U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999.
| | 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.
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2601571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Lake Street, Suite 102, Peabody MA 01960
(Address of principal executive offices) (Zip Code)
978-536-2777
(Issuer's telephone number)
_______________________________________________________________________________
(Former Name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ______
Applicable only to corporate issuers
Number of shares outstanding of each class of common equity, as of January 31,
2000:
Class A Common Stock 5,760,438
Class B Common Stock 727,170
Transitional Small Business Disclosure Format
(Check one):
Yes______ No X
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PHC, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - December 31, 1999 and June 30,
1999.
Condensed Consolidated Statements of Operations - Three months ended
December 31, 1999 and December 31, 1998; Six months ended December 31,
1999 and December 31, 1998.
Condensed Consolidated Statements of Cash Flows - Six months ended
December 31, 1999 and December 31, 1998.
Notes to Condensed Consolidated Financial Statements - December 31,
1999.
Item 2. Management's Discussion and Analysis of Plan of Operation
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
Signatures
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PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
PHC INC. AND SUBSIDIARIES (UNAUDITED)
CONSOLIDATED BALANCE SHEETS
Dec. 31 June 30
1999 1999
___________ ________
ASSETS
Current assets:
Cash & Cash Equivalents $ 25,034 $ 381,170
Accounts receivable, net of allowance for bad
debts of $3,398,687 at Dec. 31, 1999,
$3,647,848 at June 30,1999 5,582,163 6,343,227
Prepaid expenses 177,949 101,865
Other receivables and advances 234,924 334,155
Deferred Income Tax Asset 459,280 459,280
Other Receivables, related party 77,245 53,517
__________ _________
Total current assets 6,556,595 7,673,214
Accounts Receivable, noncurrent 632,500 595,000
Other receivables, noncurrent, related party, net
of allowance for doubtful accounts of $948,533 at
Dec, 31, 1999 and $782,000 at June 30, 1999 2,987,338 2,908,113
Other Receivable 106,152 109,165
Property and equipment, net 1,425,081 1,483,319
Deferred income taxes 154,700 154,700
Deferred financing costs, net of amortization of
$73,395 at Dec. 31, 1999 and $64,041 at June 30,
1999 35,713 45,067
Goodwill, net of accumulated amortization of
$169,760 at Dec. 31, 1999 and $116,900 at June 30,
1999 1,708,215 1,761,075
Other assets 629,859 297,781
___________ ___________
Total assets $14,236,153 $15,027,434
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,812,022 $1,832,750
Notes payable--related parties 200,000 200,000
Current maturities of long term debt 795,170 1,286,318
Revolving credit note 1,047,867 1,669,830
Current portion of obligations under capital
leases 118,292 60,815
Accrued payroll, payroll taxes and benefits 314,505 333,955
Accrued expenses and other liabilities 1,357,556 1,459,290
Net current liabilities of discontinued operations 2,641,537 2,641,537
___________ ___________
Total current liabilities 8,286,949 9,484,495
___________ ___________
Long-term debt 2,614,409 1,730,230
Obligations under capital leases 159,193 51,657
Convertible debentures 500,000 500,000
___________ ___________
Total noncurrent liabilities 3,273,602 2,281,887
___________ ___________
Total liabilities 11,560,551 11,766,382
___________ ___________
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000
shares authorized, 781 and 813 shares
issued and outstanding Dec. 1999 and
June 1999 respectively. 8 8
Class A common stock, $.01 par value; 20,000,000
shares authorized, 5,749,642 and 5,612,930
shares issued Dec. 99 and June 99 respectively 57,496 56,129
Class B common stock, $.01 par value; 2,000,000
shares authorized, 727,170 and 727,210 issued
Dec. 99 and June 99 respectively, convertible
into one share of Class A common stock 7,272 7,272
Additional paid-in capital 16,074,670 15,967,176
Treasury stock, 2,776 shares at cost (12,122) (12,122)
Accumulated Deficit (13,451,722) (12,757,411)
___________ ____________
Total Stockholders' Equity 2,675,602 3,261,052
___________ ____________
Total Liabilities and Stockholders' Equity $14,236,153 $15,027,434
___________ ____________
See Notes to Consolidated Financial Statements
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PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
(as restated) (as restated)
___________________ ______________________
Revenues:
Patient Care, net $4,106,185 $4,315,192 $8,057,683 $8,791,930
Management Fees 227,831 197,389 493,235 396,842
Other 154,735 237,769 320,642 472,873
______________________ ______________________
Total revenue 4,488,751 4,750,350 8,871,560 9,661,645
______________________ ______________________
Operating expenses:
Patient care expenses 2,211,866 2,354,785 4,337,274 4,662,836
Cost of management
contracts 105,860 130,847 217,766 259,012
Provision for doubtful
accounts 630,036 788,130 1,068,388 1,144,320
Website Expenses 213,785 -- 347,840 --
Administrative expenses 1,848,759 1,911,648 3,477,268 3,817,565
______________________ ______________________
Total operating expenses 5,010,306 5,185,410 9,448,536 9,883,733
______________________ ______________________
Loss from operations (521,555) (435,060) (576,976) (222,088)
______________________ ______________________
Interest income 101,735 129,366 198,176 238,748
Other income 36,065 34,578 126,061 38,920
Interest expense (194,410) (460,122) (385,278) (772,434)
Facility Closing Costs -- (304,994) -- (304,994)
HRH Relocation Expense -- (36,935) -- (36,935)
______________________ ______________________
Total other income
(expense) (56,610) (638,107) (61,041) (836,695)
______________________ ______________________
Loss before Provision for
Taxes (578,165) (1,073,167) (638,017) (1,058,783)
Provision for Income Taxes -- -- 100 911
______________________ ______________________
Loss from Operations $(578,165)$(1,073,167) $(638,117) $(1,059,694)
______________________ ______________________
Dividends (43,733) (15,265) (56,196) (29,809)
______________________ ______________________
Loss applicable to common
shareholders $(621,898)$(1,088,432) $(694,313) $(1,089,503)
Basic and diluted (loss) per
common share $(0.09) $(0.19) $(0.11) $(0.19)
Basic and diluted weighted
average number of shares
outstanding 6,380,958 5,896,659 6,359,254 5,778,239
See Notes to Consolidated Financial Statements
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PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended
December 31
1999 1998
(as restated)
___________________________
Cash flows from operating activities:
Net (loss) $(638,117) $(1,059,694)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 163,444 161,421
Compensatory stock options and stock and warrants
issued for obligations 67,797 143,738
Changes in:
Accounts Receivable 722,855 519,722
Prepaid expenses and other current assets (76,084) (179,597)
Other assets (332,078) (14,760)
Accounts payable (20,728) 447,358
Accrued expenses and other liabilities (121,184) (321,564)
__________ ___________
Net cash used in operating activities (234,095) (303,376)
__________ ___________
Cash flows from investing activities:
Acquisition of property and equipment (53,313) (123,227)
Disposition of property, equipment and
intangibles -- 341,929
__________ ___________
Net cash provided by (used in) investing activities (53,313) 218,702
__________ ___________
Cash flows from financing activities:
Revolving debt, net (621,963) (56,871)
Net debt activity 558,044 (35,509)
Deferred financing costs -- (7,202)
Preferred stock dividends paid (4,809) (30,020)
Convertible debt -- 500,000
__________ ___________
Net cash provided by (used in) financing activities (68,728) 370,398
__________ ___________
NET INCREASE (DECREASE) IN CASH (356,136) 285,724
Beginning cash balance 381,170 227,077
ENDING CASH BALANCE 25,034 512,801
__________ ___________
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $400,278 $562,046
Income taxes 35,500 51,195
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of Preferred Stock to Common Stock $50,000 $40,000
Issuance of Preferred Stock in lieu of cash
for Dividends due $18,000 $33,000
Issuance of Common Stock in lieu of cash for
Dividends due $33,386 $0
See Notes to Consolidated Financial Statements
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PHC, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
December 31, 1999
Note A - The Company
PHC, Inc. (the "Company") is a national health care company specializing in
the treatment of substance abuse, which includes alcohol and drug dependency and
related disorders, and in the provision of psychiatric services. The Company
currently operates two substance abuse treatment facilities: Highland Ridge
Hospital, located in Salt Lake City, Utah; and Mount Regis Center, located in
Salem, Virginia, near Roanoke and eight psychiatric facilities: Harbor Oaks
Hospital, a 64-bed psychiatric hospital located in New Baltimore, Michigan;
Harmony Healthcare, a provider of outpatient behavioral health services at two
locations in Las Vegas, Nevada; Total Concept EAP, a provider of outpatient
behavioral health services in Shawnee Mission, Kansas; and North Point-Pioneer,
Inc. ("NPP") which operates four outpatient behavioral health centers under the
name Pioneer Counseling Center in the greater Detroit metropolitan area. The
Company also operates BSC-NY, Inc., which provides management and administrative
services to psychotherapy and psychological practices in the greater New York
City metropolitan area. Through its subsidiary, Behavioral Health Online, Inc.,
("BHO"), the Company operates its web site, Behavioralhealthonline.com, which
offers behavioral health education, training and products for the behavioral
health professional.
