepaid, addressed to Mortgagor or
Mortgagee at their last known addresses.
28. SEVERABILITY. If any provision of this Mortgage is in conflict with any
statute or rule of law of the State of Michigan or is otherwise
unenforceable for any reason, then that provision shall be deemed null and
void to the extent of the conflict or unenforceability, but shall be deemed
separable from and shall not invalidate any other provision of this
Mortgage.
29. VENUE AND JURISDICTION. All provisions of this Mortgage shall be governed
by and construed in accordance with the laws of the State of Michigan.
Venue shall be in Macomb County, Michigan for any action brought with
regard to this Mortgage. Mortgagor consents to personal jurisdiction over
it by any Michigan courts to the extent that personal jurisdiction may be
necessary to enforce any of the provisions of this Mortgage.
[SIGNATURES FOLLOW]
<PAGE>
Signed on the date set forth above.
MORTGAGOR:
WITNESSES: PHC OF MICHIGAN, INC.,
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
/s/ T. A. Bates
Name:
ACKNOWLEDGMENT
STATE OF MASSACHUSETTS )
COUNTY OF ESSEX )
The foregoing instrument was acknowledged before me on ____________, 2000,
by Bruce A. Shear, the President of PHC of Michigan, Inc., a Massachusetts
corporation, on behalf of the corporation.
/s/ Paula C. Wurts
Notary Public, Essex County
My commission expires November 29, 2002
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
SECURED UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS SECURED UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the
"Guaranty") is dated as of May 26, 2000 and is made by BSC--NY, INC., a New York
corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation ("LENDER").
R E C I T A L S
1. Pursuant to a certain Secured Term Note of even date with this Guaranty (as
the note may from time to time be amended, modified or supplemented, the "TERM
Note") made in favor of Lender by PHC of Michigan, Inc., a Massachusetts
corporation ("BORROWER") that is an affiliate of Guarantor, Lender has agreed to
make available to Borrower a secured term loan in the maximum aggregate
principal amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the
"LOAN").
B. Lender is willing to make the Loan under the Term Note but only upon the
condition, among others, that Guarantor shall have executed and delivered to
Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Guaranty and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. All capitalized terms used but not defined in this Guaranty shall have
the respective meanings given them in the Term Note.
2. To induce Lender to make the Loan upon the terms and conditions set
forth in the Term Note, and in consideration thereof, Guarantor hereby
unconditionally and irrevocably guaranties to Lender, and to its successors,
endorsees, transferees and assigns, Borrower's prompt and complete payment when
due, whether at the stated maturity, by acceleration or otherwise, of all of
Borrower's obligations under the Term Note (collectively, the "OBLIGATIONS"),
and Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Term Note.
3. As security for Guarantor's obligations under this Guaranty, Guarantor
hereby assigns and grants to Lender a continuing priority lien on and security
interest in, upon, and to the following property:
a. All of Guarantor's now-owned and hereafter acquired or arising Accounts,
accounts receivable and rights to payment of every kind and description, and any
contract rights, chattel paper, documents and instruments with respect thereto;
b. All of Guarantor's now or hereafter acquired deposit accounts into which
Accounts are deposited, including the Concentration Account;
c. All of Guarantor's right, title and interest, and all of Guarantor's
rights, remedies, security and liens, in, to and in respect of the Accounts,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, guaranties or other contracts of suretyship with
respect to the Accounts, deposits or other security for the obligation of any
Account debtor, and credit and other insurance;
d. All of Guarantor's right, title and interest in, to and in respect of
all goods relating to, or which by sale have resulted in, Accounts, including,
without limitation, all goods described in invoices or other documents or
instruments with respect to, or otherwise representing or evidencing, any
Account, and all returned, reclaimed or repossessed goods;
e. All deposit accounts, as such term is defined in the UCC;
f. All books, records, ledger cards, computer programs and information and
other property at any time evidencing or relating to the Accounts; and
g. The proceeds (including, without limitation, insurance proceeds) of all
of the foregoing.
4. Guarantor hereby waives notice of the acceptance of this Guaranty and of
the extending of credit as above specified and the state of indebtedness of
Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms of such
credit, and waives diligence, presentment, demand of payment, protest or notice,
whether of non-payment, dishonor, protest or otherwise, of any document or
documents and notice of any extension, renewal, modification or default and
assent to the release, substitution or variation of any collateral that may at
any time be held as security for any credit extended to Borrower, all without
relieving Guarantor of any liability under this Guaranty. The obligations of
Guarantor under this Guaranty shall be an unconditional obligation to make
prompt payment and performance to Lender irrespective of the genuineness,
validity, regularity or enforceability of any indebtedness or evidence of
indebtedness of Borrower to Lender or of other circumstances that might
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of Lender's rights either (i) against Borrower on
all or any part of its Obligations or (ii) under this Guaranty.
5. Notwithstanding any payment or payments made by Guarantor under this
Guaranty or any setoff or application of funds of Guarantor by Lender, Guarantor
shall not be entitled to be subrogated to any of the rights of Lender against
Borrower or any collateral security or guarantee or right of offset held by
Lender for the payment or performance of the Obligations, nor shall Guarantor
seek any reimbursement from Borrower in respect of payments made by Guarantor
under this Guaranty, until all amounts then owing and any other performance then
due to Lender by Borrower for or on account of the Obligations are paid and
satisfied in full. Upon such payment and satisfaction in full, Guarantor shall
be subrogated to all rights of Lender against Borrower or any collateral
security or guarantee or right of offset held by Lender for the payment and
performance of the Obligations.
6. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
7. This is intended to be and shall be construed as a continuing guaranty
and shall remain in full force and effect and shall be binding in accordance
with and to the extent of its terms upon Guarantor and Guarantor's successors
and assigns, and shall inure to the benefit of Lender, and its successors,
endorsees, transferees and assigns.
8. If all or any part of the Obligations of Borrower to Lender are not paid
when due, Guarantor hereby guaranties that it will pay the same to Lender, upon
demand, without set-off or counterclaim and without reduction by reason of any
taxes, levies, imposts, charges and withholdings, restrictions or conditions of
any nature that are now or may hereafter be imposed, levied or assessed by any
country, political subdivision or taxing authority, all of which will be for the
account of and paid by Guarantor, and Lender need not first proceed to preserve,
utilize or exhaust any other right or remedy against Borrower or any other
guarantor or any security that Lender may have to obtain payment. The payment
shall be made in immediately available funds to Lender's office at 2 Wisconsin
Circle, Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven M. Curwin,
Deputy General Counsel, or at such other place as Lender may designate in
writing.
9. No failure to exercise and no delay in exercising, on the part of
Lender, any right, power or privilege under this Guaranty shall operate as a
waiver of the right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
of the right, power or privilege, or the exercise of any other power or right.
The rights and remedies provided in this Guaranty are cumulative and not
exclusive of any rights or remedies provided by law.
10. Notice or demand to the parties shall be sufficiently given if in
writing and personally delivered, or mailed by registered or certified first
class mail, postage prepaid, return receipt requested, or sent by commercial
courier against receipt, or by telecopier (with a confirming copy sent by
regular mail) to the party intended and at the address or addresses specified
below:
GUARANTOR: 200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: (978) 536-2777
Telecopier: (978) 536-2677
Attention: Bruce A. Shear, President
LENDER: 2 Wisconsin Circle, 4th Floor
Chevy Chase, Maryland 20815
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
Attention: Steven M. Curwin, Deputy General Counsel
Any party may designate a change of address by notice in writing to the other
parties, such notice to be effective ten (10) days after mailing or delivery as
provided in this Section 10.
11. Guarantor hereby represents, warrants, and covenants to Lender that:
a. It is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has the
corporate power and authority to own its property, conduct its business as now
being conducted and to make and perform this Guaranty and the transactions
contemplated by this Guaranty, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the nature and
extent of the business conducted by it, or property owned by it, and applicable
law require such qualification, except where the failure so to qualify would not
have a material adverse effect on the business, operations or financial position
of Guarantor.
b. The execution, delivery and performance of this Guaranty have been duly
authorized by all necessary corporate action and will not violate any provision
of law or any order of any court or governmental agency or the certificate of
incorporation or other incorporating documents or bylaws of Guarantor, or
conflict with, or result in a breach of, or constitute (with or without notice
or lapse of time or both) a default under, or result in the creation of any
security interest, lien, charge or encumbrance upon any property or assets of
Guarantor, pursuant to any agreement, indenture or other instrument to which it
is a party or by which it may be bound.
c. Except as disclosed to Lender in writing prior to the execution of this
Guaranty, no action, suit, investigation or proceeding is pending or known to be
threatened against or affecting Guarantor that, if adversely determined, would
have a material adverse effect upon its financial condition or operations.
d. Guarantor is not in default under any provision of its certificate of
incorporation or other incorporating documents, bylaws or stock provisions (or
any amendment to such documents or provisions), any indenture relating to
borrowed money, any agreement to which it is a party or by which it is bound,
any other indenture, or any order, regulation, ruling or requirement of a court
or public body or authority by which it is bound, which default would have a
material adverse effect on the business, operations or financial position of
Guarantor.
e. No license, consent or approval of, or filing with, any governmental
body or other regulatory authority is required for the making and performance
of, or any instrument or transaction contemplated by, this Guaranty. Guarantor
holds all certificates and authorizations of all governmental agencies and
authorities required by law to enable it to engage in the business currently
transacted by it, except those certificates and authorizations as to which the
failure to so hold would not, in the aggregate, have a material adverse effect
on Guarantor.
f. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by Lender.
12. The obligations of Guarantor under this Guaranty shall continue in full
force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise fully satisfied, and continue to be
effective or be reinstated, as the case may be, if at any time payment or other
satisfaction of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Borrower, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable bankruptcy laws or any other similar law, or any law or order of
any government or government agency purporting to reduce, amend or otherwise
affect, the Obligations, shall impair, affect, be a defense to or claim against
the obligations of Guarantor under this Guaranty.
13. In addition to its guarantee of Borrower's payment of the Obligations
and Borrower's performance of all covenants, obligations and agreements
contained in the Loan Documents, Guarantor shall pay all actual costs and
expenses (including reasonable attorney's fees) paid or incurred by Lender in
connection with the enforcement of this Guaranty.
14. Guarantor hereby agrees to execute any and all further documents,
agreements, and instruments, and take all further actions, that Lender shall
reasonably request to effectuate or further preserve, evidence, perfect or
protect the rights purported to be created in favor of Lender under this
Guaranty.
15. Guarantor hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Obligations, or any part of the Obligations, that diligent inquiry would
reveal, and Guarantor hereby agrees that Lender shall have no duty to advise
Guarantor of information known to Lender regarding such condition or any such
circumstances. If Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to Guarantor, Lender shall be under
no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information that, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor.
16. This Guaranty may be executed in one or more counterpart copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
17. If any term, covenant or condition of this Guaranty, or the application
of such term, covenant or condition to any party or circumstance, shall be found
by a court of competent jurisdiction to be, to any extent, invalid or
unenforceable, the remainder of this Guaranty and the application of such term,
covenant, or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term, covenant or condition shall be valid and enforced to the fullest extent
permitted by law. Upon determination that any such term is invalid, illegal or
unenforceable, the parties to this Guaranty shall amend this Guaranty so as to
effect the original intent of the parties as closely as possible in an
acceptable manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS GUARANTY IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO GUARANTOR AT ITS ADDRESS SET
FORTH IN SECTION 10 OF THIS GUARANTY.
19. GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY GUARANTOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
20. GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT
OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON BEHALF OF
GUARANTOR IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF
OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
GUARANTOR IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS GUARANTY (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
GUARANTOR AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
GUARANTOR WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
21. In any litigation, trial, arbitration or other dispute resolution
proceeding relating to this Guaranty or any of the other Loan Documents, all
directors, officers, employees and agents of Guarantor or of its Affiliates
shall be deemed to be employees or managing agents of Guarantor for purposes of
all applicable law or court rules regarding the production of witnesses by
notice for testimony (whether in a deposition, at trial or otherwise). Guarantor
agrees that Lender's counsel in any such dispute resolution proceeding may
examine any of these individuals as if under cross-examination and that any
discovery deposition of any of them may be used in that proceeding as if it were
an evidence deposition. Guarantor in any event will use all commercially
reasonable efforts to produce in any such dispute resolution proceeding, at the
time and in the manner requested by Lender, all Persons, documents (whether in
tangible, electronic or other form) or other things under its control and
relating to the dispute in any jurisdiction that recognizes that (or any
similar) distinction.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of the
date first written above.
ATTEST: BSC-NY, INC.
a New York corporation
By: /s/ Bruce A. Shear
Name: Bruce A. Shear
Title: President
<PAGE>
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the "GUARANTY") is
dated as of May 26, 2000 and is made by PHC, INC., a Massachusetts corporation
("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware
corporation ("LENDER").
R E C I T A L S
1. Pursuant to a certain Secured Term Note of even date with this Guaranty
(as the note may from time to time be amended, modified or supplemented, the
"TERM NOTE") made in favor of Lender by PHC of Michigan, Inc., a Massachusetts
corporation ("BORROWER") that is a wholly owned subsidiary of Guarantor, Lender
has agreed to make available to Borrower a secured term loan in the maximum
aggregate principal amount of Five Hundred Thousand and No/100 Dollars
($500,000.00) (the "LOAN").
B. Lender is willing to make the Loan under the Term Note but only upon the
condition, among others, that Guarantor shall have executed and delivered to
Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Guaranty and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. All capitalized terms used but not defined in this Guaranty shall have
the respective meanings given them in the Term Note.
2. To induce Lender to make the Loan upon the terms and conditions set
forth in the Term Note, and in consideration thereof, Guarantor hereby
unconditionally and irrevocably guaranties to Lender, and to its successors,
endorsees, transferees and assigns, Borrower's prompt and complete payment when
due, whether at the stated maturity, by acceleration or otherwise, of all of
Borrower's obligations under the Term Note (collectively, the "OBLIGATIONS"),
and Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Term Note.
3. Guarantor hereby waives notice of the acceptance of this Guaranty and of
the extending of credit as above specified and the state of indebtedness of
Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms of such
credit, and waives diligence, presentment, demand of payment, protest or notice,
whether of non-payment, dishonor, protest or otherwise, of any document or
documents and notice of any extension, renewal, modification or default and
assent to the release, substitution or variation of any collateral that may at
any time be held as security for any credit extended to Borrower, all without
relieving Guarantor of any liability under this Guaranty. The obligations of
Guarantor under this Guaranty shall be an unconditional obligation to make
prompt payment and performance to Lender irrespective of the genuineness,
validity, regularity or enforceability of any indebtedness or evidence of
indebtedness of Borrower to Lender or of other circumstances that might
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of Lender's rights either (i) against Borrower on
all or any part of its Obligations or (ii) under this Guaranty.
4. Notwithstanding any payment or payments made by Guarantor under this
Guaranty or any setoff or application of funds of Guarantor by Lender, Guarantor
shall not be entitled to be subrogated to any of the rights of Lender against
Borrower or any collateral security or guarantee or right of offset held by
Lender for the payment or performance of the Obligations, nor shall Guarantor
seek any reimbursement from Borrower in respect of payments made by Guarantor
under this Guaranty, until all amounts then owing and any other performance then
due to Lender by Borrower for or on account of the Obligations are paid and
satisfied in full. Upon such payment and satisfaction in full, Guarantor shall
be subrogated to all rights of Lender against Borrower or any collateral
security or guarantee or right of offset held by Lender for the payment and
performance of the Obligations.
5. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
6. This is intended to be and shall be construed as a continuing guaranty
and shall remain in full force and effect and shall be binding in accordance
with and to the extent of its terms upon Guarantor and Guarantor's successors
and assigns, and shall inure to the benefit of Lender, and its successors,
endorsees, transferees and assigns.
7. If all or any part of the Obligations of Borrower to Lender are not paid
when due, Guarantor hereby guaranties that it will pay the same to Lender, upon
demand, without set-off or counterclaim and without reduction by reason of any
taxes, levies, imposts, charges and withholdings, restrictions or conditions of
any nature that are now or may hereafter be imposed, levied or assessed by any
country, political subdivision or taxing authority, all of which will be for the
account of and paid by Guarantor, and Lender need not first proceed to preserve,
utilize or exhaust any other right or remedy against Borrower or any other
guarantor or any security that Lender may have to obtain payment. The payment
shall be made in immediately available funds to Lender's office at 2 Wisconsin
Circle, Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven M. Curwin,
Deputy General Counsel, or at such other place as Lender may designate in
writing.
8. No failure to exercise and no delay in exercising, on the part of
Lender, any right, power or privilege under this Guaranty shall operate as a
waiver of the right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
of the right, power or privilege, or the exercise of any other power or right.
The rights and remedies provided in this Guaranty are cumulative and not
exclusive of any rights or remedies provided by law.
