Exhibit 10.27
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December 19, 2006, among PHC, Inc., a Massachusetts corporation (the "Company"),
and Camden Partners Limited Partnership, a Delaware limited partnership (the
"Purchaser"); and
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company $2,000,000 of
the Company's Common Stock, as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings
indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section 3.1(k).
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a Person as such terms are used in and construed under Rule 144. With
respect to the Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as the Purchaser will be
deemed to be an Affiliate of the Purchaser.
"Business Day" means any day except Saturday, Sunday and any day, which
shall be a federal legal holiday, or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
"Closing" means the closing of the purchase and sale of the Common Stock
pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.01 par value per
share, and any securities into which such common stock may hereafter be
reclassified.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
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Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
"Company Counsel" means Arent Fox PLLC, counsel to the Company.
"Disclosure Schedules" means the Disclosure Schedules concurrently
delivered herewith.
"Effective Date" means the date that the Registration Statement is first
declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Intellectual Property Rights" shall have the meaning ascribed to such term
in Section 3.1(p).
"Liens" shall have the meaning ascribed to such term in Section 3.1(a).
"Material Adverse Effect" shall have the meaning ascribed to such term in
Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in Section
3.1(n).
"Per Share Purchase Price" equals $2.08.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering the
resale by the Purchaser of the Shares.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Agreement, among the Company and the Purchaser, in
the form of Exhibit B hereto.
"Rule 144," means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Securities" means the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to the
Purchaser pursuant to this Agreement.
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"Subscription Amount" means, as to the Purchaser, the amount set forth
below the Purchaser's signature block on the signature page hereto, in United
States dollars and in immediately available funds.
"Subsidiary" with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person are held by the Owner or one or
more Subsidiaries of the Owner.
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which the Common Stock is traded on the over-the-counter market, as
reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market
or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement and the Registration Rights
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. At the Closing, the Purchaser shall purchase and the Company
shall issue and sell $2,000,000 of Common Stock. The Purchaser shall
purchase from the Company, and the Company shall issue and sell to the
Purchaser, a number of Shares equal to the Purchaser's Subscription
Amount divided by the Per Share Purchase Price, rounded up to the next
whole share.
2.2 Closing Conditions.
(a) At the Closing (unless otherwise specified below), the Company
shall deliver or cause to be delivered to the Purchaser the
following:
(i) this Agreement duly executed by the Company;
(ii) within three (3) Trading Days of the Closing, a certificate
evidencing a number of Shares equal to the Purchaser's
Subscription Amount divided by the Per Share Purchase Price,
registered in the name of the Purchaser;
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(iii) a legal opinion of Company Counsel, in the form of Exhibit
A hereto, addressed to the Purchaser; and
(iv) the Registration Rights Agreement duly executed by the
Company.
(b) At the Closing the Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such;
(ii) the Purchaser's Subscription Amount as to such Closing by
wire transfer to the account of the Company per the written
instructions of the Company; and
(iii) the Registration Rights Agreement duly executed by the
Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules, the
Company hereby makes the following representations and warranties as
of the date hereof to the Purchaser:
(a) Subsidiaries. The Company owns, directly or indirectly, 100% of
the capital stock of each Subsidiary free and clear of any lien,
charge, security interest, encumbrance, right of first refusal or
other restriction (collectively, "Liens"), and all the issued and
outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. Each Subsidiary is listed on the
Disclosure Schedules. The Company does not hold any capital
stock, equity securities or any convertible securities of any
Person other than the Subsidiaries.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as
applicable), with the requisite corporate (or other) power and
authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company
and the Subsidiaries is duly qualified to conduct business and is
in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business currently
conducted or property currently owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not have
or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document or the Shares, (ii) a material adverse
effect on the results of operations, assets, prospects, business
or financial condition of the Company and the Subsidiaries, taken
as a whole, or (iii) adversely impair the Company's ability to
perform in any material respect on a timely basis its obligations
under any Transaction Document (any of (i), (ii) or (iii), a
"Material Adverse Effect").
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(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The
execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is
required by the Company in connection therewith. Each Transaction
Document has been (or upon delivery will have been) duly executed
by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies or the
enforceability of rights of indemnification and contribution
under the applicable securities laws.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will
not (i) conflict with or violate any provision of the Company's
or any Subsidiary's certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction,
decree, Material Permit, license or other restriction of any
court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case
of each of clauses (ii) and (iii), such as would not have or
reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other
than (a) the filing with the Commission of the Registration
Statement, the application(s) to each Trading Market for the
listing of the Shares for trading thereon in the time and manner
required thereby, and applicable Blue Sky filings or (b) such as
have already been obtained or such exemptive filings as are
required to be made under applicable securities laws.
(f) Issuance of the Securities. The Securities are duly authorized
and the Shares, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens.
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(g) Capitalization. The capitalization of the Company is as described
in the Company's Quarterly Report on Form 10-Q, dated November
14, 2006 filed with the Commission. The Company has not issued
any capital stock since such filing other than pursuant to the
exercise of employee stock options under the Company's stock
option plans, the issuance of shares of Common Stock to employees
pursuant to the Company's employee stock purchase plan and
pursuant to the conversion or exercise of outstanding Common
Stock Equivalents. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. The
issue and sale of the Securities will not obligate the Company to
issue shares of Common Stock or other securities to any Person
(other than the Purchaser) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. Since December 31,
2003, all issued stock options and outstanding shares of capital
stock of the Company have been granted or issued, as the case may
be, in compliance with all applicable securities laws.
(h) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and
the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to make such
filings) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the "SEC
Reports") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to
the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder,
and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the
Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods
involved, except as stated therein ("GAAP"), and fairly present
in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then
ended.
(i) Material Changes. Since the date of the latest audited financial
statements included within the Annual Report on Form 10-K, for
the period ended June 30, 2006, filed with the Commission on
October 13, 2006, except as set forth in the Quarterly Report on
Form 10-Q, for the period ended September 30, 2006, filed with
the Commission on November 14, 2006, (i) there has been no event,
occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or
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otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, and (iii) the
Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its
capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant
to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential
treatment of information.
(j) Form S-3 Eligibility. The Company is not currently eligible to
register the Shares for resale by the Purchaser using Form S-3
promulgated under the Securities Act.