In June, 1998 the Company's sub acute long-term care facility, Franvale
Nursing and Rehabilitation Center, in Braintree, Massachusetts was closed in a
state receivership action which was precipitated when the Company caused the
owner of the Franvale facility, Quality Care Centers of Massachusetts, Inc., to
institute a proceeding under Chapter 11 of the Federal Bankruptcy Code. The net
assets and liabilities of this facility are shown as discontinued operations in
the accompanying financial statements. The liquidation of the assets and
liabilities of Franvale may result in a non-cash financial statement gain. The
recognition of any gain has been deferred until final resolution of all
contingent liabilities.
Note B - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months ended December 31, 1999
are not necessarily indicative of the results that may be expected for the year
ending June 30, 2000. The accompanying financial statements should be read in
conjunction with the June 30, 1999 consolidated financial statements and
footnotes thereto included in the Company's 10-KSB filed on October 13, 1999 as
amended on October 20, 1999 and November 29, 1999.
NOTE C - Restatement of December 31, 1998 financial information
In December 1998 the Company issued $500,000 in convertible debentures
together with 25,000 warrants and 105,000 warrants in lieu of cash for
professional fees. In error the value of these warrants was not charged as an
expense during the period. The Company has amended the December 31, 1998
financial information to reflect the Black-Scholes value of these warrants as
additional expense of $69,357.
During the December 31, 1998 quarter the Company issued shares to the
former owners of BSC in a price guarantee agreement. The value of these shares
was incorrectly recorded as acquisition price at the time of issuance. The
Company has amended the December 31, 1998 financial information to expense
approximately $92,000 in increased expenses related to this transaction.
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The Company also amended the December 31, 1998 financial information to
reverse the recognition of part of the gain related to the liquidation of assets
of Quality Care Centers of Massachusetts, Inc. having determined that it was
more appropriate to defer recognition of any gain until final resolution of all
contingent liabilities. The accompanying balance sheet includes approximately
$2,600,000 in current liabilities and $530,000 in deferred expenses related to
the closing of the Quality Care Centers of Massachusetts facility, Franvale. The
deferred expenses are from various litigations brought against the subsidiary,
which except for the Massachusetts litigation, have been settled and related
legal costs. The Company anticipates that the final case pending, which was
filed by the State of Massachusetts, will result in additional costs of less
than the reserves available when all cases are settled. Based on existing facts
and conditions we anticipate that the elimination of this liability will result
in a non-cash gain and a substantial increase in net worth. (See "Part II, Item
1, Legal Proceedings" for details regarding the case filed by the State of
Massachusetts)
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Item 2. Management's Discussion and Analysis or Plan of Operation
PHC, INC. and Subsidiaries
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
During the quarter ended December 31, 1999, we experienced a loss from
operations of $578,165. Of this loss $217,225 is attributable to the start-up
operations of Behavioralhealthonline.com and the additional $360,940 is due to
the seasonal decline in census in our inpatient facilities. Seasonal decline is
attributable to the number of holidays in the quarter ending in December and our
patient's reluctance to be away from home during these holidays.
Net patient care revenue decreased 4.8% to $4,106,185 for the three months
ended December 31, 1999 from $4,315,192 for the three months ended December 31,
1998 and 8.4% to $8,057,683 for the six months ended December 31, 1999 from
$8,791,930 for the six months ended December 31, 1998. This decrease in revenue
is primarily due to the closing of the Virginia outpatient operations, the
seasonal decline in census in our inpatient facilities as referred to above and
a change in payor mix at our Utah facility. The trend of lower census has been
reversed in the current quarter. Our census for the month of January 2000 is
higher than the census for January 1999 and reflects an increase of
approximately 45% over the census for December 1999. This higher census has
continued into February and we expect will result in increased profitability.
Patient care expenses decreased 6.1% to $2,211,866 for the three months
ended December 31, 1999 from $2,354,785 for the three months ended December 31,
1998 and 7.0% to $4,337,274 for the six months ended December 31, 1999 from
$4,662,836 for the six months ended December 31, 1998. This decrease in expenses
is a result of the closing of the Virginia clinics, continued operational
changes at all subsidiaries and expected decreases related to the decline in
revenues. Administrative expenses decreased 3.3% to $1,848,759 for the three
months ended December 31, 1999 from $1,911,648 for the three months ended
December 31, 1998 and 8.9% to $3,477,268 for the six months ended December 31,
1999 from $3,817,565 for the six months ended December 31, 1998. Administrative
expense decreases were primarily a result of the closing of the Virginia
clinics. This current level of administrative expenses is expected to be the new
normal level since the results of the streamlining of operations has been fully
affected.
Website expenses include all costs relevant to the development and the
operations of the Behavioralhealthonline.com website. These expenses are
expected to continue to increase while the site is in development stages. The
site is not expected to produce revenues until the final quarter of fiscal 2000.
We are currently pursuing equity financing for the site development.
We continue to view receivables most conservatively by maintaining the
ratio of reserves for bad debt to receivables at approximately 35%. This amount
is based on the current age of accounts receivable and is expected to decrease
as our more aggressive collection practices decrease the number of days our
patient receivables remain unpaid.
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Liquidity and Capital Resources
A significant factor in the liquidity and cash flow of the Company is the
timely collection of its accounts receivable. Net accounts receivable from
patient care decreased during the six months ended December 31, 1999 by 10.4%,
approximately $720,000. This is a result of increased collection activity and
more aggressive bad debt write offs. The Company continues to closely monitor
its accounts receivable balances and is working to reduce amounts due consistent
with growth in revenues.
During the quarter ended December 31, 1999 the Company met its cash flow
needs through ongoing accounts receivable financing and through debt and equity
transactions as follows:
NUMBER
TRANSACTION OF MATURITY
DATE TYPE SHARES PROCEEDS DATE TERMS STATUS
_______________________________________________________________________________
10/99 Warrants issued 37,500 0 07/05/2004 exercise outstanding
for investment price
banking services $1.45
including
assisting in
identifying
potential equity
investors for
Behavioral Health
Online, Inc.
11/99 Revolving term 0 $979,000 11/30/2001 prime plus outstanding
Note maximum ($579,000 5% annual
advance paid interest rate
$1,000,000. off plus 1%
Secured by a existing annual
Restated debtand commitment
Mortgage on the $400,000 fee
Michigan advanced
property and for
Guarantees of working
the Parent capital)
Company and its
Chief Executive
Officer.
We utilize our accounts receivable funding facilities to the maximum extent
available to meet current cash needs and sustain existing operations. Although
our existing operations are operating at a profit expenses incurred by our
non-revenue producing start-up Company, Behavioral Health Online, Inc., cause
negative cash flow from operations and create the need for additional financing.
We are currently aggressively pursuing financing for our website operations to
help relieve the strain on cash flow from our behavioral health facilities. If
financing for our website operations does not become available in the near
future or should our existing operations result in unanticipated losses, we may
be required to borrow funds on less favorable terms then have been available in
the past.
Year 2000 Compliance
The required modifications to the Company's billing and receivable software
were completed in a timely manner to preclude major problems with the change
over to the eight-digit date on January 1, 2000. Some minor problems arose in
the area of reporting, which were immediately corrected without any major delays
in work progress.
We did not experience any stoppage or delays in receipt of essential
products nor were there any year 2000 equipment problems or utility service
interruptions.
In our efforts to protect against any adverse situations arising from the
change over to the year 2000, the Company expended approximately $55,000.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
As a consequence of Franvale's bankruptcy and subsequent receivership, a
number of claims were asserted against the Company all of which have been
resolved except the following:
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.
Preliminary negotiations between the Company and the State are under way.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on December 23, 1999.
In addition to the election of directors (with regards to which (I) proxies were
solicited pursuant to Regulation 14A under the Securities and Exchange Act of
1934, as amended, (II) there was no solicitation in opposition to the
management's nominees as listed on the proxy statement, and (III) all of such
nominees were elected), the stockholders ratified the selection by the Board of
Directors of BDO Seidman, LLP as the Company's independent auditors for the
fiscal year ending June 30, 2000.
Item 6. Exhibits
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).
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Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHC, Inc.
Registrant
Date: February 14, 2000 /s/ Bruce A. Shear
Bruce A. Shear
President
Chief Executive Officer
Date: February 14, 2000 /s/ Paula C. Wurts
Paula C. Wurts
Controller
Assistant Treasurer
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Exhibit Index Description
27 Financial Data Schedule
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).
