SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): October 19, 2004
PHC, Inc.
(Exact Name of Registrant as Specified in its Charter)
Massachusetts
(State of Incorporation or Organization)
0-22916 04-2601571
(Commission File Number) (I.R.S. Employer
Identification No.)
200 Lake Street, Suite 102, Peabody, Massachusetts 01960
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 536-2777
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
___ Written communications pursuant: to Rule 425 under the Securities Act
(17 CFR 230.425)
___ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
___ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
___ Pre-commencement communications pursuant to Rule 13c-4 ( c) under the
Exchange Act (17 CFR 240.13e-4 ( c)
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Item 1.01. Entry into a Material Definitive Agreement
On October 19, 2004, the Company entered into a revolving credit, term loan
and security agreement with CapitalSource Finance, LLC to replace the Company's
primary lender and provide additional liquidity. Each of the Company's material
subsidiaries, other than Pivotal Research Centers, Inc, is a co-borrower under
the agreement. The agreement includes a term loan in the amount of $1,400,000
and an accounts receivable funding revolving credit agreement with a maximum
loan amount of $3,500,000, including $900,000 available as an overline for
growth.
The term loan note carries interest at prime plus 3.5%, but not less than
9%, with twelve monthly principal payments of $25,000, 12 monthly principal
payments of $37,500, and eleven monthly principal payments of $50,000 beginning
November 1, 2004 with balance due at maturity, on October 1, 2007.
The revolving credit note carries interest at prime plus 2.25%, but not
less than 6.75% paid through lock box payments of third party accounts
receivable. The revolving credit term is three years, renewable for two
additional one-year terms.
All of the assets of the Company and its material subsidiaries, other than
Pivotal Research Centers, Inc., secure the obligations under the agreement, the
term loan note and the revolving credit note, including a first mortgage on PHC
of Michigan Inc.'s real property, a second mortgage on PHC of Virginia Inc.'s
real property, and a leasehold mortgage on PHC of Utah, Inc.'s leasehold
interests.
In connection with this transaction the Company paid approximately $180,000
in commitment and loan origination fees that will be amortized as additional
interest over the term of the agreement. Supplemental to the loan and security
agreement, the Company issued a warrant to purchase 250,000 shares of PHC, Inc.
class A common stock at an exercise price of $1.15 per share. The warrant is
exercisable, in whole or in part, until October 19, 2014 and contains standard
adjustments provisions for dilution and a minimum put provision pursuant to
which the Company may be required to redeem the warrant, or shares issued under
the warrant, for a minimum redemption price of $100,000. The maximum redemption
price of the warrant is equal to the lesser of $350,000 or the difference
between the market price of shares of class A common stock on the date the put
is exercised and the exercise price of the shares underlying the warrant. The
redemption price of the warrant and the underlying shares will be reduced by any
proceeds realized by the holder of the warrant from the sale of shares issued
under the warrant prior to the redemption date. The documents evidencing this
transaction, the revolving credit, term loan and security agreement, the
revolving credit note, The term loan note and warrant are filed as exhibits to
this form 8-K.
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Item 9.01. Financial Statements and exhibits
( c ) Exhibits
4.14 Warrant Agreement issued to CapitalSource Finance, LLC to purchase
250,000 shares of Class A Common stock dated October 19, 2004.
10.38 Revolving Credit, Term Loan and Security Agreement, dated October 19,
2004, by and between PHC, Inc, PHC of Utah, Inc., PHC of Virginia,
Inc. PHC of Michigan, Inc., PHC of Nevada, Inc., North Point Pioneer,
Inc, Wellplace, Inc., Detroit Behavioral Institute, Inc. and
CapitalSource Finance, LLC.
10.39 Term Loan Note, dated October 19, 2004, by and between PHC, Inc, PHC
of Utah, Inc., PHC of Virginia, Inc. PHC of Michigan, Inc., PHC of
Nevada, Inc., North Point Pioneer, Inc, Wellplace, Inc., Detroit
Behavioral Institute, Inc. and CapitalSource Finance, LLC in the
amount of $1,400,000.
10.40 Revolving Note dated October 19, 2004, by and between PHC, Inc, PHC
of Utah, Inc., PHC of Virginia, Inc. and PHC of Michigan, Inc., PHC of
Nevada, Inc., North Point Pioneer, Inc, Wellplace, Inc., Detroit
Behavioral Institute, Inc. and CapitalSource Finance, LLC in the
amount of $3,500,000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHC, INC.
Date: October 22, 2004 By: /s/ Bruce A. Shear
_______________________
Bruce A. Shear
President
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