Exhibit 4.39
AMENDED AND RESTATED CERTIFICATE OF DESIGNATION
OF
SERIES C 8% CONVERTIBLE PREFERRED STOCK
OF
PHC, Inc.
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Pursuant to Section 25 of the
Business Corporation Law of the State of
Massachusetts
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PHC, Inc., a corporation organized and existing under the General
Corporation Law of the State of Massachusetts (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of
Directors of the Corporation on June 15, 2000 and on June 26, 2000 pursuant
to authority of the Board of Directors as required by Section 26 of the
Business Corporation Law of the State of Massachusetts:
Resolved, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Certificate of
Incorporation, the Board of Directors hereby authorizes a series of the
Corporation's previously authorized Preferred Stock, par value $.01 per share
(the "Preferred Stock"), and hereby states the designation and number of
shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
Series C 8% Convertible Preferred Stock:
ARTICLE 1
Definitions
The terms defined in this Article whenever used in this
Certificate of Designation have the following respective meanings:
(a) "Additional Capital Shares" has the meaning set forth in Section 6.1(c).
(b) "Affiliate" has the meaning ascribed to such term in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended.
(c) "Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
(d) "Closing Date" has the meaning set forth in the Securities Purchase
Agreement.
(e) "Capital Shares" means the Common Shares and any other shares of any
other class or series of capital stock, whether now or hereafter authorized
and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or
winding-up) of the Corporation.
(f) "Common Shares" or "Common Stock" means shares of class A common stock,
par value $.01 per share, of the Corporation.
(g) "Common Stock Issued at Conversion", when used with reference to the
securities issuable upon conversion of the Series C Preferred Stock, means
all Common Shares now or hereafter Outstanding and securities of any other
class or series into which the Series C Preferred Stock hereafter shall have
been changed or substituted, whether now or hereafter created and however
designated.
(h) "Conversion Date" means any day on which all or any portion of shares
of the Series C Preferred Stock is converted in accordance with the
provisions hereof.
(i) "Conversion Notice" means a written notice of conversion substantially
in the form annexed hereto as Annex I.
(j) "Conversion Price" means on any date of determination the applicable
price for the conversion of shares of Series C Preferred Stock into Common
Shares on such day as set forth in Section 6.1.
(k) "Corporation" means PHC, Inc., a Massachusetts corporation, and any
successor or resulting corporation by way of merger, consolidation, sale or
exchange of all or substantially all of the Corporation's assets, or
otherwise.
(l) "Current Market Price" means on any date of determination the closing
bid price of a Common Share on such day as reported on Nasdaq; provided, if
such security bid is not listed or admitted to trading on Nasdaq, as reported
on the principal national security exchange or quotation system on which such
security is quoted or listed or admitted to trading, or, if not quoted or
listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the
over-the-counter market on the day in question as reported by Bloomberg LP,
or a similar generally accepted reporting service, as the case may be.
(m) [Reserved]
(n) "Dividend Period" means the semi-annual period commencing on and
including the Issue Date or, if a dividend has previously been paid, the day
after the immediately preceding Dividend Payment Due Date and ending on and
including the immediately subsequent Dividend Payment Due Date.
(o) "Dividend Payment Due Date" means March 31 and September 30 of each
year.
(p) "Dividend Rate" means 8% per annum, computed on the basis of a 360-day
year.
(q) "Holder" means The Shaar Fund Ltd., any successor thereto, or any
Person or Persons to whom the Series C Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(r) "Issue Date" means, as to any share of Series C Preferred Stock, the
date of issuance of such share.
(s) "Junior Securities" means all capital stock of the Corporation except
for the Series C Preferred Stock.
(t) "Liquidation Preference" means, with respect to a share of the Series C
Preferred Stock, an amount equal to the sum of (i) the Stated Value thereof,
plus (ii) the aggregate of all accrued and unpaid dividends (whether or not
earned or declared, whether or not there were funds legally available for the
payment of dividends and whether or not a Dividend Payment Due Date has
occurred since the last dividend payment) on such share of Series C Preferred
Stock until the most recent Dividend Payment Due Date; provided that, in the
event of an actual liquidation, dissolution or winding up of the Corporation,
the amount referred to in clause (iii) above shall be calculated by including
accrued and unpaid dividends to the actual date of such liquidation,
dissolution or winding up, rather than the Dividend Payment Due Date referred
to above.
(u) "Mandatory Conversion Date" has the meaning set forth in Section 6.8.
(v) "Market Price" per Common Share means the arithmetic mean of the
closing bid prices of the Common Shares as reported on Nasdaq for the five
consecutive Trading Days on which the lowest closing bid prices are reported
during any Valuation Period; provided, if such security bid is not listed or
admitted to trading on Nasdaq, as reported on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price
of such security on the over-the-counter market on the day in question as
reported by Bloomberg LP, or a similar generally accepted reporting service,
for the five consecutive Trading Days on which the five lowest closing bid
prices are reported during any Valuation Period.
(w) "Nasdaq" means the Nasdaq SmallCap Market.
(x) "Optional Redemption Price" has the meaning set forth in Section 6.5.
(y) "Outstanding", when used with reference to Common Shares or Capital
Shares (collectively, "Shares"), means, on any date of determination, all
issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that any such Shares directly or
indirectly owned or held by or for the account of the Corporation or any
Subsidiary of the Corporation shall not be deemed "Outstanding" for purposes
hereof.
(z) "Person" means an individual, a corporation, a partnership, an
association, a limited liability company, an unincorporated business
organization, a trust or other entity or organization, and any government or
political subdivision or any agency or instrumentality thereof.
(aa) "Redemption Date" has the meaning set forth in Section 6.5.
(bb) "Registration Rights Agreement" means that certain Registration Rights
Agreement to be dated as of June 28, 2000 between the Corporation and The
Shaar Fund Ltd.
(cc) "SEC" means the United States Securities and Exchange Commission.
(dd) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as in effect at the time.
(ee) "Securities Purchase Agreement" means that certain Securities Purchase
Agreement to be dated as of June 28, 2000 between the Corporation and The
Shaar Fund Ltd.
(ff) "Series C Preferred Shares" or "Series C Preferred Stock" means the
shares of Series C 8% Convertible Preferred Stock of the Corporation or such
other convertible preferred stock of the Corporation as may be exchanged
therefor.