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Exhibit 10.69
Heller Financial, Inc.
2 Wisconsin Circle, Fourth Floor
Chevy Chase, Maryland 20815
301,961.1640
HELLER FINANCIAL
November _____, 1999
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Attention: Bruce A. Shear, President
RE: FINANCING ARRANGEMENTS BETWEEN PHC, INC. AND
HELLER HEALTHCARE FINANCE, INC.
Dear Mr. Shear:
Heller Healthcare Finance, Inc. ("LENDER") is currently a party to several
financing arrangements with PHC, Inc. ("PHC") and its affiliates, PHC of
Michigan, Inc. ("PHCM"), PHC of Rhode Island, Inc., PHC of Utah, Inc., PHC of
Virginia, Inc. and Pioneer Counseling of Virginia, Inc. (collectively with PHCM,
"PHC BORROWERS"):
o Revolving Credit Loan in the aggregate principal amount of
$4,000,000, made pursuant to a Loan and Security Agreement
made by and among PHC Borrowers and Lender, dated as of
February 20, 1998 (the "PHC LOAN AGREEMENT")
o Secured Term Loan in the original aggregate principal amount
of $1,100,000 made pursuant to a Secured Term Note made by
PHCM in favor of Lender's predecessor-in-interest, dated as of
March 12, 1997 (the "MARCH TERM NOTE")
o Secured Term Loan in the original aggregate principal amount
of $500,000 made pursuant to a Secured Term Note made by PHCM
in favor of Lender's predecessor-in-interest, dated as of
December 9, 1997 (the "DECEMBER TERM NOTE")
Lender currently expects to make an additional Secured Term Loan to PHCM in
the original aggregate principal amount of $1,000,000 (the "NEW TERM LOAN")
pursuant to a Secured Term Note to be made by PHCM in favor of Lender and dated
as of even date with this Letter Agreement (the "NEW TERM NOTE").
H:\WP\LEGAL\CLIENTSPHCMICH\Nov99\LetterAgreement.wpd
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PHC, Inc.
November ____, 1999
Page 2
It is a condition, among others, to Lender's making the New Term Loan and
accepting the New Term Note that each of PHC, PHCM and the other PHC Borrowers
agree that
1. An Event of Default under the New Term Note, the related Restated
Mortgage or any other document related to the New Term Note or the New
Term Loan shall be an Event of Default under each of the PHC Loan
Agreement, the March Term Note and the December Term Note.
2. Each of the PHC Loan Agreement, the March Term Note and the December
Term Note shall be deemed to be amended by this Letter Agreement to
reflect the provisions of paragraph 1 above.
3. This Letter Agreement shall be deemed to be a Loan Document under each
of the PHC Loan Agreement, the March Term Note, the December Term Note
and the New Term Note.
If the foregoing is acceptable, please sign this Letter Agreement where
indicated and return it to the undersigned.
Very truly yours,
HELLER HEALTHCARE FINANCE, INC.
By: __________________________
Name:
Title:
THE FOREGOING IS AGREED AS OF THIS ________ DAY OF NOVEMBER, 1999:
PHC, INC.
By: /s/ Bruce A. Shear
President
[SIGNATURES CONTINUE]
H:\WP\LEGAL\CLIENTSPHCMICH\Nov99\LetterAgreement.wpd
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PHC, Inc.
November ____, 1999
Page 3
PHC OF MICHIGAN, INC.
By: /s/ Bruce A. Shear
President
PHC OF RHODE ISLAND, INC.
By: /s/ Bruce A. Shear
President
PHC OF UTAH, INC.
By: /s/ Bruce A. Shear
President
PHC OF VIRGINIA, INC.
By: /s/ Bruce A. Shear
President
PIONEER COUNSELING OF
VIRGINIA, INC.
By: /s/ Bruce A. Shear
President
H:\WP\LEGAL\CLIENTSPHCMICH\Nov99\LetterAgreement.wpd
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RESTATED MORTGAGE
$2,100,000.00
MORTGAGOR: PHC OF MICHIGAN, INC.
MORTGAGEE: HELLER HEALTHCARE FINANCE, INC.
November _______, 1999
Prepared by and after recording, return to:
Stephen L. Burlingame, Esq.
Fraser Trebilcock Davis & Foster, P.C.
1000 Michigan National Tower
Lansing, MI 48933
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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 01 960, 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".
RECITALS
A. This Mortgage amends and restates in its entirety that certain Mortgage made
by Mortgagor in favor of HealthCare Financial Partners-Funding 11, L.P. as the
original mortgagee ("ORIGINAL MORTGAGEE"), which was recorded in the official
records of the Macomb County, Michigan registrar of deeds at Liber 07442 Page
175 on May 5, 1997 (the "ORIGINAL MORTGAGE"). The Original Mortgage secures the
obligations of Mortgagor under that certain Secured Term Note in the original
principal amount of One Million One Hundred Thousand and No/100 Dollars
($1,100,000) made by Mortgagor in favor of Original Mortgagee and dated March
12, 1997 (the "MARCH TERM NOTE"). The March Term Note is still outstanding.
B. On September 22, 1997, Original Mortgagee assigned the Original Mortgage to
HCFP Funding 11, Inc., the successor-in-interest to Original Mortgagee
("SUCCESSOR"), which assignment is evidenced by an Assignment of Mortgage dated
as of September 22, 1997 (the "ASSIGNMENT"), and which Assignment has been
submitted for recording in the official records of the Macomb County, Michigan
registrar of deeds, and assigned the March Term Note to Successor, which
assignment is evidenced by an Allonge to Note dated as of September 22, 1997.
C. On July 31, 1999, Successor assigned the Original Mortgage to Mortgagee,
which assignment is evidenced by an Assignment of Mortgage dated as of November
____, 1999 (the "SECOND ASSIGNMENT"), and which Second Assignment has been
submitted for recording in the official records of the Macomb County, Michigan
registrar of deeds, and assigned the March Term Note to Mortgagee, which
assignment is evidenced by an Allonge to Note dated as of July 31, 1999.
Mortgagee is the current holder of the March Term Note.
D. Mortgagor is executing a Secured Term Note in favor of Mortgagee dated as of
even date with this Mortgage in an original principal amount of One Million and
No/100 Dollars ($ 1,000,000.00) (the "NOVEMBER TERM NOTE" and collectively with
the March Term Note, the "TERM NOTES"). Mortgagee requires that the obligations
of Mortgagor under the November Term Note be secured by the premises (as defined
below) and Mortgagor has agreed to execute this Mortgage to evidence Mortgagee's
security interest.
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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 November Term Note;
(c) payment by Mortgagor to Mortgagee of all sums expended or advanced by
Mortgagee pursuant to any term or provision of this Mortgage;
(d) 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;
(e) 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 Ten-n 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.
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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 $2,000,000, and
against property damage, with a coverage limit of at least $2,000,000,
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.
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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.
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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 IS I (MCLA 554.231 et seq., MSA
26.1137(l) 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.
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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.
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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 of 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) by Mortgagor for the benefit of creditors or a written admission by
Mortgagor of the inability to pay debts generally as they become due;
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(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.
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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.
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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 ten-ns 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.
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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]
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<PAGE>
Signed on the date set forth above.
MORTGAGOR:
WITNESSES: PHC OF MICHIGAN, INC.,
a Massachusetts corporation
/s/ T. Bates By: /s/ Bruce A. Shear
President
______________________________
Name:
ACKNOWLEDGMENT
STATE OF MASSACHUSETTS }
COUNTY OF ESSEX }
The foregoing instrument was acknowledged before me on November 22, 1999,
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
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<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
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<PAGE>
SECURED TERM NOTE
$1,000,000.00
NOVEMBER _______, 1999
FOR VALUE RECEIVED, and intendig to be legally bound, the undersigned,
PHC OF MICHIGAN, INC., a Massachusetts corporation ("BORROWER"), promises to
pay, in lawful money of the United States, to the order of HELLER HEALTHCARE
FINANCE, INC., a Delaware corporation, its successors and assigns ("LENDER"),
the principal sum of ONE MILLION AND 00/100 DOLLARS ($1,000,000.00) (the
"PRINCIPAL SUM") together with interest, costs of collection and other fees as
further set forth in this Secured Term Note (the "NOTE"), to be paid in
accordance with the terms set forth below (the "LOAN"). The Principal Sum may be
advanced and re-advanced from time to time on or after the date of this Note in
periodic advances (each, an "ADVANCE ") so long as the total amount of
outstanding Advances does not exceed the Available Funding (as defined in
Section I (c) below).