(k) Litigation. Except as disclosed in the Disclosure Schedules,
there is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign)
(collectively, an "Action") which may have or reasonably be
expected to result in a Material Adverse Effect. Neither the
Company nor any Subsidiary, nor any current director or officer
thereof, is or has been during the past five years the subject of
any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation
by the Commission involving the Company. There has not been
during the past five years, and to the knowledge of the Company,
there is not pending or contemplated, any investigation by the
Commission involving or any current director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(m) Compliance. Except as disclosed in the Disclosure Schedules,
neither the Company nor any Subsidiary (i) is in default under or
in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result
in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is
in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and
local laws applicable to its business (including the provisions
of the Sarbanes-Oxley Act of 2002, as amended), except in the
case of clauses (i), (ii) and (iii) as would not have or
reasonably be expected to result in a Material Adverse Effect.
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(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as
described in the SEC Reports, except where the failure to possess
such permits would not have or reasonably be expected to result
in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any Subsidiary (i) has any knowledge of or
received any notice of proceedings relating to the revocation,
suspension or modification of any Material Permit, or (ii) has
any reason to believe that any circumstance has occurred or
exists that would result in the revocation, suspension or
modification of any Material Permit.
(o) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them
that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal
property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of
such property and do not materially interfere with the use made
and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other
taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by
the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance, except as would not have or
reasonably be expected to result in a Material Adverse Effect.
(p) Intellectual Property . The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material
for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have
would have or reasonably be expected to result in a Material
Adverse Effect (collectively, the "Intellectual Property
Rights"). No other person or entity has any rights to any of the
Intellectual Property Rights owned by the Company or any
Subsidiaries, and, to the Company's knowledge, no other person or
entity is infringing, violating or misappropriating any of the
Company's Intellectual Property Rights. Neither the Company nor
any Subsidiary has received any communications alleging that it
has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of
any other person or entity.
(q) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are
engaged. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue
its business without a material increase in cost.
(r) Transactions With Affiliates and Employees. Except as set forth
in the Disclosure Schedules, none of the officers or directors of
the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction
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with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from
any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $100,000
other than (a) for payment of salary or consulting fees for
services rendered, (b) reimbursement for expenses incurred on
behalf of the Company and (c) for other employee benefits,
including stock option agreements under any stock option plan of
the Company.
(s) Internal Accounting Controls. The Company and each of its
Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets
is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the Company and designed such disclosures controls and
procedures to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the
certifying officers by others within those entities, particularly
during the period in which the Company's Form 10-K or 10-Q, as
the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's
controls and procedures as of a date within 90 days prior to the
filing date of the Form 10-K for the fiscal year ended June 30
2006 (such date, the "Evaluation Date"). The Company presented in
its most recently filed Form 10-Q the conclusions of the
certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no
significant changes in the Company's internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or in other factors that could significantly affect
the Company's internal controls.
(t) Certain Fees. No brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank
or other Person with respect to the transactions contemplated by
this Agreement. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by this Agreement.
(u) Private Placement.
(i) Assuming the accuracy of the Purchaser's representations and
warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchaser as contemplated
hereby.
(ii) Neither the Company, nor any of its affiliates, nor any
Person acting on its or their behalf has, directly or
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indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under
circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable
shareholder approval provisions.
(v) Investment Company. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(w) Registration Rights. Except pursuant to the Registration
Rights Agreement, no Person has any right to cause the
Company to effect the registration under the Securities Act
of any securities of the Company.
(x) No Listing. The Company is not currently listed on any
Trading Market.
(y) Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any,
in order to render inapplicable any control share
acquisition, business combination, poison pill (including
any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of
its state of incorporation that is or could become
applicable to the Purchaser as a result of the Purchaser and
the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the
Purchaser's ownership of the Securities.
(z) Disclosure. The Company confirms that, neither the Company
nor any other Person acting on its behalf has provided the
Purchaser or its agents or counsel with any information that
constitutes or might constitute material, non-public
information. The Company understands and confirms that the
Purchaser will rely on the foregoing representations and
covenants in effecting transactions in securities of the
Company. The Transaction Agreements (including the
Disclosure Schedules), and the SEC Reports are true and
correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of
the circumstances under which they were made, not
misleading.
3.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants as of the date hereof and as of
the Closing Date to the Company as follows:
(a) Organization; Authority. The Purchaser is an entity duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with full right, power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and
performance by the Purchaser of the transactions contemplated by
this Agreement has been duly authorized by all necessary
corporate action on the part of the Purchaser. Each Transaction
Document to which it is party has been duly executed by the
Purchaser, and when delivered by the Purchaser in accordance with
terms hereof, will constitute the valid and legally binding
obligation of the Purchaser, enforceable against it in accordance
with its terms.
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(b) Investment Intent. The Purchaser understands that the Securities
are "restricted securities" and have not been registered under
the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof,
has no present intention of distributing any of such Securities
and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this
representation and warranty not limiting the Purchaser's right to
sell the Securities pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state
securities laws). The Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. The Purchaser
does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
(c) Purchaser Status. At the time the Purchaser was offered the
Securities, it was, and at the date hereof it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. The
Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.
(d) Experience of the Purchaser. The Purchaser has such knowledge,
sophistication and experience in business and financial matters
so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. The Purchaser is able to
bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such
investment.
(e) General Solicitation. The Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or any other general
solicitation or general advertisement.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement, to the Company, to an Affiliate or partner of the
Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the
terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in the
following form:
15
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT') AND APPLICABLE STATE SECURITIES LAWS,
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WTTH A FINANCIAL INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501 (a)
UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that the Purchaser may
from time to time pledge pursuant to a bona fide margin
agreement with a registered broker-dealer or grant a
security interest in some or all of the Securities to a
financial institution that is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and, if
required under the terms of such arrangement, the Purchaser
may transfer pledged or secured Securities to the pledgees
or secured parties. Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of
legal counsel of the pledgee, secured party or pledgor shall
be required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement
under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately
amend the list of Selling Stockholders thereunder.