9. Notice or demand to the parties shall be sufficiently given if in
writing and personally delivered, or mailed by registered or certified first
class mail, postage prepaid, return receipt requested, or sent by commercial
courier against receipt, or by telecopier (with a confirming copy sent by
regular mail) to the party intended and at the address or addresses specified
below:
GUARANTOR: 200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: (978) 536-2777
Telecopier: (978) 536-2677
Attention: Bruce A. Shear, President
LENDER: 2 Wisconsin Circle, 4th Floor
Chevy Chase, Maryland 20815
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
Attention: Steven M. Curwin, Deputy General Counsel
Any party may designate a change of address by notice in writing to the
other parties, such notice to be effective ten (10) days after mailing or
delivery as provided in this Section 9.
10. Guarantor hereby represents, warrants, and covenants to Lender that:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has the
corporate power and authority to own its property, conduct its business as now
being conducted and to make and perform this Guaranty and the transactions
contemplated by this Guaranty, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the nature and
extent of the business conducted by it, or property owned by it, and applicable
law require such qualification, except where the failure so to qualify would not
have a material adverse effect on the business, operations or financial position
of Guarantor.
(b) The execution, delivery and performance of this Guaranty have been duly
authorized by all necessary corporate action and will not violate any provision
of law or any order of any court or governmental agency or the certificate of
incorporation or other incorporating documents or bylaws of Guarantor, or
conflict with, or result in a breach of, or constitute (with or without notice
or lapse of time or both) a default under, or result in the creation of any
security interest, lien, charge or encumbrance upon any property or assets of
Guarantor, pursuant to any agreement, indenture or other instrument to which it
is a party or by which it may be bound.
(c) Except as disclosed to Lender in writing prior to the execution of this
Guaranty, no action, suit, investigation or proceeding is pending or known to be
threatened against or affecting Guarantor that, if adversely determined, would
have a material adverse effect upon its financial condition or operations.
(d) Guarantor is not in default under any provision of its certificate of
incorporation or other incorporating documents, bylaws or stock provisions (or
any amendment to such documents or provisions), any indenture relating to
borrowed money, any agreement to which it is a party or by which it is bound,
any other indenture, or any order, regulation, ruling or requirement of a court
or public body or authority by which it is bound, which default would have a
material adverse effect on the business, operations or financial position of
Guarantor.
(e) No license, consent or approval of, or filing with, any governmental
body or other regulatory authority is required for the making and performance
of, or any instrument or transaction contemplated by, this Guaranty. Guarantor
holds all certificates and authorizations of all governmental agencies and
authorities required by law to enable it to engage in the business currently
transacted by it, except those certificates and authorizations as to which the
failure to so hold would not, in the aggregate, have a material adverse effect
on Guarantor.
11. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by Lender.
12. The obligations of Guarantor under this Guaranty shall continue in full
force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise fully satisfied, and continue to be
effective or be reinstated, as the case may be, if at any time payment or other
satisfaction of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Borrower, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable bankruptcy laws or any other similar law, or any law or order of
any government or government agency purporting to reduce, amend or otherwise
affect, the Obligations, shall impair, affect, be a defense to or claim against
the obligations of Guarantor under this Guaranty.
13. In addition to its guarantee of Borrower's payment of the Obligations
and Borrower's performance of all covenants, obligations and agreements
contained in the Loan Documents, Guarantor shall pay all actual costs and
expenses (including reasonable attorney's fees) paid or incurred by Lender in
connection with the enforcement of this Guaranty.
14. Guarantor hereby agrees to execute any and all further documents,
agreements, and instruments, and take all further actions, that Lender shall
reasonably request to effectuate or further preserve, evidence, perfect or
protect the rights purported to be created in favor of Lender under this
Guaranty.
15. Guarantor hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Obligations, or any part of the Obligations, that diligent inquiry would
reveal, and Guarantor hereby agrees that Lender shall have no duty to advise
Guarantor of information known to Lender regarding such condition or any such
circumstances. If Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to Guarantor, Lender shall be under
no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information that, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor.
16. This Guaranty may be executed in one or more counterpart copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
17. If any term, covenant or condition of this Guaranty, or the application
of such term, covenant or condition to any party or circumstance, shall be found
by a court of competent jurisdiction to be, to any extent, invalid or
unenforceable, the remainder of this Guaranty and the application of such term,
covenant, or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term, covenant or condition shall be valid and enforced to the fullest extent
permitted by law. Upon determination that any such term is invalid, illegal or
unenforceable, the parties to this Guaranty shall amend this Guaranty so as to
effect the original intent of the parties as closely as possible in an
acceptable manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS GUARANTY IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO GUARANTOR AT ITS ADDRESS SET
FORTH IN SECTION 9 OF THIS GUARANTY.
19. GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY GUARANTOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
20. GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT
OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON BEHALF OF
GUARANTOR IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF
OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
GUARANTOR IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS GUARANTY (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
GUARANTOR AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
GUARANTOR WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
21. In any litigation, trial, arbitration or other dispute resolution
proceeding relating to this Guaranty or any of the other Loan Documents, all
directors, officers, employees and agents of Guarantor or of its Affiliates
shall be deemed to be employees or managing agents of Guarantor for purposes of
all applicable law or court rules regarding the production of witnesses by
notice for testimony (whether in a deposition, at trial or otherwise). Guarantor
agrees that Lender's counsel in any such dispute resolution proceeding may
examine any of these individuals as if under cross-examination and that any
discovery deposition of any of them may be used in that proceeding as if it were
an evidence deposition. Guarantor in any event will use all commercially
reasonable efforts to produce in any such dispute resolution proceeding, at the
time and in the manner requested by Lender, all Persons, documents (whether in
tangible, electronic or other form) or other things under its control and
relating to the dispute in any jurisdiction that recognizes that (or any
similar) distinction.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of the
date first written above.
ATTEST: PHC, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
<PAGE>
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the "GUARANTY") is
dated as of May 26, 2000 and is made by BRUCE A. SHEAR, an individual
("Guarantor"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware
corporation ("LENDER").
R E C I T A L S
A. Pursuant to a certain Secured Term Note of even date with this Guaranty
(as the note may from time to time be amended, modified or supplemented, the
"TERM NOTE") made by PHC of Michigan, Inc., a Massachusetts corporation
("BORROWER"), in favor of Lender, Lender has agreed to make available to
Borrower a secured term loan in the maximum aggregate principal amount of Five
Hundred Thousand and No/100 Dollars ($500,000.00) (the "LOAN").
B. Lender is willing to make the Loan under the Term Note but only upon the
condition, among others, that Guarantor shall have executed and delivered to
Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Guaranty and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. All capitalized terms used but not defined in this Guaranty shall have
the respective meanings given them in the Term Note.
2. To induce Lender to make the Loan upon the terms and conditions set
forth in the Term Note, and in consideration thereof, Guarantor hereby
unconditionally and irrevocably guaranties to Lender, and to its successors,
endorsees, transferees and assigns, Borrower's prompt and complete payment when
due, whether at the stated maturity, by acceleration or otherwise, of all of
Borrower's obligations under the Term Note (collectively, the "OBLIGATIONS"),
and Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Term Note. . Notwithstanding the
foregoing, Guarantor's aggregate obligations under this Guaranty (in addition to
the Guaranty of Guarantor under that certain Guaranty between Lender and
Guarantor dated as of November , 1999) shall be limited to the amount of One
Hundred Fifty Thousand and No/100 Dollars ($150,000.00).
3. Guarantor hereby waives notice of the acceptance of this Guaranty and of
the extending of credit as above specified and the state of indebtedness of
Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms of such
credit, and waives diligence, presentment, demand of payment, protest or notice,
whether of non-payment, dishonor, protest or otherwise, of any document or
documents and notice of any extension, renewal, modification or default and
assent to the release, substitution or variation of any collateral that may at
any time be held as security for any credit extended to Borrower, all without
relieving Guarantor of any liability under this Guaranty. The obligations of
Guarantor under this Guaranty shall be an unconditional obligation to make
prompt payment and performance to Lender irrespective of the genuineness,
validity, regularity or enforceability of any indebtedness or evidence of
indebtedness of Borrower to Lender or of other circumstances that might
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of Lender's rights either (i) against Borrower on
all or any part of its Obligations or (ii) under this Guaranty.
4. Notwithstanding any payment or payments made by Guarantor under this
Guaranty or any setoff or application of funds of Guarantor by Lender, Guarantor
shall not be entitled to be subrogated to any of the rights of Lender against
Borrower or any collateral security or guarantee or right of offset held by
Lender for the payment or performance of the Obligations, nor shall Guarantor
seek any reimbursement from Borrower in respect of payments made by Guarantor
under this Guaranty, until all amounts then owing and any other performance then
due to Lender by Borrower for or on account of the Obligations are paid and
satisfied in full. Upon such payment and satisfaction in full, Guarantor shall
be subrogated to all rights of Lender against Borrower or any collateral
security or guarantee or right of offset held by Lender for the payment and
performance of the Obligations.
5. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
6. This is intended to be and shall be construed as a continuing guaranty
and shall remain in full force and effect and shall be binding in accordance
with and to the extent of its terms upon Guarantor and Guarantor's heirs and
assigns, and shall inure to the benefit of Lender, and its successors,
endorsees, transferees and assigns.
7. If all or any part of the Obligations of Borrower to Lender are not paid
when due, Guarantor hereby guaranties that he will pay the same to Lender, upon
demand, without set-off or counterclaim and without reduction by reason of any
taxes, levies, imposts, charges and withholdings, restrictions or conditions of
any nature that are now or may hereafter be imposed, levied or assessed by any
country, political subdivision or taxing authority, all of which will be for the
account of and paid by Guarantor, and Lender need not first proceed to preserve,
utilize or exhaust any other right or remedy against Borrower or any other
guarantor or any security that Lender may have to obtain payment. The payment
shall be made in immediately available funds to Lender's office at 2 Wisconsin
Circle, Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven M. Curwin,
Deputy General Counsel, or at such other place as Lender may designate in
writing.
8. No failure to exercise and no delay in exercising, on the part of
Lender, any right, power or privilege under this Guaranty shall operate as a
waiver of the right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
of the right, power or privilege, or the exercise of any other power or right.
The rights and remedies provided in this Guaranty are cumulative and not
exclusive of any rights or remedies provided by law.
9. Notice or demand to the parties shall be sufficiently given if in
writing and personally delivered, or mailed by registered or certified first
class mail, postage prepaid, return receipt requested, or sent by commercial
courier against receipt, or by telecopier (with a confirming copy sent by
regular mail) to the party intended and at the address or addresses specified
below:
GUARANTOR: c/o PHC of Michigan, Inc.
200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: (978) 536-2777
Telecopier: (978) 536-2677
LENDER: 2 Wisconsin Circle
Fourth Floor
Chevy Chase, Maryland 20815
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
Attention: Steven M. Curwin, Deputy General Counsel
Any party may designate a change of address by notice in writing to the
other parties, such notice to be effective ten (10) days after mailing or
delivery as provided in this Section 9.
10. Guarantor hereby represents, warrants, and covenants to Lender:
a. Guarantor has the full right, power and authority to enter into this
Guaranty.
b. The execution, delivery and performance of this Guaranty will not
violate any provision of law or any order of any court or governmental agency or
conflict with, or result in a breach of, or constitute (with or without notice
or lapse of time or both) a default under, or result in the creation of any
security interest, lien, charge or encumbrance upon any property or assets of
Guarantor, pursuant to any agreement, indenture or other instrument to which he
is a party or by which he may be bound.
c. Except as disclosed to Lender in writing prior to the execution of this
Guaranty, no action, suit, investigation or proceeding is pending or known to be
threatened against or affecting Guarantor that, if adversely determined, would
have a material adverse effect upon his financial condition.
d. The financial statements of Guarantor previously delivered to Lender are
true, correct and complete and fairly present the financial condition of
Guarantor as of the date thereof. There are no material unrealized or
anticipated liabilities, direct or indirect, fixed or contingent, of Guarantor
as of the dates of such financial statements which are not reflected therein or
in the notes thereto. There has been no material adverse change in the financial
condition of Guarantor since the date of such financial statements of Guarantor
delivered to Lender.
e. No license, consent or approval of, or filing with, any governmental
body or other regulatory authority is required for the making and performance
of, or any instrument or transaction contemplated by, this Guaranty. Guarantor
holds all certificates and authorizations of all governmental agencies and
authorities required by law to enable him to engage in the business currently
transacted by it, except those certificates and authorizations as to which the
failure to so hold would not, in the aggregate, have a material adverse effect
on Guarantor.
11. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by Lender.
12. The obligations of Guarantor under this Guaranty shall continue in full
force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise fully satisfied, and continue to be
effective or be reinstated, as the case may be, if at any time payment or other
satisfaction of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Borrower, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable bankruptcy laws or any other similar law, or any law or order of
any government or governmental agency purporting to reduce, amend or otherwise
affect, the Obligations, shall impair, affect, be a defense to or claim against
the obligations of Guarantor under this Guaranty.
13. In addition to his guaranty of Borrower's payment of the Obligations
and Borrower's performance of all covenants, obligations and agreements
contained in the Term Note, Guarantor shall pay all actual costs and expenses
(including reasonable attorney's fees) paid or incurred by Lender in connection
with the enforcement of this Guaranty.
14. Guarantor hereby agrees to execute any and all further documents,
agreements, and instruments, and take all further actions, that Lender shall
reasonably request to effectuate or further preserve, evidence, perfect or
protect the rights purported to be created in favor of Lender under this
Guaranty.
15. Guarantor hereby assumes responsibility for keeping himself informed of
the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Obligations, or any part of the Obligations, that diligent inquiry would
reveal, and Guarantor hereby agrees that Lender shall have no duty to advise
Guarantor of information known to Lender regarding such condition or any such
circumstances. If Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to Guarantor, Lender shall be under
no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information that, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor.
16. This Guaranty may be executed in one or more counterpart copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
17. If any term, covenant or condition of this Guaranty, or the application
of such term, covenant or condition to any party or circumstance, shall be found
by a court of competent jurisdiction to be, to any extent, invalid or
unenforceable, the remainder of this Guaranty and the application of such term,
covenant, or condition to parties or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term, covenant or condition shall be valid and enforced to the fullest extent
permitted by law. Upon determination that any such term is invalid, illegal or
unenforceable, the parties to this Guaranty shall amend this Guaranty so as to
effect the original intent of the parties as closely as possible in an
acceptable manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS GUARANTY IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO GUARANTOR AT HIS ADDRESS SET
FORTH IN SECTION 9 OF THIS GUARANTY.
19. GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY GUARANTOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
20. GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY COURT
OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON BEHALF OF
GUARANTOR IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK THEREOF
OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
GUARANTOR IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS GUARANTY (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
GUARANTOR AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
GUARANTOR WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of the
date first written above.
WITNESS: GUARANTOR:
/s/ T. A. Bates /s/ Bruce A.Shear
Name: Bruce A. Shear
<PAGE>
AMENDED AND RESTATED CROSS-COLLATERALIZATION
AND CROSS-DEFAULT AGREEMENT
BY AND AMONG
PHC OF MICHIGAN, INC.,
PHC OF UTAH, INC.,
PHC OF VIRGINIA, INC.
PHC OF RHODE ISLAND, INC.
PIONEER COUNSELING OF VIRGINIA, INC.
(COLLECTIVELY, "BORROWER")
AND
HELLER HEALTHCARE FINANCE, INC.
("LENDER")
May 26, 2000
Prepared by and after recording, return to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis & Foster, P.C.
1000 Michigan National Tower
Lansing, MI 48933
<PAGE>
AMENDED AND RESTATED CROSS-COLLATERALIZATION
AND CROSS-DEFAULT AGREEMENT
THIS AMENDED AND RESTATED CROSS-COLLATERALIZATION AND CROSS-DEFAULT
AGREEMENT (the "Agreement") made as of the 26th day of May, 2000, is executed by
and among PHC, INC., a Massachusetts corporation ("PHC"), PHC OF MICHIGAN, INC.,
a Massachusetts corporation having its principal place of business at 200 Lake
Street, Suite 102, Peabody, Massachusetts 01960 ("PHCM"), PHC OF UTAH, INC., a
Massachusetts corporation ("PHCU"), PHC OF VIRGINIA, INC., a Massachusetts
corporation ("PHCVA"), PHC OF RHODE ISLAND, INC., a Massachusetts corporation
("PHCRI"), and PIONEER COUNSELING OF VIRGINIA, INC., a Massachusetts corporation
("Pioneer," and collectively with PHC, PHCM, PHCU, PHCVA, PHCRI and Pioneer,
"Borrower"), and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation having
its principal office at 2 Wisconsin Circle, 4th Floor, Chevy Chase, Maryland
20815 and formerly known as HCFP FUNDING, INC. ("HHF"), that is the assignee of
HCFP FUNDING II, INC. ("HCFPII") (HHF and HHF as assignee of HCFPII are referred
to as "Lender").
RECITALS:
A. Borrower and Lender entered into that certain Cross-Collateralization
and Cross-Default Agreement (the "Agreement") dated as of July 13, 1998, wherein
Borrower agreed, among other things, to cross-collateralize the Loans with one
another and to provide for the cross-default of the Loans with one another.