1. PRINCIPAL AND INTEREST.
a. Beginning November 30, 2000, and on the last day of each month
thereafter through and including September 30, 2001, Borrower promises to
pay to Lender the Principal Sum by making a monthly installment payment
equal to the amount necessary to ensure that the outstanding Principal Sum
does not exceed the Available Funding, and by making a final balloon
payment of all outstanding unpaid Principal Sum, interest, fees and charges
on October 31, 2001 (the "MATURITY DATE"). Borrower may make additional
payments of principal from time to time during the term, which payments,
subject to subsection (c) below, will pen-nit additional advances to be
made under this Note. The term of this Note shall not be further extended
unless the term of the Loan and Security Agreement dated as of February 20,
1998 by and among Borrower, PHC of Utah, Inc., PHC of Virginia, Inc., PHC
of Rhode Island, Inc. and Pioneer Counseling of Virginia, Inc. and Lender,
pursuant to which Borrower and Lender have entered into a revolving credit
arrangement in a principal amount not to exceed $4,000,000.00 (as the
agreement has been or may be amended, modified or restated from time to
time, the ("LOAN AGREEMENT"), is further extended to the same date.
b. In addition to repayment of the Principal Sum, Borrower promises to
pay to Lender interest on the Principal Sum on a monthly basis from the
date of this Note until the Maturity Date. Interest shall be at a
fluctuating rate per annum compounded daily (on the basis of the actual
number of days elapsed over a year of 360 days) equal to the Prime Rate
plus five percent (Prime plus 5.0%) (the "BASE RATE"), provided that after
an Event of Default such rate shall be equal to the Base Rate plus five
percent (5%) (the "DEFAULT INTEREST RATE"). For purposes of the foregoing,
the term "PRIME RATE" means that rate of interest designated as such by
Citibank, N.A. (the "BANK "), or any successor to the Bank, as the rate may
from time to time fluctuate. If the Bank ceases to designate such a base
lending rate, Lender shall reasonably select an alternate, nationally
recognized commercial bank as the designator
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<PAGE>
such interest rate. Accrued interest shall be payable monthly in arrears on
the last Business Day (as defined below) of each month from the date of
this Note through and including the Maturity Date. After maturity, and
until the entire Principal Sum plus any other amount due and unpaid shall
be paid in full, without limiting any of Lender's other rights and
remedies, all outstanding amounts of the Principal Sum shall bear interest,
payable on demand, at the Default Interest Rate, but in no event shall the
interest payable exceed the maximum lawful rate.
c. The maximum amount available for Advances of the Principal Sum (the
"AVAILABLE FUNDING") shall be equal to the Principal Sum through November
30, 2000, and shall then be reduced by Ten Thousand and No/100 Dollars
($10,000.00) on the first Business Day of each month beginning on December
1, 2000 and continuing through the Maturity Date.
d. Repayment of Borrower's obligations under this Note is secured by,
among other things, the Collateral defined and described in Section 7 of
this Note.
2. FEES.
a. In consideration for the extension of credit by Lender as evidenced
by this Note, Borrower shall pay to Lender a Commitment Fee in the amount
of Ten Thousand and No/100 Dollars ($10,000.00), which Commitment Fee shall
be paid to Lender through a deduction from the Initial Advance (as defined
in Section 4(a) below).
b. Borrower acknowledges and agrees that the financing provided by
Lender pursuant to this Note is essential to Borrower in continuing to
finance its operations. Accordingly, in consideration thereof and as a
material inducement to Lender to make the original advance under the Loan
and to continue making advances under the Loan, Borrower shall pay to
Lender an annual financing fee (the "FINANCING FEE") equal to Ten Thousand
and No/ I 00 Dollars ($10,000.00). The Financing Fee shall be due and
payable on November 1 of each year during the term of this Note.
3. ADDITIONAL PAYMENTS. Borrower further promises to pay to Lender,
immediately upon demand any and all other sums and charges that may at the time
become due and payable under this Note, and all reasonable costs and
disbursements in connection with the preparation of this Note, and in the
collection of any payments due under this Note and in any action, suit or
proceeding to protect, sustain or enforce the rights and remedies of Lender
under this Note.
4. CONDITIONS TO BORROWING. PREPAYMENT.
a. Subject to the terms and conditions of this Note, Lender shall make
available to Borrower the initial advance of the Principal Sum (the
"INITIAL ADVANCE") in immediately available funds not later than 12:00 Noon
(Maryland time) on the Business Day on which the following conditions
precedent are satisfied:
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<PAGE>
(i) Borrower shall have executed and delivered to Lender, or
caused to be executed and delivered to Lender, the following documents
(collectively, the "INITIAL LOAN DOCUMENTS"):
(A) This Note;
(B) That certain Unconditional Guaranty of Payment and
Performance made by PHC, Inc. in favor of Lender (the "PHC
GUARANTY");
(C) That certain Secured Unconditional Guaranty of Payment
and Performance made by BSC-NY, Inc. in favor of Lender (the "BSC
GUARANTY");
(D) That certain Unconditional Guaranty of Payment and
Performance made by Bruce A. Shear in favor of Lender (the "SHEAR
GUARANTY" and collectively with the PHC Guaranty and the BSC
Guaranty, the "GUARANTIES");
(E) That certain Restated Mortgage made by Borrower as
mortgagor and Lender as mortgagee (the "RESTATED MORTGAGE")
covering the real property commonly known as 35031 23 Mile Road,
New Baltimore, Michigan 48047, which is more particularly
described on Exhibit "A" to this Note; and
(F) All financing statements and other documents,
certificates and agreements reasonably deemed necessary or
appropriate by Lender to effectuate the transaction;
(ii) All representations, warranties and covenants
contained in this Note or otherwise made in writing in
connection with this Note or the other Initial Loan
Documents by or on behalf of Borrower shall be true and
correct in all material respects, and no Event of Default
shall have occurred or be continuing under this Note or any
other Initial Loan Documents;
(iii) All representations, warranties and covenants
contained in the Loan Agreement or otherwise made in writing
in documents entered into or executed in connection with the
Loan Agreement (collectively with the Loan Agreement, the
"REVOLVING LOAN DOCUMENTS"), by or on behalf of Borrower
shall be true and correct in all material respects, and no
Event of Default shall have occurred and be continuing under
the Loan Agreement or the Revolving Loan Documents;
(iv) All representations, warranties and covenants
contained in that certain Secured Term Note in the original
principal amount of $1,l 00,000 made by Borrower in favor of
HealthCare Financial Partners-Funding II, L.P. as to which
Lender is the successor-in-interest and dated March 12, 1997
(as it has been or may be amended, restated, modified or
replaced from time to time, the "MARCH TERM NOTE") or
otherwise made in writing in documents entered into or
executed in connection with the March Term Note
(collectively with the March Term Note, the "MARCH LOAN
DOCUMENTS"), by or on behalf of Borrower shall be true and
correct in all material respects, and no Event of Default
shall have occurred and be continuing under the March Term
Note or the March Loan Documents;
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<PAGE>
(v) All representations, warranties and covenants
contained in that certain Secured Term Note in the original
principal amount of $500,000.00 made by Borrower in favor of
HCFP Funding 11, Inc. and dated as of December 9, 1997 (as
it has been or may be amended, restated, modified or
replaced from time to time, the "DECEMBER TERM NOTE"), which
December Term Note was assigned by HCFP Funding II, Inc. to
Lender by an Assignment dated July 31, 1999, or otherwise
made in writing in documents entered into or executed in
connection with the December Term Note (collectively with
the December Term Note, the "DECEMBER LOAN DOCUMENTS"), by
or on behalf of Borrower shall be true and correct in all
material respects, and no Event of Default shall have
occurred and be continuing under the December Term Note or
the December Loan Documents (the Revolving Loan Documents,
the March Loan Documents and the December Loan Documents are
sometimes collectively referred to as the "EXISTING LOAN
DOCUMENTS");
(vi) Lender shall have received amendments to the Loan
Agreement, the March Term Note and the December Term Note,
respectively, containing appropriate cross default
provisions; and
(vii) Lender shall have received Uniform Commercial
Code ("UCC") judgment and tax lien searches with the
Secretary of State and local filing offices of each
jurisdiction where Borrower maintains a place of business,
which searches yield results consistent with the
representations and warranties contained in this Note.
b. Subject to the terms and conditions of this Note, Lender shall
make available to Borrower additional Advances of the Principal Sum in
immediately available funds not later than 12:00 Noon (Maryland time)
on the Business Day on which the following conditions precedent are
satisfied:
(i) Borrower shall have executed and delivered, or caused to
be executed and delivered, to Lender, the following documents
(collectively with the Initial Loan Documents, the "LOAN
DOCUMENTS"):
(A) A Borrowing Base certified by the President or Chief Financial Officer
of Borrower (which shall be delivered at least one (1) Business Day prior to the
requested date of the Advance), which reflects that the total principal to be
outstanding under this Note after the Advance does not exceed the Available
Funding;
(B) All documents, certificates and agreements reasonably deemed necessary
or appropriate by Lender to effectuate the transaction.