(c) Certificates evidencing the Shares shall not be subject to any
transfer restrictions and shall not contain any legend (including
the legend set forth in Section 4.1(b)), (i) while a registration
statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or
(ii) following any sale of such Shares pursuant to Rule 144, or
(iii) if such Shares are eligible for sale under Rule 144(k), or
(iv) if such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if
16
required by the Company's transfer agent to effect the removal of
the legend hereunder. The Company agrees that following the
Effective Date or at such time as such legend is no longer
required under this Section 4.1(c), it will, no later than five
Trading Days following the delivery by the Purchaser to the
Company or the Company's transfer agent of a certificate
representing Shares, as the case may be, issued with a
restrictive legend, deliver or cause to be delivered to the
Purchaser a certificate representing such Securities that is free
from all restrictive and other legends. The Company may not make
any notation on its records or give instructions to any transfer
agent of the Company that enlarge the restrictions on transfer
set forth in this Section.
4.2 Furnishing of Information. As long as the Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to
the Exchange Act. Upon the request of any such holder of Securities,
the Company shall deliver to such holder a written certification of a
duly authorized officer as to whether it has complied with the
preceding sentence. As long as the Purchaser owns Securities, if the
Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Purchaser and make publicly available in
accordance with Rule 144(c) such information as is required for the
Purchaser to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the
Securities to the Purchaser, or that would be integrated with the
offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.4 Securities Laws Disclosure; Publicity. The Company shall, within one
(1) Trading Day of the Closing Date, issue a press release and within
two (2) Trading Days file a Current Report on Form 8-K, in each case
reasonably acceptable to the Purchaser disclosing the transactions
contemplated hereby and make such other filings and notices in the
manner and time required by the Commission. The Company and the
Purchaser shall consult with each other in issuing any press releases
with respect to the transactions contemplated hereby, and neither the
Company nor the Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of
the Company, with respect to any press release of the Purchaser, or
without the prior consent of the Purchaser, with respect to any press
release of the Company, which consent shall not unreasonably be
withheld, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of the
Purchaser, or include the name of the Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the
prior written consent of the Purchaser, except (i) as required by
federal securities law in connection with the registration statement
contemplated by the Registration Rights Agreement and (ii) to the
extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchaser
with prior notice of such disclosure permitted under subclause (i) or
(ii).
17
4.5 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide the
Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information, unless
prior thereto the Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information. The Company
understands and confirms that the Purchaser shall be relying on the
foregoing representations in effecting transactions in securities of
the Company.
4.6 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for
(i) the satisfaction of any portion of the Company's debt (other than
payment of trade payables in the ordinary course of the Company's
business and prior practices), (ii) to redeem any Company equity or
equity-equivalent securities or (iii) to settle any outstanding
litigation.
4.7 Indemnification of Purchaser. The Company will indemnify and hold the
Purchaser and its directors, officers, shareholders, partners,
managers, members, Affiliates, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation that any the
Purchaser Party may suffer or incur as a result of or relating to any
misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any
of the representations, warranties, covenants or agreements made by
the Company in this Agreement or in the other Transaction Documents.
The Company will reimburse the Purchaser for its reasonable legal and
other expenses (including the cost of any investigation, preparation
and travel in connection therewith) incurred in connection therewith,
as such expenses are incurred. Each Purchaser Party shall notify the
Company in writing of any action against such Purchaser Party in
respect of which the Company may be obligated to provide
indemnification on account of Section 4.7, promptly (which in the case
of formal litigation against the Purchaser Party, shall mean within
thirty (30) days of the receipt of any summons) after the receipt of
notice of the commencement thereof. The omission of any Purchaser
Party so to notify the Company of any such action shall not relieve
the Company from any liability which the Company may have to such
Purchaser Party except to the extent the Company shall have been
materially prejudiced by the omission of such Purchaser Party to so
notify the Company, pursuant to this Section 4.7. In case any such
action shall be brought against any Purchaser Party and it shall
notify the Company of the commencement thereof, the Company shall be
entitled to participate therein and, to the extent that the Company
may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such Purchaser Party; provided, however, that (i) if
the Company shall elect not to assume the defense of such claim or
action or (ii) if the Purchaser Party reasonably determines (x) that
there may be a conflict between the positions of the Company and of
18
the Purchaser Party in defending such claim or action or (y) that
there may be legal defenses available to such Purchaser Party
different from or in addition to those available to the Company, then
separate counsel for the Purchaser Party shall be entitled to
participate in and conduct the defense, in the case of (i) and
(ii)(x), or such different defenses, in the case of (ii)(y), and the
Company shall be liable for any reasonable legal or other expenses
incurred by the Purchaser Party in connection with the defense. In no
event shall the Company be liable for fees and expenses of more than
one counsel (in addition to any local counsel) for all Purchaser
Parties. The Company will not file any papers or consent to the entry
of any judgment or enter into any settlement with respect to any third
party claim against any Purchaser Party without the prior written
consent of such Purchaser Party.
4.8 Listing of Common Stock. The Company agrees, if the Company applies to
have the Common Stock traded on any Trading Market, it will include in
such application the Shares, and will take such other action as is
necessary or desirable in the reasonable opinion of the Purchaser to
cause the Shares to be listed on such Trading Market as promptly as
possible. Once so listed, the Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a
Trading Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the bylaws or
rules of the Trading Market.
4.9 Registration Rights. The Company will register the Shares as required
pursuant to the Registration Rights Agreement and shall comply with
the terms and conditions of the Registration Rights Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. The Company shall pay, at the Closing, the
reasonable fees and out-of-pocket disbursements (up to a maximum of
$20,000) of WilmerHale, counsel to the Purchaser, in connection with
the preparation of this Agreement and the other agreements
contemplated hereby and the closing of the transactions contemplated
hereby and thereby. The Company shall pay from time to time as
incurred the reasonable fees and out-of-pocket expenses of one legal
counsel for the Purchaser reasonably retained by the Purchaser in
connection with the amendment or enforcement of this Agreement.
5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and supersede
all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via
confirmed facsimile at the facsimile number specified in this Section
prior to 5:30 p.m. (Eastern time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or
communication is delivered via confirmed facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (Eastern time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for
such notices and communications shall be as set forth on the signature
pages attached hereto.
5.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an
19
amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waiver is
sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default
or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right.
5.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof. The language used in this
Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will
be applied against any party.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
Purchaser. The Purchaser may assign any or all of its rights under
this Agreement to any Person to whom the Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing
to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchaser".
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person, except as otherwise set forth
in Sections 5.6 and 5.7.