Because certain additional loans were made by Lender to Borrower, Borrower and
Lender have agreed to execute this Agreement.
B. Borrower is currently indebted to Lender pursuant to the following
existing loans (collectively, the "Existing Loans"):
THE "REVOLVING LOAN": A revolving loan from Lender to PHCM, PHCU,
PHCVA, PHCRI, and Pioneer ("Revolver Borrowers") in the original
maximum aggregate principal sum of Four Million and No/100 Dollars
($4,000,000.00), which loan is evidenced by that certain amended and
restated Revolving Credit Note made by Revolver Borrowers payable to
Lender, dated as of February 20, 1998, and that certain amended and
restated Loan and Security Agreement dated as of February 20, 1998
between Revolver Borrowers and Lender, and which loan is secured by a
third priority Mortgage dated as of March 12, 1997 and recorded on May
5, 1997 in the Macomb County Records at Liber 07442 Pages 186-196, as
amended by that certain First Amendment to Mortgage dated as of April
30, 1998 and recorded on _______, 1998 in the Macomb County Records at
Liber ______ Pages__________ (collectively, the "Revolver Mortgage");
and
THE "FIRST TERM LOAN": A term loan from Lender to PHCM in the original
principal sum of One Million One Hundred Thousand and No/100 Dollars
($1,100,000.00), which loan is evidenced by that certain Secured Term
Note of PHCM payable to Lender, dated as of March 12, 1997, and which
loan is secured by the Restated Mortgage dated as of November , 1999
and recorded on in the Macomb County Records at Liber Pages (as
amended, modified, supplemented or restated from time to time, the
"Restated Term Mortgage").
THE "SECOND TERM LOAN": A term loan from Lender to PHCM in the
original principal sum of Five Hundred Thousand and No/100 Dollars
($500,000.00), which loan is evidenced by that certain Secured Term
Note of PHCM payable to Lender, dated as of December 9, 1997, and
which loan is secured by a second priority Mortgage dated as of
December 9, 1997 and recorded on January 9, 1998 in the Official
Records of Macomb County, Michigan at Liber 07804 Pages 73-85 (the
"Second Term Mortgage"). (The Revolver Loan, the First Term Loan and
the Second Term Loan are sometimes collectively referred to in this
Agreement as the "Existing Loans.")
C. PHCM has requested and received (i) an additional term loan of One
Million and No/100 Dollars ($1,000,000.00) from Lender dated November , 1999
(the "November Loan") and (ii) an additional term loan of Five Hundred Thousand
and No/100 Dollars ($500,000) from Lender dated May 26, 2000 (the "May Loan" and
collectively with the November Loan, the "New Loans" and sometimes referred to
collectively with the Existing Loans as the "New Loans").
D. As security for the New Loans, PHCM has executed and delivered the
Restated Mortgage to provide for, among other things, the securing of the New
Loans with a lien on the PHCM property.
E. As additional security for the New Loans, Lender has agreed to make the
New Loans, provided that (1) the New Loans are cross-collateralized with the
Existing Loans and with one another and (2) the Existing Loans are
cross-defaulted with one another AND with the New Loans and (3) the New Loans
are cross-defaulted with one another and with the Existing Loans.
F. The entities comprising Borrower are all affiliated entities under
common control and ownership (except that PHC is a public company) and will
receive direct and indirect benefits from the New Loans and the continuation of
the financing arrangements represented by the Existing Loans, which benefits,
among others, provide adequate consideration for them to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, to induce
Lender to extend the New Loans to Borrower and to continue the financing under
the Loan Documents (as defined below) and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower agrees with Lender and Lender agrees with Borrower, as follows:
1. DESCRIPTION OF NEW LOAN. The New Loans are evidenced by (i) that certain
Secured Term Note dated as of November , 1999 in the amount of One Million and
No/100 Dollars ($1,000,000) from PHCM to Lender and (ii) that certain Secured
Term Note dated as of May 26, 2000 in the amount of Five Hundred Thousand and
No/100 Dollars ($500,000) from PHCM to Lender.
2. LOAN DOCUMENTS. As used in this Agreement, the term "Loan Documents"
shall mean any and all Loan Documents evidencing or securing the Revolving Loan,
the First Term Loan, the Second Term Loan, and the New Loans. The term "Loans"
shall mean, collectively, the Revolving Loan, the First Term Loan, the Second
Term Loan, the November Loan and the May Loan.
3. CROSS-COLLATERALIZATION. The Existing Loans are hereby
cross-collateralized with each other and with the New Loans, and Borrower agrees
that the collateral described in the respective Loan Documents shall secure, in
addition to such respective Existing Loans, the obligations of PHC (and any
other applicable Borrower) under the New Loans and Loan Documents in respect of
the New Loans, including, without limitation, (a) PHC's (and any other
Borrower's or Affiliate's) obligation, if any, to pay the principal and interest
on the New Loans, as the same may hereafter be renewed, modified, amended or
extended, and to pay all other indebtedness and other agreed charges and to
perform all of the terms and conditions under the Loan Documents in respect of
the New Loans, and (b) the real property encumbered by the Restated Mortgage and
the Second Term Mortgage (collectively, the "Mortgages") securing each of the
applicable Loans.
4. CROSS-DEFAULT. The Existing Loans and the New Loans are hereby
cross-defaulted with one another, and Borrower agrees that the occurrence of an
Event of Default as defined in, and pursuant to any of the Loan Documents, which
Event of Default is not cured within the applicable grace or curative periods,
shall constitute an immediate Event of Default (without need of notice or the
expiration of any additional cure period other than as specified in such Loan
Documents) under all other Loan Documents."
5. SEVERABILITY. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, such provision shall be deemed to have been modified
to the extent necessary to make it valid, legal and enforceable. The validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
6. NO MODIFICATION EXCEPT IN WRITING. None of the terms of this Agreement
may be waived, altered, amended or otherwise changed except by an instrument in
writing duly executed by all of the parties hereto.
7. FURTHER ASSURANCES. Each entity comprising Borrower shall execute and
deliver such further instruments and perform such further acts as may be
requested by Lender from time to time to confirm the provisions of this
Agreement and the Loan Documents, to carry out more effectively the purposes of
this Agreement and the Loan Documents, or to confirm the priority of any lien
created by any of the Loan Documents.
8. ENFORCEABILITY. Each entity comprising Borrower represents and warrants
to Lender that this Agreement and the other Loan Documents are the legal, valid
and binding obligations of each entity constituting Borrower, jointly and
severally, enforceable against each such entity in accordance with their terms.
9. MISCELLANEOUS
(a) This Agreement will be recorded in the Official Records of Macomb
County, Michigan and the City of Salem, Virginia. Upon the filing of this
Agreement, all necessary recording, intangible, or documentary stamp taxes will
be duly paid by the Borrower. THIS AGREEMENT IS BEING GIVEN AS ADDITIONAL
COLLATERAL TO SECURE THE OBLIGATIONS OF THE RESPECTIVE ENTITIES COMPRISING
BORROWER UNDER THEIR RESPECTIVE LOAN DOCUMENTS.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, administrators, successors and
assigns.
10. CONTROLLING LAW. This Agreement shall be governed by the laws of the
State of Maryland (without reference to conflicts of laws).
11. RELEASE. Except for Lender's obligations, if any, to Borrower under the
Loan Documents, each entity comprising Borrower, on behalf of itself and its
partners, affiliates, successors and assigns (collectively, the "Releasing
Parties"), hereby releases and forever discharges Lender and each of its parent,
subsidiary and affiliated corporations and partnerships (including the partners
therein and thereof), and the partners, partners of partners, subsidiaries,
divisions, affiliates, officers, directors, shareholders, trustees, employees,
agents, attorneys and advisors of each of the foregoing, and each of their
respective heirs, successors and assigns (collectively, the "Released Parties",
all of whom are intended to be the beneficiaries of this release) from any and
all claims and causes of action of whatever kind and nature based upon acts or
omissions by any of them, whether such claims, causes of action, acts or
omissions are or were known or unknown, suspected or unsuspected, which the
Releasing Parties or any of them may have or have had, in whole or in part,
prior to the date of this Agreement.
8. WAIVER OF JURY TRIAL. EACH ENTITY COMPRISING BORROWER HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR
THE LOANS, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWER WITH RESPECT TO THE LOAN
DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF ANY PARTY=S
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE
RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH ENTITY COMPRISING BORROWER AGREES THAT LENDER MAY FILE A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE THEIR RIGHTS TO TRIAL BY
JURY, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR
CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN BORROWER AND
LENDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, each entity comprising Borrower has caused this
Agreement to be properly executed on the date of the notarial acknowledgments
below.
BORROWER:
WITNESS: PHC, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PHC OF MICHIGAN, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PHC OF UTAH, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PHC OF VIRGINIA, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
[SIGNATURES CONTINUED]
<PAGE>
WITNESS: PHC OF RHODE ISLAND, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PIONEER COUNSELING OF VIRGINIA, INC. a
Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
LENDER:
HELLER HEALTHCARE FINANCE, INC.
a Delaware corporation
f/k/a HCFP Funding, Inc. and as assignee of
WITNESS: HCFP Funding II, Inc.
-------------------------------
Name:
_______________________________ By: ______________________________
Name: Name:
Title:
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC, INC., a
Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF MICHIGAN, INC.,
a Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF _____________________)
COUNTY OF ___________________)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF UTAH, INC., a
Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF VIRGINIA, INC.,
a Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF RHODE ISLAND,
INC., a Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PIONEER COUNSELING OF
VIRGINIA, INC., a Massachusetts corporation, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed,
as the act of said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation, and acknowledged to me that he executed said instrument
for the purposes and consideration therein expressed, as the act of said
corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
This Instrument prepared by, and upon recording should be returned to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis & Foster
1000 Michigan National Tower
Lansing, Michigan 48933
<PAGE>
Exhibit 10.77
Promissory Note
USD: $168,000.00 Dated: May 30, 2000
FOR VALUE RECEIVED, PHC, INC., a Massachusetts corporation located at 200
Lake Street, Peabody, Massachusetts 01960 (the "BORROWER"), PROMISES TO PAY TO
THE ORDER OF Yakov Burstein, Ph.D. (the "LENDER"), or his registered assigns, in
lawful money of the United States of America and in immediately available funds,
the principal amount of One Hundred Sixty-eight Thousand Dollars ($168,000.00),
payable in Sixty (60) equal; monthly installments of principal and interest,
each to be mailed on or before the seventeenth (17th) day of each month. The
BORROWER further agrees to pay interest at an annual rate of Eleven Percent
(11%) calculated on a Three Hundred Sixty-five (365) day year and based on the
actual number of days elapsed. The initial payment will be remitted on August
17, 2000, or within three days of the execution of this Promissory Note, and
will consist of the first installment plus all accrued and unpaid interest from
May 30, 2000 to date, in the total amount of Six Thousand One Hundred Twelve and
50/100 Dollars ($6,112.50). The second through fifty-ninth installments shall be
equal installments each in the amount of Three Thousand Six Hundred Fifty-two
and 73/100 Dollars ($3,652.73). The sixtieth (60th) and final installment, in
the amount of Three Thousand Six Hundred Fifty-two and 52/100 Dollars
($3,652.52), will be remitted on July 17, 2005.
A payment shall be deemed to have been made on the business date after it
is sent via recognized overnight service procuring a signed receipt or three (3)
business days after it is postmarked and deposited in an official U.S. Post
Office receptacle.
In accepting the terms evidenced by this Note the BORROWER and LENDER each
acknowledge that this Note is being granted in consideration for the Settlement
Agreement and Mutual Releases, entered by and between the BORROWER and the
LENDER with an Effective Date of May 30, 2000, the relevant terms of which are
expressly incorporated herein and made a part hereof.
All amounts paid hereunder shall be credited first to the payment of
accrued and unpaid interest and then to outstanding principal. If LENDER has not
received the full amount of principal or interest due hereunder by the 25th day
of the month, BORROWER shall pay a late charge to LENDER in an amount equal to 1
percent of such payment then due, to be paid along with and in addition to such
overdue payment and any accrued and unpaid interest due as a result of such
overdue payment.
Any or all interest or principal outstanding hereunder may be prepaid at
any time and from time to time without penalty. Any partial prepayments of
principal shall be applied against installments of principal in the inverse
order of maturity. All payments and prepayments on this Note shall be made to
the LENDER at the following address: 184-63 Aberdeen Road, Jamaica, New York
11432. The holder of this Note is authorized to record the date and amount of
each payment or prepayment or principal hereof on the schedule annexed hereto
and made a part hereof, and any such recordation, absent other definitive
evidence of payment, shall constitute prima facie evidence of the information so
recorded, provided that the failure of the holder of this Note to make such
recordation (or any error in such recordation) shall not affect the obligations
of the BORROWER hereunder.
If any payment under this Note is due on a day other than a Business Day,
such payment shall be made on the last Business Day preceding such day. A
"Business Day" shall mean any day other than a Saturday, Sunday or other day on
which commercial banks are required or authorized to be closed in New York, New
York.
Upon the occurrence of any of the following events of default, the entire
indebtedness evidenced by this Note, including principal, interest, late charges
and expenses of collection (including reasonable attorneys' fees), shall
immediately become due and payable without notice, presentation or demand:
(a) the failure to pay to the LENDER principal or interest due hereunder
within three (3) days after receipt by the BORROWER of written notice specifying
the amount overdue; provided, however, that full payment of all unpaid and
overdue amounts within three (3) days after receipt by the BORROWER of such
written notice specifying the amount overdue, or acceptance without protest of a
payment after the said three (3) day period, shall be deemed to have cured the
default;
(b) the insolvency of BORROWER; the appointment of a receiver or
liquidator, whether voluntary or involuntary, for BORROWER; the filing by
BORROWER of a petition under the provisions of any state insolvency law, or the
Bankruptcy Code, as now in effect or hereafter amended; the filing against
BORROWER of a petition under the provisions of any state insolvency law, or the
Bankruptcy Code, as now in effect or hereafter amended, which petition is not
dismissed within 30 days after its filing; the making by BORROWER of an
assignment for the benefit of his creditors; the institution by BORROWER of any
other type of insolvency proceeding (under bankruptcy laws or otherwise) or
proceeding for the settlement of claims against it; or the institution against
BORROWER of any other type of insolvency proceeding (under bankruptcy laws or
otherwise) or proceeding for the settlement of claims against it, which
proceeding is not dismissed within 30 days after its filing;
(c) any representation or warranty or certificate made or deemed made
herein shall prove to have been false or misleading as of the time made or
furnished in any material respect.
In case of any one (1) or more uncured default hereunder shall happen and
be continuing, BORROWER shall pay to LENDER, immediately upon written demand
therefor, any amounts reasonably expended or incurred by LENDER in connection
with this Note, including, without limitation, reasonably attorney's fees and
costs and interest on all such amounts from the date demanded until the date
paid at the rate of Eleven Percent (11%) per annum.
This Note (a) may not be changed, waived, discharged or terminated except
by an instrument in writing signed by the LENDER and (b) shall be binding upon
BORROWER, its successors and assigns, and shall inure to the benefit of and be
enforceable by LENDER, its successors and assigns. No promises or
representations have been made by LENDER in connection herewith except as
expressly set forth herein. BORROWER hereby waives presentment, demand, protest,
notice of dishonor and all other notices and demands, except as expressly set
forth herein.
BY THEIR SIGNATURE THE UNDERSIGNED ACKNOWLEDGE THAT THEY HAVE READ,
UNDERSTAND AND UNCONDITIONALLY AGREE TO THE PROVISIONS OF THIS PROMISSORY NOTE.
BORROWER LENDER
PHC, Inc. Yakov Burstein, Ph.D.
By:_______________________________ _________________________________
Bruce A. Shear, President
Date: August 17, 2000 Date: August 17, 2000
<PAGE>
Exhibit 10.78
Settlement Agreement and Mutual Releases
This Settlement Agreement and Mutual Releases (the "Agreement") is entered
into as of the 30th day of May, 2000 between PHC, Inc. (referred to hereinafter
as "PHC"), a Massachusetts corporation, and Yakov Burstein, Ph.D. and Irwin J.
Mansdorf, Ph.D. (who are referred to hereinafter as "BURSTEIN and MANSDORF"
respectively).
Recitals:
Whereas, PHC and BURSTEIN and MANSDORF and other entities entered into an
Agreement and Plan of Merger (the "Merger Agreement") and an Agreement for
Purchase and Sale of Assets ("Asset Sale Agreement") both dated October 31,
1996; and
Whereas, PHC and BURSTEIN and MANSDORF have agreed to settle all claims
with respect to the Merger Agreement and the Asset Sale Agreement, including any
claims related to the earn-out provisions of the Merger Agreement and the Asset
Sale Agreement.