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<PAGE>
(ii) All representations, warranties and covenants contained
in this Note or otherwise made in writing in connection with this
Note or the other Initial Loan Documents by or on behalf of
Borrower shall be true and correct in all material respects, and
no Event of Default shall have occurred or be continuing under
this Note or any other Loan Documents;
(iii) All representations, warranties and covenants
contained in the Existing Loan Documents by or on behalf of
Borrower shall be true and correct in all material respects, and
no Event of Default shall have occurred or be continuing under
any of the Existing Loan Documents;
c. Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Advance by wire transfer to such bank account as may be
designated by Borrower from time to time or elsewhere if pursuant to
written direction from Borrower.
d. Lender shall enter all Advances as debits to a loan account in the
name of Borrower and shall also record as credits in the loan account all
payments made by Borrower and all proceeds of Collateral that are
indefeasibly paid to Lender, and may record in the loan account, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to
Borrower, with respect to the extension of credit contemplated by this
Note.
e. Lender will account to Borrower monthly with a statement of
Advances, charges and payments made pursuant to this Note, and the account
rendered by Lender shall be deemed final, binding and conclusive upon
Borrower absent manifest error.
f. All outstanding principal, interest, fees and other amounts due
under this Note shall be prepaid in full simultaneously with repayment of
all Obligations under the Loan Agreement and/or the termination of the Loan
Agreement.
g. Borrower may prepay all or any part of the Principal Sum
outstanding (inclusive of the Commitment Fee and all unpaid Financing Fees
if the Principal Sum is repaid in full) without penalty, together with all
interest accrued on the Principal Sum and all other sums that are payable
pursuant to this Note.
5. PAYMENT OFFICE. The Principal Sum, the interest on the Principal Sum,
and any other amounts payable under this Note are payable in lawful money of the
United States of America at the office of Lender, 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 specify in writing to Borrower.
Any payment by other than immediately available funds shall be subject to
collection. Interest shall continue to accrue until the funds by which payment
is made are available to Lender for its use. Any payment stated to be due on a
day on which banks in Maryland are required or permitted to be closed for
business shall be due and payable on the next business day (each such day, a
"BUSINESS Day") and such extension of time shall be included in the computation
of interest in connection with such payment.
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<PAGE>
6. NO PRESENTMENT: ACCELERATION. On the Maturity Date or upon the
occurrence of an Event of Default (as defined in Section 11 below), the
outstanding Principal Sum, accrued and unpaid interest on the Principal Sum, and
all other sums owed by Borrower to Lender in connection with this Note or the
other Loan Documents shall immediately become due and payable. Borrower hereby
expressly waives any presentment for payment, demand for payment, notice of
nonpayment or dishonor, protest and notice of protest of any kind.
7. SECURITY AGREEMENT.
a. This Note shall constitute a security agreement as that term is
used in the UCC and Borrower hereby grants to Lender, to secure Borrower's
obligations under this Note and the other Loan Documents, and under the
Loan Agreement and the Revolving Loan Documents, a security interest in the
following (collectively, the "COLLATERAL"):
(i) All of Borrower's now-owned and hereafter acquired or arising
accounts, contract rights, general intangibles, chattel paper,
documents and instruments, as such terms are defined in the UCC,
including, without limitation, all obligations for the payment of
money arising out of Borrower's sale of goods or rendition of services
("ACCOUNTS"), accounts receivable and rights to payment of every kind
and description, and all of Borrower's contract rights, chattel paper,
documents and instruments with respect thereto, and all of Borrower'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 ("ACCOUNT DEBTOR") means any person obligated on
any Account of Borrower, including without limitation, any Insurer and
any Medicaid/Medicare payor);
(ii) All moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, in transit to, in
possession of, or under the control of Lender or a bailee or Affiliate
of Lender, from or for Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of Borrower's
deposits (general or special), balances, sums and credits with Lender
at any time existing ("AFFILIATE") means with respect to a specified
person, any person directly or indirectly controlling, controlled by,
or under common control with the specified person, including without
limitation its stockholders and any affiliates. A person shall be
deemed to control a corporation if the person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and business of the corporation whether through the
ownership of voting securities, by contract, or otherwise);
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<PAGE>
(iii) All of Borrower'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;
(iv) All of Borrower's now or hereafter acquired deposit accounts
into which Accounts are deposited, including the Lockbox Account
("LOCKBOX ACCOUNT") means an account maintained by Borrower at Bank
One Arizona, N.A. (or a successor financial institution), into which
all collections of Accounts are paid directly);
(v) All of Borrower's now owned and hereafter acquired or arising
general intangibles and other property of every kind and description
with respect to, evidencing or relating to its Accounts, accounts
receivable and other rights to payment, including, but not limited to,
all existing and future customer lists, choses in action, claims,
books, records, ledger cards, contracts, licenses, formulae, tax and
other types of refunds, returned and unearned insurance premiums,
rights and claims under insurance policies, and computer programs,
information, software, records, and data, as the same relates to the
Accounts;
(vi) All of Borrower's other general intangibles (including,
without limitation, any proceeds from insurance policies after payment
of prior interests), patents, unpatented inventions, trade secrets,
copyrights, contract rights, goodwill, literary rights, rights to
performance, rights under licenses, choses-in-action, claims,
information contained in computer media (such as data bases, source
and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill
associated therewith) and derivatives thereof, trade names, including
the right to make, use, and vend goods utilizing any of the foregoing,
and permits, licenses, certifications, authorizations and approvals,
and the rights of Borrower thereunder, issued by any governmental,
regulatory, or private authority, agency, or entity whether now owned
or hereafter acquired, together with all cash and non-cash proceeds
and products thereof,
(vii) All of Borrower's now owned or hereafter acquired inventory
of every description which is held by Borrower for sale or lease or is
furnished by Borrower under any contract of service or is held by
Borrower as raw materials, work in process or materials used or
consumed in a business, wherever located, and as the same may now and
hereafter from time to time be constituted, together with all cash and
non-cash proceeds and products thereof;
(viii) All of Borrower's now owned or hereafter acquired
machinery, equipment, computer equipment, tools, tooling, furniture,
fixtures, goods, supplies, materials, work in process, whether now
owned or hereafter acquired, together with all additions, parts,
fittings, accessories, special tools, attachments, and accessions now
and hereafter affixed thereto and/or used in connection therewith, all
replacements thereof and substitutions therefor, and all cash and
non-cash proceeds and products thereof,
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<PAGE>
(ix) The Real Property; and
(x) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
b. Upon the occurrence of an Event of Default under this Note or the other
Loan Documents, or an Event of Default under any of the Existing Loan Documents,
Lender, in addition to all other rights, options, and remedies granted to Lender
under this Note or at law or in equity, may take any of the following steps:
(i) Declare the Loan to be immediately due and payable;
(ii) Exercise all other rights granted to it under this Note and
all rights under the UCC in effect in the applicable jurisdiction(s)
and under any other applicable law; and
(iii) Exercise all rights and remedies under all Loan Documents
or Existing Loan Documents now or hereafter in effect, including but
not limited to:
(A) The right to take possession of, send notices regarding, and collect
directly the Collateral, with or without judicial process;
(B) The right to (by its own means or with judicial assistance) enter any
of Borrower's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on such premises in compliance with
subsection (c) below, without any liability for rent, storage, utilities, or
other sums, and Borrower shall not resist or interfere with such action; and
(C) The right to require Borrower at Borrower's expense to assemble all or
any part of the Collateral and make it available to Lender at any place
designated by Lender.
c. Borrower agrees that a notice received by it at least five (5) days
before the time of any intended public sale, or the time after which any private
sale or other disposition of the Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral that threatens to decline rapidly in value or
that is sold on a recognized market may be sold immediately by Lender without
prior notice to Borrower. At any sale or disposition of Collateral, Lender may
(to the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is hereby
waived and released. Borrower covenants and agrees not to interfere with or
impose any obstacle to Lender's exercise of its rights and remedies with respect
to the Collateral following an Event of Default.
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<PAGE>
d. Lender shall have the right to proceed against all or any portion of the
Collateral to satisfy in any order (i) the liabilities and obligations of
Borrower to Lender under this Note and the other Loan Documents or (ii) upon the
occurrence of an Event of Default under any of the Existing Loan Documents, the
liabilities and obligations of Borrower under the Existing Loan Documents. All
rights and remedies granted Lender under this Note or under any of the other
Loan Documents, or otherwise available at law or in equity, shall be deemed
concurrent and cumulative, and not alternative remedies, and Lender may proceed
with any number of remedies at the same time until the Principal Sum, all
interest, costs, expenses and other charges due under, and all other existing
and future liabilities and obligations of Borrower to Lender under, this Note
are satisfied in full. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and Lender, upon the
occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and in
any order.