(gg) "Stated Value" has the meaning set forth in Article 2.
(hh) "Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Corporation.
(ii) "Trading Day" means any day on which (a) purchases and sales of
securities authorized for quotation on Nasdaq are reported thereon, (b) no
event which results in a material suspension or limitation of trading of the
Common Shares on Nasdaq has occurred and (c) at least one bid for the trading
of Common Shares is reported on Nasdaq.
(jj) "Valuation Event" has the meaning set forth in Section 6.1.
(kk) "Valuation Period" means the period of 20 Trading Days immediately
preceding the Conversion Date; provided, however, that if a Valuation Event
occurs during a Valuation Period on a date less than 5 Trading Days before
the Conversion Date, the Valuation Period shall be extended until the date 5
Trading Days after the occurrence of the Valuation Event.
All references to "cash" or "$" herein mean currency of the
United States of America.
ARTICLE 2
Designation and Amount
The designation of this series, which consists of 170,000 shares
of Preferred Stock, shall be Series C 8% Convertible Preferred Stock (the
"Series C Preferred Stock") and the stated value shall be $10 per share (the
"Stated Value").
ARTICLE 3
Rank
The Series C Preferred Stock shall rank prior to any other
capital stock of the Corporation.
ARTICLE 4
Dividends
(a) (i) Subject to clause (iv) below, the Holder shall be entitled to
receive, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, dividends at the
Dividend Rate on the Stated Value of each share of Series C Preferred
Stock on and as of each Dividend Payment Due Date with respect to each
Dividend Period. Dividends on the Series C Preferred Stock shall be
cumulative from the date of issue, whether or not declared for any
reason, including if such declaration is prohibited under any
outstanding indebtedness or borrowings of the Corporation or any of
its Subsidiaries, or any other contractual provision binding on the
Corporation or any of its Subsidiaries, and whether or not there shall
be funds legally available for the payment thereof.
(ii) Subject to clause (iv) below, each dividend shall be payable in
equal semi-annual amounts on each Dividend Payment Due Date,
commencing September 30, 2000, to the Holders of record of shares of
the Series C Preferred Stock, as they appear on the stock records of
the Corporation at the close of business on such record date, not more
than 60 days or less than 10 days preceding the payment dates thereof,
as shall be fixed by the Board of Directors. Accrued and unpaid
dividends for any past Dividend Period may be declared and paid at any
time, without reference to any Dividend Payment Due Date, to Holders
of record, not more than 15 days preceding the payment date thereof,
as may be fixed by the Board of Directors.
(iii) At the option of the Corporation, the dividend shall be paid
either (x) in cash or (y) through the issuance of duly and validly
authorized and issued, fully paid and nonassessable shares of the
Common Stock valued at the then applicable Conversion Price calculated
in accordance with the provisions of Section 6.1, assuming for this
purpose, that the applicable Dividend Payment Date is the applicable
Conversion Date and registered for resale in open market transactions
on the Registration Statement (as defined in the Registration Rights
Agreement), which Registration Statement shall then be effective under
the Securities Act; provided, however, that if no funds are legally
available for the payment of cash dividends on the Series C Preferred
Stock, dividends shall be paid as provided in clause(y) above.
(iv) Notwithstanding anything to the contrary in this Certificate, at
the option of the Corporation, the Corporation may postpone paying
dividends on shares of Series C Preferred Stock until such shares of
Series C Preferred Stock are converted. If the Corporation elects to
pay dividends according to this clause (iv), such dividends will not
be payable on the Dividend Payment Due Date but shall be payable in
accordance with Section 6.1.
(b) Except as provided in Section 4(d) hereof, the Holder shall not be
entitled to any dividends in excess of the cumulative dividends, as
herein provided, on the Series C Preferred Stock.
(c) So long as any shares of the Series C Preferred Stock are outstanding,
no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon any Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or
benefit plan (including a stock option plan) of the Corporation or any
Subsidiary) for any consideration by the Corporation, directly or
indirectly, nor shall any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any Junior
Securities, unless in each case (i) the full cumulative dividends
required to be paid in cash on all outstanding shares of the Series C
Preferred Stock shall have been paid or set apart for payment for all
past Dividend Periods with respect to the Series C Preferred Stock and
(ii) sufficient funds shall have been paid or set apart for the
payment of the dividend for the current Dividend Period with respect
to the Series C Preferred Stock.
(d) If the Corporation shall at any time or from time to time after the
Issue Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock
or other securities or property or rights or warrants to subscribe for
securities of the Corporation or any of its Subsidiaries by way of
dividend or spin-off) on shares of its Common Stock, then, and in each
such case, in addition to the dividend obligation of the Corporation
specified in Section 4(a) hereof, the Corporation shall declare,
order, pay and make the same dividend or distribution to each Holder
of Series C Preferred Stock as would have been made with respect to
the number of Common Shares the Holder would have received had it
converted all of its Series C Preferred Shares, and exercised the
Warrant held by it in full for all the Common Shares then underlying
the Warrant, immediately prior to such dividend or distribution.
ARTICLE 5
Liquidation Preference; Mergers, Consolidations, etc.
(a) If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee or sequestrator (or
other similar official) of the Corporation or of any substantial part
of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law resulting in the appointment of a receiver,
liquidator, assignee, custodian, trustee or sequestrator (or other
similar official) of the Corporation or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs,
and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, no
distribution shall be made to the holders of any shares of capital
stock of the Corporation upon liquidation, dissolution or winding-up
unless prior thereto, the Holders of shares of Series C Preferred
Stock, subject to this Article 5, shall have received the Liquidation
Preference with respect to each share.