Now, Therefore, in consideration, of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Payments to BURSTEIN and MANSDORF
In exchange for the releases set forth in paragraphs 2 and 3 and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, PHC shall deliver to BURSTEIN and MANSDORF the following:
(A) Promissory Notes: PHC agrees to pay BURSTEIN and MANSDORF Seven Hundred
Thousand and No/100 Dollars ($700,000.00) by execution and delivery of a
Promissory Note in favor of BURSTEIN and a Promissory Note in favor of MANSDORF
to be executed and delivered on the date this Agreement is executed (the
"Promissory Notes"). The Promissory Notes shall be dated as of May 30, 2000 and
shall bear the following terms:
(i) One Promissory Note with a principal in the amount of Five Hundred
Thirty-two Thousand and No/100 Dollars ($532,000.00) payable to MANSDORF
(the "MANSDORF Promissory Note), and one Promissory Note with a principal
amount of One Hundred Sixty-eight Thousand and No/100 Dollars ($168,000.00)
payable to BURSTEIN (the BURSTEIN Promissory Note), and
(ii) Both Promissory Notes shall bear interest at the rate of eleven
percent (11%) per annum over a five (5) year term, with computation of
interest beginninppg May 30, 2000, and
(iii) Both Promissory Notes shall be paid in sixty (60) equal monthly
payments of principal and interest, the first of which is due on or before
August 20, 2000, and the second through sixtieth of which are due on the
20th day of each month from September, 2000 through and including July,
2005.
All payments described herein for the MANSDORF Promissory Note shall be
forwarded to Ross P. Lanzafame, Esq. as attorney for MANSDORF at the following
address: Harter, Secrest & Emery LLP, 700 Midtown Tower, Rochester, New York
14604. All payments described herein for the BURSTEIN Promissory Note shall be
forwarded to Yakov Burstein at the following address: 184-63 Aberdeen Road,
Jamaica, New York 11432. A payment shall be deemed to have been made on the
business date after it is sent via recognized overnight service procuring a
signed receipt or three (3) business days after it is postmarked if sent postage
prepaid by U.S. Domestic 1st class mail, provided such payment has been received
by the 30th day of the month in which it is due.
(B) PHC Stock: PHC shall issue to BURSTEIN and MANSDORF common stock of
PHC. as follows: 414,815 shares of common stock of PHC, or such other amount so
as to assure a total market value of no less than Three Hundred Fifty Thousand
and No/100 Dollars ($350,000.00) valued as of the closed of business on the date
this Agreement is executed. 180,148 of such shares shall be issued to Irwin J.
Mansdorf, Ph.D. and 56,889 of such shares shall be issued to Yakov Burstein,
Ph.D as unrestricted and freely tradable stock with a combined total market
value of no less than Two Hundred Thousand and No/100 Dollars ($200,000.00)
valued as of the close of business on the date this Agreement is executed.
149,333 of such shares shall be issued to Irwin J. Mansdorf, Ph.D. and 28,445 of
such shares shall be issued to Yakov Burstein, Ph.D., subject to the filing of
any required registration statement with the Securities and Exchange Commission
with a combined total market value of no less than One Hundred Fifty Thousand
and No/100 Dollars ($150,000.00) valued as of the close of business on the date
this Agreement is executed, which registration statement shall be filed by PHC
within thirty (30) days of the execution of this Agreement.
All shares of common stock issued to BURSTEIN and MANSDORF by PHC pursuant
to this Agreement (the "Shares") shall be duly authorized, validly issued, fully
paid and non-assessable, and free and clear of any lien, encumbrance, option,
pre-emptive right, or claim of any kind whatsoever. PHC hereby represents and
warrants to BURSTEIN and MANSDORF, and PHC acknowledges that each such
representation and warranty is material and that BURSTEIN and MANSDORF are
relying upon each of such representations and warranties, regardless of any
investigation that each of them may have performed: All of the documents,
including, without limitation, registration statements, Form 10-Qs, (or
10-QSBs), Form 10-Ks (or 10-KSBs), and Form 8-Ks, filed by PHC with the
Securities and Exchange Commission are true as of the date hereof and as amended
and do not contain any statement that are false or misleading with respect to a
material fact, and do not omit to state a material fact necessary in order to
make the statements therein under the circumstance in which they are made not
false or misleading in any material respect. As of the date this Agreement is
executed, other than as previously disclosed in its public filings, PHC
represents and warrants that it has not been notified of an action being taken
regarding delisting and that PHC is not aware of any material non-public
information that could be construed by a reasonable investor as having the
potential to affect adversely the market price of the common stock of PHC. PHC
shall instruct the PHC Transfer Agent, within three days of the execution of
this Agreement, with a copy of such notification delivered to MANSDORF and
BURSTEIN, to immediately issue and deliver to Harter, Secrest & Emery LLP stock
certificates R/N/O Irwin Mansdorf/Yakov Burstein for the Shares. PHC shall bear
all costs, taxes and fees incurred in the issuance and delivery of the Shares
and the certificates therefor.
BURSTEIN and MANSDORF warrant that they will not trade, in any manner or
method, whether in their name, street name or otherwise, any shares of PHC, Inc.
between Monday, August 14, 2000 and Thursday, August 17, 2000.
(C) Attorneys' Fees: PHC shall pay BURSTEIN and MANSDORF Twenty-one
Thousand Five Hundred and No/100 Dollars ($21,500.00) in full satisfaction of
all attorneys' fees and costs incurred in connection with the negotiation,
preparation and execution of this Agreement, to be mailed within three (3) days
of the execution of this Agreement. PHC shall issue the attorneys' fee payment
in two (2) checks as follows:
(i) Ten Thousand Seven Hundred Fifty and No/100 Dollars ($10,750.00)
payable to "Harter, Secrest & Emery LLP as Attorney for Irwin J.
Mansdorf, Ph.D." and shall be forwarded to Ross P. Lanzafame, Esq. at
the following address: Harter, Secrest & Emery LLP, 700 Midtown Tower,
Rochester, New York 14604, and
(ii) Ten Thousand Seven Hundred Fifty and No/100 Dollars ($10,750.00)
payable to "Akabas & Cohen as Attorney for Yakov Burstein, Ph.D." and
shall be forwarded to Seth Akabas, Esq. at the following address:
Akabas & Cohen, 488 Madison Avenue, 11th Floor, New York, New York 10022.
2. Release of PHC by BURSTEIN and MANSDORF
For and in consideration of the payments described in paragraph 1 and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, BURSTEIN and MANSDORF, for themselves and their personal
representatives, successors and assigns, (collectively referred to in paragraphs
2 and 3 as the "BURSTEIN and MANSDORF Group") remises, releases and fully
discharges all claims any of them ever had, has claimed to have or now has
against PHC, its shareholders, employees, agents, representatives, directors,
attorneys, trustees, managers, affiliates, subsidiaries, related parties,
successors and assigns, (the "PHC Group") relating to or arising out of the
Merger Agreement and/or the Asset Sale Agreement, and any other claim which
could have been asserted by BURSTEIN and MANSDORF prior to the execution of this
Agreement. Notwithstanding the foregoing, the Employment Agreement between
BURSTEIN and BSC-NY and the Employment Agreement between BURSTEIN and
Shliselberg Physician Services, P.C., each with an effective date of November 1,
1999, including the Restrictive Covenants contained therein, shall remain in
full force and effect and is not in any way altered, amended or affected by this
Agreement and no claim thereunder, regardless of when it may have accrued, shall
be covered by, or released, removed or discharged, by this paragraph 2 or
paragraph 3 below.
3. Release of BURSTEIN and MANSDORF by PHC
For and in consideration of the release described in paragraph 2 and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the PHC Group remises, releases and fully discharges all claims
any of them ever had, has claimed to have or now has against the BURSTEIN and
MANSDORF Group or any of them relating to or arising out of the Merger Agreement
and/or the Asset Sale Agreement, and any other claim which could have been
asserted by the PHC Group or any of them against the BURSTEIN and MANSDORF Group
or any of them prior to the execution of this Agreement. Notwithstanding the
foregoing, the Employment Agreement between BURSTEIN and BSC-NY and the
Employment Agreement between BURSTEIN and Shliselberg Physician Services, P.C.,
each with an effective date of November 1, 1999, including the Restrictive
Covenants contained therein, shall remain in full force and effect and is not in
any way altered, amended or affected by this Agreement and no claim thereunder,
regardless of when it may have accrued, shall be covered by, or released,
removed or discharged, by paragraph 2 above or this paragraph 3.
4. Termination of all Arrangements
All agreements and arrangements between PHC, its affiliates and
subsidiaries, on the one hand and BURSTEIN and/or MANSDORF on the other, whether
oral or written, including but not limited to the Merger Agreement and the Asset
Sale Agreement, other than this Agreement are hereby terminated, and this
Agreement supersedes all previous representations, understandings or agreements,
oral or written. This Agreement, together with the Promissory Notes referred to
in paragraph 1 above, embody the entire understanding and agreement of the
parties hereto concerning the subject matter of the Merger Agreement and the
Asset Sale Agreement. Each party to this Agreement hereby represents to the
other parties that he/it is not aware that any other person or entity has any
claim against any party in connection with or arising from or as a result of the
Merger Agreement and/or the Asset Sale Agreement. Notwithstanding the foregoing,
the Employment Agreement between BURSTEIN and BSC-NY and the Employment
Agreement between BURSTEIN and Shliselberg Physician Services, P.C., each with
an effective date of November 1, 1999, including the Restrictive Covenants
contained therein, shall remain in full force and effect and is not in any way
altered, amended or affected by this Agreement and no claim thereunder,
regardless of when it may have accrued, shall be covered by, or released,
removed or discharged, by paragraph 2 above or paragraph 3 above. Further, the
Covenant Not To Compete, as applies to BURSTEIN and MANSDORF, appearing in
Article X of the Merger Agreement and Section 7 of the Asset Sale Agreement,
shall remain in full force and effect until October 31, 2000.
5. General
5.1 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, irrespective of the
conflict of law rules of New York State and jurisdiction and venue
shall be New York County with respect to any proceeding arising out of
or in connection with this Agreement or the Promissory Notes.
5.2 Each party hereby represents to the other that he/it has signed this
Agreement or caused it to be signed by the duly authorized
representative of such party with full authority to sign this
Agreement and that he/it has not assigned or transferred any claims or
rights arising from the Merger Agreement or the Asset Sale Agreement.
By entering into this Agreement, each party represents that he/it has
carefully read and understood the terms of this Agreement, and that
those terms are fully understood and accepted by him/it. Each party
has made such investigation of the facts pertaining to this Agreement
and of all other matters as he/it deems necessary.
5.3 This Agreement and the covenants contained herein shall be binding
upon and shall inure to the benefit of the parties hereto and their
successors, assigns, subsidiaries, affiliates, agents, employees,
representatives, officers, managers, trustees, and directors.
5.4 In consideration of the foregoing release and payments, the parties
expressly agree to hold the terms of this Agreement confidential and
agree that, with the exception of consultations with legal counsel,
accountants, and as may be required by law, the terms of this
Agreement shall not be disclosed by the parties, their officers,
shareholders, agents, employees, directors or trustees to any third
party, except in connection with the enforcement of this Agreement.
5.5 This Agreement and any discussions pertaining to the settlement of the
dispute between the parties shall not be deemed or construed to be
evidence of or an admission or concession of liability on the part of
BURSTEIN and MANSDORF, or PHC to each other or to any third party.
5.6 This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of
which taken together shall constitute but one and the same instrument.
5.7 No waivers, changes, alterations or modifications hereto shall be
effective unless in writing and signed by or by the authorized
representative of each of the hereto parties. The headings to various
clauses of this Agreement have been inserted for convenience only and
shall not be used to interpret or construe the meaning of the terms
and provisions hereof.
5.8 In the event that any party hereunder breaches this Agreement or the
Promissory Notes, then such defaulting party shall pay immediately
upon request all of the costs, including without limitation
reasonable attorneys' fees incurred by each of the other parties
hereto to enforce this Agreement or the Promissory Notes and/or to
effect or induce the defaulting party to effect a cure of such
breach, whether by court order or settlement agreement.
In Witness Whereof, each of the parties has executed this Agreement or
caused this Agreement to be executed by its duly authorized representatives as
of the day and the year set forth above.
PHC, Inc. Yakov Burstein, Ph.D.
/s/ Yakov Burstein
By: /s/ Bruce Shear
Name: Bruce Shear
Title: President
Irwin J. Mansdorf, Ph.D
/s/ Irwin J. Mansdorf
Date: August 17, 2000
<PAGE>
Exhibit 10.79
RESTATED MORTGAGE
$3,100,000.00
MORTGAGOR: PHC OF MICHIGAN, INC.
MORTGAGEE: HELLER HEALTHCARE FINANCE, INC.
May 26, 2000
Prepared by and after recording,
return to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis &
Foster, P.C.
1000 Michigan National Tower
Lansing, MI 48933
<PAGE>
RESTATED MORTGAGE
THIS INSTRUMENT ("Mortgage") WITNESSES: That PHC OF MICHIGAN, INC., a
Massachusetts corporation having its principal place of business at 200 Lake
Street, Suite 102, Peabody, Massachusetts 01960, as "Mortgagor", and HELLER
HEALTHCARE FINANCE, INC., a Delaware corporation having its principal office
at 2 Wisconsin Circle, 4th Floor, Chevy Chase, Maryland 20815, as
"Mortgagee".
R E C I T A L S
A. This Mortgage amends and restates in its entirety that certain Restated
Mortgage made by Mortgagor in favor of Mortgagee, which was recorded in the
official records of the Macomb County, Michigan registrar of deeds at Liber Page
_______ on _______ , 1999 (the "Original Mortgage"). The Mortgage secures the
obligations of Mortgagor (i) under that certain Secured Term Note in the
original principal amount of One Million One Hundred Thousand and No/100 Dollars
($1,100,000.00) made by Mortgagor in favor of Mortgagee's
predecessor-in-interest and dated March 12, 1997 (the "March Term Note"); (ii)
under that certain Secured Term Note in the original principal amount of Five
Hundred Thousand and No/100 Dollars ($500,000) made by Mortgagor in favor of
Mortgagee's predecessor-in-interest and dated December 9, 1997 (the "December
Term Note"); and (iii) under that certain Secured Term Note made by Mortgagor in
favor of Mortgagee dated as November , 1999 in an original principal amount of
One Million and No/100 Dollars ($1,000,000.00) (the "November Term Note" and
collectively with the March Term Note and the December Term Note, the "Original
Term Notes"). The Original Term Notes are still outstanding. The succession of
Mortgagee is described in the recitals of the Original Mortgage.
B. Mortgagor is executing a Secured Term Note in favor of Mortgagee dated
as of even date with this Mortgage in an original principal amount of Five
Hundred Thousand and No/100 Dollars ($500,000.00) (the "May Term Note" and
collectively with the Original Term Notes, the "Term Notes"). Mortgagee requires
that the obligations of Mortgagor under the May Term Note be secured by the
premises (as defined below) and Mortgagor has agreed to execute this Mortgage to
evidence Mortgagee's security interest.
NOW, THEREFORE, for value received, Mortgagor mortgages and warrants to
Mortgagee the property situated in the City of New Baltimore, County of Macomb,
and State of Michigan, with a street address of 35031 23 Mile Road, New
Baltimore, Michigan 48047, and legally described as shown on the attached
Exhibit A"; together with the easements, rights-of-way, licenses, privileges,
hereditaments, and appurtenances belonging to the property, and all the rents,
issues, leases, and profits, the interest of Mortgagor in the property, either
at law or in equity, all buildings, structures, and improvements, and all
fixtures located in, on, or affixed to the property, and used or usable in
connection with the operation of the property (all of the above-stated property
are collectively referred to in this Mortgage as the "premises").
This Mortgage is given to secure the following:
(a) payment of the indebtedness evidenced by the March Term Note;
(b) payment of the indebtedness evidenced by the December Term Note;
(c) payment of the indebtedness evidenced by the November Term Note;
(d) payment of the indebtedness evidenced by the May Term Note
(e) payment by Mortgagor to Mortgagee of all sums expended or advanced by
Mortgagee pursuant to any term or provision of this Mortgage;
(f) performance of the covenants, conditions, and agreements contained in this
Mortgage and in the Term Notes and in any other documents securing the
indebtedness shown above;
(g) all other indebtedness and obligations of Mortgagor currently or
subsequently owing to Mortgagee, including but not limited to all
future advances under this Mortgage or on the Term Notes, loan
agreements, security agreements, pledge agreements, assignments,
mortgages, leases, guarantees, and any other agreements, instruments,
or documents previously or subsequently signed by Mortgagor, whether
the indebtedness or obligations are direct or indirect, absolute or
contingent, primary or secondary, or related or unrelated to the
premises or the transaction of which this Mortgage is a part, and any
and all partial or full extensions or renewals of this indebtedness or
other indebtedness and obligations (all of the foregoing are
collectively referred to as the "indebtedness").
Mortgagor warrants, covenants, and agrees that:
1. Title. Mortgagor is seized of the premises, in fee simple.
Mortgagor had the right and power to mortgage and warrant the premises
as set forth in this Mortgage. The premises are free from all liens and
encumbrances except easements and restrictions of record disclosed in
___________________ Title Commitment No. ____ dated ________, relating
to the premises. Mortgagor will defend the premises against all claims
and demands.