8. USE of Funds. Borrower covenants and agrees that the loan of the Principal
Sum, or any portion of the Principal Sum, shall be used as follows: first,
to repay all existing overlines under the Loan Agreement, second, to repay
any remaining indebtedness under that certain Secured Bridge Note in the
original principal amount of $350,000.00 made by PHC, Inc. in favor of
Lender and dated March 10, 1998 (the "PHCI BRIDGE NOTE"), and finally, for
working capital or other commercial purposes of Borrower.
9. REPRESENTATIONS. Borrower hereby warrants and represents to Lender that:
a. Borrower is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Massachusetts, is in good
standing as a foreign corporation in the State of Michigan and in any other
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, has the corporate
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all certificates, licenses and qualifications required
under all laws, regulations, ordinances, or orders of public authorities
necessary for the ownership and operation of all of its properties and
transaction of all of its business.
b. Borrower has full corporate power and authority to borrow
the Loan and to enter into, execute, and deliver this Note, and to incur and
perform its obligations under this Note and the other Loan Documents, all of
which have been duly authorized by all necessary corporate action. No consent or
approval of shareholders of, or lenders to, Borrower, and no consent, approval,
filing or registration with any governmental authority is required as a
condition to the validity of this Note or the other Loan Documents or the
performance by Borrower of its obligations under this Note or the other Loan
Documents.
c. This Note, when issued and delivered for value received,
and all other Loan Documents constitute the valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
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<PAGE>
d. The execution and delivery by Borrower of this Note and the
other Loan Documents do not, and the performance of Borrower's obligations under
this Note and the other Loan Documents will not, violate, conflict with,
constitute a default under, or result in the creation of a lien or encumbrance
(other than a lien, security interest, charge or other encumbrance in favor of
Lender) upon the property of Borrower under (i) any provision of Borrower's
certificate of incorporation or bylaws, (ii) any provision of any law, rule or
regulation applicable to Borrower, or (iii) any of the following (A) any
indenture or other agreement or instrument to which Borrower is a party or by
which Borrower or its property is bound, or (B) any judgment, order or decree of
any court, arbitration tribunal, or governmental entity applicable to Borrower
or Borrower's properties or assets.
e. There are no actions, suits, proceedings or investigations
pending, including, without limitation, any condemnation proceeding, or, to the
knowledge of Borrower, threatened, against or adversely affecting Borrower's
properties or assets or the validity or enforceability of this Note or the other
Loan Documents or the ability of Borrower to perform any obligations under this
Note or the other Loan Documents. Borrower is not in default with respect to any
order, writ, injunction, decree or demand of any court, arbitration tribunal or
governmental authority having jurisdiction over Borrower.
f. The audited financial statements of Borrower as of December
31, 1998, and the unaudited financial statements as of August 31, 1999,
certified by the chief financial officer of Borrower, which were previously
delivered to Lender, are true, correct and complete and fairly present the
financial condition of Borrower and the results of Borrower's operations and
changes in financial condition as of the dates and for the periods referred to,
and have been prepared in accordance with generally accepted accounting
principles. There are no material unrealized or anticipated liabilities, direct
or indirect, fixed or contingent, of Borrower as of the dates of such financial
statements that are not reflected in the financial statements or the notes
thereto. There has been no material adverse change in the business, properties,
condition (financial or otherwise) of Borrower since August 31,1999. Borrower's
fiscal year ends on December 31.
g. Borrower is not in default under or with respect to any
obligation in any respect that could be adverse to its business, operations,
property or financial condition, or that could adversely affect the ability of
Borrower to perform its obligations under this Note or the other Loan Documents.
No Event of Default or event that, with the giving of notice or lapse of time,
or both, could become an Event of Default, has occurred and is continuing.
h. Borrower has good and marketable title to its properties and
assets, including the Collateral and the properties and assets reflected in the
financial statements in described in paragraph (f) above, subject to no lien,
mortgage, pledge, encumbrance or charge of any kind. Borrower has not agreed or
consented to cause any of its properties or assets, whether owned now or
hereafter acquired, to be subject in the future (upon the happening of a
contingency or otherwise) to any lien, mortgage, pledge, encumbrance or charge
of any kind.
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<PAGE>
i. Borrower has filed, or has obtained extensions for the filing
of, all federal, state and other tax returns which are required to be filed, and
has paid all taxes shown as due on those returns and all assessments, fees and
other amounts due as of the date hereof. All tax liabilities of Borrower were,
as of August 31, 1999 and are now, adequately provided for on Borrower's books.
No tax liability has been asserted by the Internal Revenue Service or other
taxing authority against Borrower for taxes in excess of those already paid.
j. The use of the proceeds of the Loan and Borrower's issuance
of this Note will not, directly or indirectly, violate or result in a violation
of the Securities Act of 1933 or the Securities Exchange Act of 1934, as
amended, or any regulations issued pursuant thereto, including without
limitation Regulations U, T, or X of the Board of Governors of the Federal
Reserve System. Borrower is not engaged in the business of extending credit for
the purpose of the purchasing or carrying "margin stock" within the meaning of
those regulations. No part of the proceeds of the Loan will be used to purchase
or carry any margin stock or to extend credit to others for such purpose.
k. Borrower is not an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
l. Borrower is not in violation of any statute, rule or
regulation of any governmental authority (including, without limitation, any
statute, rule or regulation relating to employment practices or to
environmental, occupational and health standards and controls). Borrower has
obtained all licenses, pen-nits, franchises, and other governmental
authorizations necessary for the ownership of its properties and the conduct of
its business. Borrower is current with all reports and documents required to be
filed with any state or federal securities commission or similar governmental
authority and is in full compliance with all applicable rules and regulations of
such commissions.
m. No use, exposure, release, generation, manufacture, storage,
treatment, transportation or disposal of hazardous material has occurred or is
occurring on or from the Real Property or any other real property on which the
Collateral is located (together with the Real Property, the "Premises") or which
is owned, leased or otherwise occupied by Borrower, or has occurred off the
Premises as a result of any action of Borrower. All hazardous material used,
treated, stored, transported to or from, generated or handled on the Premises,
or off the Premises by Borrower, has been disposed of on or off the Premises by
or on behalf of Borrower in a lawful manner. There are no underground storage
tanks present on or under the Premises owned or leased by Borrower. No other
environmental, public health or safety hazards exist with respect to the
Premises.
n. The only places of business of Borrower, and the places where
it keeps and intends to keep the Collateral and records concerning the
Collateral, are at the addresses set forth in SCHEDULE 9(N), which also lists
the owner of record of each such property.
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o. Borrower exclusively owns or possesses all the patents,
patent applications, trademarks, trademark applications, service marks, trade
names, copyrights, franchises, licenses, and rights with respect to the
foregoing necessary for the current and planned future conduct of its business,
without any conflict with the rights of others. A list of all such intellectual
property (indicating the nature of Borrower's interest), as well as all
outstanding franchises and licenses given by or held by Borrower, is attached as
SCHEDULE 9(O). Borrower is not in default of any obligation or undertaking with
respect to such intellectual property or rights.
p. The identity of the stockholders of record of all classes of
the outstanding stock of Borrower, together with the respective ownership
percentages held by such stockholders, are as set forth on SCHEDULE 9(p).
q. Neither this Note nor any other Loan Document nor any other
agreement, document, certificate, or statement furnished to Lender by or on
behalf of Borrower in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained in this Note or in the other Loan
Documents or such other documents not misleading. There is no fact known to
Borrower that adversely affects or in the future may adversely affect the
business, operations, affairs or financial condition of Borrower, or any of its
properties or assets.
r. Borrower does not own or hold any equity or long-term debt
investments in, have any outstanding advances to, have any outstanding
guarantees for the obligations of, or have any outstanding borrowings from, any
Person. Borrower is not a party to any contract or agreement, or subject to any
corporate restriction, which adversely affects its business.
s. Within five (5) years before the date of this Note, neither
the business, property or assets, or operations of Borrower has been adversely
affected in any way by any casualty, strike, lockout, combination of workers, or
order of the United States of America or other governmental authority, directed
against Borrower. There are no pending or threatened labor disputes, strikes,
lockouts, or similar occurrences or grievances against Borrower or its business.
t. Within five (5) years before the date of this Note, Borrower
has not conducted business under or used any other name (whether corporate,
partnership or assumed) except as listed on SCHEDULE 9(T). Borrower is the sole
owner of all names listed on that Schedule and any and all business done and
invoices issued in such names are Borrower's sales, business, and invoices. Each
trade name of Borrower represents a division or trading style of Borrower and
not a separate Person or independent Affiliate.
u. Borrower is not engaged in any joint venture or partnership
with any other Person.