5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal
laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting
in the State of New York. Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting
in the State of New York for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the
any of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is improper. Each party hereto
20
hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto
(including its affiliates, agents, officers, directors and employees)
hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an
action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall
be reimbursed by the other party for its attorneys fees and other
costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing for a period of 2 years
from the Closing Date.
5.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with
the same force and effect as if such facsimile signature page were an
original thereof.
5.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any
way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision that is a reasonable
substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
5.12 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested. The
applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchaser and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law
would be adequate.
5.14 Payment Set Aside. To the extent that a party makes a payment or
payments to the other party pursuant to any Transaction Document or a
party enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required
to be refunded, repaid or otherwise restored to the other party, a
trustee, receiver or any other person under any law (including,
without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such
21
restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or setoff had
not occurred.
(Signature Page Follows)
22
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PHC, INC. Address for Notice:
_________________________________
Pioneer Behavioral Health
200 Lake Street, Suite 102
By: /s/ Bruce A. Shear Peabody, Ma 01960
Name: Bruce A. Shear
Title: President Attn:
Tel: (978) 536-2777
Fax:
23
[PURCHASER SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
CAMDEN PARTNERS LIMITED PARTNERSHIP Address for Notice:
_________________________________
c/o Camden Partners Holdings, LLC
By: Camden Partners Capital Management, LLC 500 East Pratt Street
its General Partner Suite 1200
Baltimore, Maryland 21202
By: /s/ Shane Kim P: (410) 878-6800
Name: Shane Kim F: (410) 878-6850
Title: Member Attn: Shane H. Kim
Subscription Amount: $2,000,000
With a copy (which shall not constitute notice) to:
WilmerHale
1875 Pennsylvania Avenue
Washington, DC 20006
Tel: (202) 663-6000
Fax: (202) 663-6363
Attn: Gregory J. Ewald
24
DISCLOSURE SCHEDULE
3.1(a)
The Subsidiaries of PHC, Inc. are as follows:
Behavioral Health Online, Inc. (Massachusetts)
Detroit Behavioral Institute, Inc. (Massachusetts)
North Point-Pioneer, Inc. (Massachusetts)
PHC of Michigan, Inc. (Massachusetts)
PHC of Nevada, Inc. (Massachusetts)
PHC of Utah, Inc. (Massachusetts)
PHC of Virginia, Inc. (Massachusetts)
Pivotal Research Centers, Inc. (Delaware)
Seven Hills Hospital, Inc. (Delaware) (not yet commenced operations)
Wellplace, Inc. (Massachusetts)
All of the Subsidiaries are wholly owned.
The stock of all of the Subsidiaries except Pivotal Research Centers, Inc. is
pledged to CapitalSource Finance LLC pursuant to the Revolving Credit, Term Loan
and Security Agreement dated as of October 19, 2004.
The stock of Pivotal Research Centers, Inc. is pledged to Louis C. Kirby, Carol
A. Colombo and Anthony A. Bonacci.
3.1(e)
The rights to registration under the Act granted to CapitalSource Finance LLC
under the Class A Common Stock Purchase Warrant Agreement dated October 19, 2004
and filed as Exhibit 4 to the Company's Form 8-K dated October 19, 2004.
The Company is obligated to give CapitalSource Finance LLC notice of its intent
to file a registration statement.
3.1(g)
Since the date of the Company's Form 10-Q filed November 14, 2006, 135,000
shares of Class A Common Stock have been issued pursuant to the exercise of
outstanding warrants (30,000 @ $0.84 per share, 30,000 @ $0.86 per share and
75,000 (@ $1.10 per share).
The Company has issued an Equity Purchase Warrant dated June 9,2000 and an
Equity Purchase Warrant dated December 18,2000 to Heller Healthcare Finance,
Inc.; each of which state:
10. Preemptive Purchase Rights
25
If at any time the Company grants, issues or sells any shares of Common
Stock or other securities or any options, warrants, or rights to purchase
shares of Common Stock, warrants, securities or other property pro rata to
the record holders of the Common Stock (the "Subscription Rights"), then
the Holder of this Warrant shall be entitled to acquire, upon the terms
applicable to the Subscription Rights, the total number of Subscription
Rights that the Holder would have acquired if the Holder had exercised this
Warrant immediately before the record date for the grant, issuance or sale
of the Subscription Rights, or if no record date is determined, the date as
of which the record holders of Shares entitled to receive the Subscription
Rights were determined.
Schedule of outstanding options is attached as Schedule A
Schedule of outstanding warrants is attached as Schedule B
The Class A Common Stock Purchase Warrant Agreement issued to CapitalSource
Finance LLC includes anti-dilution provisions that will be triggered by the
Transaction.
3.1(0)
Substantially all of the Company's and its subsidiaries assets (except
Pivotal Research Centers, Inc.) are subject to Liens in favor of
CapitalSource Finance LLC pursuant to the Revolving Credit, Term Loan and
Security Agreement dated as of October 19, 2004.
The Mount Regis Center Facility is subject to a ftrst Lien in favor of
Douglas M. Roberts pursuant to the Deed of Trust Note dated July 28, 1987
The Company's interest in Pivotal Research Centers, Inc. is subject to a
first Lien in favor of Louis C. Kirby, Carol A. Colombo and Anthony A.
Bonacci pursuant to the Pledge Agreement dated April 30, 2004
The assets of Pivotal Research Centers, Inc. are subject to a first Lien in
favor of Louis C. Kirby, Carol A. Colombo and Anthony A. Bonacci pursuant
to the Security Agreement dated April 30, 2004
3.1(w)
The Company is obligated to give CapitalSource Finance LLC notice of its
intent to file a registration statement.
26
Schedule A
The following tables summarize information about stock options outstanding
and exercisable at December 15, 2006:
Number Outstanding At Dec. Number Exercisable At Dec.