2. Payment of Indebtedness. Mortgagor will pay all indebtedness when due,
including the principal and interest, as provided in the Term Notes.
3. Taxes and Assessments. Until the indebtedness is fully satisfied,
Mortgagor will pay all taxes, assessments, and other similar charges and
encumbrances levied on the premises before they become delinquent, and
will promptly deliver to Mortgagee, without demand, receipts showing the
payment.
4. Tax and Insurance Escrow. On request, at the option of Mortgagee,
Mortgagor will pay to Mortgagee monthly, in addition to each monthly
payment required by this Mortgage or under the Term Notes, a sum
equivalent to one-twelfth of the amount estimated by Mortgagee to be
sufficient to enable Mortgagee to pay, at least 30 days before they
become due, all taxes, assessments, and other similar charges levied
against the premises, and all insurance premiums on any policy or
policies of insurance required by this Mortgage. The additional
payments may be commingled with the general funds of Mortgagee, and no
interest shall be payable on those payments. On demand by Mortgagee,
Mortgagor will deliver and pay over to Mortgagee any additional sums
necessary to make up any deficiency in the amount necessary to enable
Mortgagee to fully pay when due any of the preceding items. In the
event of any default by Mortgagor in performing any of the terms of
this Mortgage, Mortgagee may apply against the indebtedness, in the
manner that Mortgagee may determine, any funds of Mortgagor then held
by Mortgagee under this paragraph.
5. Change of Law. If, after the date of this Mortgage, any statute or
ordinance is passed that changes in any way the laws now in force for the
taxation of mortgages or mortgaged debts or the manner in which those
taxes are collected, so as to affect this Mortgage or the interest of
Mortgagee, the whole of the principal sum secured by this Mortgage, with
all interest and charges, if any, at the option of Mortgagee, shall become
due and payable.
6. Insurance. Mortgagor will procure, deliver to, and maintain for the
benefit of Mortgagee during the term of this Mortgage:
(a) a policy of hazard insurance, providing an all-risk extended
coverage endorsement, in an amount equal to the highest replacement
value of the premises;
(b) a policy of comprehensive public liability insurance insuring
against bodily injury, with a coverage limit of at least $3,000,000,
and against property damage, with a coverage limit of at least
$3,000,000, from any accident or occurrence with respect to the
premises.
All policies of insurance required by this paragraph shall be in a
form, with companies, and in amounts acceptable to Mortgagee, and shall
contain a mortgagee endorsement clause acceptable to Mortgagee, with loss
payable to Mortgagee. Mortgagor will pay when due the premiums on any
policy of insurance required by Mortgagee, and will deliver to Mortgagee
renewals of all policies at least 10 days before their expiration date(s).
Duplicates of all policies shall be delivered to Mortgagee.
In the event of any loss or damage to the premises, Mortgagor will
give immediate written notice to Mortgagee, and Mortgagee may then make
proof of the loss or damage, if it is not promptly made by Mortgagor. All
proceeds of insurance shall be payable to Mortgagee, and any affected
insurance company is authorized and directed to make payment directly to
Mortgagee. Mortgagee is authorized to settle, adjust, or compromise any
claims for loss, damage, or destruction under any policy of insurance.
7. Maintenance and Repair. Mortgagor will not cause or permit the
commission of waste on the premises and will keep the premises in good
condition and repair. No building or other improvement on the premises
shall be removed, demolished, or materially altered without the prior
written consent of Mortgagee. Mortgagor will comply with all laws,
ordinances, regulations, and orders of all public authorities having
jurisdiction over the premises. If the premises, in the sole judgment
of Mortgagee, require inspection or repair, Mortgagee may enter upon
the premises and inspect and/or repair the premises as Mortgagee may
deem advisable, and may take other action as Mortgagee may deem
appropriate to preserve the premises. Mortgagor will pay when due all
charges for utilities or services contracted for by Mortgagor.
8. Environmental Matters. No use, exposure, release, generation,
manufacture, storage, treatment, transportation or disposal of
Hazardous Material (as defined) has occurred or is occurring on or from
the property. All Hazardous Material used, treated, stored,
transported to or from, generated or handled on the property has been
disposed of on or off the property by or on behalf of Borrower in a
lawful manner. There are no underground storage tanks present on or
under the property. No other environmental, public health or safety
hazards exist with respect to the property. "Hazardous Material" means
any substances defined or designated as hazardous or toxic waste,
hazardous or toxic material, hazardous or toxic substance, or similar
term, by any environmental statute, rule or regulation or any federal,
state or local governmental authority.
9. Waste. The failure of Mortgagor to meet its maintenance obligations or to
pay any taxes assessed against the premises or any insurance premium on
policies covering any property located on the premises shall constitute
waste as provided by MCLA 600.2927, MSA 27A.2927, and shall entitle
Mortgagee to appoint a receiver of the property for the purpose of
preventing the waste. The receiver may collect the rents and income from
the premises.
10. Condemnation. If the premises, or any part, are taken under the power of
eminent domain, the entire award, to the full extent of the indebtedness,
shall be paid to Mortgagee. Mortgagee is empowered in the name of
Mortgagor to receive and give acquittance for any award, whether it is
joint or several. However, Mortgagee shall not be held responsible for
failing to collect any award.
11. Mortgagee Expenses. If Mortgagor fails to meet any of its obligations
under this mortgage, Mortgagee shall have the right, but not the
obligation, to perform in the place of Mortgagor. If Mortgagee incurs
or expends any sums, including reasonable attorney fees, whether or not
in connection with any action or proceeding, to (a) sustain the lien of
this Mortgage or its priority, (b) protect or enforce any of
Mortgagee's rights, (c) recover any part of the indebtedness, (d) meet
an obligation of Mortgagor under this mortgage, or (e) collect
insurance or condemnation proceeds, then those sums shall become
immediately due and payable by Mortgagor with interest at the default
rate set forth in the Term Notes from the date of Mortgagee's payment
until paid by Mortgagor. The sums expended in this manner by Mortgagee
shall be secured by this Mortgage and be a lien on the premises prior
to any right, title, or interest on the premises attaching or accruing
subsequent to the lien of this Mortgage.
12. Assignment of Contracts and Licenses. Mortgagor assigns to Mortgagee,
as further security for payment of the indebtedness, Mortgagor's
interest in all agreements, contracts (including any contracts for the
lease or sale of the premises), licenses, and permits affecting the
premises. The assignment shall not be construed as a consent by
Mortgagee to any agreement, contract, license or permit so assigned, or
to impose any obligations on Mortgagee. Mortgagor shall not cancel,
amend, permit, or cause a default or termination of any of the
agreements, contracts, licenses, and permits used in conjunction with
the operation of the premises without the written approval of Mortgagee.
13. Assignment of Rents and Leases. As additional security for the payment
of the indebtedness, Mortgagor assigns and transfers to Mortgagee,
pursuant to 1953 PA 210, as amended by 1966 PA 151 (MCLA 554.231 et
seq., MSA 26.1137(1) et seq.), all the rents, profits, and income under
all leases, occupancy agreements, or arrangements upon or affecting the
premises (including any extensions or amendments) now in existence or
coming into existence during the period this Mortgage is in effect.
This assignment shall run with the land and be good and valid as
against Mortgagor and those claiming under or through Mortgagor. This
assignment shall continue to be operative during foreclosure or any
other proceedings to enforce this Mortgage. If a foreclosure sale
results in a deficiency, this assignment shall stand as security during
the redemption period for the payment of the deficiency. This
assignment is given only as collateral security and shall not be
construed as obligating Mortgagee to perform any of the covenants or
undertakings required to be performed by Mortgagor in any leases.
In the event of default in any of the terms or covenants of this
Mortgage, Mortgagee shall be entitled to all of the rights and benefits of
MCLA 554.231B.233, MSA 26.1137(1)B(3) and 1966 PA 151, and Mortgagee shall
be entitled to collect the rents and income from the premises, to rent or
lease the premises on the terms that it may deem best, and to maintain
proceedings to recover rents or possession of the premises from any tenant
or trespasser.
Mortgagee shall be entitled to enter the premises for the purpose of
delivering notices or other communications to the tenants and occupants.
Mortgagee shall have no liability to Mortgagor as a result of those acts.
Mortgagee may deliver all of the notices and communications by ordinary
first-class U.S. mail.
If Mortgagor obstructs Mortgagee in its efforts to collect the rents
and income from the premises or unreasonably refuses or neglects to assist
Mortgagee in collecting the rent and income, Mortgagee shall be entitled
to appoint a receiver for the premises and the income, rents, and profits,
with powers that the court making the appointment may confer.
Mortgagor shall at no time collect advance rent in excess of one
month under any lease pertaining to the premises, and Mortgagee shall not
be bound by any rent prepayment made or received in violation of this
paragraph. Mortgagee shall not have any obligation to collect rent or to
enforce any other obligations of any tenant or occupant of the premises to
Mortgagor. No action taken by Mortgagee under this paragraph shall cause
Mortgagee to become a "mortgagee in possession."
14. Performance of Leases. Mortgagor shall observe and perform all
obligations contained in any lease affecting the premises. Mortgagor
shall not default in performing any of the obligations imposed on
Mortgagor by any lease; such a default gives the lessee the right to
terminate or cancel the lease or offset against rentals. Upon request,
Mortgagor shall furnish to Mortgagee a statement, in any reasonable
detail that Mortgagee may request, of all leases relating to the
premises and executed counterparts of any and all leases.
15. Records. With respect to the premises and its operations, Mortgagor
shall keep proper books in accordance with generally accepted
accounting principles consistently applied. Mortgagee shall have the
right to examine the books at reasonable times as Mortgagee may elect.
Upon request, Mortgagor shall furnish to Mortgagee within sixty (60)
days after the end of each calendar year, a financial statement of
Mortgagor for the calendar year, in reasonable detail and stating in
comparative form the figures as of the end of the previous calendar
year, including statements of income and expense relating to operations
of the premises, certified by an independent certified public
accountant acceptable to Mortgagee. In addition, Mortgagor shall
furnish to Mortgagee, in a form acceptable to Mortgagee, interim
financial statements that Mortgagee may request, certified by Mortgagor.
16. Waiver. If Mortgagee (a) grants any extension of time with respect to
the payment of any part of the indebtedness, (b) takes other or
additional security for the payment of the indebtedness, (c) waives or
fails to exercise any right granted by this Mortgage or the Term Notes,
(d) grants any release on any part of the security held for the payment
of the indebtedness, or (e) amends any of the terms and provisions of
this Mortgage or the Term Notes, that act or omission shall not release
Mortgagor under any covenant of this Mortgage or the Term Notes, nor
preclude Mortgagee from exercising any right or power granted, nor
impair the lien or priority of this Mortgage.
17. Use of Premises. Mortgagor shall not make, or permit, without the prior
written consent of Mortgagee, (a) any use of the premises for any
purpose other than that for which they are now used; (b) any
alterations of the buildings, improvements, and fixtures located on the
premises; (c) any purchase, lease of, or agreement for any fixtures to
be placed on the premises under which title is reserved in the vendor.
Mortgagor shall execute and deliver documents that may be requested by
Mortgagee to confirm the lien of this Mortgage on any fixtures,
machinery, and equipment.
18. Events of Default. The occurrences listed below shall be deemed events of
default and shall entitle Mortgagee, at its option and without notice
except as required by law, to exercise any one or any combination of
remedies under this Mortgage or permitted by law:
(a) the failure by Mortgagor to (i) make any payment when due under the
Term Notes, or (ii) to perform any of the other terms, covenants, or
conditions of this Mortgage within a period of ten (10) days after
written notice from Mortgagee of Mortgagor's failure to perform an
obligation;
(b) the institution of foreclosure or other proceedings to enforce
any junior lien or encumbrance on the premises;
(c) the appointment by a court of a receiver or trustee of Mortgagor
or for any property of Mortgagor;
(d) a decree by a court adjudicating Mortgagor a bankrupt or
insolvent, or for the sequestration of any of Mortgagor's
property;
(e) the filing of a petition in bankruptcy by or against Mortgagor
under the federal Bankruptcy Code or any similar statute that is
in effect;
(f) an assignment by Mortgagor for the benefit of creditors or a
written admission by Mortgagor of the inability to pay debts
generally as they become due;
(g) the failure to comply with all of the terms and covenants of any
leases or other agreements, documents, or restrictions that now
encumber, affect, or pertain to the premises;
(h) Mortgagor, without the written consent of Mortgagee, sells, conveys,
or transfers the premises, any interest in the premises, or any
rents or profits from the premises, or causes or allows any
mortgage, lien, or other encumbrance, or any writ of attachment,
garnishment, execution, or other legal process to be placed on the
premises, or any part of the premises is transferred by operation of
law;
(i) all or any part of the premises is damaged or destroyed by fire or
other casualty, regardless of insurance coverage, or is taken by
power of eminent domain.
19. Default Remedies. Upon the occurrence of any event of default of this
mortgage, Mortgagee shall have the option, in addition to and not in
lieu of all other rights and remedies provided by law, to do any or all
of the following:
(a) Without notice, except as expressly required by law, to declare
the principal sum secured by the Mortgage, together with all
interest and all other sums secured by this mortgage, to be
immediately due and payable; to demand any installment payment
due under the Term Notes; and to institute any proceedings that
Mortgagee deems necessary to collect and otherwise to enforce the
indebtedness and obligations secured by this Mortgage and to
protect the lien of this Mortgage.
(b) Commence foreclosure proceedings against the premises pursuant
to applicable laws. Mortgagee's commencement of a foreclosure
shall be deemed an exercise by Mortgagee of its option to
accelerate the due date of all sums secured by this Mortgage.
Mortgagor grants to Mortgagee, in the event of the occurrence of
an event of default, the power to sell the premises at public
auction by advertisement, without notice or hearing, except as
required by Michigan statutes.
(c) To enter into peaceful possession of the premises and/or to receive
the rent, income, and profits, and to apply those in accordance with
paragraph 13.
Mortgagor acknowledges having been advised that Mortgagee believes
that the value of the security covered by this Mortgage is
inextricably intertwined with the effectiveness of the management,
maintenance, and general operation of the premises, and that
Mortgagee would not make the loan secured by this Mortgage unless it
could be assured that it would have the right to take possession of
the premises in order to manage, control management, and enjoy the
income, rents, and profits, immediately upon default by Mortgagor,
notwithstanding that foreclosure proceedings may not have been
instituted, or are pending, or that the redemption period may not
have expired. Accordingly, Mortgagor knowingly and voluntarily
waives all right to possession of the premises from and after the
date of default, upon demand for possession by Mortgagee.
20. Sale of Premises as a Whole or in Parcels. Upon any foreclosure sale of
the premises, the premises may be sold either as a whole or in parcels, as
Mortgagee may elect, and if in parcels, to be divided as Mortgagee may
elect, or, at the election of Mortgagee, the premises may be offered first
in parcels and then as a whole, with the offer producing the highest price
for the entire property to prevail.
21. Assignment. Mortgagor shall not make a conveyance of any interest in
the premises. A "conveyance" of Mortgagor's interest in the premises
shall include without limitation any voluntary or involuntary
disposition or dilution of legal or beneficial title to the premises by
any means. If ownership of the premises, or any part, becomes vested in
a person other than Mortgagor (with or without Mortgagee's consent),
Mortgagee may, without notice to Mortgagor, deal with the successors in
interest with reference to this Mortgage or the Term Notes without in
any way releasing or otherwise affecting Mortgagor's liability under
the Term Notes and Mortgage.
22. Application of Proceeds. In the event of the payment to Mortgagee,
pursuant to this mortgage, of any rents or profits, or proceeds of any
insurance or condemnation award, or proceeds from the sale of the
premises upon foreclosure, Mortgagee shall have the right to apply the
rents, profits, or proceeds, in amounts and proportions that Mortgagee
shall, in its sole discretion, determine, against the cost and expenses
incurred by Mortgagee in exercising its rights under this mortgage,
payment of the interest and principal due under the Term Notes, payment
of any other portion of the indebtedness, and payment of expenses
incurred in preserving the premises. Application by Mortgagee of any
proceeds toward the last maturing installments of principal and
interest to become due under the Term Notes shall not excuse Mortgagor
from making the regularly scheduled payments due under the Term Notes
and this mortgage, nor shall the application reduce the amount of the
payments. In the event of the payment of proceeds as a result of an
insurance or condemnation award, Mortgagee shall have the right, but
not the obligation, to require all or part of the proceeds of any
insurance or condemnation award to be used to restore any part of the
premises damaged or taken by reason of the occurrence which gave rise
to the payment of the proceeds.
CAUTION: PARAGRAPH 23 CONTAINS A WAIVER OF
IMPORTANT LEGAL RIGHTS
23. Waiver of Rights. This Mortgage contains a power of sale which permits
Mortgagee to cause the premises to be sold in the event of a default.