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10. AFFIRMATIVE AND NEGATIVE COVENANTS. Borrower covenants and agrees that
until this Note shall be repaid in full, it shall be bound by, and shall comply
fully with, all of the affirmative and negative covenants set forth in Article
VI and Article VII of the Loan Agreement, all of which covenants are hereby
incorporated by reference into this Note..
11. EVENTS OF DEFAULT. The following events are each an "EVENT OF DEFAULT"
under this Note:
a. Borrower fails to make any payment of principal when due or fails
to make any payment of interest, fees or other amounts owed to or for the
account of Lender under this Note and such payment remains unpaid for five (5)
Business Days after the date that such payment is due; or
b. Borrower has made any representations or warranties in this Note,
the other Loan Documents, any financial statement delivered to Lender or
otherwise in connection with this Note or the related transaction that contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained in this Note or in such document or financial
statement not misleading; or
c. Borrower shall fail to perform or observe, or cause to be performed
or observed, any other term, obligation, covenant, condition or agreement
contained in this Note or the other Loan Documents and any such failure shall
have continued for a period of ten (IO) days after written notice of such
failure; or
d. Borrower shall (i) apply for, or consent in writing to, the appoint-
ment of a receiver, trustee or liquidator; or (ii) file a voluntary petition
seeking relief under the Bankruptcy Code, or be unable, or admit in writing
Borrower's inability, to pay their debts as they become due; or (iii) make a
general assignment for the benefit of creditors; or (iv) file a petition or an
answer seeking reorganization or an arrangement or a readjustment of debt with
creditors, apply for, take advantage, permit or suffer to exist the commencement
of any insolvency, bankruptcy, suspension of payments, reorganization, debt
arrangement, liquidation, dissolution or similar event, under the law of the
United States or of any state in which Borrower is a resident; or (v) file an
answer admitting the material allegations of a petition filed against Borrower
in any such bankruptcy, reorganization or insolvency case or proceeding or (vi)
take any action authorizing, or in furtherance of, any of the foregoing; or
e. Either (i) an involuntary case is commenced against Borrower and
the petition is not contested within ten (IO) days or is not dismissed within
sixty (60) days after the commencement of the case or (ii) an order, judgment or
decree shall be entered by any court of competent jurisdiction on the
application of a creditor adjudicating Borrower bankrupt or insolvent, or
appointing a receiver, trustee or liquidator of Borrower or of all or
substantially all of the assets of Borrower and the order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) days or shall
not be discharged within thirty (30) days after the expiration of any stay of
such order, judgment, or decree; or
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f. Any obligation of Borrower for the payment of borrowed money is not
paid when due or within any applicable grace period, or such obligation becomes
or is declared to be due and payable before the expressed maturity of the
obligation, or there shall have occurred an event that, with the giving of
notice or lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable; or
g. One or more final judgments against Borrower or attachments against
its property not fully and unconditionally covered by insurance shall be
rendered by a court of record and shall remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of twenty (20) days;
h. An Event of Default occurs under the Loan Agreement or other
Revolving Loan Documents;
i. An Event of Default occurs under the March Term Note or other March
Loan Documents;
i. An Event of Default occurs under the December Term Note or
other December Loan Documents;
k. Borrower ceases any material portion of its business
l. There shall occur a material adverse change in the
financial condition or business prospects of Borrower, or Lender in good faith
shall deem itself insecure as a result of acts or events bearing upon the
financial condition of Borrower or the repayment of this Note, which default
shall have continued unremedied for a period of ten (10) days after written
notice from Lender.
12. LENDER'S RIGHTS.
a. Upon the occurrence of an Event of Default, Lender may, in addition to
its rights and remedies set forth in Sections 6 and 7 above, proceed, to the
extent permitted by law, to protect and enforce its rights either by suit in
equity or by action at law, or both, whether for the specific performance of any
covenant, condition or agreement contained in this Note or in aid of the
exercise of any power granted in this Note, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of Lender. No right
or remedy in this Note, the other Loan Documents or in other agreement or
instrument to the benefit of Lender is intended to be exclusive of
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any other right or remedy, and each and every such right or remedy shall be
cumulative and shall be in addition to every other right and remedy given under
this Note or now or hereafter existing at law or in equity or by statute or
otherwise. Without limiting the generality of the foregoing, if the outstanding
Principal Sum, or any of the other obligations of Borrower to Lender shall not
be paid when due, Lender shall not be required to resort to any particular
security, right or remedy or to proceed in any particular order of priority, and
Lender shall have the right at any time and from time to time, in any
commercially reasonable manner and in any order, to enforce its security
interests with respect to the Collateral, liens, rights and remedies, or any of
them, as it deems appropriate in the circumstances, and apply the proceeds of
any Collateral to such obligations of Borrower as it determines in its sole
discretion.
b. If an Event of Default has occurred as provided above and Borrower has
not paid the all amounts outstanding, including all principal, together with
interest accrued on such amounts, upon demand by Lender, then Borrower shall pay
to Lender interest on such outstanding amounts at a rate per annum equal to the
Default Interest Rate from the date such outstanding amounts are due until the
date this Note is paid in full. Borrower promises to pay all costs of
collection, including reasonable attorneys' fees, if this Note is referred to an
attorney for collection after the Event of Default.
13. NO DEFENSES. Borrower's obligations under this Note shall not be
subject to any set-off, counterclaim or defense to payment that Borrower now has
or may have in the future.
14. NO WAIVER. No failure or delay on the part of Lender in exercising any
right, power or privilege under this Note or the other Loan Documents, nor any
course of dealing between Borrower and Lender, shall operate as a waiver of the
right, power or privilege, nor shall a single or partial exercise of any right,
power or privilege preclude any other or further exercise of, or the exercise of
any other, right, power or privilege.
15. WRITING REQUIRED. No modification or waiver of any provisions of this
Note or any other Loan Documents, and no consent to any departure by Borrower,
shall in any event be effective, without respect to any course of dealing
between the parties, unless the modification or waiver shall be in a writing
executed by Lender and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall thereby entitle Borrower to any other or
further notice or demand in the same, similar or other circumstances.
16. USURY LIMITATION. Notwithstanding anything contained to the contrary in
this Note, Lender shall never be entitled to receive, collect or apply as
interest any amount in excess of the maximum rate of interest permitted to be
charged by applicable law. If Lender receives, collects or applies as interest
any such excess, the amount that would be excessive interest shall be applied to
the reduction of the Principal Sum; and if the Principal Sum is paid in full,
any remaining excess shall be paid to Borrower. In determining whether or not
the interest paid
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or payable in any specific case exceeds the highest lawful rate, Lender and
Borrower shall to the maximum extent permitted under applicable law: (i)
characterize any non-principal payment as an expense, fee or premium rather than
as interest; and (ii) "spread" the total amount of interest throughout the
entire term of the obligation so that the interest rate is deemed to have been
uniform throughout the entire term.
17. NOTICES. Any notice or demand given under this Note shall be given by
delivering it, sending by fax (with a confirming copy by regular mail), or by
mailing it by certified or registered mail, postage prepaid, return receipt
requested, or sent by prepaid overnight courier service addressed to Borrower at
200 Lake Street, Suite 102, Peabody, Massachusetts 01960 Attention: Paula Wurts,
Chief Financial Officer, telephone (978) 536-2777, fax (978) 536-2677. Any
notice to be given to Lender under this Note shall be given by personally
delivering it, sending it by fax (with a confirming copy by regular mail),
mailing it by certified mail, return receipt requested, or sending it by prepaid
overnight courier service, addressed to Lender at: 2 Wisconsin Circle, Fourth
Floor, Chevy Chase, Maryland 20815 Attention: Steven M. Curwin, Deputy General
Counsel, telephone (301) 961-1640, fax (301) 664-9866, or at such other place as
Lender may specify in writing to Borrower. Each party may designate a change of
address by notice to the other given in accordance with this Section 17 at least
fifteen (I 5) days before such change of address is to become effective. A
notice given under this Note shall be deemed received upon receipt if it is
personally delivered or sent by telecopier or overnight courier service and five
(5) days after it is deposited in the U.S. mail if it is sent by regular mail.
18. SECTION HEADINGS. The headings of the several paragraphs of this Note
are inserted solely for convenience of reference and are not a part of and are
not intended to govern, limit or aid in the construction of any term or
provision.