(b) In case the Corporation shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another Person (where
the Corporation is not the survivor or where there is a change in or
distribution with respect to the Common Stock of the Corporation),
sell, convey, transfer or otherwise dispose of all or substantially
all its property, assets or business to another Person, or effectuate
a transaction or series of related transactions in which more than 50%
of the voting power of the Corporation is disposed of (each, a
"Fundamental Corporate Change") and, pursuant to the terms of such
Fundamental Corporate Change, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of
Common Stock of the Corporation, then each Holder of Series C
Preferred Stock shall have the right thereafter, at its sole option,
either (x) to require the Corporation to deem such Fundamental
Corporate Change to be a liquidation, dissolution or winding up of the
Corporation pursuant to which the Corporation shall be required to
distribute, upon consummation of and as a condition to, such
Fundamental Corporate Change an amount equal to 100% of the
Liquidation Preference with respect to each outstanding share of
Series C Preferred Stock, (y) to receive the number of shares of
common stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and Other Property as
is receivable upon or as a result of such Fundamental Corporate Change
by a holder of the number of shares of Common Stock into which such
Series C Preferred Stock may be converted at the Conversion Price
applicable immediately prior to such Fundamental Corporate Change or
(z) require the Corporation, or such successor, resulting or
purchasing corporation, as the case may be, to, without benefit of any
additional consideration therefor, to execute and deliver to the
Holder shares of its Preferred Stock with substantial identical
rights, preferences, privileges, powers, restrictions and other terms
as the Series C Preferred Stock equal to the number of shares of
Series C Preferred Stock held by such Holder immediately prior to such
Fundamental Corporate Change; provided, that all Holders of Series C
Preferred Stock shall be deemed to elect the option set forth in
clause (x) above if at least a majority in interest of such Holders
elect such option. For purposes of this Section 5(b), "common stock of
the successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is
not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening
of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section
5(b) shall similarly apply to successive Fundamental Corporate
Changes.
ARTICLE 6
Conversion of Preferred Stock
Section 6.1 Conversion; Conversion Price
At the option of the Holder, the shares of Series C Preferred Stock may be
converted, either in whole or in part, into Common Shares (calculated as to each
such conversion to the nearest 1/100th of a share) at any time and from time to
time following the earlier of (i) the date which is 180 days after the Closing
Date and (ii) the date on which the registration statement filed pursuant to the
Registration Rights Agreement becomes effective, at a Conversion Price per share
of Common Stock equal to 90% of the Market Price.
The number of shares of Common Stock due upon conversion of Series C
Preferred Stock shall be (i) the number of shares of Series C Preferred Stock to
be converted, multiplied by (ii) the Stated Value plus accrued and unpaid
dividends (whether or not earned or declared, whether or not there were funds
legally available for the payment of dividends and whether or not a Dividend
Payment Due Date has occurred since the last dividend payment), to the extent
the Corporation does not at its election pay such accrued and unpaid dividends
in cash, and divided by (iii) the applicable Conversion Price.
Within two Business Days of the occurrence of a Valuation Event, the
Corporation shall send notice thereof to each Holder. Notwithstanding anything
to the contrary contained herein, if a Valuation Event occurs during any
Valuation Period, the Holder may convert some or all of its Series C Preferred
Stock, at its sole option, at a Conversion Price equal to the Current Market
Price on any Trading Day during the Valuation Period.
For purposes of this Section 6.1, a "Valuation Event" shall mean an event
in which the Corporation takes any of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution on its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital Shares"),
otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b) above, at
a price per share less, or for other consideration lower, than the Current
Market Price in effect immediately prior to such issuances, or without
consideration, except for issuances under employee benefit plans consistent with
those presently in effect and issuances under presently outstanding warrants,
options or convertible securities;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares if the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable or exercisable
for Additional Capital Shares if the consideration per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to the
terms of such convertible, exchangeable or exercisable securities shall be less
than the Current Market Price in effect immediately prior to such issuance;
(f) announces or effects a Fundamental Corporate Change;
(g) makes any distribution of its assets or evidences of indebtedness to
the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for the payment of dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or
(h) takes any action affecting the number of Outstanding Capital Shares,
other than an action described in any of the foregoing Sections 6.1(a) through
6.1(g) hereof, inclusive, which in the opinion of the Holder, determined in good
faith, would have a material adverse effect upon the rights of the Holder at the
time of a conversion of the Preferred Stock or is reasonably likely to result in
a decrease in the Market Price.
Section 6.2 Exercise of Conversion Privilege
(a) Conversion of the Series C Preferred Stock may be exercised, in whole
or in part, by the Holder by telecopying an executed and completed Conversion
Notice to the Corporation. Each date on which a Conversion Notice is telecopied
to the Corporation in accordance with the provisions of this Section 6.2 shall
constitute a Conversion Date. The Corporation shall convert the Preferred Stock
and issue the Common Stock Issued at Conversion, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the Persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. The Holder shall deliver the shares of Series C Preferred Stock to
the Corporation by express courier within 30 days following the Conversion Date.
Upon surrender for conversion, the Preferred Stock shall be accompanied by a
proper assignment thereof to the Corporation or be endorsed in blank. As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than five Business Days after the Corporation's
receipt of such Conversion Notice, the Corporation shall (i) issue the Common
Stock issued at Conversion in accordance with the provisions of this Article 6,
and (ii) cause to be mailed for delivery by overnight courier to the Holder (x)
a certificate or certificate(s) representing the number of Common Shares to
which the Holder is entitled by virtue of such conversion, (y) cash, as provided
in Section 6.3, in respect of any fraction of a Common Share issuable upon such
conversion and (z) if the Corporation chooses to pay accrued and unpaid
dividends in cash, cash in the amount of accrued and unpaid dividends as of the
Conversion Date. Such conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates so long as the Series C Preferred
Stock shall have been surrendered as aforesaid at such time, and at such time
the rights of the Holder of the Series C Preferred Stock, as such, shall cease
and the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.3), to surrender the Series C Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.00 shall be required to be given unless specifically requested by the Holder.
(b) If, at any time (i) the Corporation challenges, disputes or denies the
right of the Holder hereof to effect the conversion of the Series C Preferred
Stock into Common Shares or otherwise dishonors or rejects any Conversion Notice
delivered in accordance with this Section 6.2 or (ii) any third party commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Series C Preferred Stock into Common Shares, then the Holder shall have
the right, by written notice to the Corporation, to require the Corporation
promptly to redeem the Series C Preferred Stock for cash at a redemption price
equal to 135% of the Stated Value thereof together with all accrued and unpaid
dividends (whether or not earned or declared, whether or not there were funds
legally available for the payment of dividends and whether or not a Dividend
Payment Due Date has occurred since the last dividend payment) thereon (the
"Mandatory Purchase Amount"). Under any of the circumstances set forth above,
the Corporation shall be responsible for the payment of all costs and expenses
of the Holder, including reasonable legal fees and expenses, as and when
incurred in disputing any such action or pursuing its rights hereunder (in
addition to any other rights of the Holder).