Mortgagee may elect to cause the premises to be sold by advertisement
rather than pursuant to court action, and Mortgagor voluntarily and
knowingly waives any right Mortgagor may have by virtue of any
applicable constitutional provision or statute to any notice or court
hearing prior to the exercise of the power of sale, except as may be
expressly required by the Michigan statute governing foreclosures by
advertisement. In addition, Mortgagor knowingly and voluntarily waives
any right Mortgagor may have to remain in possession of the premises or
to collect any rents or income therefrom during the pendency of any
foreclosure proceedings and during any applicable redemption period.
Also, paragraphs 18 and 21 above entitle Mortgagee to require immediate
payment of the balance of the indebtedness in full if the premises are
sold or otherwise transferred. By execution of this mortgage, Mortgagor
represents and acknowledges that the meaning and consequences of these
paragraphs have been discussed as fully as desired by Mortgagor with
Mortgagor's legal counsel.
24. Environmental Matters. Mortgagor agrees to indemnify Mortgagee against,
and hold it harmless from, all obligations and liabilities relating to
the premises arising out of claims made or suits brought for
investigation, study, remedial work, monitoring, or other costs and
expenses arising from or associated with response to any environmental
matters, including but not limited to any (a) water pollution, air
pollution, noise, odor, spills, leaks, or inadvertent discharges,
emissions, or releases, or the generation, transportation, storage,
treatment, or disposal of solid waste, including hazardous waste,
hazardous substances, pollutants and contaminants; (b) injury,
sickness, disease, or death of any person; or (c) damage to any
property, regardless of whether the cause of the injury or damage
occurred before or after the date of this Mortgage. Mortgagor further
agrees that Mortgagee shall have no liability for any environmental
contamination associated with Mortgagor's business or the premises, and
that any involvement of Mortgagee with Mortgagor's business to protect
its security interest in the premises shall not constitute Mortgagor as
an "owner or operator" of Mortgagor's business for purposes of
determining environmental liability. In any event, if Mortgagee becomes
obligated, by judicial or administrative judgment or settlement of a
claim, to pay any amounts for response to any environmental
contamination associated or connected with Mortgagor's business or the
premises, any payment by Mortgagee shall be deemed additional
indebtedness secured by the lien of this mortgage, shall be immediately
due and payable to Mortgagee, and shall bear interest until paid at the
default interest rate specified in the Term Notes.
25. Covenants Run with Land. All of the terms and covenants of this
Mortgage shall run with the land and shall be binding on and inure to
the benefit of the respective legal representatives and successors of
the parties.
26. Release of Mortgage. If Mortgagor pays to Mortgagee the money required by
the Term Notes, in the manner and at the times provided in the Term Notes,
and all other sums of the indebtedness payable by Mortgagor to Mortgagee,
and keeps and performs the terms, covenants, and agreements of Mortgagor
with Mortgagee, then this Mortgage shall be satisfied, and Mortgagee shall
release the Mortgage.
27. Notice. All notices, demands, and requests required or permitted to be
given to Mortgagor or by law shall be deemed delivered when deposited in
the United States mail, with postage prepaid, addressed to Mortgagor or
Mortgagee at their last known addresses.
28. Severability. If any provision of this Mortgage is in conflict with any
statute or rule of law of the State of Michigan or is otherwise
unenforceable for any reason, then that provision shall be deemed null and
void to the extent of the conflict or unenforceability, but shall be
deemed separable from and shall not invalidate any other provision of this
Mortgage.
29. Venue and Jurisdiction. All provisions of this Mortgage shall be governed
by and construed in accordance with the laws of the State of Michigan.
Venue shall be in Macomb County, Michigan for any action brought with
regard to this Mortgage. Mortgagor consents to personal jurisdiction over
it by any Michigan courts to the extent that personal jurisdiction may be
necessary to enforce any of the provisions of this Mortgage.
[SIGNATURES FOLLOW]
<PAGE>
Signed on the date set forth above.
MORTGAGOR:
WITNESSES: PHC OF MICHIGAN, INC.,
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
/s/ T. A. Bates
Name:
ACKNOWLEDGMENT
STATE OF MASSACHUSETTS )
COUNTY OF ESSEX )
The foregoing instrument was acknowledged before me on _____, 2000, by
Bruce A. Shear, the President of PHC of Michigan, Inc., a Massachusetts
corporation, on behalf of the corporation.
Paula C. Wurts
Notary Public, Essex County
My commission expires November 29, 2002.
<PAGE>
Exhibit "A"
Legal Description
<PAGE>
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
SECURED UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS SECURED UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the
"Guaranty") is dated as of May 26, 2000 and is made by BSC--NY, INC., a New York
corporation ("Guarantor"), in favor of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation ("Lender").
R E C I T A L S
1. Pursuant to a certain Secured Term Note of even date with this Guaranty (as
the note may from time to time be amended, modified or supplemented, the "Term
Note") made in favor of Lender by PHC of Michigan, Inc., a Massachusetts
corporation ("Borrower") that is an affiliate of Guarantor, Lender has agreed to
make available to Borrower a secured term loan in the maximum aggregate
principal amount of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the
"Loan").
B. Lender is willing to make the Loan under the Term Note but only upon the
condition, among others, that Guarantor shall have executed and delivered to
Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Guaranty and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. All capitalized terms used but not defined in this Guaranty shall have
the respective meanings given them in the Term Note.
2. To induce Lender to make the Loan upon the terms and conditions set
forth in the Term Note, and in consideration thereof, Guarantor hereby
unconditionally and irrevocably guaranties to Lender, and to its successors,
endorsees, transferees and assigns, Borrower's prompt and complete payment when
due, whether at the stated maturity, by acceleration or otherwise, of all of
Borrower's obligations under the Term Note (collectively, the "Obligations"),
and Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Term Note.
3. As security for Guarantor's obligations under this Guaranty, Guarantor
hereby assigns and grants to Lender a continuing priority lien on and security
interest in, upon, and to the following property:
a. All of Guarantor's now-owned and hereafter acquired or arising
Accounts, accounts receivable and rights to payment of every kind and
description, and any contract rights, chattel paper, documents and instruments
with respect thereto;
b. All of Guarantor's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Concentration
Account;
c. All of Guarantor's right, title and interest, and all of
Guarantor's rights, remedies, security and liens, in, to and in respect of the
Accounts, including, without limitation, rights of stoppage in transit,
replevin, repossession and reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, guaranties or other contracts of
suretyship with respect to the Accounts, deposits or other security for the
obligation of any Account debtor, and credit and other insurance;
d. All of Guarantor's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
e. All deposit accounts, as such term is defined in the UCC;
f. All books, records, ledger cards, computer programs and
information and other property at any time evidencing or relating to the
Accounts; and
g. The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
4. Guarantor hereby waives notice of the acceptance of this Guaranty and
of the extending of credit as above specified and the state of indebtedness of
Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms of such
credit, and waives diligence, presentment, demand of payment, protest or notice,
whether of non-payment, dishonor, protest or otherwise, of any document or
documents and notice of any extension, renewal, modification or default and
assent to the release, substitution or variation of any collateral that may at
any time be held as security for any credit extended to Borrower, all without
relieving Guarantor of any liability under this Guaranty. The obligations of
Guarantor under this Guaranty shall be an unconditional obligation to make
prompt payment and performance to Lender irrespective of the genuineness,
validity, regularity or enforceability of any indebtedness or evidence of
indebtedness of Borrower to Lender or of other circumstances that might
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of Lender's rights either (i) against Borrower on
all or any part of its Obligations or (ii) under this Guaranty.
5. Notwithstanding any payment or payments made by Guarantor under this
Guaranty or any setoff or application of funds of Guarantor by Lender, Guarantor
shall not be entitled to be subrogated to any of the rights of Lender against
Borrower or any collateral security or guarantee or right of offset held by
Lender for the payment or performance of the Obligations, nor shall Guarantor
seek any reimbursement from Borrower in respect of payments made by Guarantor
under this Guaranty, until all amounts then owing and any other performance then
due to Lender by Borrower for or on account of the Obligations are paid and
satisfied in full. Upon such payment and satisfaction in full, Guarantor shall
be subrogated to all rights of Lender against Borrower or any collateral
security or guarantee or right of offset held by Lender for the payment and
performance of the Obligations.
6. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
7. This is intended to be and shall be construed as a continuing guaranty
and shall remain in full force and effect and shall be binding in accordance
with and to the extent of its terms upon Guarantor and Guarantor's successors
and assigns, and shall inure to the benefit of Lender, and its successors,
endorsees, transferees and assigns.
8. If all or any part of the Obligations of Borrower to Lender are not
paid when due, Guarantor hereby guaranties that it will pay the same to Lender,
upon demand, without set-off or counterclaim and without reduction by reason of
any taxes, levies, imposts, charges and withholdings, restrictions or conditions
of any nature that are now or may hereafter be imposed, levied or assessed by
any country, political subdivision or taxing authority, all of which will be for
the account of and paid by Guarantor, and Lender need not first proceed to
preserve, utilize or exhaust any other right or remedy against Borrower or any
other guarantor or any security that Lender may have to obtain payment. The
payment shall be made in immediately available funds to Lender's office at 2
Wisconsin Circle, Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven
M. Curwin, Deputy General Counsel, or at such other place as Lender may
designate in writing.
9. No failure to exercise and no delay in exercising, on the part of
Lender, any right, power or privilege under this Guaranty shall operate as a
waiver of the right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
of the right, power or privilege, or the exercise of any other power or right.
The rights and remedies provided in this Guaranty are cumulative and not
exclusive of any rights or remedies provided by law.
10. Notice or demand to the parties shall be sufficiently given if in
writing and personally delivered, or mailed by registered or certified first
class mail, postage prepaid, return receipt requested, or sent by commercial
courier against receipt, or by telecopier (with a confirming copy sent by
regular mail) to the party intended and at the address or addresses specified
below:
Guarantor: 200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: (978) 536-2777
Telecopier: (978) 536-2677
Attention: Bruce A. Shear, President
Lender: 2 Wisconsin Circle, 4th Floor
Chevy Chase, Maryland 20815
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
Attention: Steven M. Curwin, Deputy General Counsel
Any party may designate a change of address by notice in writing to the other
parties, such notice to be effective ten (10) days after mailing or delivery as
provided in this Section 10.
11. Guarantor hereby represents, warrants, and covenants to Lender
that:
a. It is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, and has
the corporate power and authority to own its property, conduct its business as
now being conducted and to make and perform this Guaranty and the transactions
contemplated by this Guaranty, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the nature and
extent of the business conducted by it, or property owned by it, and applicable
law require such qualification, except where the failure so to qualify would not
have a material adverse effect on the business, operations or financial position
of Guarantor.
b. The execution, delivery and performance of this Guaranty have
been duly authorized by all necessary corporate action and will not violate any
provision of law or any order of any court or governmental agency or the
certificate of incorporation or other incorporating documents or bylaws of
Guarantor, or conflict with, or result in a breach of, or constitute (with or
without notice or lapse of time or both) a default under, or result in the
creation of any security interest, lien, charge or encumbrance upon any property
or assets of Guarantor, pursuant to any agreement, indenture or other instrument
to which it is a party or by which it may be bound.
c. Except as disclosed to Lender in writing prior to the execution
of this Guaranty, no action, suit, investigation or proceeding is pending or
known to be threatened against or affecting Guarantor that, if adversely
determined, would have a material adverse effect upon its financial condition or
operations.
d. Guarantor is not in default under any provision of its
certificate of incorporation or other incorporating documents, bylaws or stock
provisions (or any amendment to such documents or provisions), any indenture
relating to borrowed money, any agreement to which it is a party or by which it
is bound, any other indenture, or any order, regulation, ruling or requirement
of a court or public body or authority by which it is bound, which default would
have a material adverse effect on the business, operations or financial position
of Guarantor.
e. No license, consent or approval of, or filing with, any
governmental body or other regulatory authority is required for the making and
performance of, or any instrument or transaction contemplated by, this Guaranty.
Guarantor holds all certificates and authorizations of all governmental agencies
and authorities required by law to enable it to engage in the business currently
transacted by it, except those certificates and authorizations as to which the
failure to so hold would not, in the aggregate, have a material adverse effect
on Guarantor.
f. No provision of this Guaranty shall be waived, amended or
supplemented except by a written instrument executed by Lender.
12. The obligations of Guarantor under this Guaranty shall continue in
full force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise fully satisfied, and continue to be
effective or be reinstated, as the case may be, if at any time payment or other
satisfaction of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Borrower, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable bankruptcy laws or any other similar law, or any law or order of
any government or government agency purporting to reduce, amend or otherwise
affect, the Obligations, shall impair, affect, be a defense to or claim against
the obligations of Guarantor under this Guaranty.
13. In addition to its guarantee of Borrower's payment of the Obligations
and Borrower's performance of all covenants, obligations and agreements
contained in the Loan Documents, Guarantor shall pay all actual costs and
expenses (including reasonable attorney's fees) paid or incurred by Lender in
connection with the enforcement of this Guaranty.
14. Guarantor hereby agrees to execute any and all further documents,
agreements, and instruments, and take all further actions, that Lender shall
reasonably request to effectuate or further preserve, evidence, perfect or
protect the rights purported to be created in favor of Lender under this
Guaranty.
15. Guarantor hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Obligations, or any part of the Obligations, that diligent inquiry would
reveal, and Guarantor hereby agrees that Lender shall have no duty to advise
Guarantor of information known to Lender regarding such condition or any such
circumstances. If Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to Guarantor, Lender shall be under
no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information that, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor.
16. This Guaranty may be executed in one or more counterpart copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
17. If any term, covenant or condition of this Guaranty, or the
application of such term, covenant or condition to any party or circumstance,
shall be found by a court of competent jurisdiction to be, to any extent,
invalid or unenforceable, the remainder of this Guaranty and the application of
such term, covenant, or condition to parties or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby,
and each term, covenant or condition shall be valid and enforced to the fullest
extent permitted by law. Upon determination that any such term is invalid,
illegal or unenforceable, the parties to this Guaranty shall amend this Guaranty
so as to effect the original intent of the parties as closely as possible in an
acceptable manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS GUARANTY IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO GUARANTOR AT ITS ADDRESS SET
FORTH IN SECTION 10 OF THIS GUARANTY.
19. GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY GUARANTOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
20. GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY
COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON
BEHALF OF GUARANTOR IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK
THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
GUARANTOR IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS GUARANTY (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
GUARANTOR AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
GUARANTOR WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
21. In any litigation, trial, arbitration or other dispute resolution
proceeding relating to this Guaranty or any of the other Loan Documents, all
directors, officers, employees and agents of Guarantor or of its Affiliates
shall be deemed to be employees or managing agents of Guarantor for purposes of
all applicable law or court rules regarding the production of witnesses by
notice for testimony (whether in a deposition, at trial or otherwise). Guarantor
agrees that Lender's counsel in any such dispute resolution proceeding may
examine any of these individuals as if under cross-examination and that any
discovery deposition of any of them may be used in that proceeding as if it were
an evidence deposition. Guarantor in any event will use all commercially
reasonable efforts to produce in any such dispute resolution proceeding, at the
time and in the manner requested by Lender, all Persons, documents (whether in
tangible, electronic or other form) or other things under its control and
relating to the dispute in any jurisdiction that recognizes that (or any
similar) distinction.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of the
date first written above.
ATTEST: BSC--NY, INC.
a New York corporation
By: /s/ Bruce A. Shear
Name: Bruce A. Shear
Title: President
<PAGE>
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the "Guaranty") is
dated as of May 26, 2000 and is made by PHC, INC., a Massachusetts corporation
("Guarantor"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware
corporation ("Lender").
R E C I T A L S
1. Pursuant to a certain Secured Term Note of even date with this Guaranty
(as the note may from time to time be amended, modified or supplemented, the
"Term Note") made in favor of Lender by PHC of Michigan, Inc., a Massachusetts
corporation ("Borrower") that is a wholly owned subsidiary of Guarantor, Lender
has agreed to make available to Borrower a secured term loan in the maximum
aggregate principal amount of Five Hundred Thousand and No/100 Dollars
($500,000.00) (the "Loan").
B. Lender is willing to make the Loan under the Term Note but only upon
the condition, among others, that Guarantor shall have executed and delivered to
Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Guaranty and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. All capitalized terms used but not defined in this Guaranty shall have the
respective meanings given them in the Term Note.
2. To induce Lender to make the Loan upon the terms and conditions set
forth in the Term Note, and in consideration thereof, Guarantor hereby
unconditionally and irrevocably guaranties to Lender, and to its successors,
endorsees, transferees and assigns, Borrower's prompt and complete payment when
due, whether at the stated maturity, by acceleration or otherwise, of all of
Borrower's obligations under the Term Note (collectively, the "Obligations"),
and Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Term Note.
3. Guarantor hereby waives notice of the acceptance of this Guaranty and
of the extending of credit as above specified and the state of indebtedness of
Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms of such
credit, and waives diligence, presentment, demand of payment, protest or notice,
whether of non-payment, dishonor, protest or otherwise, of any document or
documents and notice of any extension, renewal, modification or default and
assent to the release, substitution or variation of any collateral that may at
any time be held as security for any credit extended to Borrower, all without
relieving Guarantor of any liability under this Guaranty. The obligations of
Guarantor under this Guaranty shall be an unconditional obligation to make
prompt payment and performance to Lender irrespective of the genuineness,
validity, regularity or enforceability of any indebtedness or evidence of
indebtedness of Borrower to Lender or of other circumstances that might
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of Lender's rights either (i) against Borrower on
all or any part of its Obligations or (ii) under this Guaranty.