Exercise Price 15, 2006 15, 2006
$ .22 6,000 6,000
.35 40,000 40,000
.45 19,000 19,000
.55 138,000 138,000
.69 35,000 35,000
.74 50,000 50,000
.75 146,000 146,000
.81 6,000 6,000
1.03 6,000 6,000
1.07 10,000 10,000
1.11 50,000 50,000
1.17 20,000 20,000
1.20 35,000 35,000
1.21 50,000 50,000
1.33 50,000 50,000
1.37 15,000 15,000
1.38 5,000 5,000
1.41 50,000 50,000
1.45 50,000 31,250
1.48 50,000 50,000
1.95 1,250 313
2.05 3,750 938
2.06 58,500 19,125
2.11 80,000 20,000
2.20 33,750 8,438
2.28 23,750 5,938
2.35 5,000 1,250
2.38 15,000 15,000
2.53 37,500 9,375
2.68 90,000 22,500
2.73 105,000 26,250
3.50 6,000 6,000
__________ __________
1,290,500 947,376
27
Schedule B
The Company has the following warrants outstanding at December 15, 2006:
Date of Number of Exercise Expiration
Issuance Shares Price Date
__________________________________________________________________________
04/01/2003 10,000 shares $1.00 per share April 2008
09/22/2003 20,000 shares $. 90 per share Sept 2008
03/02/2004 15,113 shares $1.10 per share Mar 2007
04/29/2004 171,590 shares $1.10 per share Apr 2007
04/30/2004 6,750 shares $1.24 per share Apr 2007
10/19/2004 250,000 shares $1.15 per share Oct 2014
10/10/2005 100,000 shares $1.10 per share Sept 2007
28
Exhibit A
[Form of Opinion]
29
Arent Fox
ATTORNEYS AT LAW
Jeffrey E. Jordan
202.857.6473 DIRECT
December 19, 2006 202-857-6395 FAX
jordanjefftey@arentfox.com
Camden Partners Limited Partnership
c/o Camden Partners Holdings, LLC
500 East Pratt Street, Suite 1200
Baltimore, Maryland 21202
Re:. PHC. Inc.
Gentlemen:
We have acted as counsel for PHC, Inc., a Massachusetts corporation (the
"Company"), in connection with the sale by the Company to Camden Partners
Limited Partnership, a Delaware limited partnership (the "Purchaser" or "you")
of 961,539 shares of the Company's Class A Common Stock, par value $0.01 per
share (the "Shares"), pursuant to the Securities Purchase Agreement dated as of
December 19, 2006 (the "Purchase Agreement") between the Company the Purchaser
and the execution and delivery by the Company of the Registration Rights
Agreement dated as of December 19, 2006 (the "Registration Rights Agreement")
between the Company and the Purchaser. The Purchase Agreement and the
Registration Rights Agreement are referred to herein collectively as the
"Agreements." Unless otherwise defined herein, capitalized terms used herein
have the respective meaning given them in the Agreements.
In rendering this opinion, we have made such legal and factual examinations
and inquiries as we have deemed advisable or necessary for the purpose of
rendering this opinion. As to matters of fact material to the opinions expressed
herein, we have relied without independent investigation upon the
representations and warranties as to factual matters contained in and made by
the Company pursuant to the Purchase Agreement and upon certificates and
statements of government officials and of officers of the Company. In addition,
we have examined originals or copies of documents, corporate records and other
writings which we consider relevant for the purposes of this opinion. In such
examination, we have assumed the genuineness of all signatures on original
documents, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents (except for the due
execution and delivery of the Agreements by the Company) where due execution and
delivery are a prerequisite to the effectiveness thereof. In making our
examination of documents executed by an entity other than the Company, we have
assumed that such other entity had the power to enter into and perform all its
obligations thereunder, and we also have assumed the due authorization by such
other entity of all requisite actions and the due execution and delivery of such
documents by such other entity.
As used in this opinion, the expression "to our knowledge" or "known to us"
with reference to matters of fact refers to the current actual knowledge, after
an examination of documents referred to herein and after the examinations and
inquiries described in the foregoing paragraph, of Jeffrey E. Jordan, Steven
Cohen and Patricio Garavito, the attorneys of this firm who have worked on the
transactions referred to in the first paragraph of this opinion. Except to the
30
Camden Partners Limited Partnership
December 19, 2006
Page 2
the extent expressly set forth herein, we have not undertaken any independent
investigation to determine the existence or absence of any facts, and no
inference as to our knowledge of the existence or absence or any such facts
should be drawn from our representation of the Company or the rendering of the
opinions set forth below.
In rendering the opinions in paragraphs (a), (b), (c) and (e), we have
relied, as to all matters pertaining to Massachusetts law, upon the opinions
dated the date hereof of Andy DeMayo, Esq., in-house counsel to the Company. We
express no opinion as to matters governed by any laws other than the laws of the
State of New York, the Delaware General Corporation Law and the federal law of
the United States of America. To the extent that laws other than the foregoing
are applicable with respect to matters set forth in this opinion, we have
assumed that such laws are either identical to, or would be applied in a manner
consistent with, the laws of the State of New York. We assume no obligation to
supplement this letter if any of the applicable laws change in any manner.
In rendering the opinion set forth in paragraph (a) below, we have relied
exclusively on certificates of public officials, although we have not obtained a
tax good standing certificate and no opinion is provided with respect to tax
good standing.
In rendering the opinion set forth in paragraph (f), we have assumed that
the representations and warranties of the Purchaser set forth in the Purchase
Agreement are true and complete and that the information provided by the Company
to the Purchaser in connection with the offer and sale of the Shares was
accurate and complete. We have also assumed the accuracy of, and have relied
upon, the Company's representations to us that the Company has made no offer to
sell the Shares by means of any general solicitation or in connection with the
publication of any advertisement therefor.
Based upon foregoing and subject to the qualifications set forth herein,
we are of the opinion that:
(a) The Company is a corporation incorporated, existing and in good
standing under the laws of the Commonwealth of Massachusetts. Each of the
Subsidiaries is a corporation incorporated, existing and in good standing under
the laws of the jurisdiction of its formation.
(b) The Company has the necessary corporate power and authority to own its
property and conduct its business as, to our knowledge, it is currently being
conducted, to enter into the Agreements and to issue, sell and deliver to the
Purchaser the Shares to be issued and sold by it thereunder, and the execution
and delivery of the Agreements has been duly authorized by all necessary
corporate action on the part of the Company.
(c) The Shares to be issued by the Company pursuant to the terms of the
Purchase Agreement will be, upon issuance and delivery against payment therefore
in accordance with the terms of the Agreement, duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in the Disclosure Schedule,
shareholders of the Company have no preemptive rights, rights of first refusal
or similar rights under the Massachusetts Business Corporation Act, the Company
31
Camden Partners Limited Partnership
December 19,2006
Page 3
Articles of Incorporation or By-laws or, to our knowledge, any agreement filed
or incorporated by reference as an exhibit to the Company's annual report on
Form 10-K filed with the SEC on October 13, 2006.
(d) The Purchase Agreement constitutes a valid and binding obligation of
the Company, enforceable against the Company according to its terms.
(e) The performance by the Company of the Agreements and the consummation
by the Company of the transactions therein contemplated will not contravene any
provision of the Company's Articles of Incorporation, By-laws or any Applicable
Law. Except as set forth in the Disclosure Schedule, the performance by the
Company of the Agreements and the consummation by the Company of the
transactions therein contemplated will not conflict with, violate or breach any
of the terms and provisions, or constitute a default under, any (i) indenture,
mortgage, deed of trust, loan agreement, bond, debenture, note agreement or
other evidence of indebtedness, or any lease, contract or other agreement or
instrument filed or incorporated by reference as an exhibit to the Company's
annual report on Form IO-K filed with the SEC on October 13, 2006, or, (ii) any
order, writ or decree of any court or governmental agency or body having
jurisdiction over the Company, or over any of its properties or operations
specifically naming the Company and known to us. "Applicable Law" means, subject
to the exclusions in the next sentence, any provision of New York or federal law
or regulation that is generally applicable to organizations such as the Company.
The term "Applicable Law" excludes federal and state securities laws, rules and
regulations.
(f) The offer, sale and issuance of the Shares in conformity with the terms
of the Purchase Agreement constitutes transactions exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended.
The opinions hereinafter expressed are subject to the following further
qualifications:
The opinions set forth above are subject to the following additional
qualifications:
(a) The validity, binding nature and enforceability of the Agreements may
be limited by bankruptcy, insolvency, reorganization, moratorium and other laws
or equitable principles, whether such principles are applied by a court of
equity or a court of law, and we express no opinion on whether a court would
grant specific performance, injunctive relief or any other equitable remedy.
(b) A court could refuse to permit the Investors to enforce their remedies
under the Agreements by reason of (i) a waiver by the Purchaser, (ii)
unconscionable conduct by the Purchaser, (iii) the exercise of remedies by the
Purchaser without providing adequate notice to the Company of the default and a
reasonable opportunity to cure the default, (iv) the court's determination that
the Company is entitled to an opportunity to be heard by the court before the
Purchaser is entitled to exercise any remedies, (v) the court's determination
that a remedy is a penalty or is unconscionable, (vi) the court's determination
that the Purchaser is seeking to exercise remedies with respect to a breach that
32
Camden Partners Limited Partnership
December 19,2006
Page 4
is immaterial or that does not adversely affect the Purchaser, (vii) defenses
arising from the Purchaser's failure to act in accordance with the terms and
conditions of the Agreement, (viii) defenses arising as a consequence of the
passage of time (e.g., laches or statutes of limitation), (ix) defenses arising
as a result of the Purchaser's failure to act in a commercially reasonable
33
manner or in good faith, or (x) public policy considerations.
(c) We express no opinion with respect to any of the following provisions
if they are contained in any of the Agreements: (i) any provisions under which
the Company waives any of its legal or equitable rights except to the extent the
waived rights are expressly waivable pursuant to a statute or constitutional
provision; (ii) any provisions entitling the Purchaser to obtain reimbursement
for attorneys' fees and other costs incurred by the Purchaser; (iii) any
provision exonerating or indemnifying the Purchaser (or any agent or employee of
the Purchaser or any party acting on behalf of the Purchaser) from the
consequences of its own acts or omissions; (iv) any severability provision; (v)
any provision to the effect that rights or remedies are not exclusive, that
every right or remedy is cumulative and may be exercised in addition to or with
any other right or remedy or that the election of a particular remedy does not
preclude recourse to one or more other remedies; (vi) any provision that
authorizes the entry of a confession of judgment; (vii) any provision which
purports to affect jurisdiction or venue of any specified court or courts, or
which purports to establish evidentiary standards, or which waives trial by
jury; or (viii) choice of law provisions.
(d) Except as set forth in paragraph (f), we express no opinion with
respect to federal or state securities laws.
(e) We express no opinion as to the enforceability of the indemnification
and contribution provisions in the Registration Rights Agreement.
This opinion is furnished to you solely for your benefit and may not be
relied on by, nor may copies be delivered to, any other person without our prior
written consent. We assume no obligation to inform you of any facts,
circumstances, events or changes in the law that may hereafter be brought to our
attention that may aIter, affect or modify the opinion expressed herein.
Sincerely,
/s/ Arent Fox PLLC
___________________
Arent Fox PLLC
34
(Logo) Pioneer Behavioral Health
200 Lake Street, Suite 102
Peabody, MA 01960
(978) 536-2777
Fax (978) 536-2677
December 19, 2006
Camden Partners Limited Partnership
c/o Camden Partners Holdings, LLC
500 East Pratt Street, Suite 1200
Baltimore, Maryland 21202
Re: PHC. Inc.
Gentlemen:
I have acted as in-house counsel for PHC, Inc., a Massachusetts corporation
(the "Company"), in connection with the sale by the Company to Camden Partners
Limited Partnership, a Delaware limited partnership (the "Purchaser" or "you"),
of 961,539 shares of the Company's Class A Common Stock, par value $0.01 per
share (the "Shares"), pursuant to the Securities Purchase Agreement dated as of
December 19, 2006 (the "Purchase Agreement") between the Company the Purchaser
and the execution and delivery by the Company of the Registration Rights
Agreement dated as of December 19, 2006 (the "Registration Rights Agreement")
between the Company the Purchaser. The Purchase Agreement and the Registration
Rights Agreement are referred to herein collectively as the "Agreements." Unless
otherwise defined herein, capitalized terms used herein have the respective
meaning given them in the Agreements.
In rendering this opinion, I have made such legal and factual examinations
and inquiries as I have deemed advisable or necessary for the purpose of
rendering this opinion. As to matters of fact material to the opinions expressed
herein, I have relied without independent investigation upon the representations
and warranties as to factual matters contained in and made by the Company
pursuant to the Purchase Agreement and upon certificates and statements of
government officials and of officers of the Company. In addition, I have
examined originals or copies of documents, corporate records and other writings
which I consider relevant for the purposes of this opinion. In such examination,
I have assumed the genuineness of all signatures on original documents, the
conformity to original documents of all copies submitted to me and the due
execution and delivery of all documents (except for the due execution and
delivery of the Agreements by the Company) where due execution and delivery are
a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to my knowledge" or "known to me"
with reference to matters of fact refers to my current actual knowledge, after
an examination of documents referred to herein and after the examinations and
inquiries described in the foregoing paragraph. Except to the extent expressly
35
Camden Partners Limited Partnership
December 19,2006
Page 2
set forth herein, I have not undertaken any independent investigation to
determine the existence or absence of any facts, and no inference as to my
knowledge of the existence or absence or any such facts should be drawn from my
representation of the Company or the rendering of the opinions set forth below.
I express no opinion as to matters governed by any laws other than the laws
of the Commonwealth of Massachusetts. To the extent that laws other than the
foregoing are . applicable. with respect to matters set forth in this opinion, I
have assumed that such laws are either identical to, or would be applied in a
manner consistent with, the laws of the Commonwealth of Massachusetts. I assume
no obligation to supplement this letter if my of the applicable laws change in
any manner.
In rendering the opinion set forth in paragraph (a) below, I have relied
exclusively on my inspection of the corporate records available for inspection
through the web page maintained by Corporations Division of the Massachusetts
Secretary of the Commonwealth.
Based upon foregoing and subject to the qualifications set forth herein, I
am of the opinion that:
(a). The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of tile Commonwealth of Massachusetts. Each of
the Subsidiaries stated to be incorporated in Massachusetts is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts.
(b) The Company has the necessary corporate power and authority to own its
property and conduct its business as, to my knowledge, it 'is currently being
conducted, to enter into the Agreements and to issue, sell and deliver to the
Purchaser the Shares to be issued and sold by it thereunder, and the execution
and delivery of the Agreements has been duly authorized by all necessary
corporate action on the part of the Company.
(c) The Shares to be issued by the Company pursuant to the terms of the
Purchase Agreement will be, upon issuance and delivery against payment therefore
in accordance with the terms of the Agreement, duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in the Disclosure Schedule.
shareholders of the Company have no preemptive rights, rights of first refusal
or similar rights under the Massachusetts Corporation Act, the Company's
Articles of Incorporation or By-laws or, to my knowledge, any agreement filed or
incorporated by reference as an exhibit to the Company's annual rep9rt on Form
10-K filed with the SEC on October 13, 2006.
(d) The performance by the Company of the Agreements and the consummation
by the Company of the transactions therein contemplated will not contravene any
provision of the Company's Articles of Incorporation, By-laws or any Applicable
Law or any order, writ or decree of any court or governmental agency or body
having jurisdiction over the Company, or over any of its properties or
operations, specifically naming the Company and known to me. "Applicable Law"
means any provision of Massachusetts law or regulation that is generally
applicable to organizations such as the Company.
36
Camden Partners Limited Partnership
December 19, 2006
Page 3.
This opinion is furnished to you solely for your benefit and may not be
relied on by, nor may copies be delivered to, any other person without my prior
written consent. I assume no obligation to inform you of any facts,
circumstances, events or changes in the law that may hereafter be brought to my
attention that may alter, affect or modify the opinion expressed herein.
Sincerely,
/s/ Andy DeMayo, Esq.
_____________________________________
Andy DeMayo, Esq.
Director of Corporate Services /
Compliance Officer
37
Exhibit B
[Registration Rights Agreement]
38
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 19, 2006, by and among PHC, Inc., a Massachusetts
corporation (the "Company"), and Camden Partners Limited Partnership, a Delaware
limited partnership (the "Purchaser").
This Agreement is made pursuant to, and as a condition to closing under,
the Securities Purchase Agreement, dated as of the date hereof among the Company
and the Purchaser (the "Purchase Agreement").
The Company and the Purchaser hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Blackout Period" shall have the meaning set forth in Section 2(b).
"Effectiveness Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 120th calendar day
following the Closing Date and with respect to any additional
Registration Statements required pursuant to Section 2(c), the 120th
calendar day following the date on which the Company first knows, or
reasonably should have known, that such additional Registration
Statement is required hereunder.
"Effectiveness Period " shall have the meaning set forth in Section
2(a).
"Filing Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 90th calendar day
following the Closing Date and, with respect to any additional
Registration Statements which may be required pursuant to Section
2(c), the 90th calendar day following the date on which the Company
first knows, or reasonably should have known that such additional
Registration Statement is required hereunder.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
39
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering
of any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
"Registrable Securities" means the Shares and any other shares of
Common Stock now held or hereafter acquired by the Holder from the
Company, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.
"Registration Statement" means a Registration Statements required to
be filed hereunder, including (in each case) the Prospectus,
amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" solely for the purpose of this Agreement means the Shares (as
defined in the Purchase Agreement).
2. Registration.
(a) On or prior to each Filing Date, the Company shall use best efforts to
prepare and file with the Commission a Registration Statement covering the
resale of 100% of the Registrable Securities for an offering to be made on a
continuous basis pursuant to Rule 415. A Registration Statement required
hereunder shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith). Each
Registration Statement required hereunder shall contain (except if otherwise
directed by the Holders) the "Plan of Distribution" attached hereto as Annex A.
The Company shall cause such Registration Statement to become effective and
remain effective as provided herein. The Company shall use commercially
reasonable efforts to cause each Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event not later than the Effectiveness Date, and shall commercially
reasonable efforts to keep such Registration Statement continuously effective
under the Securities Act until the later of two years after the date the such
Registration Statement is declared effective by the Commission or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company pursuant to a written opinion letter to such effect, addressed
40
and acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"), provided that the Effectiveness Period shall end prior
to two years after the date the such Registration Statement is declared
effective by the Commission if all Registrable Securities covered by such
Registration Statement have been sold.
(b) If a Registration Statement filed or required to be filed
hereunder is not declared effective by the Commission on or before the
Effectiveness Date or ceases to remain effective at any time during
the Effectiveness Period (any such failure or breach to be referred to
as an "Event") then in addition to any other rights the Holders may
have hereunder or under applicable law: (x) on the seventh day after
the date of such Event (the "Event Date"), the Company shall make a
payment to each Holder of an amount in cash or shares of the Company's
Common Stock (at the Company's option), as liquidated damages and not
as a penalty, equal to 1.0% of the aggregate purchase price paid by
such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder; and (y) on seventh day of each
monthly anniversary of each such Event Date (if the applicable Event
shall not have been cured by such date) until the applicable Event is
cured, the Company shall make a pro rata payment to each Holder in an
amount in cash or shares of the Company's Common Stock (at the
Company's option), as liquidated damages and not as a penalty, equal
to 1.0% of the aggregate purchase price paid by such Holder pursuant
to the Purchase Agreement for any Registrable Securities then held by
such Holder for each month or pro rata portion thereof until the
applicable Event is cured. For purposes of the calculating the value
of shares of the Company's Common Stock issued pursuant to this
Section 2(b), the per share price of the Company's Common Stock shall
be the Per Share Purchase Price (subject to adjustment for stock
splits, dividends, combinations and the like). Notwithstanding the
foregoing, if at anytime after the Effectiveness Date the Company, in
good faith and on the written advice of counsel, notifies the Holders
of any of the events set forth in Section 3(c)(v), the Company shall
not be liable for the payments described above for the period
beginning on the date the Company provides such notice to all Holders
and ending on the date when such event is addressed pursuant to
Section 3(i) (such period being referred to as the "Blackout Period");
provided, however, that the Company shall be liable for the payment
described above if, and to the extent, the Blackout Period (i) exceeds
an aggregate of 30 calendar days in any 12-month period, or (ii)
occurs on more than two separate occasions in any 12-month period
(regardless of the length of each Blackout Period)
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of Common
Stock then registered in a Registration Statement, then the Company
shall file as soon as reasonably practicable but in any case prior to
the applicable Filing Date, an additional Registration Statement
covering the resale of by the Holders of not less than 100% of the
number of such Registrable Securities.
3. Registration Procedures.
In connection with the Company's registration obligations hereunder,
the Company shall:
41
(a) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto, (i)
furnish to the Holders copies of all such documents proposed to be filed
(including documents incorporated or deemed incorporated by reference to the
extent requested by such Person) which documents will be subject to the review
of such Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto, to which the Holders of a majority of the Registrable
Securities shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the Commission
with respect to a Registration Statement or any amendment thereto and, as
promptly as reasonably possible, upon request, provide the Holders true and
complete copies of all correspondence from and to the Commission relating to
such Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by a Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in a Registration Statement as so
amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold as promptly as
reasonably possible (and, in the case of (i)(A) below, not less than three
Trading Days prior to such filing) and (if requested by any such Person) confirm
such notice in writing promptly following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the Company
whether there will be a "review" of a Registration Statement and whenever the
Commission comments in writing on such Registration Statement (the Company shall
upon request provide true and complete copies thereof and all written responses
thereto to each of the Holders); and (C) with respect to a Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other federal or state governmental
authority during the period of effectiveness of a Registration Statement for
amendments or supplements to a Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (v) of the occurrence of any event or passage
of time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in such Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to such Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus, as
42
the case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e) Furnish to each Holder, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent reasonably requested by such
Person, and all exhibits to the extent reasonably requested by such Person
(including those previously furnished or incorporated by reference) promptly
after the filing of such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many copies of the
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.
(g) Prior to any public offering of Registrable Securities, use
commercially reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder reasonably requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified, subject
the Company to any material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.
(h) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.
43
(i) Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment if necessary, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither such Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Comply with all applicable rules and regulations of the Commission,
except where a failure to comply would be immaterial.
(k) The Company may require each selling Holder to furnish to the Company a
certified statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if requested by the Commission, the controlling person
thereof.
4. Registration Expenses.
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
Trading Market on which the Common Stock is then listed for trading, and (B) in
compliance with applicable state securities or Blue Sky laws), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is reasonably requested by the holders of a majority of the
Registrable Securities included in a Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In addition, the Company shall pay
for the reasonable fees and disbursements for a single counsel for the Holders,
not to exceed $15,000.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, managers, members, partners., directors, agents and employees of each
of them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
44
contained in a Registration Statement, any Prospectus or any form of prospectus
or in any amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that (1) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(c). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising out of or based solely upon: (x) such Holder's failure to
comply with the prospectus delivery requirements of the Securities Act or (y)
any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not misleading
(i) to the extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by such Holder
to the Company specifically for inclusion in such Registration Statement or such
Prospectus or (ii) to the extent that (1) such untrue statements or omissions
are based upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in a Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(c). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
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gross proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have prejudiced
the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). In no event
shall the Company be liable for fees and expenses of more than one counsel (in
addition to any local counsel) for all Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party; provided, that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses applicable to such
actions for which such Indemnified Party is not entitled to indemnification
hereunder, determined based upon the relative faults of the parties.
46
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud by
such Holder. No person or entity guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
47
(b) Compliance. Each Holder covenants and agrees that it will comply with
the prospectus delivery requirements of the Securities Act as applicable to it
in connection with sales of Registrable Securities pursuant to a Registration
Statement.
(c) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c), such Holder will
forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
(d) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and Holders
holding at least 66% of the then outstanding Registrable Securities.
(e) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
provided for below prior to 5:30 p.m. (Eastern time) on a Trading Day, (ii) the
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number provided for below later than
5:30 p.m. (Eastern time) on any date and earlier than 11:59 p.m. (Eastern time)
on such date, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be delivered and addressed as set forth in the
Purchase Agreement.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. Except to its successors, the
Company may not assign its rights or obligations hereunder without the prior
written consent of each Holder. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.
(g) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
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(h) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the State of New York. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the State of New York for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of
this Agreement), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
(i) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law or equitable remedies.
(j) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(signature pages follow)
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
PHC, INC.
By:/s/ Bruce A. Shear
_______________________
Name: Bruce A. Shear
Title: President
[PURCHASER'S SIGNATURE PAGES TO FOLLOW]
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[PURCHASER SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]
CAMDEN PARTNERS LIMITED PARTNERSHIP
By: Camden Partners Capital Management, LLC
its General Partner
By: /s/ Shane Kim
_________________________________
Name: Shane Kim
Title: Member
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Plan of Distribution
The Selling Stockholders and any of their pledgees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded (including the OTC Bulletin Board) or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933 amending the list of
Selling Stockholders to include the pledgee, transferee or other successors in
interest as Selling Stockholders under this prospectus.
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The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The Selling Stockholders have informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
The Company is required to pay all fees and expenses incident to the
registration of the shares. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
The Company will not receive any of the proceeds from sales by Selling
Stockholders.
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