(c) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. (subscript)101 et
seq. (the "Bankruptcy Code"). In the event the Corporation is a debtor under the
Bankruptcy Code, the Corporation hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. (subscript)362 in respect of
the Holder's conversion privilege. The Corporation hereby waives to the fullest
extent permitted any rights to relief it may have under 11 U.S.C. (subscript)362
in respect of the conversion of the Series C Preferred Stock. The Corporation
agrees, without cost or expense to the Holder, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. (subscript)362.
Section 6.3 Fractional Shares
No fractional Common Shares or scrip representing fractional Common Shares
shall be issued upon conversion of the Series C Preferred Stock. Instead of any
fractional Common Shares which otherwise would be issuable upon conversion of
the Series C Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction. Section 6.4
Adjustments to Conversion Price
For so long as any shares of the Series C Preferred Stock are outstanding,
if the Corporation issues and sells pursuant to an exemption from registration
under the Securities Act (other than pursuant to presently outstanding warrants,
options or convertible securities) (A) Common Shares at a purchase price that is
lower than the Conversion Price on the date of issuance of such Common Shares,
(B) warrants or options with an exercise price on the date of issuance thereof
that is lower than the Conversion Price for the Holder on such date, except for
warrants or options issued pursuant to employee stock option agreements or stock
incentive agreements of the Corporation, or (C) convertible, exchangeable or
exercisable securities with a right to exchange at lower than the Current Market
Price on the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements, then the Conversion Price shall be reduced to equal
the lowest of any such purchase price, exercise price or exchange price, and the
number of shares of Common Stock into which the Series C Preferred Stock is
convertible pursuant to the second paragraph of Section 6.1 shall be
correspondingly adjusted. After such reduction, the Conversion Price shall never
exceed the Conversion Price as so reduced, in spite of any subsequent increase
in the Market Price.
Section 6.5 Optional Redemption
At any time after the date of issuance of the Series C Preferred Stock
until the Mandatory Conversion Date (as defined below), the Corporation, upon
notice delivered to the Holder as provided in Section 6.6, may redeem, in cash,
the Series C Preferred Stock (but only with respect to such shares as to which
the Holder has not theretofore furnished a Conversion Notice in compliance with
Section 6.2), at 100% of the Stated Value thereof (the "Optional Redemption
Price"), together with all accrued and unpaid dividends (whether or not earned
or declared, whether or not there were funds legally available for the payment
of dividends and whether or not a Dividend Payment Due Date has occurred since
the last dividend payment) thereon to the date of redemption (the "Redemption
Date"); provided, however, that the Corporation may only redeem the Series C
Preferred Stock under this Section 6.5 if the Current Market Price is less than
the Current Market Price on the Issue Date. Except as set forth in this Section
6.5, the Corporation shall not have the right to redeem the Series C Preferred
Stock.
Section 6.6 Notice of Redemption
Notice of redemption pursuant to Section 6.5 shall be provided by the
Corporation to the Holder in writing (by registered mail or overnight courier at
the Holder's last address appearing in the Corporation's security registry) not
less than 10 nor more than 15 days prior to the Redemption Date, which notice
shall specify the Redemption Date and refer to Section 6.5 (including a
statement of the Current Market Price per Common Share) and this Section 6.6.
Section 6.7 Surrender of Preferred Stock
Upon any redemption of the Series C Preferred Stock pursuant to Sections
6.5 and 6.6, the Holder shall either deliver the Series C Preferred Stock by
hand to the Corporation at its principal executive offices or surrender the same
to the Corporation at such address by express courier within 14 days after the
date that the Buyer receives payment therefore. Payment of the Optional
Redemption Price shall be made by the Corporation to the Holder by wire transfer
of immediately available funds to such account(s) as the Holder shall specify to
the Corporation. If payment of such Optional Redemption Price is not made in
full by the Redemption Date, the Holder shall again have the right to convert
the Series C Preferred Stock as provided in Article 6 hereof.
Section 6.8 Mandatory Conversion
On the third anniversary of the date of this Certificate of Designation
(the "Mandatory Conversion Date"), the Corporation shall convert all Series C
Preferred Stock outstanding, at the Conversion Price utilizing the Stated Value
(plus accrued and unpaid dividends (whether or not earned or declared, whether
or not there were funds legally available for the payment of dividends and
whether or not a Dividend Payment Due Date has occurred since the last dividend
payment)) as the value of each share of Series C Preferred Stock, into shares of
Common Stock registered for resale in open market transactions on the
Registration Statement (as defined in the Registration Rights Agreement), which
Registration Statement shall then be effective under the Securities Act. Section
6.9 Certain Conversion Limitations
(a) Notwithstanding anything herein to the contrary, the Holder shall not
have the right, and the Corporation shall not have the obligation, to convert
all or any portion of the Series C Preferred Stock (and the Corporation shall
not have the right to pay dividends on the Series C Preferred Stock in shares of
Common Stock) if and to the extent that the issuance to the Holder of shares of
Common Stock upon such conversion (or payment of dividends) would result in the
Holder being deemed the "beneficial owner" of more than 5% of the then
Outstanding shares of Common Stock within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then Outstanding shares of Common Stock,
then the Corporation shall redeem so many of such Holder's shares (the
"Redemption Shares") of Series C Preferred Stock as are necessary to cause such
Holder to be deemed the beneficial owner of not more than 5% of the then
Outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series C Preferred Stock, and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series C Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) 100% of the Stated Value
of the Redemption Shares and (ii) any accrued and unpaid dividends (whether or
not earned or declared, whether or not there were funds legally available for
the payment of dividends and whether or not a Dividend Payment Due Date has
occurred since the last dividend payment) to the date of such redemption.