4. Notwithstanding any payment or payments made by Guarantor under this
Guaranty or any setoff or application of funds of Guarantor by Lender, Guarantor
shall not be entitled to be subrogated to any of the rights of Lender against
Borrower or any collateral security or guarantee or right of offset held by
Lender for the payment or performance of the Obligations, nor shall Guarantor
seek any reimbursement from Borrower in respect of payments made by Guarantor
under this Guaranty, until all amounts then owing and any other performance then
due to Lender by Borrower for or on account of the Obligations are paid and
satisfied in full. Upon such payment and satisfaction in full, Guarantor shall
be subrogated to all rights of Lender against Borrower or any collateral
security or guarantee or right of offset held by Lender for the payment and
performance of the Obligations.
5. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
6. This is intended to be and shall be construed as a continuing guaranty
and shall remain in full force and effect and shall be binding in accordance
with and to the extent of its terms upon Guarantor and Guarantor's successors
and assigns, and shall inure to the benefit of Lender, and its successors,
endorsees, transferees and assigns.
7. If all or any part of the Obligations of Borrower to Lender are not
paid when due, Guarantor hereby guaranties that it will pay the same to Lender,
upon demand, without set-off or counterclaim and without reduction by reason of
any taxes, levies, imposts, charges and withholdings, restrictions or conditions
of any nature that are now or may hereafter be imposed, levied or assessed by
any country, political subdivision or taxing authority, all of which will be for
the account of and paid by Guarantor, and Lender need not first proceed to
preserve, utilize or exhaust any other right or remedy against Borrower or any
other guarantor or any security that Lender may have to obtain payment. The
payment shall be made in immediately available funds to Lender's office at 2
Wisconsin Circle, Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven
M. Curwin, Deputy General Counsel, or at such other place as Lender may
designate in writing.
8. No failure to exercise and no delay in exercising, on the part of
Lender, any right, power or privilege under this Guaranty shall operate as a
waiver of the right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
of the right, power or privilege, or the exercise of any other power or right.
The rights and remedies provided in this Guaranty are cumulative and not
exclusive of any rights or remedies provided by law.
9. Notice or demand to the parties shall be sufficiently given if in
writing and personally delivered, or mailed by registered or certified first
class mail, postage prepaid, return receipt requested, or sent by commercial
courier against receipt, or by telecopier (with a confirming copy sent by
regular mail) to the party intended and at the address or addresses specified
below:
Guarantor: 200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: (978) 536-2777
Telecopier: (978) 536-2677
Attention: Bruce A. Shear, President
Lender: 2 Wisconsin Circle, 4th Floor
Chevy Chase, Maryland 20815
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
Attention: Steven M. Curwin, Deputy General Counsel
Any party may designate a change of address by notice in writing to
the other parties, such notice to be effective ten (10) days after mailing or
delivery as provided in this Section 9.
10. Guarantor hereby represents, warrants, and covenants to Lender
that:
(a) It is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, and has
the corporate power and authority to own its property, conduct its business as
now being conducted and to make and perform this Guaranty and the transactions
contemplated by this Guaranty, and is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the nature and
extent of the business conducted by it, or property owned by it, and applicable
law require such qualification, except where the failure so to qualify would not
have a material adverse effect on the business, operations or financial position
of Guarantor.
(b) The execution, delivery and performance of this Guaranty have
been duly authorized by all necessary corporate action and will not violate any
provision of law or any order of any court or governmental agency or the
certificate of incorporation or other incorporating documents or bylaws of
Guarantor, or conflict with, or result in a breach of, or constitute (with or
without notice or lapse of time or both) a default under, or result in the
creation of any security interest, lien, charge or encumbrance upon any property
or assets of Guarantor, pursuant to any agreement, indenture or other instrument
to which it is a party or by which it may be bound.
(c) Except as disclosed to Lender in writing prior to the execution
of this Guaranty, no action, suit, investigation or proceeding is pending or
known to be threatened against or affecting Guarantor that, if adversely
determined, would have a material adverse effect upon its financial condition or
operations.
(d) Guarantor is not in default under any provision of its
certificate of incorporation or other incorporating documents, bylaws or stock
provisions (or any amendment to such documents or provisions), any indenture
relating to borrowed money, any agreement to which it is a party or by which it
is bound, any other indenture, or any order, regulation, ruling or requirement
of a court or public body or authority by which it is bound, which default would
have a material adverse effect on the business, operations or financial position
of Guarantor.
(e) No license, consent or approval of, or filing with, any
governmental body or other regulatory authority is required for the making and
performance of, or any instrument or transaction contemplated by, this Guaranty.
Guarantor holds all certificates and authorizations of all governmental agencies
and authorities required by law to enable it to engage in the business currently
transacted by it, except those certificates and authorizations as to which the
failure to so hold would not, in the aggregate, have a material adverse effect
on Guarantor.
11. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by Lender.
12. The obligations of Guarantor under this Guaranty shall continue in
full force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise fully satisfied, and continue to be
effective or be reinstated, as the case may be, if at any time payment or other
satisfaction of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Borrower, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable bankruptcy laws or any other similar law, or any law or order of
any government or government agency purporting to reduce, amend or otherwise
affect, the Obligations, shall impair, affect, be a defense to or claim against
the obligations of Guarantor under this Guaranty.
13. In addition to its guarantee of Borrower's payment of the Obligations
and Borrower's performance of all covenants, obligations and agreements
contained in the Loan Documents, Guarantor shall pay all actual costs and
expenses (including reasonable attorney's fees) paid or incurred by Lender in
connection with the enforcement of this Guaranty.
14. Guarantor hereby agrees to execute any and all further documents,
agreements, and instruments, and take all further actions, that Lender shall
reasonably request to effectuate or further preserve, evidence, perfect or
protect the rights purported to be created in favor of Lender under this
Guaranty.
15. Guarantor hereby assumes responsibility for keeping itself informed of
the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Obligations, or any part of the Obligations, that diligent inquiry would
reveal, and Guarantor hereby agrees that Lender shall have no duty to advise
Guarantor of information known to Lender regarding such condition or any such
circumstances. If Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to Guarantor, Lender shall be under
no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information that, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor.
16. This Guaranty may be executed in one or more counterpart copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
17. If any term, covenant or condition of this Guaranty, or the
application of such term, covenant or condition to any party or circumstance,
shall be found by a court of competent jurisdiction to be, to any extent,
invalid or unenforceable, the remainder of this Guaranty and the application of
such term, covenant, or condition to parties or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby,
and each term, covenant or condition shall be valid and enforced to the fullest
extent permitted by law. Upon determination that any such term is invalid,
illegal or unenforceable, the parties to this Guaranty shall amend this Guaranty
so as to effect the original intent of the parties as closely as possible in an
acceptable manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS GUARANTY IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO GUARANTOR AT ITS ADDRESS SET
FORTH IN SECTION 9 OF THIS GUARANTY.
19. GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY GUARANTOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
20. GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY
COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON
BEHALF OF GUARANTOR IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK
THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
GUARANTOR IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS GUARANTY (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
GUARANTOR AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
GUARANTOR WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
21. In any litigation, trial, arbitration or other dispute resolution
proceeding relating to this Guaranty or any of the other Loan Documents, all
directors, officers, employees and agents of Guarantor or of its Affiliates
shall be deemed to be employees or managing agents of Guarantor for purposes of
all applicable law or court rules regarding the production of witnesses by
notice for testimony (whether in a deposition, at trial or otherwise). Guarantor
agrees that Lender's counsel in any such dispute resolution proceeding may
examine any of these individuals as if under cross-examination and that any
discovery deposition of any of them may be used in that proceeding as if it were
an evidence deposition. Guarantor in any event will use all commercially
reasonable efforts to produce in any such dispute resolution proceeding, at the
time and in the manner requested by Lender, all Persons, documents (whether in
tangible, electronic or other form) or other things under its control and
relating to the dispute in any jurisdiction that recognizes that (or any
similar) distinction.
[SIGNATURES FOLLOW]
<PAGE>
the date first written above.
ATTEST: PHC, INC.
a Massachusetts corporation
By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
<PAGE>
THIS GUARANTY CONTAINS PROVISIONS FOR WAIVER
OF JURY TRIAL
UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE
THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (the "Guaranty") is
dated as of May 26, 2000 and is made by BRUCE A. SHEAR, an individual
("Guarantor"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware
corporation ("Lender").
R E C I T A L S
A. Pursuant to a certain Secured Term Note of even date with this Guaranty
(as the note may from time to time be amended, modified or supplemented, the
"Term Note") made by PHC of Michigan, Inc., a Massachusetts corporation
("Borrower"), in favor of Lender, Lender has agreed to make available to
Borrower a secured term loan in the maximum aggregate principal amount of Five
Hundred Thousand and No/100 Dollars ($500,000.00) (the "Loan").
B. Lender is willing to make the Loan under the Term Note but only upon
the condition, among others, that Guarantor shall have executed and delivered to
Lender this Guaranty.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained in this Guaranty and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. All capitalized terms used but not defined in this Guaranty shall have
the respective meanings given them in the Term Note.
2. To induce Lender to make the Loan upon the terms and conditions set
forth in the Term Note, and in consideration thereof, Guarantor hereby
unconditionally and irrevocably guaranties to Lender, and to its successors,
endorsees, transferees and assigns, Borrower's prompt and complete payment when
due, whether at the stated maturity, by acceleration or otherwise, of all of
Borrower's obligations under the Term Note (collectively, the "Obligations"),
and Borrower's prompt and complete performance of all of its other covenants,
obligations and agreements contained in the Term Note. . Notwithstanding the
foregoing, Guarantor's aggregate obligations under this Guaranty (in addition to
the Guaranty of Guarantor under that certain Guaranty between Lender and
Guarantor dated as of November , 1999) shall be limited to the amount of One
Hundred Fifty Thousand and No/100 Dollars ($150,000.00).
3. Guarantor hereby waives notice of the acceptance of this Guaranty and
of the extending of credit as above specified and the state of indebtedness of
Borrower at any time, and expressly agrees to any extensions, renewals,
accelerations or modifications of such credit or any of the terms of such
credit, and waives diligence, presentment, demand of payment, protest or notice,
whether of non-payment, dishonor, protest or otherwise, of any document or
documents and notice of any extension, renewal, modification or default and
assent to the release, substitution or variation of any collateral that may at
any time be held as security for any credit extended to Borrower, all without
relieving Guarantor of any liability under this Guaranty. The obligations of
Guarantor under this Guaranty shall be an unconditional obligation to make
prompt payment and performance to Lender irrespective of the genuineness,
validity, regularity or enforceability of any indebtedness or evidence of
indebtedness of Borrower to Lender or of other circumstances that might
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of Lender's rights either (i) against Borrower on
all or any part of its Obligations or (ii) under this Guaranty.
4. Notwithstanding any payment or payments made by Guarantor under this
Guaranty or any setoff or application of funds of Guarantor by Lender, Guarantor
shall not be entitled to be subrogated to any of the rights of Lender against
Borrower or any collateral security or guarantee or right of offset held by
Lender for the payment or performance of the Obligations, nor shall Guarantor
seek any reimbursement from Borrower in respect of payments made by Guarantor
under this Guaranty, until all amounts then owing and any other performance then
due to Lender by Borrower for or on account of the Obligations are paid and
satisfied in full. Upon such payment and satisfaction in full, Guarantor shall
be subrogated to all rights of Lender against Borrower or any collateral
security or guarantee or right of offset held by Lender for the payment and
performance of the Obligations.
5. Any indebtedness of Borrower now or hereafter owed to or held by
Guarantor is hereby subordinated to the indebtedness of Borrower to Lender; and
such indebtedness of Borrower to Guarantor if Lender so requests shall be
collected, enforced and received by Guarantor as trustee for Lender and be paid
over to Lender on account of the indebtedness of Borrower to Lender but without
reducing or affecting in any manner the liability of Guarantor under the other
provisions of this Guaranty.
6. This is intended to be and shall be construed as a continuing guaranty
and shall remain in full force and effect and shall be binding in accordance
with and to the extent of its terms upon Guarantor and Guarantor's heirs and
assigns, and shall inure to the benefit of Lender, and its successors,
endorsees, transferees and assigns.
7. If all or any part of the Obligations of Borrower to Lender are not
paid when due, Guarantor hereby guaranties that he will pay the same to Lender,
upon demand, without set-off or counterclaim and without reduction by reason of
any taxes, levies, imposts, charges and withholdings, restrictions or conditions
of any nature that are now or may hereafter be imposed, levied or assessed by
any country, political subdivision or taxing authority, all of which will be for
the account of and paid by Guarantor, and Lender need not first proceed to
preserve, utilize or exhaust any other right or remedy against Borrower or any
other guarantor or any security that Lender may have to obtain payment. The
payment shall be made in immediately available funds to Lender's office at 2
Wisconsin Circle, Fourth Floor, Chevy Chase, Maryland 20815, Attention: Steven
M. Curwin, Deputy General Counsel, or at such other place as Lender may
designate in writing.
8. No failure to exercise and no delay in exercising, on the part of
Lender, any right, power or privilege under this Guaranty shall operate as a
waiver of the right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
of the right, power or privilege, or the exercise of any other power or right.
The rights and remedies provided in this Guaranty are cumulative and not
exclusive of any rights or remedies provided by law.
9. Notice or demand to the parties shall be sufficiently given if in
writing and personally delivered, or mailed by registered or certified first
class mail, postage prepaid, return receipt requested, or sent by commercial
courier against receipt, or by telecopier (with a confirming copy sent by
regular mail) to the party intended and at the address or addresses specified
below:
Guarantor: c/o PHC of Michigan, Inc.
200 Lake Street, Suite 102
Peabody, Massachusetts 01960
Telephone: (978) 536-2777
Telecopier: (978) 536-2677
Lender: 2 Wisconsin Circle
Fourth Floor
Chevy Chase, Maryland 20815
Telephone: (301) 961-1640
Telecopier: (301) 664-9866
Attention: Steven M. Curwin, Deputy General Counsel
Any party may designate a change of address by notice in writing to
the other parties, such notice to be effective ten (10) days after mailing or
delivery as provided in this Section 9.
10. Guarantor hereby represents, warrants, and covenants to Lender:
a. Guarantor has the full right, power and authority to enter
into this Guaranty.
b. The execution, delivery and performance of this Guaranty will not
violate any provision of law or any order of any court or governmental agency or
conflict with, or result in a breach of, or constitute (with or without notice
or lapse of time or both) a default under, or result in the creation of any
security interest, lien, charge or encumbrance upon any property or assets of
Guarantor, pursuant to any agreement, indenture or other instrument to which he
is a party or by which he may be bound.
c. Except as disclosed to Lender in writing prior to the execution
of this Guaranty, no action, suit, investigation or proceeding is pending or
known to be threatened against or affecting Guarantor that, if adversely
determined, would have a material adverse effect upon his financial condition.
d. The financial statements of Guarantor previously delivered to
Lender are true, correct and complete and fairly present the financial condition
of Guarantor as of the date thereof. There are no material unrealized or
anticipated liabilities, direct or indirect, fixed or contingent, of Guarantor
as of the dates of such financial statements which are not reflected therein or
in the notes thereto. There has been no material adverse change in the financial
condition of Guarantor since the date of such financial statements of Guarantor
delivered to Lender.
e. No license, consent or approval of, or filing with, any
governmental body or other regulatory authority is required for the making and
performance of, or any instrument or transaction contemplated by, this Guaranty.
Guarantor holds all certificates and authorizations of all governmental agencies
and authorities required by law to enable him to engage in the business
currently transacted by it, except those certificates and authorizations as to
which the failure to so hold would not, in the aggregate, have a material
adverse effect on Guarantor.
11. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by Lender.
12. The obligations of Guarantor under this Guaranty shall continue in
full force and effect and shall remain in operation until all of the Obligations
shall have been paid in full or otherwise fully satisfied, and continue to be
effective or be reinstated, as the case may be, if at any time payment or other
satisfaction of any of the Obligations is rescinded or must otherwise be
restored or returned upon the bankruptcy, insolvency, or reorganization of
Borrower, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of applicable bankruptcy laws or any other similar law, or any law or order of
any government or governmental agency purporting to reduce, amend or otherwise
affect, the Obligations, shall impair, affect, be a defense to or claim against
the obligations of Guarantor under this Guaranty.
13. In addition to his guaranty of Borrower's payment of the Obligations
and Borrower's performance of all covenants, obligations and agreements
contained in the Term Note, Guarantor shall pay all actual costs and expenses
(including reasonable attorney's fees) paid or incurred by Lender in connection
with the enforcement of this Guaranty.
