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SECURED BRIDGE NOTE
$2,000,000.00 July 15, 1998
FOR VALUE RECEIVED, and intending to be legally bound, the undersigned,
MHM SERVICES, INC., a Delaware corporation ("MHM"), MHM CORRECTIONAL SERVICES,
INC., a Delaware corporation ("MCS"), MHM OF COLORADO, INC., a Delaware
corporation ("MOC"), MHM EXTENDED CARE SERVICES, INC., a Delaware corporation
("Extended"), OAKVIEW LIMITED PARTNERSHIP, a Maryland limited partnership
("Oakview"), and COLUMBIA HEALTH ASSOCIATES LIMITED, a Maryland limited
partnership ("Columbia" and collectively with Oakview and the MHM entities,
"Borrower"), jointly and severally, promise to pay, in lawful money of the
United States, to the order of HCFP FUNDING II, INC., a Delaware corporation,
its successors and assigns ("Lender"), the principal sum of TWO MILLION AND
NO/100 DOLLARS ($2,000,000.00), or so much of such sum as shall have been
advanced by Lender (the "Principal Sum") in accordance with the terms of this
Secured Bridge Note (the "Note"), together with interest and other fees as
further set forth in this Note, to be paid in accordance with the terms set
forth below.
1. Principal and Interest.
a. If not sooner repaid, ▇▇▇▇▇▇▇▇ promises to pay to ▇▇▇▇▇▇ the
entire Principal Sum on January 15, 1999 (the "Maturity Date").
b. In addition to the repayment of the Principal ▇▇▇, ▇▇▇▇▇▇▇▇
promises to pay to Lender interest on the Principal Sum on a monthly basis from
the date of this Note until the Maturity Date. Interest shall be at a
fluctuating rate per annum (on the basis of the actual number of days elapsed
over a year of 360 days) equal to the Prime Rate plus two percent (Prime plus
2.0%) (the "Base Rate"), provided that after an Event of Default the rate shall
be equal to the Base Rate plus five percent (5%) (the "Default Interest Rate").
For purposes of the foregoing, the term "Prime Rate" means that rate of
interest designated as such by Fleet National Bank of Connecticut, N.A. (the
"Bank"), or any successor to the Bank, as the same may from time to time
fluctuate. If the Bank ceases to designate such a base lending rate, Lender
shall reasonably select an alternate, nationally recognized commercial bank as
the designator of such interest rate. Accrued interest shall be payable monthly
in arrears on the last Business Day (as defined below) of each month from July
31, 1998 and continuing through and including the Maturity Date. After
maturity, and until the entire Principal Sum plus any other amount due and
unpaid shall be paid in full, without limiting any of Lender's other rights and
remedies, all outstanding amounts of the Principal Sum shall bear interest,
payable on demand, at the Default Interest Rate, but in no event shall the
interest payable exceed the maximum lawful rate.
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c. If interest due under this Note is not paid when due, then
Lender may request that the due and unpaid interest be paid from excess
collections under the working capital line of credit made available to the
borrower under the Loan Agreement (as defined below in Section 4(a)(vii).
d. Repayment of all obligations under this Note is secured by,
among other things, the following:
(i) All of Borrower's rights to payment under that certain
Cost Settlement Report more particularly described on Schedule 1(d) (the "Cost
Settlement");
(ii) That certain Assignment of Deed of Trust Notes as
Collateral from Oakview and Columbia to Lender of even date with this Note (the
"Purchase Note Assignment"), assigning Borrower's rights under (A) that certain
Purchase Money Note No. 1 made by Glass Mental Health Foundation, Inc., a
not-for-profit Maryland corporation ("Glass"), in favor of Oakview and Columbia,
dated as of April 5, 1996, in the original principal amount of One Million Eight
Hundred Seventy-Five Thousand and No/100 Dollars ($1,875,000) ("Purchase Note
1"), and (B) that certain Purchase Money Note No. 2 made by Glass, in favor of
Oakview and Columbia, dated as of April 5, 1996, in the original principal
amount of Two Hundred Seventy-Five Thousand and No/100 Dollars ($275,000.00)
("Purchase Note 2");
(iii) That certain Collateral Assignment of Security Agreement
from Oakview and Columbia to Lender of even date with this Note (the "Security
Agreement Assignment") of Borrower's rights under that certain Security
Agreement made by Glass in favor of Oakview and Columbia, dated as of April 5,
1996 (the "Security Agreement"); and
(iv) That certain Collateral Assignment of Deed of Trust from
Oakview and Columbia to Lender of even date with this Note (the "Deed of Trust
Assignment") of Borrower's rights under that certain first priority Purchase
Money Deed of Trust and Security Agreement dated as of April 5, 1996 (the "Glass
Deed of Trust") executed by Glass in favor of Oakview and Columbia, encumbering
that certain real property at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the "Real Property").
2. Fees. In consideration for the extension of credit by Lender as
evidenced by this Note, Borrower shall pay to Lender (i) a Commitment Fee in the
amount of Forty Thousand and No/100 Dollars ($40,000.00), which shall be paid to
Lender through a deduction from the amount to be advanced at the time of the
loan evidenced by this Note; and (ii) a Completion Fee in the amount of Forty
Thousand and No/l00 Dollars ($40,000.00), which shall be due and payable on the
earlier of the Maturity Date or the date on which Borrower pays in full all
principal and interest under this Note.