(b) Notwithstanding anything herein to the contrary, if and to the extent
that, on any date (the "Section 16 Determination Date"), the holding by the
Holder of shares of the Series C Preferred Stock would result in the Holder's
becoming subject to the provisions of Section 16(b) of the Exchange Act in
virtue of being deemed the "beneficial owner" of more than 10% of the then
Outstanding shares of Common Stock, then the Holder shall not have the right,
and the Corporation shall not have the obligation, to convert so many of such
Holder's shares of Series C Preferred Stock (the "Section 16 Redemption Shares")
as shall cause such Holder to be deemed the beneficial owner of more than 10% of
the then Outstanding shares of Common Stock during the period ending 60 days
after the Section 16 Determination Date. If any court of competent jurisdiction
shall determine that the foregoing limitation is ineffective to prevent a Holder
from being deemed the beneficial owner of more than 10% of the then Outstanding
shares of Common Stock for the purposes of such Section 16(b), then the
Corporation shall redeem the Section 16 Redemption Shares. Upon such
determination by a court of competent jurisdiction, the Section 16 Redemption
Shares shall immediately and without further action be deemed returned to the
status of authorized but unissued shares of Series C Preferred Stock, and the
Holder shall have no interest in or rights under such Section 16 Redemption
Shares. Any and all dividends paid on or prior to the date of such determination
shall be deemed dividends paid on the remaining shares of Series C Preferred
Stock held by the Holder. Such redemption shall be for cash at a redemption
price equal to the sum of (i) 100% of the Stated Value of the Section 16
Redemption Shares and (ii) any declared and unpaid dividends to the date of such
redemption.
(c) Unless the Corporation shall have obtained the approval of its voting
stockholders to such issuance in accordance with the rules of Nasdaq or any
other stock market rules with which the Corporation shall be required to comply,
but only to the extent required thereby, the Corporation shall not issue shares
of Common Stock (i) upon conversion of any shares of Series C Preferred Stock or
(ii) as a dividend on the Series C Preferred Stock, if such issuance of Common
Stock, when added to the number of shares of Common Stock previously issued by
the Corporation (x) upon conversion of shares of the Series C Preferred Stock,
(y) upon exercise of the Warrants issued pursuant to the terms of the Securities
Purchase Agreement and (z) in payment of dividends on the Series C Preferred
Stock, would equal or exceed 20% of the number of shares of the Corporation's
Common Stock which were issued and Outstanding on the Issue Date (the "Maximum
Issuance Amount"). In the event that a properly executed Conversion Notice is
received by the Corporation which would require the Corporation to issue shares
of Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall honor such conversion request by (a) converting the number of
shares of Series C Preferred Stock stated in the Conversion Notice which is not
in excess of the Maximum Issuance Amount and (b) redeeming the remaining number
of shares of Series C Preferred Stock stated in the Conversion Notice in cash at
a price equal to 100% of the Stated Value thereof, together with all accrued and
unpaid dividends (whether or not earned or declared, whether or not there were
funds legally available for the payment of dividends and whether or not a
Dividend Payment Due Date has occurred since the last dividend payment) on the
total number of shares stated in the Conversion Notice. In the event that the
Corporation shall elect to pay a dividend in shares of Common Stock which would
require the Corporation to issue shares of Common Stock equal to or in excess of
the Maximum Issuance Amount, the Corporation shall pay (1) a dividend in a
number of shares of Common Stock equal to one less than the Maximum Issuance
Amount and (2) the balance of the dividend in cash.
ARTICLE 7
Voting Rights
The Holders of the Series C Preferred Stock have no voting power, except as
otherwise provided by the Business Corporation Law of the State of Massachusetts
(the "MBCL"), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each Holder of
Series C Preferred Stock with prior notification of any meeting of the
shareholders (and copies of all proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice thereof to
each Holder at least 30 days prior to the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event,
together with a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the MBCL the vote of the Holders of the Series C
Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the Holders of at least a majority of the outstanding shares of
Series C Preferred Stock represented at a duly held meeting at which a quorum is
present or by written consent of a majority of the outstanding shares of Series
C Preferred Stock (except as otherwise may be required under the MBCL) shall
constitute the approval of such action by the class. To the extent that under
the MBCL Holders of the Series C Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series C Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated. Holders of the Series C Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of all proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Corporation's bylaws and the MBCL.
ARTICLE 8
Protective Provisions
So long as shares of Series C Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided in the MBCL) of the Holders of at least a majority of the
then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences or privileges of the Series C
Preferred Stock;
(b) create any new class or series of capital stock having a preference
over the Series C Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior Securities") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series C Preferred Stock;
(c) increase the authorized number of shares of Series C Preferred Stock; or
(d) do any act or thing not authorized or contemplated by this Certificate
of Designation which would result in taxation of the Holders of shares of the
Series C Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code of 1986, as
hereafter from time to time amended).
In the event Holders of least a majority of the then outstanding shares of
Series C Preferred Stock agree to allow the Corporation to alter or change the
rights, preferences or privileges of the shares of Series Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series C Preferred Stock,
then the Corporation will deliver notice of such approved change to the Holders
of the Series Preferred Stock that did not agree to such alteration or change
(the "Dissenting Holders") and Dissenting Holders shall have the right for a
period of 30 days to convert pursuant to the terms of this Certificate of
Designation as in effect prior to such alteration or change or to continue to
hold their shares of Series C Preferred Stock.
Notwithstanding anything to the contrary herein, if at any time the
Corporation shall "spin-off" certain of its assets or businesses by
transferring, directly or indirectly, such assets or businesses to a Subsidiary
of the Corporation ("Spinco") and making a dividend (the "Spin-off Dividend") to
the Corporation's stockholders of the shares of capital stock of Spinco, then
prior to making the Spin-off Dividend, the Corporation shall cause Spinco to
issue to each Holder that number of shares of preferred stock of Spinco with
substantially identical rights, preferences, privileges, powers, restrictions
and other terms as the Series C Preferred Stock equal to the number of shares of
Series C Preferred Shares held by such Holder immediately prior to the Spin-off
Dividend. ARTICLE 9 Miscellaneous Section 9.1 Loss, Theft, Destruction of
Preferred Stock
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of shares of Series C Preferred Stock and, in
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series C Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series C Preferred Stock, new shares of Series
C Preferred Stock of like tenor. The Series C Preferred Stock shall be held and
owned upon the express condition that the provisions of this Section 9.1 are
exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series C Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
Section 9.2 Who Deemed Absolute Owner
The Corporation may deem the Person in whose name the Series C Preferred
Stock shall be registered upon the registry books of the Corporation to be, and
may treat it as, the absolute owner of the Series C Preferred Stock for the
purpose of receiving payment of dividends on the Series C Preferred Stock, for
the conversion of the Series C Preferred Stock and for all other purposes, and
the Corporation shall not be affected by any notice to the contrary. All such
payments and such conversion shall be valid and effectual to satisfy and
discharge the liability upon the Series C Preferred Stock to the extent of the
sum or sums so paid or the conversion so made.