14. Guarantor hereby agrees to execute any and all further documents,
agreements, and instruments, and take all further actions, that Lender shall
reasonably request to effectuate or further preserve, evidence, perfect or
protect the rights purported to be created in favor of Lender under this
Guaranty.
15. Guarantor hereby assumes responsibility for keeping himself informed
of the financial condition of Borrower, and any and all endorsers and/or other
guarantors of any instrument or document evidencing all or any part of the
Obligations, and of all other circumstances bearing upon the risk of nonpayment
of the Obligations, or any part of the Obligations, that diligent inquiry would
reveal, and Guarantor hereby agrees that Lender shall have no duty to advise
Guarantor of information known to Lender regarding such condition or any such
circumstances. If Lender, in its sole discretion, undertakes at any time or from
time to time to provide any such information to Guarantor, Lender shall be under
no obligation (i) to undertake any investigation not a part of its regular
business routine, (ii) to disclose any information that, pursuant to accepted or
reasonable commercial finance practices, Lender wishes to maintain confidential,
or (iii) to make any other or future disclosures of such information or any
other information to Guarantor.
16. This Guaranty may be executed in one or more counterpart copies, each
of which shall be an original and all of which together shall constitute one and
the same instrument, and it is not necessary that all parties' signatures appear
on each counterpart.
17. If any term, covenant or condition of this Guaranty, or the
application of such term, covenant or condition to any party or circumstance,
shall be found by a court of competent jurisdiction to be, to any extent,
invalid or unenforceable, the remainder of this Guaranty and the application of
such term, covenant, or condition to parties or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby,
and each term, covenant or condition shall be valid and enforced to the fullest
extent permitted by law. Upon determination that any such term is invalid,
illegal or unenforceable, the parties to this Guaranty shall amend this Guaranty
so as to effect the original intent of the parties as closely as possible in an
acceptable manner.
18. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS GUARANTY IS
COMMENCED BY LENDER IN THE STATE COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN
THE STATE OF MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF
MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO GUARANTOR AT HIS ADDRESS SET
FORTH IN SECTION 9 OF THIS GUARANTY.
19. GUARANTOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY GUARANTOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS GUARANTY TO ANY
COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS
TO SERVE AS CONCLUSIVE EVIDENCE OF GUARANTOR'S WAIVER OF THE RIGHT TO JURY
TRIAL. FURTHER, GUARANTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO
GUARANTOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
20. GUARANTOR AUTHORIZES ANY ATTORNEY ADMITTED TO PRACTICE BEFORE ANY
COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH COURT TO APPEAR ON
BEHALF OF GUARANTOR IN ANY COURT IN ONE OR MORE PROCEEDINGS, OR BEFORE ANY CLERK
THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO CONFESS JUDGMENT AGAINST
GUARANTOR IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON THIS GUARANTY (INCLUDING
PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS
ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT
COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING.
GUARANTOR AGREES AND CONSENTS THAT VENUE AND JURISDICTION SHALL BE PROPER IN THE
CIRCUIT COURT OF ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY,
MARYLAND, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND.
GUARANTOR WAIVES THE BENEFIT OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF
COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING UPON GUARANTOR ANY RIGHT OR
PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF EXECUTION, OR SUPPLEMENTARY
PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR IMMEDIATE ENFORCEMENT OF A
JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND SHALL NOT BE
EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO; SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO TIME, IN THE SAME OR
DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM NECESSARY, CONVENIENT, OR
PROPER.
[SIGNATURES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of the
date first written above.
WITNESS: GUARANTOR:
/s/ T. A. Bates /s/ Bruce A.
Shear
Name: Bruce A. Shear
<PAGE>
AMENDED AND RESTATED CROSS-COLLATERALIZATION
AND CROSS-DEFAULT AGREEMENT
BY AND AMONG
PHC OF MICHIGAN, INC.,
PHC OF UTAH, INC.,
PHC OF VIRGINIA, INC.
PHC OF RHODE ISLAND, INC.
PIONEER COUNSELING OF VIRGINIA, INC.
(collectively, "Borrower")
AND
HELLER HEALTHCARE FINANCE, INC.
("Lender")
May 26, 2000
Prepared by and after recording,
return to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis & Foster,
P.C.
1000 Michigan National Tower
Lansing, MI 48933
<PAGE>
AMENDED AND RESTATED CROSS-COLLATERALIZATION
AND CROSS-DEFAULT AGREEMENT
THIS AMENDED AND RESTATED CROSS-COLLATERALIZATION AND CROSS-DEFAULT
AGREEMENT (the "Agreement") made as of the 26th day of May, 2000, is executed by
and among PHC, INC., a Massachusetts corporation ("PHC"), PHC OF MICHIGAN, INC.,
a Massachusetts corporation having its principal place of business at 200 Lake
Street, Suite 102, Peabody, Massachusetts 01960 ("PHCM"), PHC OF UTAH, INC., a
Massachusetts corporation ("PHCU"), PHC OF VIRGINIA, INC., a Massachusetts
corporation ("PHCVA"), PHC OF RHODE ISLAND, INC., a Massachusetts corporation
("PHCRI"), and PIONEER COUNSELING OF VIRGINIA, INC., a Massachusetts corporation
("Pioneer," and collectively with PHC, PHCM, PHCU, PHCVA, PHCRI and Pioneer,
"Borrower"), and HELLER HEALTHCARE FINANCE, INC., a Delaware corporation having
its principal office at 2 Wisconsin Circle, 4th Floor, Chevy Chase, Maryland
20815 and formerly known as HCFP Funding, Inc. ("HHF"), that is the assignee of
HCFP Funding II, Inc. ("HCFPII") (HHF and HHF as assignee of HCFPII are referred
to as "Lender").
RECITALS:
A. Borrower and Lender entered into that certain Cross-Collateralization
and Cross-Default Agreement (the "Agreement") dated as of July 13, 1998, wherein
Borrower agreed, among other things, to cross-collateralize the Loans with one
another and to provide for the cross-default of the Loans with one another.
Because certain additional loans were made by Lender to Borrower, Borrower and
Lender have agreed to execute this Agreement.
B. Borrower is currently indebted to Lender pursuant to the
following existing loans (collectively, the "Existing Loans"):
The "Revolving Loan": A revolving loan from Lender to PHCM, PHCU, PHCVA,
PHCRI, and Pioneer ("Revolver Borrowers") in the original maximum aggregate
principal sum of Four Million and No/100 Dollars ($4,000,000.00), which loan is
evidenced by that certain amended and restated Revolving Credit Note made by
Revolver Borrowers payable to Lender, dated as of February 20, 1998, and that
certain amended and restated Loan and Security Agreement dated as of February
20, 1998 between Revolver Borrowers and Lender, and which loan is secured by a
third priority Mortgage dated as of March 12, 1997 and recorded on May 5, 1997
in the Macomb County Records at Liber 07442 Pages 186-196, as amended by that
certain First Amendment to Mortgage dated as of April 30, 1998 and recorded on
_______, 1998 in the Macomb County Records at Liber ______ Pages__________
(collectively, the "Revolver Mortgage"); and
The "First Term Loan": A term loan from Lender to PHCM in the original
principal sum of One Million One Hundred Thousand and No/100 Dollars
($1,100,000.00), which loan is evidenced by that certain Secured Term Note of
PHCM payable to Lender, dated as of March 12, 1997, and which loan is secured by
the Restated Mortgage dated as of November _____, 1999 and recorded on ________
in the Macomb County Records at Liber _______ Pages _________ (as amended,
modified, supplemented or restated from time to time, the "Restated Term
Mortgage").
The "Second Term Loan": A term loan from Lender to PHCM in the original
principal sum of Five Hundred Thousand and No/100 Dollars ($500,000.00), which
loan is evidenced by that certain Secured Term Note of PHCM payable to Lender,
dated as of December 9, 1997, and which loan is secured by a second priority
Mortgage dated as of December 9, 1997 and recorded on January 9, 1998 in the
Official Records of Macomb County, Michigan at Liber 07804 Pages 73-85 (the
"Second Term Mortgage"). (The Revolver Loan, the First Term Loan and the Second
Term Loan are sometimes collectively referred to in this Agreement as the
"Existing Loans.")
C. PHCM has requested and received (i) an additional term loan of One
Million and No/100 Dollars ($1,000,000.00) from Lender dated November , 1999
(the "November Loan") and (ii) an additional term loan of Five Hundred Thousand
and No/100 Dollars ($500,000) from Lender dated May 26, 2000 (the "May Loan" and
collectively with the November Loan, the "New Loans" and sometimes referred to
collectively with the Existing Loans as the "New Loans").
D. As security for the New Loans, PHCM has executed and delivered the
Restated Mortgage to provide for, among other things, the securing of the New
Loans with a lien on the PHCM property.
E. As additional security for the New Loans, Lender has agreed to make the
New Loans, provided that (1) the New Loans are cross-collateralized with the
Existing Loans and with one another and (2) the Existing Loans are
cross-defaulted with one another AND with the New Loans and (3) the New Loans
are cross-defaulted with one another and with the Existing Loans.
F. The entities comprising Borrower are all affiliated entities under
common control and ownership (except that PHC is a public company) and will
receive direct and indirect benefits from the New Loans and the continuation of
the financing arrangements represented by the Existing Loans, which benefits,
among others, provide adequate consideration for them to enter into this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, to induce
Lender to extend the New Loans to Borrower and to continue the financing under
the Loan Documents (as defined below) and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower agrees with Lender and Lender agrees with Borrower, as follows:
1. Description of New Loan. The New Loans are evidenced by (i) that
certain Secured Term Note dated as of November , 1999 in the amount of One
Million and No/100 Dollars ($1,000,000) from PHCM to Lender and (ii) that
certain Secured Term Note dated as of May 26, 2000 in the amount of Five Hundred
Thousand and No/100 Dollars ($500,000) from PHCM to Lender.
2. Loan Documents. As used in this Agreement, the term "Loan Documents"
shall mean any and all Loan Documents evidencing or securing the Revolving Loan,
the First Term Loan, the Second Term Loan, and the New Loans. The term "Loans"
shall mean, collectively, the Revolving Loan, the First Term Loan, the Second
Term Loan, the November Loan and the May Loan.
3. Cross-Collateralization. The Existing Loans are hereby
cross-collateralized with each other and with the New Loans, and Borrower agrees
that the collateral described in the respective Loan Documents shall secure, in
addition to such respective Existing Loans, the obligations of PHC (and any
other applicable Borrower) under the New Loans and Loan Documents in respect of
the New Loans, including, without limitation, (a) PHC's (and any other
Borrower's or Affiliate's) obligation, if any, to pay the principal and interest
on the New Loans, as the same may hereafter be renewed, modified, amended or
extended, and to pay all other indebtedness and other agreed charges and to
perform all of the terms and conditions under the Loan Documents in respect of
the New Loans, and (b) the real property encumbered by the Restated Mortgage and
the Second Term Mortgage (collectively, the "Mortgages") securing each of the
applicable Loans.
4. Cross-Default. The Existing Loans and the New Loans are hereby
cross-defaulted with one another, and Borrower agrees that the occurrence of an
Event of Default as defined in, and pursuant to any of the Loan Documents, which
Event of Default is not cured within the applicable grace or curative periods,
shall constitute an immediate Event of Default (without need of notice or the
expiration of any additional cure period other than as specified in such Loan
Documents) under all other Loan Documents."
5. Severability. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, such provision shall be deemed to have been modified
to the extent necessary to make it valid, legal and enforceable. The validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
6. No Modification Except in Writing. None of the terms of this
Agreement may be waived, altered, amended or otherwise changed except by an
instrument in writing duly executed by all of the parties hereto.
7. Further Assurances. Each entity comprising Borrower shall execute and
deliver such further instruments and perform such further acts as may be
requested by Lender from time to time to confirm the provisions of this
Agreement and the Loan Documents, to carry out more effectively the purposes of
this Agreement and the Loan Documents, or to confirm the priority of any lien
created by any of the Loan Documents.
8. Enforceability. Each entity comprising Borrower represents and warrants
to Lender that this Agreement and the other Loan Documents are the legal, valid
and binding obligations of each entity constituting Borrower, jointly and
severally, enforceable against each such entity in accordance with their terms.
9. Miscellaneous.
(a) This Agreement will be recorded in the Official Records of
Macomb County, Michigan and the City of Salem, Virginia. Upon the filing of this
Agreement, all necessary recording, intangible, or documentary stamp taxes will
be duly paid by the Borrower. THIS AGREEMENT IS BEING GIVEN AS ADDITIONAL
COLLATERAL TO SECURE THE OBLIGATIONS OF THE RESPECTIVE ENTITIES COMPRISING
BORROWER UNDER THEIR RESPECTIVE LOAN DOCUMENTS.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, administrators, successors and
assigns.
10. Controlling Law. This Agreement shall be governed by the laws of
the State of Maryland (without reference to conflicts of laws).
11. Release. Except for Lender's obligations, if any, to Borrower under
the Loan Documents, each entity comprising Borrower, on behalf of itself and its
partners, affiliates, successors and assigns (collectively, the "Releasing
Parties"), hereby releases and forever discharges Lender and each of its parent,
subsidiary and affiliated corporations and partnerships (including the partners
therein and thereof), and the partners, partners of partners, subsidiaries,
divisions, affiliates, officers, directors, shareholders, trustees, employees,
agents, attorneys and advisors of each of the foregoing, and each of their
respective heirs, successors and assigns (collectively, the "Released Parties",
all of whom are intended to be the beneficiaries of this release) from any and
all claims and causes of action of whatever kind and nature based upon acts or
omissions by any of them, whether such claims, causes of action, acts or
omissions are or were known or unknown, suspected or unsuspected, which the
Releasing Parties or any of them may have or have had, in whole or in part,
prior to the date of this Agreement.
8. WAIVER OF JURY TRIAL. EACH ENTITY COMPRISING BORROWER HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR
THE LOANS, OR (B) IN ANY WAY CONNECTED WITH OR PERTAINING OR RELATED TO OR
INCIDENTAL TO ANY DEALINGS OF LENDER AND/OR BORROWER WITH RESPECT TO THE LOAN
DOCUMENTS OR IN CONNECTION WITH THIS AGREEMENT OR THE EXERCISE OF ANY PARTY=S
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE, OR THE CONDUCT OR THE
RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH ENTITY COMPRISING BORROWER AGREES THAT LENDER MAY FILE A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY, AND
BARGAINED AGREEMENT OF BORROWER IRREVOCABLY TO WAIVE THEIR RIGHTS TO TRIAL BY
JURY, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR
CONTROVERSY WHATSOEVER (WHETHER OR NOT MODIFIED HEREIN) BETWEEN BORROWER AND
LENDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE
SITTING WITHOUT A JURY.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, each entity comprising Borrower has caused this
Agreement to be properly executed on the date of the notarial acknowledgments
below.
BORROWER:
WITNESS: PHC, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PHC OF MICHIGAN, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PHC OF UTAH, INC.
a Massachusetts corporation
T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PHC OF VIRGINIA, INC.
a Massachusetts corporation
T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
[SIGNATURES CONTINUED]
<PAGE>
WITNESS: PHC OF RHODE ISLAND, INC.
a Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
WITNESS: PIONEER COUNSELING OF VIRGINIA, INC. a
Massachusetts corporation
/s/ T. A. Bates
Name:
/s/ Barbara Faustino By: /s/ Bruce A. Shear
Name: Bruce A. Shear
President
LENDER:
HELLER HEALTHCARE FINANCE, INC.
a Delaware corporation
f/k/a HCFP Funding, Inc. and as assignee
of
WITNESS: HCFP Funding II, Inc.
--------------------------
Name:
__________________________ By: ______________________________
Name: Name:
Title:
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC, INC., a
Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF MICHIGAN, INC.,
a Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF _____________________)
COUNTY OF ___________________)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF UTAH, INC., a
Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF VIRGINIA, INC.,
a Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
1
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PHC OF RHODE ISLAND,
INC., a Massachusetts corporation, and acknowledged to me that he executed said
instrument for the purposes and consideration therein expressed, as the act of
said corporation.
Given under my hand and seal this ___ day of _______, 2000.
----------------------------------
Notary Public
My Commission Expires:______________
2
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the managing member of PIONEER COUNSELING OF
VIRGINIA, INC., a Massachusetts corporation, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed,
as the act of said corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
3
<PAGE>
NOTARY ACKNOWLEDGMENT
STATE OF MASSACHUSETTS)
COUNTY OF ESSEX)
Before me, a Notary Public in and for said County and State, on this day
personally appeared __________________ known to me (or proved to me on the oath
of ____________) to be the person whose name is subscribed to the foregoing
instrument, and known to me to be the of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation, and acknowledged to me that he executed said instrument
for the purposes and consideration therein expressed, as the act of said
corporation.
Given under my hand and seal this 3rd day of August, 2000.
/s/ Paula C. Wurts
Notary Public
My Commission Expires: November 29, 2002
4
<PAGE>
This Instrument prepared by, and upon recording should be returned to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis & Foster
1000 Michigan National Tower
Lansing, Michigan 48933
5
<PAGE>