19. SEVERABILITY. If any term, provision, covenant or condition of this
Note or the application of such term, provision, 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 Note and the
application of such ten-n, provision, 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, provision, covenant or condition
shall be valid and enforced to the fullest extent permitted by law. Upon
determination that any such term, provision, covenant or condition is invalid,
illegal or unenforceable, Lender may, but is not obligated to, advance funds to
Borrower under this Note until Borrower and Lender amend this Note so as to
effect the original intent of the parties as closely as possible in a valid and
enforceable manner.
20. SURVIVAL OF TERMS. All covenants, agreements, representations and
warranties made in this Note or in any financial statements delivered pursuant
to this Note shall survive Borrower's execution and delivery of this Note to
Lender and shall continue in full force and effect so long as this Note or any
other obligation under this Note shall be outstanding and unpaid or any other
obligation of Borrower to Lender or its affiliates under this Note shall remain
unperformed.
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21. INDEMNITY. Borrower hereby agrees to indemnify and hold harmless
Lender, its partners, officers, agents and employees (collectively,
"INDEMNITEE") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties under this Note or from the breach of any of the
representations or warranties contained in this Note. In addition, Borrower
shall defend Indemnitee against and save it harmless from all claims of any
Person with respect to the Collateral. Notwithstanding any contrary provision in
this Agreement, the obligations of Borrower under this Section 21 shall survive
the payment in full of the all obligations under this Note and the termination
of this Note.
22. GOVERNING, LAW, CONSENT TO JURISDICTION. THIS NOTE IS TO BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
RESPECT TO ANY OTHERWISE APPLICABLE CONFLICTS-OF-LAWS PRINCIPLES, BOTH AS TO
INTERPRETATION AND PERFORMANCE, AND THE PARTIES EXPRESSLY CONSENT AND AGREE TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND AND TO THE LAYING OF
VENUE IN MARYLAND, WAIVING ALL CLAIMS OR DEFENSES BASED ON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE, INCONVENIENT FORUM OR THE LIKE. BORROWER HEREBY
CONSENTS TO SERVICE OF PROCESS BY MAILING A COPY OF THE SUMMONS TO BORROWER, BY
CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH
IN SECTION 17 ABOVE. BORROWER FURTHER WAIVES ANY CLAIM FOR CONSEQUENTIAL DAMAGES
IN RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER IN GOOD FAITH.
23. WAIVER OF TRIAL BY JURY. EACH OF BORROWER AND LENDER HEREBY (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUES 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 HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY
IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH OF BORROWER AND LENDER,
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. EACH PARTY
IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS NOTE TO ANY COURT HAVING
JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS NOTE, SO AS TO
SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL.
FURTHER, EACH OF BORROWER AND LENDER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.
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24. CONFESSION OF JUDGMENT. BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS
ANY ATTORNEY OF RECORD, OR THE PROTHONOTARY, CLERK OR SIMILAR OFFICER OF ANY
COURT IN ANY COUNTY OF THE STATE OF MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND, AS ATTORNEY
FOR BORROWER, AS WELL AS FOR ANY PERSONS CLAIMING UNDER, BY OR THROUGH BORROWER,
TO APPEAR FOR BORROWER IN ANY SUCH COURT IN ANY SUCH ACTION BROUGHT AGAINST
BORROWER AT THE SUIT OF LENDER TO CONFESS JUDGMENT AGAINST BORROWER IN FAVOR OF
LENDER IN THE FULL AMOUNT DUE ON THIS NOTE (INCLUDING PRINCIPAL, ACCRUED
INTEREST AND ANY AND ALL CHARGES, FEES AND COSTS) PLUS ATTORNEYS FEES FOR
FIFTEEN PERCENT (15%) OF THE AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT PRIOR
NOTICE OR OPPORTUNITY OF BORROWER FOR PRIOR HEARING. BORROWER WAIVES THE BENEFIT
OF ANY AND EVERY STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY
WAIVED CONFERRING UPON BORROWER 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
BORROWER 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 AND PROPER.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this Secured Term Note as of
the day and year first above written.
BORROWER:
PHC OF MICHIGAN, INC.
a Massachusetts corporation
By. /s/ Bruce A. Shear
President
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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 November ___, 1999 and is made by PHC, INC., a Massachusetts
corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation ("LENDER").
RECITALS
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 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 One Million and No/I 00 Dollars
($1,000,000.00) (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
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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
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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.
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(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.
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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.
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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
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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]
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of
the date first written
above.
ATTEST: PHC, INC.
/s/ T. Bates By: /s/ Bruce A. Shear
President
______________________________
Name:
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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 November ___, 1999 and is made by BSC-NY, INC., a New
York corporation ("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a
Delaware corporation ("LENDER").
RECITALS
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 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 One Million and No/100 Dollars
($1,000,000.00) (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 obligations under this Guaranty shall be limited to the
amount of Three Hundred Fifty Thousand and No/100 Dollars ($350,000.00).
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(b) Any reduction in the Obligations shall reduce the
liability of Guarantor under this Guaranty pro tanto only if, and to the extent,
(i) such Obligations are less than $350,000.00 (if reductions have occurred
through the payment (by any party other than Guarantor or realization of any
collateral for the Obligations), or (ii) the reduction is from a payment by
Guarantor under this Guaranty.
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:
(i) 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;
(ii) All of Guarantor's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Concentration Account;
(iii) 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;
(iv) 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;
(v) All deposit accounts, as such term is defined in the UCC;
(vi) All books, records, ledger cards, computer programs and
information and other property at any time evidencing or relating to the
Accounts; and
(vii) 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,
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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
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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 I 0.
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.
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(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.
12. No provision of this Guaranty shall be waived, amended or supplemented
except by a written instrument executed by Lender.
13. 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.
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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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
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19. 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.
20. 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.
21. 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.
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<PAGE>
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]
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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
/s/ T. Bates By: /s/ Bruce A. Shear
President
__________________________________
Name:
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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 November ____, 1999 and is made by BRUCE A. SHEAR, an individual
("GUARANTOR"), in favor of HELLER HEALTHCARE FINANCE, INC., a Delaware
corporation ("LENDER").
RECITALS
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 One Million and No/100 Dollars ($1,000,000.00) (the "Loan I').
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. (a) 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 obligations under this Guaranty shall be limited to the
amount of One Hundred Fifty Thousand and No/100 Dollars ($150,000.00).
H\WP\LEGAL\CLIENTS\PHCMICH\Nov99\2Guarindsec.wpd
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(b) Any reduction in the Obligations shall reduce the
liability of Guarantor under this Guaranty pro tanto only if, and to the extent,
(i) such Obligations are less than $300,000.00 (if reductions have occurred
through the payment (by any party other than Guarantor or realization of any
collateral for the Obligations), or (ii) the reduction is from a payment by
Guarantor under this Guaranty.
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.
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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. Guarantor will not be called to make any payments on this Note until
all efforts have been exhausted by Lender to collect on all collateral available
to secure this note.
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
H\WP\LEGAL\CLIENTS\PHCMICH\Nov99\2Guarindsec.wpd
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<PAGE>
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. Each person constituting 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.
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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.
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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.
H\WP\LEGAL\CLIENTS\PHCMICH\Nov99\2Guarindsec.wpd
[SIGNATURES FOLLOW]
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<PAGE>
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of
the date first written
above.
WITNESS: GUARANTOR:
/s/ T. Bates By: /s/ Bruce A. Shear
President
____________________________
Name:
H\WP\LEGAL\CLIENTS\PHCMICH\Nov99\2Guarindsec.wpd
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the
consolidated balance sheet and the consolidated statement of income filed as
part of the report on Form 10-QSB and is qualified in its entirety by reference
to such report on Form 10-QSB.
</LEGEND>
<CIK> 0000915127
<NAME> PHC, Inc.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1.000
<CASH> 25,034
<SECURITIES> 0
<RECEIVABLES> 9,613,350
<ALLOWANCES> 3,398,687
<INVENTORY> 0
<CURRENT-ASSETS> 6,556,595
<PP&E> 2,531,407
<DEPRECIATION> 1,106,326
<TOTAL-ASSETS> 14,236,153
<CURRENT-LIABILITIES> 8,286,949
<BONDS> 0
0
8
<COMMON> 64,768
<OTHER-SE> 2,610,826
<TOTAL-LIABILITY-AND-EQUITY> 14,236,153
<SALES> 0
<TOTAL-REVENUES> 8,871,560
<CGS> 0
<TOTAL-COSTS> 9,448,536
<OTHER-EXPENSES> 385,278
<LOSS-PROVISION> 1,068,388
<INTEREST-EXPENSE> 385,278
<INCOME-PRETAX> (638,017)
<INCOME-TAX> 100
<INCOME-CONTINUING> (638,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (638,117)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