Section 9.3 Fundamental Corporate Change
In the case of the occurrence of any Fundamental Corporate Change described
in Section 5(b), the Corporation shall cause to be mailed to the Holder of the
Series C Preferred Stock at its last address as it appears in the Corporation's
security registry, at least 20 days prior to the applicable record, effective or
expiration date specified in connection therewith (or, if such 20 days notice is
not possible, at the earliest possible date prior to any such record, effective
or expiration date), a notice stating (x) the date on which a record is to be
taken for the purpose of such corporate action, or if a record is not to be
taken, the date as of which the Holders of record of Series C Preferred Stock to
be entitled to any dividend, distribution, issuance or granting of rights,
options or warrants are to be determined or the date on which such Fundamental
Corporate Change is expected to become effective, and (y) the date as of which
it is expected that Holders of record of Series C Preferred Stock will be
entitled to exchange their shares for securities, cash or other property
deliverable upon such Fundamental Corporate Change.
Section 9.4 Register
The Corporation shall keep at its principal office a register in which the
Corporation shall provide for the registration of the Series C Preferred Stock.
Upon any transfer of the Series C Preferred Stock in accordance with the
provisions hereof, the Corporation shall register such transfer on the register
of Series C Preferred Stock.
Section 9.5 Withholding
To the extent required by applicable law, the Corporation may withhold
amounts for or on account of any taxes imposed or levied by or on behalf of any
taxing authority in the United States having jurisdiction over the Corporation
from any payments made pursuant to the Series C Preferred Stock. Section 9.6
Headings
The headings of the Articles and Sections of this Certificate of
Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation. Section 9.7 Severability
If any provision of this Certificate of Designation, or the application
thereof to any person or entity or any circumstance, is invalid or
unenforceable, (i) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision, and (ii) the
remainder of this Certificate of Designation and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
[SIGNATURE PAGE FOLLOWS.]
In Witness Whereof, the Corporation has caused this amended and Restated
Certificate of Designation to be signed by its duly authorized officers on as of
February 14, 2001.
PHC, Inc.
By: /s/ Paula C. Wurts
Name: Paula C. Wurts
Title: CFO
ANNEX I
FORM OF CONVERSION NOTICE
To: PHC, Inc.
200 Lake Street, Suite 102
Peabody, MA 01960
Attention: Bruce Shear
The undersigned owner of this Series C 8% Convertible Preferred Stock (the
"Series C Preferred Stock") issued by PHC, Inc. (the "Corporation") hereby
irrevocably exercises its option to convert __________ shares of the Series C
Preferred Stock into shares of the common stock, par value $.01 per share
("Common Stock"), of the Corporation in accordance with the terms of the
Certificate of Designation. The undersigned hereby instructs the Corporation to
convert the number of shares of the Series C Preferred Stock specified above
into Shares of Common Stock Issued at Conversion in accordance with the
provisions of Article 6 of the Certificate of Designation. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion and the recertificated Series C Preferred Stock, if any, not
being surrendered for conversion hereby, together with any check in payment for
fractional Common Stock, be issued in the name of and delivered to the
undersigned unless a different name has been indicated below. All capitalized
terms used and not defined herein have the respective meanings assigned to them
in the Certificate of Designation. So long as the Series C Preferred Stock shall
have been surrendered for conversion hereby, the conversion pursuant hereto
shall be deemed to have been effected at the date and time specified below, and
at such time the rights of the undersigned as a Holder of the Series C Preferred
Stock shall cease and the Person or Persons in whose name or names the Common
Stock Issued at Conversion shall be issuable shall be deemed to have become the
holder or holders of record of the Common Shares represented thereby and all
voting and other rights associated with the beneficial ownership of such Common
Shares shall at such time vest with such Person or Persons.
Date and time:
__________________________
Signature
Fill in for registration of Series C Preferred Stock:
__________________________________________
__________________________________________
__________________________________________
Please print name and address (including zip code number)
Written Consent in Lieu of
a Special Meeting of the
Board of Directors of
PHC, Inc.
As of January 18, 2001
We, the undersigned, being all of the directors of PHC, Inc., a
Massachusetts corporation (the "Corporation"), acting by unanimous written
consent in lieu of a special meeting, hereby adopt, approve and confirm the
following resolutions:
WHEREAS, the Corporation has issued 170,000 shares of Series C 8%
Convertible Preferred Stock, par value $0.01 per share (the "Series C Preferred
Stock") to The Shaar Fund Ltd. (the "Stockholder") pursuant to (i) that certain
Securities Purchase Agreement dated June 28, 2000 between the Stockholder and
the Corporation (the "Securities Purchase Agreement"), and (ii) a Certificate of
Designation setting forth the rights and preferences of the Series C Preferred
Stock, and the limitations or restrictions thereon, which Certificate of
Designation, as amended, is included as Schedule I to the Certificate of Vote of
Directors Establishing a Class or Series of Stock filed by the Corporation with
the Secretary of the Commonwealth of Massachusetts on June 27, 2000 (the
"Certificate of Designation").
WHEREAS, the Stockholder has converted the following shares of Series C
Preferred Stock into shares of the Corporation's Class A Common Stock (the
"Common Stock") as provided in Section 6.1 of the Certificate of Designation:
Number of Shares of Series C
Preferred Stock Converted Conversion Date
_______________________________ _________________
2,500 as of August 16, 2000
2,500 as of September 7, 2000
WHEREAS, the Stockholder and the Corporation entered into a certain letter
agreement dated as of January 5, 2001, a copy of which has been provided to the
Board and is attached hereto as Exhibit A (the "Settlement"), which Settlement
provided that the Corporation would issue an aggregate 89,041 shares of Common
Stock to the Stockholder in connection with the conversion of 1,300 shares of
Series C Preferred Stock as of December 18, 2000 and in satisfaction of any and
all dividends, additional dividends, interest payments and/or penalty payments
otherwise due on the shares of Series C Preferred Stock.
