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EXHIBIT 4.6
CREDIT, SECURITY, AND GUARANTEE AGREEMENT
This Agreement is made this 8 day of July, 1999, by and among MHM
Correctional Services, Inc. ("Borrower"), MHM Services, Inc. ("MHM"), Xxxxxxx X.
and Xxxxxxx Xxxxxxx ("the Pinkerts", and Xxxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx,
M.D., Xxxx X. Xxxxxxxxx, and Xxx Xxxxxxxxx (the latter four individuals
sometimes referred to as "Indemnitors"). MHM Extended Care Services, Inc. joins
solely to guarantee performance hereof by its corporate affiliates.
WHEREAS, Borrower, a wholly-owned subsidiary of MHM, is in need of
additional working capital because of increases in its business and of
additional business opportunities available to it; and
WHEREAS, MHM currently has a revolving line of credit with NationsBank,
N.A. (the "Bank") in the amount of $500,000 (the "Original Line"); and
WHEREAS, in order to make the needed additional working capital available
to Borrower, it has been determined to substitute Borrower for MHM under the
Original Line and to negotiate with Bank an increase in the Line on behalf of
Borrower up to a maximum loan amount (including the Original Line) of $1.05
million (the "Revised Line");
WHEREAS, the Pinkerts have issued their personal guarantee of the
Original Line to the Bank; and Xxx Xxxxxxxxx and Xxxxxxx X. Xxxxxxxx each have
indemnified and agreed to hold harmless the Pinkerts from a pro rata portion of
any liability the Pinkerts might incur as a result of guaranteeing the Original
Line (collectively, the "Original Guarantees" and the "Original Guarantors").
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WHEREAS, in return for undertaking the obligations described in the
preceding paragraph, the Original Guarantors were granted certain Warrants to
purchase stock of MHM ("Original Warrants") which, as of June 30, 1999, were in
the following amounts:
ORIGINAL GUARANTORS ORIGINAL WARRANTS
------------------- -----------------
Xxxxxxx 105,394
Ferretti 35,126
Xxxxxxxxx 35,126
WHEREAS, the Bank will require further and additional guarantees in order
to allow substitution of Borrower as borrower under the Line and to increase the
borrowings available under the Line to $1.05 million; and
WHEREAS, the Pinkerts are willing to allow substitution of Borrower for
MHM as borrower under the Line and to increase their Guarantee by guaranteeing
repayment by the Borrower to the Bank of the Revised Line up to a maximum of
$1.05 million;
WHEREAS, Xxxxxxxxx and Ferretti are willing to maintain the
indemnification obligations undertaken by them in connection with the Original
Line and to allow substitution of Borrower as borrower under that portion of the
Line representing the Original Line, and Xxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxx,
M.D., and Ferretti are willing to undertake indemnification obligations to the
Pinkerts as to a portion of the additional liabilities the Pinkerts might incur
as a result of the increase by the Pinkerts of their Guarantee;
NOW THEREFORE, in return for good and valuable consideration, receipt and
adequacy of which is hereby acknowledged (which consideration includes without
limitation the expected benefits of the Revised Line to Borrower as a subsidiary
of MHM in which all the individual parties are stockholders) and in order to
induce the Pinkerts to issue the Bank Guarantee
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and the Indemnitors to undertake the Indemnification Obligations described
below, it hereby is agreed as follows:
1. REVISED LINE: Subject to the approval of Bank, Borrower will be
substituted for MHM as borrower under the Line, and the Line will be increased
to permit borrowings by Borrower of a total up to $1.05 million.
2. GUARANTEE: Subject to the terms and conditions of this Agreement,
the Pinkerts agree to increase their personal Guarantee to the Bank by
guaranteeing repayment by Borrower of amounts borrowed from Bank under the
Revised Line up to a total principal amount (including the Original Line) not to
exceed $1.05 million, plus interest, costs, and other expenses incurred by Bank
in connection with the Revised Line (the "Bank Guarantee"). Such guarantee
increase may be by way of issuance of a new guarantee replacing the Original
Guarantee or by issuance of another guarantee in addition to the Original
Guarantee, as the Bank and the Pinkerts may agree and in a form acceptable to
the Bank and the Pinkerts.