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3. Additional Payments. ▇▇▇▇▇▇▇▇ further promises to pay to Lender,
immediately upon demand, any and all other sums and charges that may at the time
become due and payable under this Note, and all reasonable costs and
disbursements in connection with the preparation of this Note, and in the
collection of any payments due under this Note and in any action, suit or
proceeding to protect, sustain or enforce the rights and remedies of Lender
under this Note.
4. Conditions to Borrowing; Prepayment.
a. Subject to the terms and conditions of this Note, Lender shall
make available to Borrower the Principal Sum, in immediately available funds,
not later than 12:00 Noon (Eastern time) on the Business Day on which the
following conditions precedent are satisfied:
(i) Borrower shall have executed and delivered to Lender
this Note, the Purchase Note Assignment, the Security Agreement Assignment, the
Deed of Trust Assignment, the Common Stock Purchase Warrant made by MHM in favor
of Health Care Financial Partners, Inc., the parent of Lender ("HCFP"), of even
date with this Note (the "Warrant"), the Registration Rights Agreement made by
and between MHM and HCFP, of even date with this Note (the "Registration Rights
Agreement"), and all other documents, certificates and agreements reasonably
requested by ▇▇▇▇▇▇ and duly executed or delivered in connection with this
transaction;
(ii) Borrower shall have caused to be executed by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, president of ▇▇▇▇▇▇▇▇, that certain Secured Unconditional Guaranty of
Payment and Performance in favor of ▇▇▇▇▇▇ and of even date with this Note (the
"Guaranty") (this Note, the Purchase Note Assignment, the Security Agreement
Assignment, the Deed of Trust Assignment, the Warrant, the Registration Rights
Agreement, the Guaranty and all such other documents related to the loan, as
amended from time to time, are sometimes collectively referred to in this
Secured Note as the "Loan Documents");
(iii) Borrower shall have delivered to Lender originals of
Purchase Note 1, Purchase Note 2, the Security Agreement and the Glass Deed of
Trust (which are sometimes collectively referred to as the "Glass Documents"),
or an Affidavit of Lost Instrument, in a form acceptable to Lender in its sole
discretion, executed under oath by an officer of Congress Financial Corporation;
(iv) Borrower shall have delivered or caused to be delivered
to Lender a settlement agreement by and between Borrower and Mediq Incorporated
(collectively with any of its subsidiaries or affiliates, "MEDIQ") relating to
the dismissal of all actions pending between Borrower and MEDIQ and as more
particularly described on Schedule 4(a) (collectively, the "MEDIQ Litigation"),
and all other documents necessary to effectuate the dismissal of the MEDIQ
Litigation and/or the satisfaction of all judgments that MEDIQ may have against
Borrower in connection with the MEDIQ Litigation (collectively, the "MEDIQ
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Judgment"), which documents shall have been executed by all parties and shall be
in form ready for filing with the appropriate courts and any other applicable
authorities:
(v) Borrower shall have delivered or caused to be delivered
to Lender that certain Promissory Note made by Borrower in favor of MEDIQ, which
has been marked as "Settled and Paid", along with UCC-3 Termination Statements,
signed by MEDIQ and any other necessary party, evidencing the release by MEDIQ
of all liens against any of Borrower's assets;
(vi) No Event of Default under this Note and no material
breach under any other Loan Documents, shall have occurred and be continuing;
(vii) No Event of Default shall have occurred under that
certain Loan and Security Agreement by and between Extended and MOC, as
borrower, and HCFP Funding, Inc., an affiliate of Lender ("Funding"), as lender,
dated as of March 11, 1997, as amended on September 24, 1997 and as it may be
amended, modified, restated or replaced from time to time (the "Loan
Agreement");
(viii) All warranties contained in this Note, the other Loan
Documents or otherwise made in writing in connection with this transaction by or
on behalf of Borrower or any party to any Loan Document shall be true and
correct in all material respects;
(ix) Lender shall have received Uniform Commercial Code
("UCC"), judgment and tax lien searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower maintains a place of
business, which searches yield results consistent with the representations and
warranties contained in this Note; and
(x) Borrower shall have used its best efforts to provide an
endorsement in favor of ▇▇▇▇▇▇ on ▇▇▇▇▇▇▇▇'s current title insurance policy that
insures the interest of Borrower and its successors and assigns in the Real
Property.
b. Borrower hereby irrevocably authorizes ▇▇▇▇▇▇ to disburse the
proceeds of the requested advance by wire transfer to such bank account as may
be designated by MHM from time to time or elsewhere if pursuant to written
direction from MHM.
c. Lender shall enter all advances of the Principal ▇▇▇ as debits
to a loan account in the name of ▇▇▇▇▇▇▇▇ and shall also record as credits in
the loan account all payments made by ▇▇▇▇▇▇▇▇ and all proceeds of Collateral
that are indefeasibly paid to Lender, and may record in the loan account, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower,
with respect to the extension of credit contemplated by this Note.
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d. ▇▇▇▇▇▇ will account to Borrower monthly with a statement of
advances, charges and payments made pursuant to this Note, and the account
rendered by ▇▇▇▇▇▇ shall be deemed final, binding and conclusive upon Borrower
absent manifest error.
e. All amounts received by Borrower relating to the Cost
Settlement shall be immediately applied as a mandatory prepayment of principal
under this Note.
f. All amounts received by Borrower as net proceeds on the sale of
the Real Property shall be immediately applied as a mandatory prepayment of
principal under this Note.
g. All amounts due under this Note shall become immediately due
and payable upon the termination of the Loan Agreement.
h. Borrower may prepay all or any part of the Principal Sum
outstanding, without penalty, together with all interest accrued on the
Principal Sum and all other sums that are payable pursuant to this Note.
5. Payment Office. The Principal Sum, the interest on the Principal
Sum, and any other amounts payable under this Note are payable in lawful money
of the United States of America at the office of Lender, at ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
or at such other place as Lender may specify in writing to Borrower. Any payment
by other than immediately available funds shall be subject to collection.
Interest shall continue to accrue until the funds by which payment is made are
available to Lender for its use. Any payment stated to be due on a day on which
banks in Maryland are required or permitted to be closed for business shall be
due and payable on the next business day (each such day, a "Business Day") and
such extension of time shall be included in the computation of interest in
connection with such payment.
6. No Presentment; Acceleration. On the Maturity Date or upon the
occurrence of an Event of Default (as defined in Section 12 below), the
outstanding Principal Sum, accrued and unpaid interest on the Principal Sum, and
all other sums owed by Borrower to Lender in connection with this Note or the
other Loan Documents shall immediately become due and payable. Borrower hereby
expressly waives any presentment for payment, demand for payment, notice of
nonpayment or dishonor, protest and notice of protest of any kind.
7. Security Agreement.
a. This Note shall constitute a security agreement as that term is
used in the UCC and Borrower hereby grants to Lender, in order to secure
Borrower's obligations under this Note, a security interest in the following
(collectively, the "Collateral"):
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(i) All of ▇▇▇▇▇▇▇▇'s now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind and
description, and all of Borrower's contract rights, chattel paper, documents and
instruments with respect thereto, and all of Borrower's rights, remedies,
security and liens, in, to and in respect of the Accounts, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any obligor, and credit and
other insurance (for purposes of this Note, "Account" means any right to payment
for goods sold or leased or services rendered, whether or not evidenced by an
instrument or chattel paper, and whether or not earned by performance,
including, without limitation, the right to payment of management fees);
(ii) All moneys, securities and other property and the
proceeds thereof, now or hereafter held or received by, in transit to, in
possession of, or under the control of Lender or a bailee or Affiliate (as
defined in Section 11(j) below) of Lender, from or for Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all of
Borrower's deposits (general or special), balances, sums and credits with Lender
at any time existing;
(iii) All of ▇▇▇▇▇▇▇▇'s right, title and interest in, to and
in respect of all goods relating to, or which by sale have resulted in,
Accounts, including, without limitation, all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(iv) All of Borrower's now or hereafter acquired deposit
accounts into which Accounts are deposited, including the Lockbox Account (for
purposes of this Note, "Lockbox Account" means an account maintained by Debtor
at Bank One Arizona, N.A. (or a successor financial institution), into which all
collections of Accounts are paid directly);
(v) All of Borrower's now owned and hereafter acquired or
arising general intangibles and other property of every kind and description
with respect to, evidencing or relating to its Accounts, accounts receivable and
other rights to payment, including, but not limited to, all existing and future
customer lists, choses in action, claims, books, records, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts;
(vi) All of ▇▇▇▇▇▇▇▇'s other general intangibles (including,
without limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and
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derivatives thereof, trade names, including the right to make, use, and vend
goods utilizing any of the foregoing, and permits, licenses, certifications,
authorizations and approvals, and the rights of Borrower thereunder, issued by
any governmental, regulatory, or private authority, agency, or entity whether
now owned or hereafter acquired, together with all cash and non-cash proceeds
and products thereof;
(vii) All of Borrower's now owned or hereafter acquired
inventory of every description which is held by Borrower for sale or lease or is
furnished by Borrower under any contract of service or is held by Borrower as
raw materials, work in process or materials used or consumed in a business,
wherever located, and as the same may now and hereafter from time to time be
constituted, together with all cash and non-cash proceeds and products thereof;
(viii) All of Borrower's now owned or hereafter acquired
machinery, equipment, computer equipment, tools, tooling, furniture, fixtures,
goods, supplies, materials, work in process, whether now owned or hereafter
acquired, together with all additions, parts, fittings, accessories, special
tools, attachments, and accessions now and hereafter affixed thereto and/or used
in connection therewith, all replacements thereof and substitutions therefor,
and all cash and non-cash proceeds and products thereof;
(ix) The proceeds of the Cost Settlement;
(x) Purchase Note 1, Purchase Note 2, the Security
Agreement, and the Glass Deed of Trust; and
(xi) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
Borrower shall, at ▇▇▇▇▇▇▇▇'s expense, perform all acts and execute
all documents requested by ▇▇▇▇▇▇ at any time to evidence, perfect, maintain and
enforce ▇▇▇▇▇▇'s security interest and the priority of ▇▇▇▇▇▇'s security
interest in the Collateral. Upon ▇▇▇▇▇▇'s request, at any time and from time to
time, Borrower shall, at Borrower's sole cost and expense, execute and deliver
to Lender one or more financing statements (in form and substance satisfactory
to Lender) pursuant to the UCC and, where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more financing statements signed
only by ▇▇▇▇▇▇. Notwithstanding anything to the contrary contained in this Note,
Borrower and ▇▇▇▇▇▇ agree that ▇▇▇▇▇▇ is, and shall be deemed to be, the
"secured party" as that term is defined in the UCC and elsewhere with respect to
personal property.
b. In addition to all other rights, options, and remedies granted
to Lender under this Note, upon the occurrence of an Event of Default, Lender
may exercise all other rights granted to it under this Note and all rights under
the Uniform Commercial Code in effect in the
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applicable jurisdiction(s) and under any other applicable law, and exercise the
following rights and remedies (which list is given by way of example and is not
intended to be an exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices regarding,
and collect directly the Collateral, with or without judicial process, and to
exercise all rights and remedies available to Lender with respect to the
Collateral under the Uniform Commercial Code in effect in the jurisdiction(s) in
which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance with subsection (c) below, without any liability for rent,
storage, utilities, or other sums, and Borrower shall not resist or interfere
with such action;
(iii) The right to require Borrower at Borrower's expense to
assemble all or any part of the Collateral and make it available to Lender at
any place designated by Lender; and
(iv) The right to relinquish or abandon any Collateral or any
security interest therein.
c. ▇▇▇▇▇▇▇▇ agrees that a notice received by it at least five (5)
days before the time of any intended public sale, or the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Collateral that threatens to decline rapidly
in value or that is sold on a recognized market may be sold immediately by
Lender without prior notice to Borrower. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrower,
which right is hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to ▇▇▇▇▇▇'s exercise of its rights and
remedies with respect to the Collateral following an Event of Default.
d. Lender shall have the right to proceed against all or any
portion of the Collateral to satisfy the liabilities and obligations of Borrower
to Lender in any order. All rights and remedies granted Lender under this Note
and under any agreement referred to in this Note, or otherwise available at law
or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time
until the Principal Sum, all interest, costs, expenses and other charges due
under, and all other existing and future liabilities and obligations of Borrower
to Lender under, this Note are satisfied
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in full. The exercise of any one right or remedy shall not be deemed a waiver or
release of any other right or remedy, and Lender, upon the occurrence of an
Event of Default, may proceed against Borrower, and/or the Collateral, at any
time, under any agreement, with any available remedy and in any order.
8. Use of Funds. Borrower covenants and agrees that the loan of the
Principal Sum, or any portion of the Principal Sum, shall be used to settle
the MEDIQ Litigation.
9. Representations. Each entity constituting Borrower hereby warrants
and represents to Lender that:
a. It is either (i) a corporation that has been duly organized and
is validly existing, and in good standing under the laws of its state of
incorporation and is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, and has the
necessary corporate power and authority to own its assets and transact the
business in which it is engaged, and has obtained all certificates, licenses and
qualifications required under all laws, regulations, ordinances, or orders of
public authorities necessary for the ownership and operation of all of its
properties and transaction of all of its business; or (ii) a limited partnership
for which MHM serves as the general partner, has been duly formed and is validly
existing, and in good standing under the laws of its state of formation and is
in good standing as a foreign limited partnership in each jurisdiction in which
the character of the properties owned or leased by it or the nature of its
business makes such qualification necessary, and has the necessary power and
authority to own its assets and transact the business in which it is engaged,
and has obtained all certificates, licenses and qualifications required under
all laws, regulations, ordinances, or orders of public authorities necessary for
the ownership and operation of all of its properties and transaction of all of
its business
b. Borrower has full power and authority to enter into, execute,
and deliver this Note and to perform its obligations under this Note and the
other Loan Documents, all of which have been duly authorized by all necessary
action of its directors or the directors of its general partner. This Note
constitutes a valid and binding obligation of Borrower, enforceable in
accordance with its terms.
c. The execution, delivery or performance of or under this Note
will not violate or conflict with any law, rule, regulation, order, judgment,
indenture, instrument, or agreement by which Borrower or Borrower's properties
or assets are bound or affect, or conflict or be inconsistent with, or result in
any breach of, any of the terms, covenants or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of
Borrower, pursuant to the
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terms of any indenture, mortgage, deed of trust, agreement or other instrument
to which Borrower is a party or by which Borrower's properties or assets may be
bound or to which they may be subject other than a lien, security interest,
charge or other encumbrance in favor of Lender.
d. Other than the MEDIQ Litigation or as disclosed on Schedule
9(d), there are no actions, suits or other proceedings pending, including,
without limitation, any condemnation proceeding, or to the knowledge of Borrower
threatened, against or adversely affecting Borrower's properties or assets or
the validity or enforceability of this Note or the other Loan Documents.
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or governmental authority. Other than as disclosed on
Schedule 9(d), there is no litigation or proceeding, including, without
limitation, any condemnation proceeding, pending or, to the knowledge of
Borrower, threatened against or affecting Borrower's properties or assets, or
any circumstances existing which would in any manner materially adversely affect
Borrower's properties or assets, or the validity or ability of Borrower to
perform any obligations under this Note or the other Loan Documents.
e. The financial statements of ▇▇▇▇▇▇▇▇ previously delivered to
Lender are true, correct and complete and fairly present the financial condition
of Borrower as of the date presented. No material adverse change in the
financial condition of Borrower has occurred since the date of such financial
statements of ▇▇▇▇▇▇▇▇ delivered to Lender.
f. Other than those rights of MEDIQ relating to the MEDIQ
Litigation which will be released simultaneously with the closing of the Loan,
Borrower is the sole owner of all right, title and interest in and to all of the
Collateral, free and clear of any lien, security interest, charge or
encumbrance, other than a lien, security interest, charge or other encumbrance
in favor of Lender, and Borrower has the full right, power, and authority to
convey, transfer, and grant the security title and security interest in the
Collateral granted to the Lender.
g. The outstanding balances of Purchase Note 1 and Purchase Note
2, respectively, are as set forth on Schedule 9(g).
10. Affirmative Covenants.
Borrower covenants and agrees that until this Note shall be repaid
in full:
a. Financial Statements. Borrower will furnish to Lender (i)
monthly, quarterly and annual profit and loss statements, balance sheets, and
cash flow reports; (ii) internally prepared annual financial statements for
Borrower within sixty (60) days after the end of Borrower's fiscal years; and
(iii) promptly upon receipt thereof, copies of any reports submitted to Borrower
by independent accountants in connection with any interim audit of the books of
Borrower and copies of each management control letter provided to Borrower by
independent accountants.
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b. Existence, Good Standing, and Compliance with Laws. Borrower
will do or cause to be done all things necessary to obtain and keep in full
force and effect all corporate or partnership existence, as applicable, rights,
licenses, privileges, and franchises of Borrower necessary to the ownership of
its property or the conduct of its business, and comply with all applicable
present and future laws, ordinances, rules, regulations, orders and decrees of
any governmental authority having or claiming jurisdiction over Borrower.
c. Taxes and Charges. Borrower will timely file all tax reports
and pay and discharge all taxes, assessments and governmental charges or levies
imposed upon Borrower, or its income or profits or upon its properties or any
part thereof, before the same shall be in default and prior to the date on which
penalties attach thereto, as well as all lawful claims for labor, material,
supplies or otherwise which, if unpaid, might become a lien or charge upon the
properties or any part thereof of Borrower; provided, however, that Borrower
shall not be required to pay and discharge or cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith and by appropriate proceedings
by ▇▇▇▇▇▇▇▇, and Borrower shall have set aside on their books adequate reserve
therefor; and provided further, that such deferment of payment is permissible
only so long as Borrower's title to, and its right to use, the Collateral is not
adversely affected thereby and ▇▇▇▇▇▇'s lien and priority on the Collateral are
not adversely affected, altered or impaired thereby.
d. Insurance. Borrower will carry adequate public liability and
professional liability insurance with responsible companies satisfactory to
Lender in such amounts and against such risks as is customarily maintained by
similar businesses and by owners of similar property in the same general area.
e. Maintenance of Property. Borrower will maintain, keep and
preserve all of the Note Collateral in good repair, working order and condition
and from time to time make all necessary and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the business carried
on in connection therewith may be properly and advantageously conducted at all
times.
f. Litigation and Other Proceedings. Borrower shall give prompt
notice to Lender of any litigation, arbitration, or other proceeding before any
court or governmental authority against or affecting Borrower if the amount
claimed is not fully insured and is more than $10,000.00.
g. Licensure; Medicare/Medicaid Cost Reports. Borrower will
maintain all certificates of need, provider numbers and licenses necessary to
conduct its business as presently conducted, and take any steps required to
comply with any such new or additional requirements that may be imposed on
providers of medical products and services. If required, all Medicaid/Medicare
cost reports will be properly filed.
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h. Visits and Inspections. ▇▇▇▇▇▇▇▇ agrees to permit
representatives of ▇▇▇▇▇▇, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, ▇▇▇▇▇▇▇▇'s business, assets, liabilities, financial condition,
business prospects and results of operations.
i. Further Assurances. Borrower will defend its title to the
Collateral against all persons and will, upon request of the Lender, (i) furnish
such further assurances of title as may be required by the Lender, (ii) deliver
and execute or cause to be delivered and executed, in form and content
satisfactory to the Lender, any financing statements, notices, certificates of
title, and other documents and pay the cost of filing or recording the same in
all public offices deemed necessary by the Lender, as well as any recordation,
documentary, or transfer tax required by law to be paid in connection with such
filing or recording, and (iii) do such other acts as the Lender may reasonably
request in order to perfect, preserve, maintain, or continue the perfection of
the Lender's security interest in the Collateral and/or its priority.
j. Dismissal of MEDIQ Litigation. Within one (1) Business Day
after the Closing, Borrower shall make, or shall cause to be made, all necessary
filings with the Court to evidence the dismissal, with prejudice, of the MEDIQ
Litigation.
k. Institution of Foreclosure Proceedings. Within two (2) Business
Days following ▇▇▇▇▇▇'s written request, Borrower shall instruct its counsel
immediately to file a foreclosure action in the Circuit Court of ▇▇▇▇▇▇ County,
Maryland seeking foreclosure of the Glass Deed of Trust.
11. Negative Covenants.
Borrower covenants and agrees that until this Note shall be repaid
in full:
a. Borrowing. Borrower will not create, incur, assume or suffer to
exist any liability for borrowed money except: (i) indebtedness to Lender; (ii)
indebtedness of Borrower secured by mortgages, encumbrances or liens expressly
permitted by ▇▇▇▇▇▇; (iii) accounts payable to trade creditors and current
operating expenses (other than for borrowed money) which are not aged more than
one hundred twenty (120) days from the billing date or more than thirty (30)
days from the due date, in each case incurred in the ordinary course of business
and paid within such time period, unless the same are being contested in good
faith and by appropriate and lawful proceedings, and Borrower shall have set
aside such reserves, if any, with respect thereto as are required by GAAP and
deemed adequate by Borrower and its independent accountants; and (iv) borrowings
incurred in the ordinary course of its business and not exceeding $10,000.00
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in the aggregate outstanding at any one time. Borrower will not make
prepayments on any existing or future indebtedness for borrowed money in excess
of $10,000.00 to any third person or entity (other than Lender, to the extent
permitted by this Note or any subsequent agreement between Borrower and
Lender).
b. Liens and Encumbrances. Borrower will not create, incur, assume
or suffer to exist any mortgage, pledge, lien or other encumbrance of any kind
(including the charge upon property purchased under a conditional sale or other
title retention agreement) upon, or any security interest in, any of the
Collateral, whether now owned or hereafter acquired. Notwithstanding the
foregoing, Borrower may grant to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ a security interest,
subordinated in all respects to Lender's liens, in all of the Collateral except
Purchase Note 1, Purchase Note 2 and the Glass Deed of Trust.
c. Loans. Borrower will not make loans or advances to any third
person or entity, other than (i) trade credit extended in the ordinary course of
its business, and (ii) advances for business travel and similar temporary
advances in the ordinary course of business to officers, members, directors, and
employees without the prior written consent of ▇▇▇▇▇▇.
d. Contingent Liabilities. Borrower will not assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any third person or entity, except by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business.
e. Joint Ventures. Borrower will not invest directly or indirectly
in any joint venture for any purpose without the prior written consent of
Lender.
f. Merger, Acquisition, or Sale of Assets. Borrower will not enter
into any merger or consolidation with or acquire all or substantially all of the
assets of any Person, and will not sell, lease, or otherwise dispose of any of
its assets except in the ordinary course of its business without the prior
written consent of Lender.
g. Sale and Leaseback. Borrower will not, directly or indirectly,
enter into any arrangement whereby Borrower sells or transfers all or any part
of its assets and thereupon and within one year thereafter rents or leases the
assets so sold or transferred without the prior written consent of Lender.
h. Distributions. Borrower will not make, declare or pay dividends
or distributions.
i. Subsidiaries. Borrower does not have, and will not form, any
subsidiary with assets valued over $20,000.00, or make any equity investment in
or any loan in the nature of an equity investment to, any other person, without
the prior written consent of Lender.
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j. Transactions with Affiliates and Subsidiaries. Borrower will
not enter into any transaction, including without limitation the purchase, sale,
or exchange of property, or the lending or giving of funds to any Affiliate or
subsidiary, except in the ordinary course of business and pursuant to the
reasonable requirements of Borrower's business and upon terms substantially the
same and no less favorable to Borrower as it would obtain in a comparable arm's
length transaction with any Person not an Affiliate or subsidiary, and so long
as the transaction is not otherwise prohibited under this Note. For purposes of
the foregoing, the term "Affiliate" means, with respect to a specified Person,
any Person directly or indirectly controlling, controlled by, or under common
control with the specified Person, including without limitation their
stockholders, members and any Affiliates of the specified Person. A Person shall
be deemed to control a corporation, limited liability company or other entity if
the Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and business of the corporation or other entity,
whether through the ownership of voting securities, by contract, or otherwise.
For purposes of the foregoing definition the term "Person" means an individual,
partnership, corporation, trust, joint venture, joint stock company, limited
liability company, association, unincorporated organization, governmental
authority, or any other entity.
k. Contracts and Agreements. Borrower will not become or be a
party to any contract or agreement which would materially breach this Note, or
materially breach any other material instrument, agreement, or document to which
Borrower is a party or by which it is or may be bound.
l. Truth of Statements and Certificates. Borrower will not furnish
to Lender any certificate or other document that contains any untrue statement
of a material fact or that omits to state a material fact necessary to make it
not misleading in light of the circumstances under which it was furnished.
12. Events of Default. The following events are each an "Event of
Default" under this Note:
a. Borrower fails to make any payment of principal when due or
fails to make any payment of interest, fees or other amounts owed to or for the
account of Lender under this Note and such payment remains unpaid for five (5)
days after the date that such payment is due; or
b. Borrower has made any representations or warranties in this
Note, the Loan Documents, any financial statement delivered to Lender or
otherwise in connection with this Note or the related transaction that contains
any untrue statement of a material fact or omits a material fact necessary to
make the statements contained in this Note or in such document or financial
statement not misleading; or
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c. Borrower shall fail to perform or observe, or cause to be
performed or observed, any other term, obligation, covenant, condition or
agreement contained in this Note or the other Loan Documents, and any such
failure shall have continued for a period of ten (10) days after written notice
of such failure; or
d. Borrower shall (i) apply for, or consent in writing to, the
appointment of a receiver, trustee or liquidator; or (ii) file a voluntary
petition seeking relief under the Bankruptcy Code, or be unable, or admit in
writing Borrower's inability, to pay their debts as they become due; or (iii)
make a general assignment for the benefit of creditors; or (iv) file a petition
or an answer seeking reorganization or an arrangement or a readjustment of debt
with creditors, apply for, take advantage, permit or suffer to exist the
commencement of any insolvency, bankruptcy, suspension of payments,
reorganization, debt arrangement, liquidation, dissolution or similar event,
under the law of the United States or of any state in which Borrower is a
resident; or (v) file an answer admitting the material allegations of a petition
filed against Borrower in any such bankruptcy, reorganization or insolvency case
or proceeding or (vi) take any action authorizing, or in furtherance of, any of
the foregoing; or
e. (i) an involuntary case is commenced against ▇▇▇▇▇▇▇▇ and the
petition is not contested within ten (10) days or is not dismissed within sixty
(60) days after the commencement of the case or (ii) an order, judgment or
decree shall be entered by any court of competent jurisdiction on the
application of a creditor adjudicating Borrower bankrupt or insolvent, or
appointing a receiver, trustee or liquidator of Borrower or of all or
substantially all of the assets of Borrower and the order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) days or shall
not be discharged within ten (10) days after the expiration of any stay of such
order, judgment, or decree; or
f. Any obligation of Borrower for the payment of borrowed money in
excess of $10,000.00 is not paid when due or within any applicable grace
period, or such obligation becomes or is declared to be due and payable before
the expressed maturity of the obligation, or there shall have occurred an event
that, with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due
and payable; or
g. One or more final judgments against Borrower or attachments
against its property in excess of $10,000.00 and not fully and unconditionally
covered by insurance shall be rendered by a court of record and shall remain
unpaid, unstayed on appeal, undischarged, unbonded and undismissed for a period
of twenty (20) days; or
h. Borrower ceases any material portion of its business operations
as currently conducted; or
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i. There shall occur a material adverse change in the financial
condition or business prospects of Borrower, or Lender in good faith shall deem
itself insecure as a result of acts or events bearing upon the financial
condition of Borrower or the ability of Borrower to repay this Note, which
change shall have continued unremedied for a period of ten (10) days after
written notice from Lender; or
j. Borrower shall fail to comply strictly with the terms of
Section 10(j) and/or Section 10(k) of this Note; or
k. An Event of Default shall occur under the Loan Agreement.
13. Lender's Rights.
a. Upon the occurrence of an Event of Default, Lender may, in
addition to its rights and remedies set forth in Section 7 above, proceed, to
the extent permitted by law, to protect and enforce its rights either by suit in
equity or by action at law, or both, whether for the specific performance of any
covenant, condition or agreement contained in this Note or in aid of the
exercise of any power granted in this Note, or proceed to enforce the payment of
this Note or to enforce any other legal or equitable right of Lender. No right
or remedy in this Note or the other Loan Documents or in other agreement or
instrument to the benefit of Lender is intended to be exclusive of any other
right or remedy, and each and every such right or remedy shall be cumulative and
shall be in addition to every other right and remedy given under this Note or
now or hereafter existing at law or in equity or by statute or otherwise.
Without limiting the generality of the foregoing, if the outstanding Principal
Sum, or any of the other obligations of Borrower to Lender shall not be paid
when due, Lender shall not be required to resort to any particular security,
right or remedy or to proceed in any particular order of priority, and Lender
shall have the right at any time and from time to time, in any commercially
reasonable manner and in any order, to enforce its security interests with
respect to the Collateral, liens, rights and remedies, or any of them, as it
deems appropriate in the circumstances, and apply the proceeds of any Collateral
to such obligations of Borrower as it determines in its sole discretion.
b. If an Event of Default has occurred as provided above and
Borrower has not paid the all amounts outstanding, including all principal,
together with interest accrued on such amounts, upon demand by Lender, then
Borrower shall pay to Lender interest on such outstanding amounts at a rate per
annum equal to the Default Interest Rate from the date such outstanding amounts
are due until the date this Note is paid in full. ▇▇▇▇▇▇▇▇ promises to pay all
costs of collection, including reasonable attorneys' fees, if this Note is
referred to an attorney for collection after the Event of Default.
14. No Defenses. Borrower's obligations under this Note shall not be
subject to any set-off, counterclaim or defense to payment that Borrower now has
or may have in the future.
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15. No Waiver. No failure or delay on the part of Lender in exercising
any right, power or privilege under this Note or the other Loan Documents nor
any course of dealing between Borrower and Lender, shall operate as a waiver of
the right, power or privilege, nor shall a single or partial exercise of any
right. power or privilege preclude any other or further exercise of, or the
exercise of any other, right, power or privilege.
16. Writing Required. No modification or waiver of any provisions of
this Note or any other Loan Documents, and no consent to any departure by
Borrower, shall in any event be effective, without respect to any course of
dealing between the parties, unless the modification or waiver shall be in a
writing executed by ▇▇▇▇▇▇ and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on Borrower in any case shall thereby entitle Borrower to any other or
further notice or demand in the same, similar or other circumstances.