WHEREAS, the Corporation has issued all shares of Common Stock to the
Stockholder as provided in the Settlement.
WHEREAS, the Stockholder has requested the conversion of additional shares
of Series C Preferred Stock into shares of Common Stock, and that dividend
payments thereon be made in accordance with the new conversion and dividend
payment terms set forth in the Agreement, as defined below.
WHEREAS, the Corporation desires to enter into an Agreement with the
Stockholder (the "Agreement"), a copy of which has been provided to the Board of
Directors for its review and is attached hereto, which Agreement provides for
certain amendments to the terms of the Securities Purchase Agreement and
Certificate of Designation.
RESOLVED, that the Board hereby ratifies and approves the Settlement,
including any and all shares of Common Stock previously issued as a dividend on
shares of Series C Preferred Stock as provided in the Settlement.
RESOLVED, FURTHER, that the Board hereby declares dividends on the shares
of Series C Preferred Stock to be issued to the Stockholder upon the conversion
thereof, as set forth in the table below, which dividends shall be in the
amounts as set forth below and payable in cash or in shares of Common Stock as
shall be determined by the President of the Corporation in his sole discretion.
Number of Shares Dividend
of Series C Shares of Dividend (if paid in
Preferred Stock Conversion Common (if paid in shares of
to be converted: Date Stock cash) Common Stock)
_______________________________________________________________________________
2,000 January 3, 2001 168,350 $840 (1) 7,071 (1)
2,000 January 10, 2001 168,350 $871 (2) 7,332 (2)
2,000 January 15, 2001 168,350 $893 (3) 7,517 (3)
2,000 January 17, 2001 168,350 $902 (4) 7,594 (4)
(1) (2) (3) (4)
$20,000 x 8% x $20,000 x 8% x $20,000 x 8% x $20,000 x 8% x
189/360 = $840 196 /360 = $871 201 /360 = $893 203/360 = $902
$840/$0.1188 = $871/$0.1188 = 893/$0.1188 = $902/$0.1188 =
7,071 7,332 7,517 7,594
RESOLVED, FURTHER, that the Board approves the Agreement, including,
without limitation, that certain Amended and Restated Certificate of Designation
which is included as an attachment to the Agreement, the terms of which Amended
and Restated Certificate of Designation are incorporated by reference in the
Agreement under the terms thereof.
RESOLVED, FURTHER, that the appropriate officers of the Corporation are
hereby authorized and directed to execute and deliver in the Corporation's name
and on its behalf the Agreement, including the Amended and Restated Certificate
of Designation, together with any and all other documents, instruments and
certificates required to be delivered to effectuate and consummate any and all
transactions contemplated thereby, with such changes, additions and
modifications therein as they shall approve, such approval to be conclusively
evidenced by their execution thereof.
RESOLVED, FURTHER, that the appropriate officers of the Corporation are
hereby authorized and directed to prepare, execute and file an Amendment to the
Corporation's Articles of Organization or such other documents as shall be
required to be filed with the Commonwealth of Massachusetts so as to effectuate
the terms of the Amended and Restated Certificate of Designation.
RESOLVED, FURTHER, that any and all actions taken by the officers of the
Corporation with respect to the Settlement and the Agreement, are hereby
approved, ratified and adopted.
RESOLVED, FURTHER, that in addition to the specific authorizations set
forth in any of the foregoing resolutions, the Corporation's officers, or any
one of them, are hereby authorized and directed to take, from time to time, any
and all actions and to execute and deliver, from time to time, any and all
documents in the name and on behalf of the Corporation necessary or desirable to
effectuate or consummate any of the foregoing resolutions.
APPROVED:
/s/ Bruce A. Shear /s/ Howard W. Phillips
Bruce A. Shear Howard W. Phillips
/s/ Gerald M. Perlow /s/ William F. Grieco
Gerald M. Perlow William F. Grieco
/s/ Donald E. Robar
Donald E. Robar
Exhibit A
PHC, Inc.
200 Lake Street, Suite 102
Peabody, MA 01960
January 5, 2001
VIA FAX
The Shaar Fund Ltd.
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, New York 10048
Attention: Mr. Samuel Levinson
Dear Sam:
This letter is to confirm our agreement that PHC, Inc. (the "Company") will
issue 89,041 shares of the Company's Class A Common Stock ("Common Shares") to
The Shaar Fund Ltd. ("Shaar") in full payment and satisfaction of (i) the
conversion into Common Shares as of December 18, 2000 of $13,000 of shares of
the Company's Series C 8% Convertible Preferred Stock (the "Preferred Shares")
owned by Shaar and (ii) any and all dividends (the "Dividends") due on such
Preferred Shares and on the following, previously converted Preferred Shares
(collectively, all such converted Preferred Shares being referred to as the
"Converted Preferred Shares"):
1. $25,000 of Preferred Shares converted to Common Shares as of August 16,
2000
2. $25,000 of Preferred Shares converted to Common Shares as of September
7, 2000
The above 89,041 Common Shares shall be deemed to include and satisfy any and
all dividends, additional dividends, interest payments and/or penalty payments
otherwise due on the Converted Preferred Shares due to the late payment thereof,
as provided under that certain Securities Purchase Agreement dated June 28, 2000
between the Company and Shaar, and the Certificate of Designation governing the
Preferred Shares.
Shaar hereby acknowledges receipt of this letter by signing below and waives any
and all claims against the Company with respect to the Converted Preferred
Shares and the Dividends thereon.
Sincerely,
PHC, Inc.
By: /s/ Bruce A. Shear
Bruce A. Shear, President and Chief Executive Officer
Agreed:
Date: January __, 2001
The Shaar Fund Ltd.
By: __________________
Name:
Title:
AGREEMENT CONCERNING SERIES C PREFERRED STOCK
This Agreement dated as of the [__] day of February, 2001, by and between
PHC, Inc., a Massachusetts corporation (the "Corporation"), and The Shaar Fund
Ltd. (the "Stockholder").