3. INDEMNIFICATION: Subject to the terms and conditions of this
Agreement, Indemnitors hereby agree, severally and not jointly, and each up to
the maximum total principal amount set forth next to their names below, to
indemnify and hold harmless the Pinkerts for any liability for repayment of
principal amounts, and for a proportionate share of the associated costs or
expenses (including without limitation, interest paid or interest foregone and
attorney fees) incurred by the Pinkerts as a result of their issuance of the
Bank Guarantee (the "Indemnification Obligations"). The Indemnification
Obligations include by reference as though fully set forth herein all terms and
conditions set forth in the Guarantee issued by the Pinkerts to the Bank in
connection with the Revised Line so that the indemnification liabilities of
Indemnitors to the Pinkerts shall conform to the liabilities the Indemnitors
would have assumed had they themselves
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been parties to the Bank Guarantee (but limited in amount, pro rata, to the
amounts set forth beside the name of each):
INDEMNITY
INDEMNITOR OBLIGATIONS
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Ferretti $150K
Xxxxxxxxx $100K
Xxxxxxxxx $150K
Shipon $150K
4. GUARANTEE AND INDEMNIFICATION FEES: In consideration of the
issuance of the Bank Guarantee by the Pinkerts pursuant to paragraph 2, above,
and of the assumption of the Indemnification Obligations by the Indemnitors
pursuant to paragraph 3, above, MHM hereby agrees to issue Warrants to the
Pinkerts and to the Indemnitors for the purchase of stock in MHM at a price of
$.10 (ten cents) per share, in the following amounts:
(a) Initiation Fee: as a fee for initiation of the Bank Guarantee
and of the Indemnification Obligations:
GUARANTORS/INDEMNITORS INITIATION WARRANTS
---------------------- -------------------
Pinkerts 90,000
Ferretti 27,000
Xxxxxxxxx 18,000
Xxxxxxxxx 27,000
Shipon 27,000
(b) Continuation Fee: As a fee for the ongoing risks represented
by the Bank Guarantee and the Indemnification Obligations, for each month
during which the Bank Guarantee and Indemnification Obligations are
outstanding, Warrants for the number of shares as are equal in value (at
a price of $.10 (ten cents) per share)
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to one and one-half percent of the average loan balance which is
outstanding during the month and which is subject to the Bank Guarantee
and the Indemnification Obligations. Such Warrants shall be prorated
among the individual parties in proportion to the loan amounts set forth
next to the name of each in column 1 below, such that if the full Loan
amount of $1.05 million were outstanding during a given month each of the
individual parties hereto would receive for that month the number of
warrants set forth next to the name of each under column 2:
1. 2.
GUARANTORS/ GUARANTEE/INDEMNITY ADDITIONAL
INDEMNITORS OBLIGATIONS WARRANTS/MONTH
----------- ----------- --------------
Pinkerts $500K (portion not indemnified) 7,500
Ferretti $150K 2,250
Xxxxxxxxx $100K 1,500
Xxxxxxxxx $150K 2,250
Shipon $150K 2,250
The Warrants to be issued pursuant to this paragraph 4 shall be in the
form attached as Exhibit A.
5. ORIGINAL WARRANTS: It is understood that the issuance of Warrants
pursuant to this Agreement shall be in addition to the Original Warrants
described in the fifth "Whereas Clause," above, to which each of the
shareholders identified in said clause previously has become entitled as a
result of the Original Guarantee, which entitlement is hereby confirmed and
ratified. Further provided, however, that the Original Warrants hereby are
amended to provide that the price per share at which stock of Borrower may be
purchased under the Original Warrants shall be $.10 (ten cents) per share. It is
hereby acknowledged that issuance of Warrants as a Continuation Fee pursuant to
paragraph 4(b) above shall be in lieu of and substitute for any similar
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or additional warrants which otherwise might have become issuable hereafter
pursuant to the Original Guarantee.
6. OBLIGATIONS OF BORROWER AND MHM TO GUARANTORS AND INDEMNITORS:
(a) Borrower and MHM acknowledge that Guarantor and Indemnitors
have undertaken the obligations set out in this Agreement as an
accommodation to Borrower and MHM, at considerable personal financial
risk. Accordingly, and in further consideration of the agreements of
Guarantor and Indemnitors herein, Borrower and MHM agree to indemnify and
hold harmless Guarantor and Indemnitors from any and all loss, expenses,
fees, costs, claims, demands, and liabilities of any kind (including
without limitation, payments of interests and fees, appraisal and audit
expenses, letter of credit fees, bank fees or charges, and attorney's
fees) in any way arising from or related to this Agreement or the
performance or nonperformance of the undertakings set forth herein, it
being the intent of the parties that Guarantor and Indemnitors shall not
incur or bear any unreimbursed cost or expense, and shall not undertake
any unreimbursed liability by reason of their agreement as set forth
herein. The indemnification granted hereby shall survive both payment in
full of all obligations hereunder and termination of this Agreement.
(b) Borrower and MHM agree that they will not consent to or enter
into any modification or amendment of the Revised Line or seek any waiver
in connection with therewith, without the prior written consent of
Grantors and Indemnitors. Borrower and MHM will give Grantors and
Indemnitors prompt written notice of any default or any other notice in
connection with the Revised
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Line received or sent by Borrower or MHM or on its behalf of either,
together with a complete copy of such notice. The Pinkerts hereby agree
that they will promptly furnish to Indemnitors copies of any notices or
communications received by them from Bank in connection with the Bank
Guarantee or the Revised Line.
(c) As security for the obligations of Borrower and MHM under this
Agreement, including the obligation to repay to Guarantors and
Indemnitors any payments made pursuant to the Bank Guarantee or the
Indemnification Obligations, Borrower and MHM hereby grant to Guarantor
and Indemnitor a lien and security interest in all of the accounts
receivable of Borrower and MHM, whether existing now or hereafter
created. Such lien and security interest shall be of the first priority,
superior to all other liens, security interests, claims, or interests
whatsoever. Upon the request of the Guarantor or any Indemnitor, Borrower
and MHM will execute and deliver any and all documents, agreements,
instruments, and other writings (including but not limited to executed
Forms UCC 1) necessary or appropriate to create and perfect the security
interest created hereby. Borrower and MHM further agree that, in the
event of any Guarantee or Indemnity Payment, the Guarantors and
Indemnitors shall be entitled, upon satisfaction of the Borrowers'
obligations to Bank under Revised Line, to be subrogated to all rights of
Bank against Borrower and MHM and to all collateral security or
guarantees or rights of offset held by Bank for payment and performance
of Borrower's or MHM's obligations under the Revised Line.
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(d) Release of Guarantor and Indemnitors. Borrower and MHM release
Guarantor and Indemnitors from any claims for loss or damage resulting
from any acts, omissions, or conduct of any kind by Guarantors or
Indemnitors.
7. ADDITIONAL UNDERTAKINGS
(a) MHM Services, Inc. and MHM Extended Care Services, Inc.,
hereby each guarantee to Guarantor and Indemnitors the full performance
by Borrower of all its obligations hereunder.
(b) No Other Borrowings. Without the written consent of Guarantor
and Indemnitors, granted or withheld in their sole discretion, Borrower
and MHM covenant and agree that they will not create, incur, assume or
suffer to exist any indebtedness, or any mortgages, liens, pledges, or
encumbrances on its property except: (i) the line of credit for up to
$1.05 Million with NationsBank which is the subject to this Agreement;
and (ii) accounts payable to trade creditors and current operating
expenses 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. Borrower and MHM will not make
prepayments on any existing or further indebtedness other than on amounts
subject to the Bank Guarantee.
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8. MISCELLANEOUS
(a) Conditions Precedent. The obligations of Guarantor and
Indemnitors hereunder shall be subject to approval and ratification of
this Agreement by the Board of Directors of Borrower and of MHM.
(b) Entire Agreement; Amendments. This Agreement constitutes the
full and entire understanding and agreement among the parties with regard
to the subject matter and supersedes all prior written or oral
agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this
Agreement nor any waiver of any provision thereof shall be made except in
writing executed by the party against whom enforcement is sought.
(c) No Waiver; Cumulative Rights. No waiver by any party hereto of
any one or more default by the other party in the performance of any of
the provisions of this Agreement shall operate or be construed as a
waiver of any further default or defaults, whether of a like or different
nature. No failure or delay on the part of any party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, no
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to
any party hereto at law, in equity or otherwise.
(d) Notices. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed
by registered or
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certified mail (return receipt requested and postage prepaid), sent by
telecopier (with a confirmation copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party as
its address set forth below, or at such other address as such party may,
by written notice, designate as its address for purposes of notice
hereunder:
MHM Services, Inc. Xxx Xxxxxxxxx
MHM Correctional Services, Inc. 0000 Xxxxxxx Xxxxx, X.X.
MHM Extended Care Services, Inc. Xxxxxxxxxx, X.X. 00000
Each at:
0000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxx 000 Xxxx X. Xxxxxxxxx
Xxxxxx, XX 00000 0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Xxxxxxx X. and Xxxxxxx Xxxxxxx
000 Xxxxxxx Xxxxx Xxxxx
XxXxxx, XX 00000 Xxxxx X. Xxxxxx, M..D.
0000 Xxxxx Xxxx
Xxxxxxx X. Xxxxxxxx Xxxxx, Xx 00000
C/o MedStar Communications, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
If mailed, notice shall be deemed to be given five (5) days after being
sent. If sent by personal delivery or telecopier, notice shall be deemed to be
given when delivered, and if sent by prepaid courier, notice shall be deemed to
be on the next Business Day following deposit with the courier.
(e) Severability. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any
party or circumstances shall be found by a court of competent
jurisdiction to be, to any extent, invalid or
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unenforceable, the remainder of this Agreement and the application of
such term, covenant, or condition to parties or circumstances other than
those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforceable to the fullest extent permitted by law. Upon determination
that any such term is invalid, illegal or unenforceable, the parties
hereto shall amend this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
(g) Third Parties. No rights are intended to be created hereunder
for the benefit of any third party donee, creditor, or incidental
beneficiary.
(h) Choice of Law; Consent to Jurisdiction. This Agreement and the
obligations thereby created shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Virginia, without regard
to any otherwise applicable principles of conflicts of laws. If any
action arising out of this agreement or the note is commenced by
Guarantor or Indemnitors in the Commonwealth of Virginia or federal court
located in the Commonwealth of Virginia, Borrower and MHM hereby consent
to the jurisdiction of any such court in any such action and to the
laying of venue in the Commonwealth of Virginia. Any process in any such
action shall be duly served if mailed by registered mail, postage
prepaid, to the Borrower and MHM at their addresses set forth above.
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IN WITNESS WHREOF, the parties hereto have each executed and delivered
this Agreement as of July 8, 1999.
MHM SERVICES, INC.
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------
Xxxxxxx X. Xxxxxxx
President
MHM CORRECTIONAL SERVICES, INC.
(BORROWER)
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------
Xxxxxxx X. Xxxxxxx
President
MHM EXTENDED CARE SERVICES, INC.
(as to paragraph 7(a))
By: /s/ XXXXXXX X. XXXXXXX
----------------------------------
Xxxxxxx X. Xxxxxxx
President
/s/ XXXXXXX X. XXXXXXX
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Xxxxxxx X. Xxxxxxx
/s/ XXXXXXX XXXXXXX
---------------------------------------
Xxxxxxx Xxxxxxx
/s/ XXXXXXX X. XXXXXXXX
---------------------------------------
Xxxxxxx X. Xxxxxxxx
/s/ XXX XXXXXXXXX
---------------------------------------
Xxx Xxxxxxxxx
/s/ XXXX X. XXXXXXXXX
---------------------------------------
Xxxx X. Xxxxxxxxx
/s/ XX. XXXXX XXXXXX
---------------------------------------
Xxxxx X. Xxxxxx, M.D.
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