17. Usury Limitation. Notwithstanding anything contained to the
contrary in this Note, ▇▇▇▇▇▇ shall never be entitled to receive, collect or
apply as interest any amount in excess of the maximum rate of interest permitted
to be charged by applicable law. If ▇▇▇▇▇▇ receives, collects or applies as
interest any such excess, the amount that would be excessive interest shall be
applied to the reduction of the Principal Sum; and if the Principal Sum is paid
in full, any remaining excess shall be paid to Borrower. In determining whether
or not the interest paid or payable in any specific case exceeds the highest
lawful rate, Lender and Borrower shall to the maximum extent permitted under
applicable law: (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest; and (ii) "spread" the total amount of interest
throughout the entire term of the obligation so that the interest rate is deemed
to have been uniform throughout the entire term.
18. Notices. Any notice or demand given under this Note shall be given
by delivering it, sending by telecopier (with a confirming copy by regular
mail), or by mailing it by certified or registered mail, postage prepaid, return
receipt requested, or sent by prepaid overnight courier service addressed to
Borrower at MHM Extended Care Services, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇, Telephone: (703)
▇▇▇-▇▇▇▇, Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇. Any notice to be given to Lender under
this Note shall be given by personally delivering it, sending it by telecopier
(with a confirming copy by regular mail), mailing it by certified or registered
mail, return receipt requested, or sending it by prepaid overnight courier
service, addressed to Lender at: ▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President: Telephone: (▇▇▇) ▇▇▇-▇▇▇▇,
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, or at such other place as Lender may specify in
writing to Borrower. Each party may designate a change of address by notice to
the other given in accordance with this Section 18 at least fifteen (15) days
before such change of address is to become effective. A notice given under this
Note shall be deemed received upon receipt if it is personally delivered or sent
by telecopier, five (5) days after it is deposited in the U.S. mail if it is
sent by regular mail, or on the next Business Day after delivery to the
overnight courier service, if it is sent by overnight courier service.
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19. Section Headings. The headings of the several paragraphs of this
Note are inserted solely for convenience of reference and are not a part of and
are not intended to govern, limit or aid in the construction of any term or
provision.
20. Severability. Any provision contained in this Note that is
prohibited or unenforceable in any respect in any jurisdiction shall, as to
such jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
21. Survival of Terms. All covenants, agreements, representations and
warranties made in this Note or in any financial statements delivered pursuant
to this Note shall survive Borrower's execution and delivery of this Note to
Lender and shall continue in full force and effect so long as this Note or any
other obligation under this Note shall be outstanding and unpaid or any other
obligation of Borrower to Lender or its affiliates under this Note shall remain
unperformed.
22. GOVERNING LAW; CONSENT TO JURISDICTION. THIS NOTE IS TO BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
RESPECT TO ANY OTHERWISE APPLICABLE CONFLICTS-OF-LAWS PRINCIPLES, BOTH AS TO
INTERPRETATION AND PERFORMANCE, AND THE PARTIES EXPRESSLY CONSENT AND AGREE TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF MARYLAND AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND AND TO THE LAYING OF
VENUE IN MARYLAND, WAIVING ALL CLAIMS OR DEFENSES BASED ON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE, INCONVENIENT FORUM OR THE LIKE. BORROWER HEREBY
CONSENTS TO SERVICE OF PROCESS BY MAILING A COPY OF THE SUMMONS TO BORROWER, BY
CERTIFIED OR REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER'S ADDRESS SET FORTH
IN SECTION 18 ABOVE. BORROWER FURTHER WAIVES ANY CLAIM FOR CONSEQUENTIAL DAMAGES
IN RESPECT OF ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY LENDER IN GOOD FAITH.
23. WAIVER OF TRIAL BY JURY. EACH OF BORROWER AND ▇▇▇▇▇▇ ▇▇▇▇▇▇ (A)
COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUES TRIABLE OF RIGHT
BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY
IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH OF BORROWER AND LENDER,
AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. EACH PARTY
IS HEREBY
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AUTHORIZED AND REQUESTED TO SUBMIT THIS NOTE TO ANY COURT HAVING JURISDICTION
OVER THE SUBJECT MATTER AND THE PARTIES TO THIS NOTE, SO AS TO SERVE AS
CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER,
EACH OF BORROWER AND ▇▇▇▇▇▇ ▇▇▇▇▇▇ CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF
THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned has executed this Secured Bridge Note
as of the day and year first above written.
BORROWER:
MHM SERVICES, INC.
a Delaware corporation
By: /S/ ▇.▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇
Title: President
MHM CORRECTIONAL SERVICES, INC.
a Delaware corporation
By: /S/ ▇.▇. ▇▇▇▇▇▇▇
--------------------------------
Name:
Title:
MHM OF COLORADO, INC.
a Delaware corporation
By: /S/ ▇.▇. ▇▇▇▇▇▇▇
--------------------------------
Name:
Title:
MHM EXTENDED CARE SERVICES, INC.
a Delaware corporation
By: /S/ ▇.▇. ▇▇▇▇▇▇▇
--------------------------------
Name:
Title:
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COLUMBIA HEALTH ASSOCIATES LIMITED
a Maryland limited partnership
By: MHM SERVICES, INC.
a Delaware corporation
Its General Partner
By: /S/ ▇.▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇
Title: President
OAKVIEW LIMITED PARTNERSHIP
a Maryland limited partnership
By: MHM SERVICES, INC.
a Delaware corporation
Its General Partner
By: /S/ [SIGNATURE]
--------------------------------
Name:
Title:
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