WHEREAS, the Corporation has issued 170,000 shares of Series C 8%
Convertible Preferred Stock, par value $0.01 per share (the "Series C Preferred
Stock") to the Stockholder pursuant to (i) that certain Securities Purchase
Agreement dated June 28, 2000 between the Stockholder and the Corporation (the
"Securities Purchase Agreement"), and (ii) a Certificate of Designation setting
forth the rights and preferences of the Series C Preferred Stock, and the
limitations or restrictions thereon, which Certificate of Designation, is
included as Schedule I to the Certificate of Vote of Directors Establishing a
Class or Series of Stock filed by the Corporation with the Secretary of the
Commonwealth of Massachusetts on June 27, 2000 (the "Certificate of
Designation").
WHEREAS, the Stockholder has converted the following shares of Series C
Preferred Stock into shares of class A common stock, par value $0.01 per share,
of the Corporation's (the "Common Stock") as provided in Section 6.1 of the
Certificate of Designation:
Number of Shares of Series C
Preferred Stock Converted Conversion Date
___________________________________ ___________________
2,500 as of August 16, 2000
2,500 as of September 7, 2000
1,300 as of December 18, 2000
WHEREAS, the Stockholder and the Corporation entered into a certain letter
agreement dated as of January 5, 2001 which provided that the Corporation would
issue an aggregate 89,041 shares of Common Stock to the Stockholder in
connection with the conversion of the foregoing 1,300 shares of Series C
Preferred Stock and in satisfaction of any and all dividends, additional
dividends, interest payments and/or penalty payments otherwise due on the shares
of Series C Preferred Stock.
WHEREAS, the Stockholder and the Corporation desire to amend the Securities
Purchase Agreement and the Certificate of Designation.
WHEREAS, the Stockholder has requested the conversion of additional amounts
of Series C Preferred Stock into shares of Common Stock, and that dividend
payments thereon be made in accordance with the new conversion and dividend
payment terms set forth in this Agreement.
WHEREAS, the Corporation has requested that the Stockholder limit its
conversions of Series C Preferred Stock so that between the date hereof and July
31, 2001 such conversions will not in the aggregate convert into greater than
20% of the outstanding Common Stock of the Corporation.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Certificate of Designation hereby is amended as set forth in the
Amended and Restated Certificate of Designation attached hereto (the "Amended
and Restated Certificate of Designation"), all of the terms of which Amended and
Restated Certificate of Designation are hereby incorporated herein by reference
and made a part hereof.
2. Section V.D of the Securities Purchase Agreement is hereby amended and
restated in its entirety as follows:
Section 9.8 "D. The Company understands that a delay in the issuance of the
shares of Common Stock issuable in lieu of cash dividends on the
Preferred Shares (when such dividends are due under the Certificate of
Designation (the "Dividend Due Date")) or upon the conversion of the
Preferred Shares or exercise of the Warrants beyond the applicable
Dividend Due Date (as defined in the Certificate of Designation),
Delivery Date or Warrant Delivery Date could result in economic loss
to Buyer. As compensation to Buyer for such loss (and not as a
penalty), the Company agrees to pay to Buyer for late issuance of
Common Stock issuable in lieu of cash dividends on the Preferred
Shares or upon conversion of the Preferred Shares or exercise of the
Warrants in accordance with the following schedule (where "No.
Business Days" is defined as the number of business days beyond seven
days from the Dividend Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable):
Compensation For Each 10
Shares of Preferred Shares
Not Converted Timely or 500
Shares of Common Stock
Issuable In Payment of
Dividends or Upon Exercise of
No. Business Days Warrants Not Issued Timely
__________________ _______________________________
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
The Company shall pay to Buyer the compensation described
above by the transfer of immediately available funds upon
Buyer's demand. Nothing herein shall limit Buyer's right
to pursue actual damages for the Company's failure to issue
and deliver Common Stock to Buyer. In addition to any
other remedies which may be available to Buyer, in the
event the Company fails for any reason to deliver such
shares of Common Stock within seven business days after the
relevant Dividend Due Date, Delivery Date or Warrant
Delivery Date, as applicable, Buyer shall be entitled to
rescind the relevant Notice of Conversion or exercise of
Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be
restored to their respective original positions immediately
prior to delivery of such Notice of Conversion on delivery."
3. The parties agree that the Corporation shall issue to the Stockholder
the following shares of Common Stock in connection with the conversion of the
following shares of Series C Preferred Stock, and that the Corporation, at its
option, shall either issue additional shares of Common Stock in the numbers set
forth below or else pay the amounts set forth below in cash in full satisfaction
of any and all dividends due the Stockholder in connection with the following
conversions of shares of Series C Preferred Stock:
Number of Shares Dividend
of Series C Shares of Dividend (if paid in
Preferred Stock Conversion Common (if paid in shares of
to be converted: Date Stock cash) Common Stock)
_______________________________________________________________________________
2,000 January 3, 2001 168,350 $840 (1) 7,071 (1)
2,000 January 10, 2001 168,350 $871 (2) 7,332 (2)
2,000 January 15, 2001 168,350 $893 (3) 7,517 (3)
2,000 January 17, 2001 168,350 $902 (4) 7,594 (4)
(1) (2) (3) (4)
$20,000 x 8% = $20,000 x 8% = $20,000 x 8% = $20,000 x 8% =
189/360 = $840 196/360 = $871 201/360 = $893 203/360 = $902
$840/$0.1188 = $871/$0.1188 = 893/$0.1188 = $902/$0.1188 =
7,071 7,332 7,517 7,594
4. The Stockholder agrees that between the date hereof and July 31, 2001 it
will limit its conversions of Series C Preferred Stock so that such conversions
will not in the aggregate convert into greater than 20% of the outstanding
Common Stock of the Corporation.
5. By its signature hereto, the Stockholder consents to the amendment to
the Corporation's Articles of Organization as filed with the Secretary of the
Commonwealth of Massachusetts so as to incorporate therein the terms of the
Amended and Restated Certificate of Designation, and to the filing of such other
documents with the Commonwealth of Massachusetts as the same shall require to
effectuate the terms of the Amended and Restated Certificate of Designation
In Witness Whereof, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
PHC, Inc.
By: /s/ Paula C. Wurts
Name: Paula C. Wurts
Title: CFO
The Shaar Fund Ltd.
By: Shaar Advisory Services, N.V.
(the advisor to the Shaar Fund
Ltd.)
By: _____________________________
Name:
Title: