LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 26, 2002
BY AND AMONG
LASALLE BUSINESS CREDIT, INC.,
AS AGENT
STANDARD FEDERAL BANK NATIONAL ASSOCIATION,
AS LENDER
MEDICAL TECHNOLOGY SYSTEMS, INC.
AND
MTS PACKAGING SYSTEMS, INC.,
AS BORROWERS
AND
THE GUARANTORS LISTED HEREIN
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Table of Contents
Page
1. DEFINITIONS...........................................................1
2. LOANS................................................................12
(a) Revolving Loans.............................................12
(b) Term Loan A.................................................13
(c) Term Loan B.................................................13
(d) Capital Expenditure Loans...................................13
(e) Repayments..................................................14
3. LETTERS OF CREDIT....................................................16
(a) General Terms...............................................16
(b) Requests for Letters of Credit..............................16
(c) Obligations Absolute........................................16
(d) Expiration Dates of Letters of Credit.......................17
4. INTEREST, FEES AND CHARGES...........................................17
(a) Interest Rate...............................................17
(b) Fees And Charges............................................17
(c) Maximum Interest............................................18
5. COLLATERAL...........................................................18
(a) Grant of Security Interest to Agent.........................18
(b) Other Security..............................................19
(c) Possessory Collateral.......................................19
(d) Electronic Chattel Paper....................................19
(e) Xxxxxx Family Trust.........................................20
(f) Guarantors..................................................20
ii
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.............................................20
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.........................20
8. COLLECTIONS..........................................................21
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.........22
(a) Daily/Weekly Reports........................................22
(b) Monthly Reports.............................................22
(c) Financial Statements........................................23
(d) Annual Projections..........................................23
(e) Explanation of Budgets and Projections......................23
(f) Public Reporting............................................24
(g) Valuation of Assets of Guarantors...........................24
(h) Other Information...........................................24
10. TERMINATION..........................................................24
11. REPRESENTATIONS AND WARRANTIES.......................................25
(a) Financial Statements and Other Information..................25
(b) Locations...................................................25
(c) Loans by Borrowers..........................................25
(d) Accounts and Inventory......................................26
(e) Liens.......................................................26
(f) Organization, Authority and No Conflict.....................26
(g) Litigation..................................................26
(h) Compliance with Laws and Maintenance of Permits.............26
(i) Affiliate Transactions......................................27
(j) Names and Tradenames........................................27
iii
(k) Equipment...................................................27
(l) Enforceability..............................................27
(m) Solvency....................................................27
(n) Indebtedness................................................27
(o) Margin Security and Use of Proceeds.........................27
(p) Parent, Subsidiaries and Affiliates.........................27
(q) No Defaults.................................................28
(r) Employee Matters............................................28
(s) Intellectual Property.......................................28
(t) Environmental Matters.......................................28
(u) ERISA Matters...............................................28
(v) Subordinated Debt and Preferred Stock Financing.............28
(w) Xxxxxx License Agreement....................................29
(x) Absence of Undisclosed Liabilities..........................29
(y) Interrelatedeness of Borrowers and Guarantors...............29
(z) Individual Material Adverse Effect on Closing Date..........29
12. AFFIRMATIVE COVENANTS................................................29
(a) Maintenance of Records......................................29
(b) Notices.....................................................29
(c) Compliance with Laws and Maintenance of Permits.............31
(d) Inspection and Audits.......................................31
(e) Insurance...................................................31
(f) Collateral..................................................33
(g) Use of Proceeds.............................................33
(h) Taxes.......................................................33
iv
(i) Intellectual Property.......................................33
(j) Senior Management...........................................33
(k) Key Person Life Insurance...................................34
(l) Xxxxxx License Agreement....................................34
(m) Preferred Stock Documents...................................34
(n) Subordinated Debt Documents.................................34
(o) Borrower Subsidiaries.......................................34
13. NEGATIVE COVENANTS...................................................34
(a) Guaranties..................................................34
(b) Indebtedness................................................34
(c) Liens.......................................................35
(d) Mergers, Sales, Acquisitions, Subsidiaries and Other
Transactions Outside the Ordinary Course of Business.....35
(e) Dividends and Distributions.................................36
(f) Investments; Loans..........................................36
(g) Fundamental Changes, Line of Business.......................36
(h) Equipment...................................................36
(i) Use of Proceeds.............................................36
(j) Affiliate Transactions......................................37
(k) Subordinated Debt Payments..................................37
(l) Certain Warrant and Preferred Stock Provisions..............37
14. FINANCIAL COVENANTS..................................................37
(a) Tangible Net Worth..........................................37
(b) Debt Service Coverage Ratio.................................38
(c) Interest Coverage Ratio.....................................38
(d) Capital Expenditure Limitations.............................39
v
15. DEFAULT..............................................................39
(a) Payment.....................................................39
(b) Breach of this Agreement and the Other Agreements...........39
(c) Breaches or Amendments of Other Obligations.................39
(d) Breach of Representations and Warranties....................39
(e) Loss of Collateral..........................................40
(f) Levy, Seizure or Attachment.................................40
(g) Bankruptcy or Similar Proceedings...........................40
(h) Appointment of Receiver.....................................40
(i) Judgment....................................................41
(j) Dissolution of Obligor......................................41
(k) Default or Revocation of Guaranty...........................41
(l) Criminal Proceedings........................................41
(m) Change of Control...........................................41
(n) Change of Management........................................41
(o) Termination of Life Insurance Policies......................41
(p) Material Adverse Effect.....................................41
(q) Xxxxxx License Agreement....................................41
16. REMEDIES UPON AN EVENT OF DEFAULT....................................41
17. CONDITIONS PRECEDENT.................................................42
18. INDEMNIFICATION......................................................44
19. NOTICE...............................................................45
20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION...............45
21. MODIFICATION AND BENEFIT OF AGREEMENT................................46
22. HEADINGS OF SUBDIVISIONS.............................................46
VI
23. POWER OF ATTORNEY....................................................46
24. CONFIDENTIALITY......................................................46
25. COUNTERPARTS.........................................................47
26. ELECTRONIC SUBMISSIONS...............................................47
27. WAIVER OF JURY TRIAL; OTHER WAIVERS..................................47
28. AGENT AND LENDER.....................................................48
29. JOINT AND SEVERAL OBLIGATIONS........................................48
VII
EXHIBITS
Exhibit A Business and Collateral Locations
Exhibit B Compliance Certificate
Exhibit C Commercial Tort Claims
Exhibit D Form of Capital Expenditure Note
Exhibit E Form of Accountant's Letter
SCHEDULES
Schedule A Addresses of Borrowers and Guarantors
Schedule 2 Description of Preferred Stock
Schedule 5(e) Intellectual Property licensed to Borrowers
by Xxxxxx Family Trust
Schedule 11(g) Litigation
Schedule 11(i) Affiliate Transactions
Schedule 11(j) Names and Trade Names
Schedule 11(n) Indebtedness
Schedule 11(p) Parents, Subsidiaries and Affiliates
Schedule 11(s) Intellectual Property
Schedule 11(x) Liabilities
Schedule 13(c) Permitted Liens
Schedule 17(a) Closing Document List
1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from
time to time, this "Agreement") made this 26th day of June, 2002 by and among
LASALLE BUSINESS CREDIT, INC., as Agent ("Agent"), STANDARD FEDERAL BANK
NATIONAL ASSOCIATION, a national banking association, as Lender ("Lender"),
MEDICAL TECHNOLOGY SYSTEMS, INC. ("MTS"), a Delaware corporation, and MTS
PACKAGING SYSTEMS, INC., a Florida corporation, each having its principal place
of business at having its principal place of business at 00000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxx, Xxxxxxx 00000 ("Packaging", and with MTS, each a
"Borrower" and collectively, the "Borrowers").
WITNESSETH:
WHEREAS, the Borrowers may, from time to time, request Loans from Agent on
behalf of Lender, and the parties wish to provide for the terms and conditions
upon which such Loans or other financial accommodations, if made by Agent on
behalf of Lender, shall be made;
WHEREAS, the Guarantors are all direct or indirect wholly-owned
Subsidiaries of MTS, and as such, will derive benefit form the extension of the
financial accommodations hereunder;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal
or extension) hereafter made to a Borrower by Agent on behalf of Lender, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by each Borrower, the parties, intending to be legally
bound, agree as follows:
1. DEFINITIONS.
"Account", "Account Debtor", "Chattel Paper", "Commercial Tort Claims",
"Deposit Accounts", "Documents", "Electronic Chattel Paper", "Equipment",
"Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory",
"Investment Property", "Letter-of-Credit Rights", "Proceeds" and "Tangible
Chattel Paper" shall have the respective meanings assigned to such terms, as of
the date of this Agreement, in the Pennsylvania Uniform Commercial Code as the
same may be in effect from time to time.
"Affiliate" shall mean any Person (i) which directly or indirectly through
one or more intermediaries controls, is controlled by, or is under common
control with, a Borrower, (ii) which beneficially owns or holds five percent
(5%) or more of the voting control or equity interests of a Borrower, or (iii)
five percent (5%) or more of the voting control or equity interests of which is
beneficially owned or held by Borrower. No Borrower or Guarantor shall be deemed
to be an Affiliate of any other Borrower or Guarantor. No Obligor shall be
deemed to be an Affiliate of the Subordinated Lender, and the Subordinated
Lender shall not be deemed to be an Affiliate of any Obligor.
2
"Approved Electronic form Notice", "Approved Electronic form", and
"Electronic form" shall have the meanings specified in Section 26 hereof.
"Authorized Officer" shall mean any of the President, Chief Financial
Officer or Treasurer of a Borrower (and other Person designated as such by such
officers).
"Business" shall mean the manufacture and sale of medication dispensing
systems and disposable medication dispensing products, packaging equipment and
allied ancillary products.
"Business Day" shall mean any day other than a Saturday, a Sunday or any
day that banks in Philadelphia, Pennsylvania are required or permitted to close.
"Capital Expenditure Loans" shall mean the Loans made pursuant to Section
2(d) hereof.
"Capital Expenditures" shall mean for any Person, with respect to any
period of determination, the aggregate of all expenditures (whether paid in cash
or accrued as liabilities and including expenditures for capitalized lease
obligations) by such Person during such period that are required by GAAP,
consistently applied, to be included in or reflected by the property, plant and
equipment or similar fixed asset accounts (or intangible accounts subject to
amortization) on the balance sheet of such Person, including, to the extent not
already accounted for, capitalized development costs for such period.
"Change of Control" shall mean the occurrence of any of the following: as
the result of the issuance of securities by MTS or the disposition of
outstanding securities of MTS by the holders thereof, by merger, or by any other
transaction, members of the Xxxxxx Family collectively own less than 22.5% of
the combined voting power of all classes of Voting Securities, or (2) any
"person" or group of persons (within the meaning of section 13(d) of the
Securities Exchange Act of 1934 or Rule 13d-5 thereunder), other than one or
more members of the Xxxxxx Family or holders of the Series A Preferred Stock,
Warrants or shares of common stock issued as a result of conversion of the
exercise of the Warrants or the conversion of the Preferred Stock, becomes the
"beneficial owner" (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, except that a person shall be deemed to be the beneficial
owner of all securities that such person has the right to acquire before or
after the expiration of any period of time specified in such rule) of Voting
Securities with combined voting power equal to or greater than the combined
voting power of all Voting Securities held at the time in the aggregate by the
members of the Xxxxxx Family. In determining the percentage of voting power of
all Voting Securities held by any Person (or "person"), all Voting Securities
issuable upon the exercise, conversion or exchange of outstanding options,
warrants, convertible securities or other rights to purchase or subscribe for
Voting Securities shall be deemed to be outstanding.
"Closing Date" shall mean the date of the funding of the initial Loans.
"Closing Document List" shall have the meaning specified in Section 17(a)
hereof.
3
"Collateral" shall mean all of the property of a Borrower or Guarantor
described in Section 5 hereof, together with all other real or personal property
of any Obligor or any other Person now or hereafter pledged or assigned to Agent
or Lender to secure, either directly or indirectly, repayment of any of the
Liabilities.
"Concentration Percentage" shall have the meaning specified in clause (xiv)
of the definition "Eligible Account".
"Debt Service Coverage Ratio" shall mean, for any Person, with respect to
any period of determination, the ratio of (i) such Person's net income after
taxes for such period (excluding any after-tax gains or losses on the sale of
assets (other than the sale of Inventory in the ordinary course of business) and
excluding other after-tax extraordinary gains or losses), plus depreciation and
amortization deducted in determining net income for such period, plus tax
benefits which offset any income tax expense provisions deducted in determining
net income for such period, minus Unfinanced Capital Expenditures for such
period plus the after-tax increase in LIFO reserves, or minus the after tax
decrease in LIFO reserves, to (ii) such Person's current principal maturities of
long-term debt and capitalized leases paid or scheduled to be paid during such
period, plus any prepayments on indebtedness owed to any other Person (exclusive
of payments of Excess Cash Flow made in accordance with Section 2(e)(v)(B)
hereof, trade payables and Revolving Loans) and paid during such period plus, if
the period of determination ends on and is for such Person's Fiscal Year, any
Permitted Dividends paid during such Fiscal Year.
"Default" shall mean an event which, with the giving of notice or the
passage of time or both, would result in an Event of Default.
"Eligible Account" shall mean an Account owing to a Borrower which is
acceptable to Agent in its reasonable discretion for lending purposes. Without
limiting Agent's discretion, Agent shall, in general, consider an Account to be
an Eligible Account if it meets, and so long as it continues to meet, the
following requirements:
(i) it is genuine and in all respects is what it purports to be;
(ii) it is owned by a Borrower, such Borrower has the right to subject
it to a security interest in favor of Agent, or assign it to Agent, and it
is subject to a first priority perfected security interest in favor of
Agent and to no other claim, lien, security interest or encumbrance
whatsoever other than Permitted Liens (excluding those Permitted Liens set
forth in clause (v) of the definition thereof);
(iii) it arises from (A) the performance of services by a Borrower in
the ordinary course of such Borrower's business, and such services have
been fully performed and acknowledged and accepted by the Account Debtor
thereunder; or (B) the sale or lease of Goods by a Borrower in the ordinary
course of such Borrower's business, and (x) such Goods have been completed
in accordance with the Account Debtor's specifications (if any) and
delivered to the Account Debtor, (y) such Account Debtor has not refused to
accept, returned or offered to return, any of the Goods which are the
subject of such Account, and (z) such Borrower has possession of, or such
Borrower has delivered to Agent (at Agent's request) shipping and delivery
receipts evidencing delivery of such Goods;
4
(iv) it is evidenced by an invoice rendered to the Account Debtor
thereunder, is due and payable by its terms within ninety (90) days after
the date of the invoice and does not remain unpaid more than ninety (90)
days past the invoice date thereof; provided, however, that if more than
twenty-five percent (25%) of the aggregate dollar amount of invoices owing
by a particular Account Debtor remain unpaid more than ninety (90) days
after the respective invoice dates thereof, then all Accounts owing by that
Account Debtor shall be deemed ineligible;
(v) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor thereunder, and is not subject to setoff, counterclaim,
credit, allowance or adjustment by such Account Debtor, or to any claim by
such Account Debtor denying liability thereunder in whole or in part;
(vi) it does not arise out of a contract or order which fails in any
material respect to comply with the requirements of applicable law;
(vii) the Account Debtor thereunder is not a director, officer,
employee or agent of a Borrower, or a Subsidiary, Parent or Affiliate;
(viii) if the Account Debtor thereof is the United States of America
or any state or local government, or any department, agency or
instrumentality thereof, the Borrower to which such Account shall have
assigned its right to payment of such Account to Agent pursuant to, and in
full compliance with, the Assignment of Claims Act of 1940, as amended, or
any comparable state or local law, as applicable;
(ix) it is not an Account with respect to which the Account Debtor is
located in a state which requires the Borrower to which such Account is
owed, as a precondition to commencing or maintaining an action in the
courts of that state, either to (A) receive a certificate of authority to
do business and be in good standing in such state; or (B) file a notice of
business activities report or similar report with such state's taxing
authority, unless (x) such Borrower has taken one of the actions described
in clauses (A) or (B); (y) the failure to take one of the actions described
in either clause (A) or (B) may be cured retroactively by such Borrower at
its election; or (z) such Borrower has proven, to Agent's satisfaction,
that it is exempt from any such requirements under any such state's laws;
(x) the Account Debtor is located within the United States of America
or is located within a foreign country and, in each case, the Account owing
by such Account Debtor is payable in U.S. Dollars and with respect to
Account Debtors who are residents or citizens of or are located within a
foreign country, the Account is supported by a letter of credit or credit
insurance which is in form and substance satisfactory to Agent, issued by a
financial institution acceptable to Agent and assigned to Agent in a manner
acceptable to Agent;
(xi) it is not an Account with respect to which the Account Debtor's
obligation to pay is subject to any repurchase obligation or return right,
as with sales made on a xxxx-and-hold, guaranteed sale, sale on approval,
sale or return or consignment basis;
5
(xii) it is not an Account which consists of customer deposits or
progress xxxxxxxx (such that the obligation of the Account Debtor is
conditioned upon a Borrower's satisfactory completion of any further
performance under the agreement giving rise thereto);
(xiii) it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or (B)
which violates any of the covenants of the Borrowers contained in this
Agreement;
(xiv) it is not an Account owing to a Borrower which, when added to a
particular Account Debtor's other indebtedness to such Borrower, exceeds
10% of all Accounts of Borrower (the "Concentration Percentage"), or a
credit limit determined by Agent in its reasonable discretion for that
Account Debtor (except that Accounts excluded from Eligible Accounts solely
by reason of this clause (xiv) shall be Eligible Accounts to the extent of
such credit limit); provided, however, that with respect to Omnicare, Inc.,
PharMerica/Amerisource Bergen Corporation, McKesson Corporation and
Cardinal Health, Inc., the Concentration Percentage shall be 20%.
(xv) it is not a contra Account; and
(xvi) it is not an Account (i) with respect to which the prospect of
payment or performance by the Account Debtor is or will be impaired or (ii)
of poor credit quality as determined by Agent in its reasonable discretion.
"Eligible Inventory" shall mean Inventory of a Borrower which consists of
finished goods or raw materials and is acceptable to Agent in its reasonable
discretion for lending purposes. Without limiting Agent's discretion, Agent
shall, in general, consider such Inventory to be Eligible Inventory if it meets,
and so long as it continues to meet, the following requirements:
(i) it is owned by a Borrower, such Borrower has the right to subject
it to a security interest in favor of Agent and it is subject to a first
priority perfected security interest in favor of Agent and to no other
claim, lien, security interest or encumbrance whatsoever other than
Permitted Liens (excluding those Permitted Liens set forth in clause (v) of
the definition thereof);
(ii) it is located on one of the premises listed on Exhibit A (or
other locations of which Agent has been advised in writing pursuant to
Section 12(b)(i) hereof) and is not in transit;
(iii) if held for sale or lease or furnishing under contracts of
service, it is (except as Agent may otherwise consent in writing) new and
unused and free from defects which would, in Agent's reasonable
determination, affect its market value;
(iv) it is not stored with a bailee, consignee, warehouseman,
processor or similar party unless Agent has given its prior written
approval and the Borrower owning such Inventory has caused any such bailee,
consignee, warehouseman, processor or similar party to issue and deliver to
Agent, in form and substance reasonably acceptable to Agent, such Uniform
Commercial Code financing statements, warehouse receipts, waivers and other
documents as Agent shall require;
6
(v) Agent has determined, in accordance with Agent's customary
business practices, that it is not unacceptable due to age, type, category
or quantity;
(vi) it is not slow moving or obsolete, as determined by Agent in its
reasonable discretion;
(vii) it does not consist of samples, assemblies, packaging materials
or shipping materials, spare parts, supplies or tooling; and
(viii) it is not Inventory (A) with respect to which any of the
representations and warranties contained in this Agreement are untrue; or
(B) which violates any of the covenants of the Borrowers contained in this
Agreement.
"Environmental Laws" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to business of any Borrower
or any Guarantor or facilities owned or operated by any Borrower or any
Guarantor, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contamination, chemicals, or hazardous, toxic
or dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, modified or restated from time to time.
"Eureka" shall mean Eureka I, L.P., a Delaware limited partnership, and its
successors in interest.
"Event of Default" shall have the meaning specified in Section 15 hereof.
"Excess Cash Flow" shall have the meaning specified in Section 2(e)(v)(B)
hereof.
"Financial Statements" shall have the meaning specified in Section 9(a)
hereof.
"Fiscal Year" shall mean each twelve (12) month accounting period of MTS
and its Subsidiaries, which ends on March 31 of each year.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Guarantor" or "Guarantors" shall mean each of the Subsidiaries of MTS
which have entered or shall enter into a guaranty of the Liabilities.
7
"Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
"Indemnified Party" shall have the meaning specified in Section 18 hereof.
"Individual Material Adverse Effect" shall mean a material adverse effect
on the business, profitability, property, assets, business prospects, operations
or condition, financial or otherwise, of any one Obligor.
"Interest Coverage Ratio" shall mean, for any Person, with respect to any
period of determination, the ratio of (i) such Person's net income after taxes
for such period (excluding any after-tax gains or losses on the sale of assets
(other than the sale of Inventory in the ordinary course of business) and
excluding other after-tax extraordinary gains or losses), plus depreciation and
amortization deducted in determining net income for such period, plus interest
expense deducted in determining net income for such period, plus tax benefits
which offset income tax expense provisions deducted in determining net income
for such period minus Unfinanced Capital Expenditures for such period, and plus
the after-tax increase in LIFO reserves, or minus the after tax decrease in LIFO
reserves, to (ii) interest expense deducted in determining net income for such
period.
"Interest Period" shall have the meaning specified in Section 4 hereof.
"Investment" shall have the meaning specified in Section 13(f) hereof.
"LaSalle Bank" shall mean LaSalle Bank National Association, Chicago,
Illinois.
"Letter of Credit" shall mean any Letter of Credit issued for the account
of a Borrower under this Agreement.
"Letter of Credit Obligations" shall mean, as of any date of determination,
the sum of (i) the undrawn face amount of the Letters of Credit and (ii) the
aggregate unreimbursed amount of all draws under a Letter of Credit.
"Liabilities" shall mean any and all obligations, liabilities and
indebtedness of any Obligor to Agent or Lender or to any parent, affiliate or
subsidiary of Agent or Lender of any and every kind and nature, howsoever
created, arising or evidenced and howsoever owned, held or acquired, whether now
or hereafter existing, whether now due or to become due, whether primary,
secondary, direct, indirect, absolute, contingent or otherwise (including,
without limitation, obligations of performance), whether several, joint or joint
and several, and whether arising or existing under written or oral agreement or
by operation of law.
8
"Life Insurance Policy" of "Life Insurance Policies" shall have the meaning
specified in Section 12(k) hereof.
"Loans" shall mean all loans and advances made by Agent on behalf of Lender
to or on behalf of a Borrower hereunder.
"Lock Box" and "Lock Box Account" shall have the meanings specified in
Section 8(a) hereof.
"Master Letter of Credit Agreement" shall mean the form of Master Letter of
Credit Agreement used by Agent in conjunction with the issuance of Letters of
Credit.
"Material Adverse Effect" shall mean a material adverse effect on the
business, profitability, property, assets, business prospects, operations or
condition, financial or otherwise, of a MTS and its Subsidiaries, taken as a
whole.
"Material Agreement" shall mean, with respect to any Person, each contract,
whether written or oral, to which such Person is a party involving aggregate
consideration payable to or by such Person of $100,000 or more in one year or
involving extensions of credit by or to such Person of $100,000 or more, but
excluding the agreements documenting credit facilities being repaid on the
Closing Date.
"Maximum Loan Limit" shall mean Eight Million Seven Hundred Thousand
Dollars ($8,700,000).
"Maximum Revolving Loan Limit" shall mean Five Million Dollars
($5,000,000).
"Minimum Net Availability" shall mean, at any time of determination, an
amount equal to (a) the lesser of: (i) the Maximum Revolving Loan Limit; and
(ii) the Revolving Loan Limit available to the Borrowers at such time, minus (b)
the sum of: (i) all sums due and owing by the Borrowers to the Borrowers' trade
creditors which are outstanding beyond trade terms usually and customarily
afforded to the Borrowers by their trade creditors (as determined by Agent from
time to time in the reasonable exercise of its discretion); plus (ii) the
outstanding principal balance of all initial Revolving Loans and Letter of
Credit Obligations; plus (iii) all taxes due to any federal, state or local
taxing authority due and not yet paid; plus (iv) all unpaid fees due hereunder
and all costs and expenses incurred by the Borrowers in connection with closing
the transactions contemplated by this Agreement.
"Obligor" shall mean each Borrower, each Guarantor and each other Person
who is or shall become primarily or secondarily liable for any of the
Liabilities or who has pledged or assigned Collateral to secure the payment and
performance of the Liabilities.
9
"Other Agreements" shall mean all agreements, instruments and documents,
other than this Agreement, including, without limitation, guaranties, mortgages,
trust deeds, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, contribution and repayment agreements, leases,
financing statements and all other writings heretofore, now or from time to time
hereafter executed by or on behalf of a Borrower, a Guarantor, any other Obligor
or any other Person and delivered to Agent or Lender or to any parent, affiliate
or subsidiary of Agent or Lender or in connection with the Liabilities or the
transactions contemplated hereby, as each of the same may be amended, modified
or supplemented from time to time.
"Parent" shall mean any Person now or at any time or times hereafter owning
or controlling (alone or with any other Person) at least a majority of the
issued and outstanding equity of MTS or of any of its Subsidiaries.
"PBGC" shall have the meaning specified in Section 12(b)(v) hereof.
"Permitted Dividend" shall mean any dividend paid by MTS on the Preferred
Stock to a holder of the Preferred Stock which is permitted to be made under the
provisions of the Subordination Agreement.
"Permitted Liens" shall mean (i) liens for taxes, assessments, fees and
other governmental charges, and for claims the payment of which is not yet
overdue or is being contested in good faith (and for which adequate reserves
have been established by MTS on its books in conformity with GAAP), (ii)
statutory liens of landlords, carriers, warehousemen, processors, mechanics,
materialmen or suppliers incurred in the ordinary course of business and
securing amounts not yet due or declared to be due by the claimant thereunder;
(iii) liens or security interests in favor of Agent; (iv) zoning restrictions
and easements, licenses, covenants and other restrictions affecting the use of
real property that do not individually or in the aggregate have a material
adverse effect on any Borrower's ability to use such real property for its
intended purpose in connection with such Borrower's business; (v) liens in
connection with purchase money indebtedness and capitalized leases otherwise
permitted pursuant to the Agreement; provided, that such liens attach only to
the assets the purchase of which was financed by such purchase money
indebtedness or which is the subject of such capitalized leases; (vi) liens in
favor of customs and revenue authorities which secure payment of customs duties
in connection with the importation of goods; provided that all such customs
duties are promptly paid; (vii) liens in favor of the Subordinated Lender;
(viii) liens described on Schedule 13(c) hereto and (ix) liens (other than any
lien created by ERISA) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other types of social security.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
"Plan" shall have the meaning specified in Section 12(b)(v) hereof.
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"Preferred Stock" shall mean 2,000 shares (as such number may be increased
pursuant to adjustments made and paid-in kind dividends paid, in accordance with
the Preferred Stock Documents) of Series A Convertible Participating Preferred
Stock to be issued by MTS to the Subordinated Lender on the date hereof for a
purchase price of $2,000,000, as more fully described on Schedule 2 attached
hereto and made a part hereof.
"Preferred Stock Documents" shall mean the Securities Purchase Agreement of
even date herewith between Eureka and MTS, the certificate of designations for
the Preferred Stock and any and all documents, agreement and instruments
executed in connection therewith.
"Prime Rate" shall mean LaSalle Bank's publicly announced prime rate (which
is not intended to be LaSalle Bank's lowest or most favorable rate in effect at
any time) in effect from time to time.
"Proceeding" shall have the meaning specified in Section 15(g) hereof.
"Revolving Loan Limit" shall have the meaning specified in Section 2(a)
hereof.
"Revolving Loans" shall have the meaning specified in Section 2(a) hereof.
"Xxxxxx Family" shall mean (1) Xxxx X. Xxxxxx, his siblings, the
descendants of Xxxx X. Xxxxxx and his siblings, and the spouses of any of the
foregoing persons; and (2) any general or limited partnership (including Jade
Partners), trust (including the Xxxxxx Family Trust) or other entity, all of
whose partners, beneficiaries or other owners are Persons described in clause
(1).
"Xxxxxx License Agreement" shall mean that certain license agreement by and
between the Xxxxxx Family Trust, as licensor, and MTS, as licensee, dated as of
September 2, 1990, under the terms of which licensor has licensed certain
intellectual property to licensee.
"South Trust Bank" shall have the meaning specified in Section 17(d)
hereof.
"Subordinated Debt" shall mean the indebtedness of the Borrowers and the
Guarantors to the Subordinated Lender, in the aggregate principal amount of
$4,000,000, which shall at all times be fully junior and subordinated to all of
the Liabilities in accordance with the terms of the Subordination Agreement,
together with any refinancing thereof; provided, that such refinancing does not
have an earlier maturity date or a greater interest rate than the Subordinated
Debt currently has, does not contain other terms or conditions which are more
onerous to or less favorable to the Borrowers than those currently contained in
the Subordinated Debt Documents, and any new lender of such refinanced
Subordinated Debt which is not a signatory thereto, becomes a signatory to the
Subordination Agreement.
"Subordinated Debt Documents" shall mean the securities purchase agreement,
the subordinated note and any and all other related documents, agreements and
instruments entered into in connection with the Subordinated Debt.
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"Subordinated Lender" shall mean Eureka I, L.P. and/or certain of its
Affiliates, as lender of the Subordinated Debt, and their respective successors
and assigns.
"Subordination Agreement" shall mean the Subordination Agreement of even
date herewith by and among the Agent, the Subordinated Lender and the Borrowers
and Guarantors, as applicable, which sets forth the terms of the lien and
payment subordination of the Subordinated Debt and the payment subordination of
certain terms of the Warrants and the Preferred Stock to the Liabilities.
"Subsidiary" shall mean any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time stock of any other class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by MTS or a Subsidiary of MTS, or any partnership,
joint venture or limited liability company of which more than fifty percent
(50%) of the outstanding equity interests are at the time, directly or
indirectly, owned by MTS or a Subsidiary of MTS or any partnership of which MTS
or a Subsidiary of MTS is a general partner.
"Tangible Net Worth" shall mean, with respect to a Person, such Person's
shareholders' equity, defined in accordance with GAAP, less the book value (to
the extent included in such shareholders' equity) of all assets reflected as
goodwill (which shall in no event include trademarks, patents or other
intellectual property or capitalized development costs), plus the amount of any
LIFO reserve, all as determined under GAAP, consistently applied;
"Term" shall have the meaning specified in Section 10 hereof.
"Term Loan A" shall have the meaning specified in Section 2(b) hereof.
"Term Loan B" shall have the meaning specified in Section 2(c) hereof.
"Term Loans" shall mean, collectively, Term Loan A, Term Loan B.
"2004 Tangible Net Worth Requirement" shall have the meaning specified in
Section 14(a) hereof.
"2005 Tangible Net Worth Requirement" shall have the meaning specified in
Section 14(a) hereof.
"Unfinanced Capital Expenditures" shall mean those Capital Expenditures
which have not been financed, funded or paid for with the proceeds of Loans
(other than Revolving Loans), purchase money indebtedness, capital leases or any
other form of indebtedness.
"Voting Securities" shall mean securities entitled in ordinary
circumstances to vote generally in the election of directors of MTS.
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"Warrants" shall mean the Warrants to be issued in conjunction with the
Subordinated Debt to the Subordinated Lender.
"Warrant Shares" shall mean the shares of common stock of MTS to be issued
upon the exercise of the Warrants.
2. LOANS.
(a) Revolving Loans. Subject to the terms and conditions of this
Agreement and the Other Agreements, during the Term, Agent on behalf of
Lender shall make revolving loans and advances (the "Revolving Loans") to
one or more Borrowers in an aggregate amount up to the lesser of: (x) the
Maximum Revolving Loan Limit minus the Letter of Credit Obligations or (y)
the sum of the following sublimits (the "Revolving Loan Limit") minus the
Letter of Credit Obligations:
(i) Up to eighty-five percent (85%) of the face amount (less
maximum discounts, credits and allowances which may be taken by or
granted to Account Debtors in connection therewith in the ordinary
course of each Borrower's business) of Eligible Accounts of the
Borrowers; plus
(ii) Up to the lesser of: (A) the sum of (without duplication)
sixty percent (60%) of the lower of cost or market value on a FIFO
basis of the Eligible Inventory of each Borrower; and (B) Two Million
Dollars ($2,000,000); minus
(iii) such reserves as Lender elects, in its reasonable
discretion, to establish from time to time.
The aggregate unpaid principal balance of the Revolving Loans made to
all Borrowers plus the outstanding Letter of Credit Obligations of the
Borrowers shall not at any time exceed the lesser of (i) the Revolving Loan
Limit and (ii) the Maximum Revolving Loan Limit (as each of such amounts
may be increased or decreased by Agent, in its sole discretion). If at any
time the outstanding Revolving Loans made to all Borrowers exceed either
the Revolving Loan Limit or the Maximum Revolving Loan Limit, or any
portion of the Revolving Loans plus the outstanding Letter of Credit
Obligations exceed any applicable sublimit within the Revolving Loan Limit,
the Borrowers shall immediately, and without the necessity of demand by
Agent, pay to Agent such amount as may be necessary to eliminate such
excess, and Agent shall apply such payment to the outstanding Revolving
Loans in such order as Agent shall determine in its sole discretion;
provided, however, that if such excess results from any establishment of
reserves by Agent or from the imposition of any modification to the
eligibility criteria set forth in the definitions of Eligible Accounts and
Eligible Inventory or in this Section 2(a) in such a manner that items
heretofore eligible thereunder are rendered ineligible, Borrowers shall
have five (5) days to eliminate such excess.
Each Borrower hereby authorizes Agent, in its sole discretion, to
charge any accounts of the Borrowers maintained at LaSalle Bank or advance
Revolving Loans to make any payments of principal, interest, fees, costs or
expenses required to be made under this Agreement or the Other Agreements.
All Revolving Loans shall, in Agent's sole discretion, be evidenced by one
or more promissory notes in form and substance satisfactory to Agent.
However, if such Revolving Loans are not so evidenced, such Revolving Loans
may be evidenced solely by entries upon the books and records maintained by
Agent.
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A request for a Revolving Loan shall be made or shall be deemed to be
made, each in the following manner: Borrower shall give Agent same day
notice, no later than 12:00 P.M. (Philadelphia time) for such day, of its
request for a Revolving Loan, in which notice such Borrower shall specify
the amount of the proposed borrowing and the proposed borrowing date;
provided, however, that no such request may be made at a time when there
exists an Event of Default. Each check or request for payment against the
control disbursement account maintained by Borrowers at LaSalle Bank shall
constitute a request for a Revolving Loan. As an accommodation to the
Borrowers, Agent may permit telephone requests for Revolving Loans and
electronic transmittal of instructions, authorizations, agreements or
reports to Agent by Borrowers. Unless such Borrower specifically directs
Agent in writing not to accept or act upon telephonic or electronic
communications from it, Agent shall have no liability to such Borrower for
any loss or damage suffered by such Borrower as a result of Agent's
honoring of any requests, execution of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Agent by such Borrower,
and Agent shall have no duty to verify the origin of any such communication
or the authority of the Person sending it (but such request must purport to
be sent by an Authorized Officer).
Each Borrower hereby irrevocably authorizes Agent to disburse the
proceeds of each Revolving Loan requested by such Borrower, or deemed to be
requested by such Borrower, as follows: the proceeds of each Revolving Loan
requested under Section 2(a) shall be disbursed by Agent in lawful money of
the United States of America in immediately available funds, in the case of
the initial borrowing, in accordance with the terms of the written
disbursement letter from Borrower, and in the case of each subsequent
borrowing, by wire transfer or Automated Clearing House (ACH) transfer to
such bank account as may be agreed upon by such Borrower and Agent from
time to time, or elsewhere if pursuant to a written direction from such
Borrower.
(b) Term Loan A. Subject to the terms and conditions of this Agreement
and the Other Agreements, on the date that the conditions to the initial
Loans are satisfied, Lender shall make a term loan to the Borrowers in an
amount equal to Seven Hundred Thousand Dollars ($700,000) ("Term Loan A").
(c) Term Loan B. Subject to the terms and conditions of this Agreement
and the Other Agreements, on the date that the conditions to the initial
Loans are satisfied, Lender shall make a term loan to the Borrowers in an
amount equal to Two Million Dollars ($2,000,000) ("Term Loan B").
(d) Capital Expenditure Loans. Subject to the terms and conditions of
this Agreement and the Other Agreements, from time to time after the
initial Loans are advanced hereunder, but in no event after the date which
is six months prior to the last day of the Term, Agent shall make advances
to the Borrowers up to eighty percent (80%) of the purchase price
(exclusive of sales taxes, delivery charges and other "soft" costs related
to such purchase) of Equipment to be purchased with the proceeds of such
advances, which Equipment is acceptable to Agent in its reasonable
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discretion, and upon which Agent on behalf of Lender shall have a first
priority perfected security interest; provided, that (i) the aggregate
amount advanced during the Term for such purchases shall not exceed One
Million Dollars ($1,000,000), (ii) at least five (5) Business Days prior to
any such advance hereunder, the Borrowers shall have furnished to Agent an
invoice and acceptance letter for the Equipment being purchased and shall
have executed such documents and taken such other actions as Agent shall
required to assure that Agent has a first priority perfected security
interest in such Equipment, (iii) each advance hereunder shall be in an
amount not less than Two Hundred Fifty Thousand Dollars ($250,000), and
(iv) the Borrowers shall have executed and delivered to Agent a CapEx Note
in the form of Exhibit D annexed hereto. The CapEx Line shall not be
available for further advances at any time during which a Default or Event
of Default has occurred unless the Agent in its sole discretion waives such
Default or Event of Default in writing.
(e) Repayments. The obligation of the Borrowers to repay the
Liabilities shall be joint and several. The Loans shall be repaid as
follows:
(i) Repayment of Revolving Loans. The Revolving Loans and all
other Liabilities (other than the Term Loan B) shall be repaid on the
last day of the Term.
(ii) Repayment of Term Loan A. The principal of Term Loan A shall
be repaid in (i) thirty-five (35) equal and consecutive monthly
installments of principal of Eleven Thousand Six Hundred Sixty-Six and
67/100 Dollars ($11,666.67), payable on the first day of each month
during the period beginning on and including July 1, 2002 and ending
on and including June 1, 2005 and (ii) one final payment of the
remaining principal balance thereof, together with all interest and
fees accrued and unpaid thereon, on the last day of the Term. If any
such payment due date is not a Business Day, then such payment shall
be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of the amount of interest
and fees due hereunder.
(iii) Repayment of Term Loan B. The principal of Term Loan B
shall be repaid in (i) twenty-four (24) equal and consecutive monthly
installments of principal of Eighty-Three Thousand Three Hundred
Thirty-Three and 33/100 (83,333.33), payable on the first day of each
month during the period beginning on and including July 1, 2002 and
ending on and including June 1, 2004; provided that, on June 1, 2004,
the Borrowers shall also repay any other remaining principal balance
of the Term Loan B and interest accrued and unpaid thereon. If any
such payment due date is not a Business Day, then such payment shall
be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of the amount of interest
and fees due hereunder.
(iv) Repayment of Capital Expenditure Loans. The principal of
each Capital Expenditure Loan shall be repaid in (i) equal and
consecutive monthly installments, each in an amount equal to
one-sixtieth (1/60th) of the principal amount of such Capital
Expenditure Loan, payable on the first day of each month during the
period beginning on and including the first day of the month next
succeeding the month in which such Capital Expenditure Loan is made
and ending on and including June 1, 2005 and (ii) one final payment of
the remaining principal balance thereof, together with all interest
and fees accrued and unpaid thereon, on the last day of the Term. If
any such payment due date is not a Business Day, then such payment
shall be made on the next succeeding Business Day, and such extension
of time shall be included in the computation of the amount of interest
and fees due hereunder.
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(v) Mandatory Prepayments of the Term Loans.
(A) Sales of Assets. Upon receipt of the proceeds of the
sale or other disposition of any Equipment of a Borrower, or if
any of such Equipment is damaged, destroyed or taken by
condemnation in whole or in part, the proceeds thereof shall be
paid by the Borrowers to Agent as a mandatory prepayment of the
Term Loan or the Capital Expenditure Loan which was advanced
against the value of such asset, such payment to be applied
against the remaining installments of principal in the inverse
order of their maturities until such Term Loan or Capital
Expenditure Loan is repaid in full, and then against the
remaining Term Loan or Capital Expenditure Loan, as determined by
Agent in its sole discretion, in the inverse order of their
maturities until repaid in full, and then against the other
Liabilities, as determined by Agent in its sole discretion.
Notwithstanding the foregoing, in the event of any casualty loss
or condemnation regarding the property of any Borrower in respect
of which the insurance proceeds are equal to or less than Two
Hundred Fifty Thousand Dollars ($250,000) and provided that no
Event of Default shall be continuing, the applicable Borrower may
use such insurance proceeds so long as (i) Borrowers shall
confirm to Agent in writing that they have business interruption
insurance in effect providing for the payment of proceeds in
amounts reasonably acceptable to Agent, (ii) Borrowers shall
submit to Agent their plan for operations after such casualty
loss, which plan must be in form and content reasonably
satisfactory to Agent, and (iii) Borrowers shall confirm to Agent
that the amount of such proceeds is sufficient to complete the
plan presented to Agent, or Borrowers shall have demonstrated to
Agent that they will have cash sufficient to cover any deficiency
thereof.
(B) Excess Cash Flow. Coincident with receipt of MTS's
Fiscal Year end consolidated audited Financial Statements for
each Fiscal Year commencing with the Fiscal Year ending March 31,
2003, but in no event later than July 31 of such Fiscal Year, the
Borrowers shall make a mandatory prepayment of the Term Loan B in
an amount equal to fifty percent (50%) of the "Excess Cash Flow"
of MTS and its Subsidiaries (as described below) for the Fiscal
Year just ended, such prepayment to be applied against the
remaining installments of principal of Term Loan B in the inverse
order of their maturities, such mandatory prepayments to continue
until the date on which the Term Loan B shall be repaid in full.
For purposes hereof, "Excess Cash Flow" shall mean, for each
Fiscal Year, the sum of (i) the Net Income, depreciation and
amortization and tax benefits of MTS and its Subsidiaries, on a
consolidated basis, minus the sum of ----- (ii) Unfinanced
Capital Expenditures, actual principal payments with respect to
long-term debt and payments of Permitted Dividends of MTS and its
Subsidiaries, on a consolidated basis, all as determined in
accordance with GAAP, consistently applied.
(f)Promissory Notes. The Loans shall, in Agent's sole discretion, be
evidenced by one or more promissory notes in form and substance
satisfactory to Agent, however if such Loans are not so evidenced, such
Loans may be evidenced solely by entries upon the books and records
maintained by the Agent and the entries on such books and records shall be
deemed accurate absent manifest error.
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3. LETTERS OF CREDIT.
(a) General Terms. Subject to the terms and conditions of this
Agreement and the Other Agreements, during the Term, Agent may from time to
time cause to be issued and co-sign for or otherwise guarantee, upon
Borrower's request, commercial and/or standby Letters of Credit; provided,
that the (i) aggregate undrawn face amount of all such Letters of Credit
shall at no time exceed Five Hundred Thousand Dollars ($500,000.00) and
(ii) sum of the outstanding Revolving Loans plus the Letter of Credit
Obligations shall at no time exceed the lesser of (A) the Revolving Loan
Limit or (B) the Maximum Loan Limit. Payments made on account of any Letter
of Credit shall constitute Loans hereunder, and Borrowers agree that each
payment made by the issuer of a Letter of Credit in respect of a Letter of
Credit shall constitute a request by the Borrowers for a Loan to reimburse
such issuer. The Borrowers shall remit to Agent a Letter of Credit fee on
the aggregate undrawn face amount of all Letters of Credit outstanding at
rates to be established by Agent at the time of any such request, which fee
shall be payable monthly in arrears on the last Business Day of each month.
The Borrowers shall also pay on demand the normal and customary
administrative charges of the issuer of the Letter of Credit for issuance,
amendment, negotiation, renewal or extension of any Letter of Credit.
(b) Requests for Letters of Credit. The Borrowers shall execute on the
Closing Date the Master Letter of Credit Agreement. Borrowers shall make
requests for Letters of Credit in writing at least two (2) Business Days
prior to the date any such Letter of Credit is to be issued. Each such
request shall specify the date such Letter of Credit is to be issued, the
amount thereof, the name and address of the beneficiary thereof and a
description of the transaction to be supported thereby. Any such notice
shall be accompanied by the form of Letter of Credit requested and any
application or reimbursement agreement required thereby. If any term of
such application or reimbursement agreement is inconsistent with this
Agreement, then the provisions of this Agreement shall control to the
extent of such inconsistency.
(c) Obligations Absolute. The Borrowers shall be obligated jointly and
severally to reimburse the issuer of any Letter of Credit, or Lender if
Lender has reimbursed such issuer on Borrowers' behalf, for any payments
made in respect of any Letter of Credit, which obligation shall be
unconditional and irrevocable and shall be paid regardless of: (i) any lack
of validity or enforceability of any Letter of Credit, (ii) any amendment
or waiver of or consent or departure from all or any provisions of any
Letter of Credit, this Agreement or any Other Agreement, (iii) the
existence of any claim, set off, defense or other right which the Borrowers
or any other Person may have against any beneficiary of any Letter of
Credit, Lender or the issuer of the Letter of Credit, (iv) any draft or
other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid, or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect, (v) any payment under
any Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit, and (vi) any other
act or omission to act or delay of any kind of the issuer of such Letter of
Credit, the Lender or any other Person or any other event or circumstance
that might otherwise constitute a legal or equitable discharge of the
Borrowers' obligations hereunder. It is understood and agreed by the
Borrowers that the issuer of any Letter of Credit may accept documents that
appear on their face to be in order without further investigation or
inquiry, regardless of any notice or information to the contrary.
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(d) Expiration Dates of Letters of Credit. Commercial Letters of
Credit shall have a term not to exceed ninety (90) days. Standby Letters of
Credit shall have a term not to exceed one year. In no event shall any
Letter of Credit expire later than thirty (30) days prior to the expiration
of the Term.
4. INTEREST, FEES AND CHARGES.
(a) Interest Rate. Each Revolving Loan shall bear interest at the rate
of one percent (1.0%) per annum in excess of the Prime Rate in effect from
time to time. Term Loan A shall bear interest at the rate of one and
one-quarter of one percent (1.25%) per annum in excess of the Prime Rate.
Term Loan B shall bear interest at the rate of two and one-quarter of one
percent (2.25%) per annum in excess of the Prime Rate. Each Capital
Expenditure Loan shall bear interest at the rate of one and one-quarter of
one percent (1.25%) per annum in excess of the Prime Rate. All such
interest to be payable on the first Business Day of each month in arrears.
Said rates of interest shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate, effective on the effective
date of each such change in the Prime Rate. Upon the occurrence of an Event
of Default and during the continuance thereof, each Loan shall bear
interest at the rate of two percent (2%) per annum in excess of the
interest rate otherwise payable thereon, which interest shall be payable on
demand. All interest shall be calculated on the basis of a 360-day year.
(b) Fees And Charges.
(i) Facility Fee. The Borrowers have agreed to pay to the Agent a
facility fee in the aggregate amount of $107,000. The Agent
acknowledges its receipt of the first installment of the facility fee
in the amount of $53,500 on June 10, 2002. On the date of this
Agreement, the Borrowers shall pay to Agent the balance of the
facility fee in an amount equal to $53,500.
(ii) Unused Line Fee. The Borrowers shall pay to Agent an unused
line fee of one-half of one percent (0.50%) of the difference between
the Maximum Revolving Loan Limit and the average daily balance of the
outstanding Revolving Loans plus the Letter of Credit Obligations for
each month, which fee shall be fully earned by Agent and payable
monthly in arrears on the first Business Day of each month. Said fee
shall be calculated on the basis of a 360-day year.
(iii) Letter of Credit Fees and Charges. The Borrowers shall pay
to the Agent all fees and charges with respect to Letters of Credit as
provided for in Section 3(b) hereof.
(iv) Costs and Expenses. The Borrowers shall be obligated to
reimburse Agent and Lender for all costs and expenses, including,
without limitation, legal expenses and reasonable attorneys' fees,
actually incurred by Agent and Lender in connection with the (i)
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documentation and consummation of this transaction and any other
transactions between the Borrowers and Agent, including, without
limitation, Uniform Commercial Code and other public record searches
and filings, overnight courier or other express or messenger delivery,
principal background reports, appraisal and audit costs, surveys,
title insurance and environmental audit or review costs; (ii)
collection, protection or enforcement of any rights in or to the
Collateral; (iii) collection of any Liabilities; and (iv) enforcement
of any of Agent's and Lender's rights under this Agreement. The
Borrowers shall also pay all normal service charges with respect to
all accounts maintained by the Borrowers with LaSalle Bank and any
additional services requested by the Borrowers from Agent, Lender and
LaSalle Bank. All such costs, expenses and charges shall, if owed to
LaSalle Bank, be reimbursed by Agent, and in such event or in the
event such costs and expenses are owed to Agent, constitute
Liabilities hereunder, shall be payable by the Borrowers to Agent on
demand, and, until paid, shall bear interest at the highest rate then
applicable to Loans hereunder.
(v) Capital Adequacy Charge. If Agent or Lender shall have
determined that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or in the interpretation or
application thereof, or compliance by Agent or Lender with any request
or directive regarding capital adequacy (whether or not having the
force of law) from any central bank or governmental authority enacted
after the date hereof, does or shall have the effect of reducing the
rate of return on such party's capital as a consequence of its
obligations hereunder to a level below that which Agent or Lender
could have achieved but for such adoption, change or compliance
(taking into consideration Agent's policies with respect to capital
adequacy) by a material amount, then from time to time, after
submission by Agent to the Borrowers of a written demand therefor
("Capital Adequacy Demand") together with the certificate described
below, the Borrowers shall pay to Agent or Lender such additional
amount or amounts ("Capital Adequacy Charge") as will compensate Agent
or Lender for such reduction, such Capital Adequacy Demand to be made
with reasonable promptness following such determination. A certificate
of Agent or Lender claiming entitlement to payment as set forth above
shall be conclusive in the absence of manifest error. Such certificate
shall set forth the nature of the occurrence giving rise to such
reduction, the amount of the Capital Adequacy Charge to be paid to
Agent or Lender, and the method by which such amount was determined.
In determining such amount, Agent or Lender may use any reasonable
averaging and attribution method, applied on a non-discriminatory
basis.
(c) Maximum Interest. It is the intent of the parties that the rates
of interest and other charges to the Borrowers under this Agreement shall
be lawful; therefore, if for any reason the interest or other charges
payable under this Agreement are found by a court of competent
jurisdiction, in a final determination, to exceed the limit which Agent or
Lender may lawfully charge the Borrowers, then the obligation to pay
interest and other charges shall automatically be reduced to such limit
and, if any amount in excess of such limit shall have been paid, then such
amount shall be refunded to the Borrowers.
5. COLLATERAL.
(a) Grant of Security Interest to Agent. As security for the payment
of all Loans now or in the future made by Agent or Lender to the Borrowers
hereunder and for the payment or other satisfaction of all other
Liabilities, each Borrower hereby grants and assigns to Agent for the
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benefit of Agent and Lender a continuing lien and security interest in the
following property of each Borrower, whether now or hereafter owned,
existing, acquired or arising and wherever now or hereafter located: (a)
all Accounts (whether or not Eligible Accounts) and all Goods whose sale,
lease or other disposition by such Borrower has given rise to Accounts and
have been returned to, or repossessed or stopped in transit by, such
Borrower; (b) all Chattel Paper, Instruments, Documents and General
Intangibles (including, without limitation, all patents, patent
applications, trademarks, trademark applications, tradenames, trade
secrets, goodwill, copyrights, copyright applications, registrations,
licenses, software, franchises, customer lists, tax refund claims, claims
against carriers and shippers, guarantee claims, contracts rights, payment
intangibles, security interests, security deposits and rights to
indemnification); (c) all Inventory (whether or not Eligible Inventory);
(d) all Goods (other than Inventory), including, without limitation,
Equipment, vehicles and Fixtures; (e) all Investment Property; (f) all
Deposit Accounts, bank accounts, deposits and cash; (g) all Letter of
Credit Rights, (h) all Commercial Tort Claims, (i) all ownership interests
in the issued and outstanding capital stock or other equity interests in
each of its Subsidiaries, (j) any other property of such Borrower now or
hereafter in the possession, custody or control of Agent or Lender or any
agent or any parent, affiliate or subsidiary of Agent or Lender or any
participant with Agent or Lender in the Loans, for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or
otherwise) and (k) all additions and accessions to, substitutions for, and
replacements, products and all Proceeds of the foregoing property,
including, without limitation, proceeds of all insurance policies insuring
the foregoing property, and all of such Borrower's books and records
relating to any of the foregoing and to such Borrower's business.
(b) Other Security. Agent, in its sole discretion, without waiving or
releasing any obligation, liability or duty of either Borrower or any other
Obligor under this Agreement or the Other Agreements or any Event of
Default, may at any time or times hereafter, but shall not be obligated to,
pay, acquire or accept an assignment of any security interest, lien,
encumbrance or claim asserted by any Person in, upon or against the
Collateral. All sums paid by Agent in respect thereof and all costs, fees
and expenses including, without limitation, reasonable attorney's fees, all
court costs and all other charges relating thereto incurred by Agent, shall
constitute Liabilities, payable by the Borrowers to Agent on demand and,
until paid and satisfied in full, shall bear interest at the highest rate
then applicable to Loans hereunder.
(c) Possessory Collateral. Promptly after receipt by a Borrower of any
portion of the Collateral evidenced by an agreement, Instrument or
Document, including, without limitation, any Tangible Chattel Paper or any
Investment Property consisting of certificated securities, such Borrower
shall deliver the original thereof to Agent together with an appropriate
endorsement or other specific evidence of assignment thereof to Agent (in
form and substance acceptable to Agent). If an endorsement or assignment of
any such items shall not be made for any reason, Agent is hereby
irrevocably authorized, as such Borrower's attorney and agent-in-fact, to
endorse or assign the same on such Borrower's behalf.
(d) Electronic Chattel Paper. To the extent that a Borrower obtains or
maintains any Electronic Chattel Paper, such Borrower shall create, store
and assign the record or records comprising the Electronic Chattel Paper in
such a manner that (i) a single authoritative copy of the record or records
exists which is unique, identifiable and, except as otherwise provided in
clauses (iv), (v) and (vi) below, unalterable, (ii) the authoritative copy
20
identifies Agent as the assignee of the record or records, (iii) the
authoritative copy is communicated to and maintained by Agent or its
designated custodian, (iv) copies or revisions that add or change an
identified assignee of the authoritative copy can only be made with the
participation of Agent, (v) each copy of the authoritative copy and any
copy of a copy is readily identifiable as a copy that is not the
authoritative copy and (vi) any revision of the authoritative copy is
readily identifiable as an authorized or unauthorized revision.
(e) Xxxxxx Family Trust. As additional security for the Liabilities,
the Borrowers shall cause the Xxxxxx Family Trust to grant Agent on behalf
of Lender a lien and security interest in all right, title and interest to
any and all intellectual property owned by it and currently licensed to the
Borrowers, including but not limited to the intellectual property listed on
Schedule 5(e) attached hereto .
(f) Guarantors. As additional security for the Liabilities, the
Borrowers shall cause each of the Guarantors to guaranty and become surety
to Agent for the benefit of Agent and Lender for all of the Liabilities
pursuant to a Guaranty in form and substance satisfactory to Agent. The
obligations of each Guarantor shall be secured by a lien and security
interest in all of the assets and property of each such Guarantor pursuant
to a Guarantor Security Agreement, and such assets and property shall be
deemed to be Collateral for all purposes hereunder.
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
The Borrower shall, at Agent's request, at any time and from time to time,
execute and deliver to Agent such financing statements, documents and other
agreements and instruments (and pay the cost of filing or recording the same in
all public offices deemed necessary or desirable by Agent) and do such other
acts and things or cause third parties to do such other acts and things as Agent
may deem necessary or desirable in its reasonable discretion in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Agent (free and clear of all other liens, claims,
encumbrances and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Liabilities, and in order to facilitate the collection of the Collateral.
Borrower irrevocably hereby makes, constitutes and appoints Agent (and all
Persons designated by Agent for that purpose) as such Borrower's true and lawful
attorney and agent-in-fact to execute and file such financing statements,
documents and other agreements and instruments and do such other acts and things
as may be necessary to preserve and perfect Agent's security interest in the
Collateral. The Borrower further agrees that a carbon, photographic, photostatic
or other reproduction of this Agreement or of a financing statement shall be
sufficient as a financing statement. The Borrower further ratifies and confirms
the prior filing by Agent of any and all UCC financing statements which identify
such Borrower as the debtor and Agent as the secured party and any or all
Collateral as collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS. Until an Event of Default
has occurred, Borrower shall have the right, except as otherwise provided in
this Agreement, in the ordinary course of the Borrower's business, to (a) sell,
lease or furnish under contracts of service any of the Borrower's Inventory
normally held by Borrower for any such purpose; and (b) use and consume any raw
materials, work in process or other materials normally held by the Borrower for
such purpose; provided, however, that a sale in the ordinary course of business
shall not include any transfer or sale in satisfaction, partial or complete, of
a debt owed by such Borrower.
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8. COLLECTIONS.
(a) The Borrower shall direct all of its Account Debtors to make all
payments on the Accounts owed to it directly to a post office box (the
"Lock Box") designated by, and under the exclusive control of, Agent, at
LaSalle Bank. The Borrowers shall establish an account (the "Lock Box
Account") in Agent's name with LaSalle Bank, into which all payments
received in the Lock Box shall be deposited, and into which the Borrower
will immediately deposit all payments received by Borrower for Inventory or
on Accounts in the identical form in which such payments were received,
whether by cash or check. If any Borrower, any Affiliate or Subsidiary, any
shareholder, officer, director, employee or agent of such Borrower or any
Affiliate or Subsidiary, or any other Person acting for or in concert with
Borrower shall receive any monies, checks, notes, drafts or other payments
relating to or as Proceeds of Accounts or other Collateral, such Borrower
and each such Person shall receive all such items in trust for, and as the
sole and exclusive property of, Agent and, immediately upon receipt
thereof, shall remit the same (or cause the same to be remitted) in kind to
the Lock Box Account. LaSalle Bank shall acknowledge and agree, in a manner
satisfactory to Agent, that the amounts on deposit in such Lock Box Account
are the sole and exclusive property of Agent, that LaSalle Bank will follow
Agent's instructions with respect to disposition of funds in the Lock Box
and Lock Box Account without further consent from any Borrower, that
LaSalle Bank has no right to setoff against the Lock Box Account or against
any other account maintained by LaSalle Bank into which the contents of the
Lock Box Account are transferred, and that LaSalle Bank shall wire, or
otherwise transfer in immediately available funds to Agent in a manner
satisfactory to Agent, funds deposited in the Lock Box Account on a daily
basis as such funds are collected. The Borrowers agree that all payments
made to such Lock Box Account or otherwise received by Agent, whether in
respect of the Accounts or as Proceeds of other Collateral or otherwise,
will be applied on account of the Liabilities in accordance with the terms
of this Agreement. The Borrowers agree to pay all fees, costs and expenses
in connection with opening and maintaining the Lock Box and Lock Box
Account. All of such fees, costs and expenses if not paid by the Borrowers,
may be paid by Agent, and in such event, all amounts paid by Agent shall
constitute Liabilities hereunder, shall be payable to Agent by the
Borrowers upon demand, and, until paid, shall bear interest at the highest
rate then applicable to Loans hereunder. All checks, drafts, instruments
and other items of payment or Proceeds of Collateral shall be endorsed by
the Borrowers to Agent, and, if that endorsement of any such item shall not
be made for any reason, Agent is hereby irrevocably authorized to endorse
the same on the Borrowers' behalf. For the purpose of this Section 8, the
Borrowers irrevocably hereby make, constitute and appoint Agent (and all
Persons designated by Agent for that purpose) as the Borrowers' true and
lawful attorney and agent-in-fact (i) to endorse the Borrowers' name upon
said items of payment and/or Proceeds of Collateral and upon any Chattel
Paper, Document, Instrument, invoice or similar document or agreement
relating to any Account of any Borrower or Goods pertaining thereto; (ii)
to take control in any manner of any item of payment or Proceeds thereof
and (iii) to have access to any lock box or postal box into which any of
any Borrower's mail is deposited, and open and process all mail addressed
to any Borrower and deposited therein.
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(b) Agent may, at any time and from time to time, whether before or
after notification to any Account Debtor and whether before or after the
maturity of any of the Liabilities, (i) enforce collection of any of any
Borrower's Accounts or other amounts owed to such Borrower by suit or
otherwise; (ii) exercise all of any Borrower's rights and remedies with
respect to proceedings brought to collect any Accounts or other amounts
owed to such Borrower; (iii) surrender, release or exchange all or any part
of any Accounts or other amounts owed to any Borrower, or compromise or
extend or renew for any period (whether or not longer than the original
period) any indebtedness thereunder; (iv) sell or assign any Account of any
Borrower or other amount owed to such Borrower upon such terms, for such
amount and at such time or times as Agent deems advisable; (v) prepare,
file and sign any Borrower's name on any proof of claim in bankruptcy or
other similar document against any Account Debtor or other Person obligated
to such Borrower; and (vi) do all other acts and things which are
necessary, in Agent's reasonable discretion, to fulfill any Borrower's
obligations under this Agreement and to allow Agent to collect the Accounts
or other amounts owed to such Borrower. In addition to any other provision
hereof, Agent may at any time, whether before or after the occurrence of a
Default or an Event of Default, at the Borrowers' expense, notify any
parties obligated on any of the Accounts to make payment directly to Agent
of any amounts due or to become due thereunder.
(c) For purposes of calculating interest and fees due under this
Agreement and determining the amount of Loans available for borrowing
purposes, checks and cash or other immediately available funds from
collections of items of payment and Proceeds of any Collateral shall be
applied in whole or in part against the outstanding Revolving Loans, in
such order as Agent shall determine in its sole discretion, one day after
receipt thereof in the Lock Box Account, subject to actual collection.
(d) On a monthly basis, Agent shall deliver to the Borrowers an
account statement showing all Loans, charges and payments, which shall be
deemed final, binding and conclusive upon the Borrowers unless the
Borrowers notify Agent in writing, specifying any error therein, within
thirty (30) days of the date such account statement is sent to them and any
such notice shall only constitute an objection to the items specifically
identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(a) Daily/Weekly Reports. The Borrowers shall deliver to Agent (if
required by Agent) an executed daily loan report and certificate on Agent's
then-current form on each day on which a Borrower requests a Revolving
Loan, and in any event not less frequently than weekly, unless otherwise
required by Agent, which shall be accompanied by copies of the Borrowers'
sales journal, cash receipts journal and credit memo journal for the
relevant period. Such report shall reflect the activity of the Borrowers
with respect to Accounts for the immediately preceding week, and shall be
in a form and with such specificity as is satisfactory to Agent and shall
contain such additional information concerning Accounts and Inventory as
may be requested by Agent including, without limitation, but only if
specifically requested by Agent, copies of all invoices prepared in
connection with such Accounts.
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(b) Monthly Reports. The Borrowers shall deliver to Agent, in addition
to any other reports, as soon as practicable, and in any event within
fifteen (15) days after the end of each month: (A) a detailed trial balance
of each Borrower's Accounts aged per invoice date, in form and substance
reasonably satisfactory to Agent including, without limitation, the names
and addresses of all Account Debtors of each Borrower, (B) a summary and
detail of accounts payable (such Accounts and accounts payable divided into
such time intervals as Agent may require in its reasonable discretion),
including a listing of any held checks and (C) an Inventory certification
in form and content satisfactory to Agent.
(c) Financial Statements. The Borrowers shall deliver to Agent the
following financial information of MTS and its Subsidiaries, all of which
shall be prepared in accordance with GAAP consistently applied, shall be
accompanied by a compliance certificate in the form of Exhibit B hereto,
which compliance certificate shall include a calculation of all financial
covenants contained in this Agreement and, in the case of the annual
audited Financial Statements to be delivered in accordance with clause (ii)
below, a calculation of Excess Cash Flow for the Fiscal Year covered by
such Financial Statements, and shall be in form and content satisfactory to
the Agent: (i) no later than thirty (30) days after the end of each
calendar month, copies of internally prepared financial statements for such
month, including, without limitation, balance sheets and statements of
income, retained earnings and cash flow ("Financial Statements"), on a
consolidated and consolidating basis, together with (A) a cumulative
statement of income from the first day of the then current Fiscal Year to
the last day of such month, (B) a report comparing Capital Expenditures for
such month against the capital budget schedule attached hereto as Schedule
9(c) and identifying all expected changes in the timing or amount of
Capital Expenditures, along with a comparison between the actual figures
for such month, the comparable figures for the prior year period (only with
respect to the balance sheet and income statement) and the comparable
figures in the current year's budget, along with management commentary.
Such Financial Statements and additional financial information shall have
been certified by the Chief Financial Officer of MTS to be true, accurate
and complete in all material respects; and (ii) no later than forty-five
(45) days after the end of each of the first three of MTS's fiscal
quarters, unaudited quarterly consolidated internally prepared Financial
Statements, which Financial Statements shall have been certified by the
Chief Financial Officer of MTS to be true, accurate and complete in all
material respects; (iii) no later than ninety (90) days after the end of
each Fiscal Year, audited consolidated annual Financial Statements, with an
unqualified opinion by independent certified public accountants selected by
MTS and reasonably satisfactory to Agent, which Financial Statements shall
be accompanied by (A) a letter from such accountants substantially in the
form of Exhibit E attached hereto and (B) copies of any management letters,
reports or other detailed information concerning significant aspects of
MTS's operations and financial affairs given to MTS or any of its
Subsidiaries by such accountants.
(d) Annual Projections. Not later than the first day of each Fiscal
Year, the Borrowers shall deliver to Agent projected consolidated balance
sheets, statements of income, cash flow and availability for MTS and its
Subsidiaries, for each of the twelve (12) months during such Fiscal Year,
which shall include, without limitation, the assumptions used therein,
together with appropriate supporting details as reasonably requested by
Agent.
(e) Explanation of Budgets and Projections. In conjunction with the
delivery of the annual presentation of projections or budgets referred to
in Section 9(d) above, MTS shall deliver a letter signed by the President
or a Vice President of MTS and by the Treasurer or Chief Financial Officer
of MTS, describing, comparing and analyzing, in detail, all changes and
developments between the anticipated financial results included in such
projections or budgets and the historical consolidated Financial Statements
of MTS and its Subsidiaries.
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(f) Public Reporting(i). Within fifteen days after transmission
thereof, MTS shall deliver to Agent copies of all registration statements
and annual, quarterly, monthly or other regular reports which MTS or any of
its Subsidiaries files with the Securities and Exchange Commission, as well
as promptly providing to Agent copies of any reports and proxy statements
delivered to its shareholders.
(g) Valuation of Assets of Guarantors. The Borrowers shall provide,
concurrently with the monthly Financial Statements to be delivered in
accordance with Section 9(c) above, a statement showing the value of the
assets of each Guarantor as of the date of such Financial Statements, which
assets shall be valued at the higher of book value and fair market value as
of such date, with a level of detail and specificity satisfactory to Agent
in its reasonable discretion.
(h) Other Information. Promptly following request therefor by Agent,
such other business or financial data, reports, appraisals and projections
as Agent may reasonably request.
10. TERMINATION. (i) THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF
UNTIL July 1, 2005 (THE "TERM") UNLESS (A) THE DUE DATE OF THE LIABILITIES IS
ACCELERATED PURSUANT TO SECTION 16 HEREOF; OR (B) THE BORROWERS ELECT TO
TERMINATE THIS AGREEMENT PRIOR TO THE END OF THE TERM BY GIVING AGENT WRITTEN
NOTICE OF SUCH ELECTION AT LEAST THIRTY (30) DAYS PRIOR TO THE TERMINATION DATE
AND BY PAYING ALL OF THE LIABILITIES IN FULL ON THE TERMINATION DATE. If one or
more of the events specified in clauses (A) or (B) above occurs, then (i) Agent
shall not make any additional Loans on or after the date identified as the date
on which the Liabilities are to be repaid; and (ii) this Agreement shall
terminate on the date thereafter that the Liabilities are paid in full. At such
time as the Borrowers shall have repaid and satisfied all of the Liabilities in
full and this Agreement shall have been terminated, the Borrowers shall deliver
to Agent and Lender a release, in form and substance satisfactory to Agent and
Lender, of all obligations and liabilities of Agent and Lender and their
respective officers, directors, employees, agents, parents, subsidiaries and
affiliates to the Borrowers, and if the Borrowers are obtaining new financing
from another lender, the Borrowers shall deliver such lender's indemnification
of Agent and Lender, in form and substance satisfactory to Agent and Lender, for
checks which Agent and Lender have credited to any account of the Borrowers, but
which subsequently are dishonored for any reason or for automatic clearinghouse
or wire transfers not yet posted to the Borrowers' account. If, during the Term
of this Agreement, the Revolving Loan facility is terminated by Borrowers or
this Agreement is terminated as a result of the occurrence of an Event of
Default, then the Borrowers agree to repay and satisfy in full all of the
Liabilities, and additionally, as a prepayment fee, the Borrowers shall pay to
Agent an amount equal to (i) two percent (2%) of the Maximum Loan Limit, if such
prepayment occurs at anytime prior to July 1, 2003, (ii) one percent (1%) of the
Maximum Loan Limit if such prepayment occurs at any time prior to July 1, 2004
but after June 30, 2003, and (iii) one-half of one percent (0.5%) of the Maximum
Loan Limit if such prepayment occurs at any time prior to the date thirty (30)
days prior to the last day of the Term but after June 30, 2004.
25
(ii) In the event the Revolving Loan facility under this Agreement is
terminated for any reason, in addition to all other obligations of the
Borrowers to Agent, the Borrowers will deposit with Agent cash in an amount
equal to one hundred ten percent (110%) of the aggregate face amount of all
Letters of Credit, plus all fees related thereto or to accrue thereunder.
Such funds shall be held by Agent as cash collateral to secure the
Borrowers' reimbursement obligations in respect of such Letters of Credit.
11. REPRESENTATIONS AND WARRANTIES. Each Borrower and each Guarantor, as
applicable, hereby represents and warrants to Agent, which representations and
warranties (whether appearing in this Section 11 or elsewhere) shall be true at
the time of each Borrower's and Guarantor's execution hereof and the closing of
the transactions described herein or related hereto, shall remain true until the
repayment in full and satisfaction of all the Liabilities and termination of
this Agreement, and shall be remade by each Borrower and each Guarantor, as
applicable, at the time each Loan is made pursuant to this Agreement, as
follows.
(a) Financial Statements and Other Information. The Financial
Statements and other information delivered or to be delivered by the
Borrowers to Agent at or prior to the date of this Agreement accurately
reflect the financial condition of MTS and its Subsidiaries as of the date
of such Financial Statements or such other information and, since the date
of the Financial Statements delivered to Agent most recently prior to the
date of this Agreement, no event has occurred which could reasonably be
expected to have a Material Adverse Effect. All written information now or
heretofore furnished by any Borrower or any Guarantor to Agent is true and
correct as of the date with respect to which such information was
furnished.
(b) Locations. The office where each Borrower and each Guarantor, as
applicable, keeps its books, records and accounts (or copies thereof)
concerning the Collateral, such Borrower's and such Guarantor's principal
place of business and all of such Borrower's and such Guarantor's other
places of business, locations of Collateral and post office boxes and
locations of bank accounts are as set forth in Exhibit A and at other
locations within the continental United States of which Agent has been
advised by such Borrower in accordance with Section 12(b)(i). The
Collateral, including, without limitation, the Equipment (except any part
thereof which any Borrower or any Guarantor shall have advised Agent in
writing consists of Collateral normally used in more than one state) is
kept, or, in the case of vehicles, based, only at the addresses set forth
on Exhibit A, and at other locations within the continental United States
of which Agent has been advised by such Borrower or such Guarantor in
writing in accordance with Section 12(b)(i) hereof. Exhibit A hereto lists
the names of the depository banks and account numbers with respect to all
bank accounts currently maintained by each Borrower and each Guarantor, as
applicable.
(c) Loans by Borrowers. There do not presently exist any loans or
advances to any Affiliate or other Person by any Borrower or Guarantor,
except for advances authorized hereunder to employees, officers and
directors of all Borrowers for travel and other expenses arising in the
ordinary course of such Borrower's business.
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(d) Accounts and Inventory. Each Account or item of Inventory which a
Borrower shall, expressly or by implication, request Agent to classify as
an Eligible Account or as Eligible Inventory, respectively, shall, as of
the time when such request is made, conform in all respects to the
requirements of such classification as set forth in the respective
definitions of "Eligible Account" and "Eligible Inventory" as set forth
herein and as otherwise established by Agent from time to time.
(e) Liens. Each Borrower and each Guarantor is the lawful owner of all
Collateral now purportedly owned or hereafter purportedly acquired by such
Borrower or such Guarantor, free from all liens, claims, security interests
and encumbrances whatsoever (and has not received notice from any Person
claiming any of the same), whether voluntarily or involuntarily created and
whether or not perfected, other than the Permitted Liens.
(f) Organization, Authority and No Conflict. Each Borrower and each
Guarantor is duly organized, validly existing and in good standing under
the laws of its state of organization, is duly qualified and in good
standing in all states where the nature and extent of the business
transacted by it or the ownership of its assets makes such qualification
necessary (except to the extent such failure to do so will not result in a
Material Adverse Effect). Each Borrower and each Guarantor has the right
and power and is duly authorized and empowered to enter into, execute and
deliver this Agreement and the Other Agreements to which it is a part and
perform its obligations hereunder and thereunder. Each Borrower's and each
Guarantor's execution, delivery and performance of this Agreement and the
Other Agreements to which it is a party does not conflict with the
provisions of the organizational documents of such party, any statute,
regulation, ordinance or rule of law, or any agreement, contract or other
document which may now or hereafter be binding on such party, and such
party's execution, delivery and performance of this Agreement and the Other
Agreements shall not result in the imposition of any lien or other
encumbrance upon any of such party's property under any existing indenture,
mortgage, deed of trust, loan or credit agreement or other agreement or
instrument by which such party or any of its property may be bound or
affected.
(g) Litigation. Except as set forth on Schedule 11(g) hereto, there
are no actions or proceedings which are pending or threatened against any
Borrower or Guarantor which might have an Individual Material Adverse
Effect on such Obligor, and such Obligor shall, promptly upon becoming
aware of any such pending or threatened action or proceeding, give written
notice thereof to Agent. No Borrower or Guarantor has any Commercial Tort
Claims pending other than those set forth on Schedule 11(g) hereto.
(h) Compliance with Laws and Maintenance of Permits. Each Borrower and
each Guarantor, as applicable, has obtained all governmental consents,
franchises, certificates, licenses, authorizations, approvals and permits,
the lack of which would have an Individual Material Adverse Effect on such
Borrower or such Guarantor. Each Borrower and each Guarantor is in
compliance in all material respects with all applicable federal, state,
local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, Environmental Laws and statutes, orders,
regulations, rules, securities laws and SEC rules and regulations and
ordinances relating to taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety) the failure
to comply with which would have an Individual Material Adverse Effect on
it.
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(i) Affiliate Transactions. Except as set forth on Schedule 11(i)
hereto or as permitted pursuant to Section 11(c) hereof, no Borrower or
Guarantor is conducting, permitting or suffering to be conducted, any
transaction with any Affiliate other than transactions with Affiliates for
the purchase or sale of Inventory or services in the ordinary course of
business pursuant to terms that are no less favorable to such Borrower or
Guarantor than the terms upon which such transfers or transactions would
have been made had they been made to or with a Person that is not an
Affiliate.
(j) Names and Tradenames. Each Borrower's and each Guarantor's name
has always been in the past 5 years as set forth on the signature pages of
this Agreement, and no Borrower or Guarantor uses tradenames, assumed
names, fictitious names or division names in the operation of the Business,
except as set forth on Schedule 11(j) hereto.
(k) Equipment. Each Borrower and each Guarantor, as applicable, has
good and indefeasible and merchantable title to and ownership of all of its
Equipment (other than Equipment leased by it). No Equipment is (i) a
Fixture to real estate unless such real estate is owned by a Borrower or a
Guarantor and is subject to a mortgage in favor of Agent or (ii) an
accession to other personal property unless such personal property is
subject to a perfected first priority lien in favor of Agent.
(l) Enforceability. This Agreement and the Other Agreements to which
each Borrower and each Guarantor is a party are the legal, valid and
binding obligations of such Obligor and are enforceable against such
Obligor in accordance with their respective terms.
(m) Solvency. Each Borrower is, and MTS and each of its Subsidiaries,
taken as a whole, is after giving effect to the transactions contemplated
hereby, solvent, is able to pay its debts as they become due, has capital
sufficient to carry on its business, now owns property having a value both
at fair valuation and at present fair saleable value greater than the
amount required to pay its debts, and will not be rendered insolvent by the
execution and delivery of this Agreement or any of the Other Agreements or
by completion of the transactions contemplated hereunder or thereunder.
(n) Indebtedness. Except as set forth on Schedule 11(n) hereto, no
Borrower or Guarantor is obligated (directly or indirectly), for any loans
or other indebtedness for borrowed money other than the Loans and the
Subordinated Debt.
(o) Margin Security and Use of Proceeds. No Borrower or Guarantor owns
any margin securities, and none of the proceeds of the Loans hereunder
shall be used for the purpose of purchasing or carrying any margin
securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any
other purpose not permitted by Regulation U of the Board of Governors of
the Federal Reserve System as in effect from time to time.
(p) Parent, Subsidiaries and Affiliates. Except as set forth on
Schedule 11(p) hereto, no Borrower or Guarantor has any Parents,
Subsidiaries or other Affiliates or divisions, nor is any Borrower or
Guarantor engaged in any joint venture or partnership with any other
Person.
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(q) No Defaults. No Borrower or Guarantor is in default under any
material contract, lease or commitment to which it is a party or by which
it is bound, nor does any Borrower or Guarantor know of any dispute
regarding any contract, lease or commitment which would have an Individual
Material Adverse Effect on any Obligor.
(r) Employee Matters. There are no controversies pending or threatened
between any Borrower or Guarantor, as applicable, and any of its employees,
agents or independent contractors other than employee grievances arising in
the ordinary course of business which would not, in the aggregate, have an
Individual Material Adverse Effect on such Obligor, and each Borrower and
each Guarantor is in compliance with all federal and state laws respecting
employment and employment terms, conditions and practices except for such
non-compliance which would not have an Individual Material Adverse Effect
on such Obligor.
(s) Intellectual Property. Each Borrower and each Guarantor, as
applicable, possesses adequate licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, tradestyles
and tradenames to continue to conduct its business as heretofore conducted
by it, and all of the foregoing are identified on Schedule 11(s) hereto.
(t) Environmental Matters. No Borrower or Guarantor, as applicable,
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in a
material respect any Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of each
Borrower and each Guarantor, as applicable, comply in all material respects
with all Environmental Laws and all licenses, permits, certificates,
approvals and similar authorizations thereunder. To Borrowers' knowledge,
there has been no investigation, proceeding, complaint, order, directive,
claim, citation or notice by any governmental authority or any other
Person, nor is any pending or to the best of any Borrower's or Guarantor's
knowledge threatened with respect to any non-compliance with or violation
of the requirements of any Environmental Law by such Borrower or such
Guarantor or the release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter,
which affects such Borrower or such Guarantor or its business, operations
or assets or any properties at which such Borrower or such Guarantor has
transported, stored or disposed of any Hazardous Materials. No Borrower or
Guarantor has material liability (contingent or otherwise) in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(u) ERISA Matters. Each Borrower and each Guarantor, as applicable,
has paid and discharged all obligations and liabilities arising under ERISA
of a character which, if unpaid or unperformed, might result in the
imposition of a lien against any of its properties or assets.
29
(v) Subordinated Debt and Preferred Stock Financing. The Borrowers
have delivered to Agent true and complete copies of all of the Subordinated
Debt Documents and the Preferred Stock Documents and each Borrower and each
Guarantor is in compliance with all of its respective obligations
thereunder.
(w) Xxxxxx License Agreement. The Borrowers have delivered to Agent a
true and complete copy of the Xxxxxx License Agreement, and the Borrowers
party thereto are in compliance thereunder.
(x) Absence of Undisclosed Liabilities. Except as disclosed in the
Financial Statements or listed on Schedule 11(x) hereof, as of the date of
this Agreement, to MTS's knowledge, (a) neither MTS nor any of its
Subsidiaries had any material liability of any nature (matured or
unmatured, fixed or contingent) which was not provided for or disclosed on
the Financial Statements except current liabilities incurred in the
ordinary course of business since April 30, 2002, and (b) all liability
reserves established by MTS and its Subsidiaries are adequate in all
material respects. There are no material loss contingencies (as such term
is used in Statement of Financial Accounting Standards No. 5) known to MTS
which are not adequately provided for in the Financial Statements.
(y) Interrelatedeness of Borrowers and Guarantors. The business
operations of each Borrower and each Guarantor are interrelated and
complement one another, and such entities have a common business purpose,
with intercompany bookkeeping and accounting adjustments used to separate
their respective properties, liabilities, and transactions. To permit their
uninterrupted and continuous operations, such entities now require and will
from time to time hereafter require funds and credit accommodations for
general business purposes. The proceeds of the Loans will directly or
indirectly benefit each Borrower and each Guarantor, severally and jointly,
regardless of which Borrower requests or receives part or all of the
proceeds of such advances.
(z) Individual Material Adverse Effect on Closing Date. To the extent
that any representation and warranty contained in this Section 11 requires
that there be no Individual Material Adverse Effect with respect to any of
the individual Obligors making such representation and warranty, such
requirement shall be only as of the Closing Date, and each subsequent time
that such representation and warranty is made, it shall only be required
that there be no Material Adverse Effect with respect to such Obligors.
12. AFFIRMATIVE COVENANTS. Until payment and satisfaction in full of all
Liabilities and termination of this Agreement, unless any Borrower or Guarantor
obtains Agent's prior written consent waiving or modifying any of such
Borrower's or such Guarantor's covenants hereunder in any specific instance,
each Borrower and each Guarantor, as applicable, covenants and agrees as
follows:
(a) Maintenance of Records. Each Borrower and each Guarantor, as
applicable, shall at all times keep accurate and complete books, records
and accounts with respect to all of such Obligor's business activities, in
accordance with sound accounting practices and GAAP, consistently applied,
and shall keep such books, records and accounts, and any copies thereof,
only at the addresses indicated for such purpose on Exhibit A;
(b) Notices. Each Borrower and each Guarantor, as applicable, shall:
30
(i) Locations. Promptly (but in no event less than ten (10) days
prior to the occurrence thereof) notify Agent of the proposed opening
of any new place of business or new location of Collateral, the
closing of any existing place of business or location of Collateral,
any change in the location of such Borrower's or such Guarantor's
books, records and accounts (or copies thereof), the opening or
closing of any post office box, the opening or closing of any bank
account or, if any of the Collateral consists of Goods of a type
normally used in more than one state, the use of any such Goods in any
state other than a state in which such Borrower or such Guarantor has
previously advised Agent that such Goods will be used.
(ii) Eligible Accounts and Inventory. Promptly upon becoming
aware thereof, notify Agent if any Account or Inventory identified by
a Borrower to Agent as an Eligible Account or Eligible Inventory
becomes ineligible for any reason.
(iii) Litigation and Proceedings. Promptly upon becoming aware
thereof, notify Agent of any actions or proceedings which are pending
or threatened against any Borrower or Guarantor which might have an
Individual Material Adverse Effect on such Obligor, and any Commercial
Tort Claims of any Obligor which may arise, which notice shall
constitute such Obligor's authorization to amend Schedule 11(g) to add
such Commercial Tort Claims.
(iv) Names and Tradenames. Notify Agent within ten (10) days of
the change of its name or the use of any tradename, assumed name,
fictitious name or division name not previously disclosed to Agent in
writing.
(v) ERISA Matters. Promptly notify Agent of (x) the occurrence of
any "reportable event" (as defined in ERISA) which might result in the
termination by the Pension Benefit Guaranty Corporation (the "PBGC")
of any employee benefit plan ("Plan") covering any officers or
employees of a Borrower or a Guarantor, any benefits of which are, or
are required to be, guaranteed by the PBGC, (y) receipt of any notice
from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor or (z) its intention to terminate or
withdraw from any Plan.
(vi) Environmental Matters. Promptly notify Agent upon becoming
aware of any investigation, proceeding, complaint, order, directive,
claim, citation or notice with respect to any material non-compliance
with or violation of the requirements of any Environmental Law by
Borrower or the generation, use, storage, treatment, transportation,
manufacture handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter which
affects a Borrower or a Guarantor, as applicable, or its business
operations or assets or any properties at which a Borrower or a
Guarantor has transported, stored or disposed of any Hazardous
Materials.
(vii) Default; Material Adverse Change. Promptly advise Agent of
any Material Adverse Effect or the occurrence of any Default or Event
of Default hereunder or under any of the Subordinated Debt Documents
or any of the Preferred Stock Documents.
All of the foregoing notices shall be provided by the Borrowers,
on behalf of themselves and the Guarantors, as applicable, to Agent in
writing.
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(c) Compliance with Laws and Maintenance of Permits. Each Borrower and
each Guarantor shall maintain all governmental consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of
which would have a Material Adverse Effect, and each Borrower and each
Guarantor shall remain in compliance with all applicable federal, state,
local and foreign statutes, orders, regulations, rules and ordinances
(including, without limitation, Environmental Laws and statutes, orders,
regulations, rules and ordinances relating to taxes, employer and employee
contributions and similar items, securities, ERISA or employee health and
safety) the failure with which to comply would have a Material Adverse
Effect. Following any determination by Agent that there is non-compliance,
or any condition which requires any action by or on behalf of any Borrower
or any Guarantor in order to avoid non-compliance, with any Environmental
Law, such Borrower or Guarantor, at Borrowers' expense, will cause an
independent environmental engineer acceptable to Agent to conduct such
tests of the relevant site(s) as are appropriate and prepare and deliver a
report setting forth the results of such tests, a proposed plan for
remediation and an estimate of the costs thereof.
(d) Inspection and Audits. Each Borrower and each Guarantor shall
permit Agent, or any Persons designated by it, to call at such Obligor's
places of business at any time; provided that, so long as no Event of
Default is continuing, the Agent shall give reasonable prior notice and
shall call only during regular business hours and, without hindrance or
delay, to inspect the Collateral, visit and inspect the properties of any
Obligor, and to inspect, audit, check and make extracts from such Obligor's
books, records, journals, orders, receipts and any correspondence and other
data relating to such Obligor's business, the Collateral or any
transactions between the parties hereto, and shall have the right to make
such verification concerning such Obligor's business as Agent may consider
reasonable under the circumstances. Borrower shall furnish to Agent such
information relevant to Agent's rights under this Agreement as Agent shall
at any time and from time to time request. Agent, through its officers,
employees or agents shall have the right, at any time and from time to
time, in Agent's name, to verify the validity, amount or any other matter
relating to any of any Borrower's Accounts, by mail, telephone, telegraph
or otherwise. Each Borrower and each Guarantor authorizes Agent to discuss
the affairs, finances and business of such Obligor with any officers,
employees or directors of such Obligor or with its Parent or any Affiliate
or the officers, employees or directors of its Parent or any Affiliate, and
to discuss the financial condition of such Obligor with such Obligor's
independent public accountants. Any such discussions shall be without
liability to Agent or to such Obligor's independent public accountants. The
Borrowers shall pay to Agent all fees, costs and expenses incurred by Agent
in the exercise of its rights hereunder, at the rate of $750.00 per person
per day, plus all out-of-pocket expenses, and all of such fees, costs and
expenses shall constitute Liabilities hereunder, shall be payable on demand
and, until paid, shall bear interest at the highest rate then applicable to
Loans hereunder;
(e) Insurance. Each Borrower and each Guarantor shall:
(i) Keep the Collateral owned by it properly housed and insured
for the full insurable value thereof against loss or damage by fire,
theft, explosion, sprinklers, collision (in the case of motor
vehicles) and such other risks as are customarily insured against by
Persons engaged in businesses similar to that of such Obligor, with
such companies, in such amounts, with such deductibles, and under
policies in such form, as shall be reasonably satisfactory to Agent.
Original (or certified) copies of such policies of insurance have been
32
or shall be, within thirty (30) days of the date hereof, delivered to
Agent, together with evidence of payment of all premiums therefor, and
shall contain a lender's loss payee and insured mortgagee endorsement,
in form and substance acceptable to Agent, showing loss under such
insurance policies payable to Agent (and secondarily liable to the
Subordinated Lender). Such endorsement, or an independent instrument
furnished to Agent, shall provide that the insurance company shall
give Agent at least thirty (30) days written notice before any such
policy of insurance is altered or canceled and that no act, whether
willful or negligent, or default of any Borrower or any Guarantor or
any other Person shall affect the right of Agent to recover under such
policy of insurance in case of loss or damage. In addition, each
Borrower and each Guarantor shall cause to be executed and delivered
to Agent an assignment of proceeds of its business interruption
insurance policies (but so long as no Event of Default is continuing
at the time payment of proceeds is to be made under such business
interruption insurance policies (which shall not include insurance on
the Collateral), Agent will not apply such proceeds to the
Liabilities, but shall permit the Borrowers to utilize such proceeds
to operate their business). Each Borrower and each Guarantor hereby
direct all insurers under all policies of insurance to pay all
proceeds payable thereunder directly to Agent. Each Borrower and each
Guarantor irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent) as such Obligor's
true and lawful attorney (and agent-in-fact) for the purpose of
making, settling and adjusting claims under such policies of
insurance, endorsing the name of such Obligor on any check, draft,
instrument or other item of payment for the proceeds of such policies
of insurance and making all determinations and decisions with respect
to such policies of insurance.
(ii) Maintain, at its expense, such public liability, third party
property damage and workers compensation insurance as is customary for
Persons engaged in businesses similar to that of such Borrower or such
Guarantor with such companies and in such amounts, with such
deductibles and under policies in such form as shall be reasonably
satisfactory to Agent and original (or certified) copies of such
policies have been or shall be, within thirty (30) days after the date
hereof, delivered to Agent, together with evidence of payment of all
premiums therefor; each such policy (other than the workers
compensation policy) shall contain an endorsement showing Agent as
additional insured thereunder and providing that the insurance company
shall give Agent at least thirty (30) days written notice before any
such policy shall be altered or canceled.
If any Borrower or any Guarantor at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required above or to
pay any premium relating thereto, then Agent, without waiving or releasing
any obligation or default by such Obligor hereunder, may (but shall be
under no obligation to) obtain and maintain such policies of insurance and
pay such premiums and take such other actions with respect thereto as Agent
deems advisable. Such insurance, if obtained by Agent, may, but need not,
protect such Obligor's interests or pay any claim made by or against such
Obligor with respect to the Collateral. Such insurance may be more
expensive than the cost of insurance such Obligor may be able to obtain on
its own and may be cancelled only upon such Obligor providing evidence that
it has obtained the insurance as required above. All sums disbursed by
Agent in connection with any such actions, including, without limitation,
court costs, expenses, other charges relating thereto and reasonable
attorneys' fees, shall constitute Loans hereunder, shall be payable on
demand by the Borrowers to Agent and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder.
33
(f) Collateral. Each Borrower and each Guarantor shall keep the
Collateral owned by it in good condition, repair and order and shall make
all necessary repairs to the Equipment and replacements thereof so that the
operating efficiency and the value thereof shall at all times be preserved
and maintained. Each Borrower and each Guarantor shall permit Agent to
examine any of the Collateral at any time wherever the Collateral may be
located; provided that, so long as no Event of Default is continuing, the
Agent shall give reasonable prior notice and shall perform such
examinations only during regular business hours, and each Borrower and each
Guarantor shall, promptly upon request therefor by Agent, deliver to Agent
any and all evidence of ownership of any of the Equipment including,
without limitation, certificates of title and applications of title. Each
Borrower and each Guarantor shall, at the request of Agent, indicate on its
records concerning the Collateral a notation, in form satisfactory to
Agent, of the security interest of Agent hereunder.
(g) Use of Proceeds. All monies and other property obtained by any
Borrower from Agent pursuant to this Agreement shall be used solely as
follows: (a) the proceeds of the initial Loans shall be used to refinance
all existing indebtedness of each Borrower or any Guarantor owing to South
Trust Bank; and (b) the proceeds of all other Loans shall be used for
working capital and general corporate purposes.
(h) Taxes. Each Borrower and each Guarantor, as applicable, shall file
all required tax returns and pay all of its taxes when due (after giving
effect to any available extensions), including, without limitation, taxes
imposed by federal, state or municipal agencies, and shall cause any liens
for taxes to be promptly released; provided, that such Obligor shall have
the right to contest the payment of such taxes in good faith by appropriate
proceedings so long as (i) the amount so contested is shown on such
Obligor's financial records; (ii) the contesting of any such payment does
not give rise to a lien for taxes; (iii) such Obligor keeps on deposit with
Agent (such deposit to be held without interest) an amount of money which,
in the reasonable judgment of Agent, is sufficient to pay such taxes and
any interest or penalties that may accrue thereon; and (iv) if such Obligor
fails to prosecute such contest with reasonable diligence, Agent may apply
the money so deposited in payment of such taxes. If such Obligor fails to
pay any such taxes and in the absence of any such contest by such Obligor,
Agent may (but shall be under no obligation to) advance and pay any sums
required to pay any such taxes and/or to secure the release of any lien
therefor, and any sums so advanced by Agent shall constitute Loans
hereunder, shall be payable by such Obligor to Agent on demand, and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder.
(i) Intellectual Property. Each Borrower and each Guarantor, as
applicable, shall maintain adequate licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, tradestyles
and tradenames to continue its business as heretofore conducted by it or as
hereafter conducted by it.
(j) Senior Management. Each Borrower and each Guarantor, as
applicable, shall cause the Business to be managed by its present senior
management team, or in the event any member of the senior management team
shall cease to serve for any reason, a replacement who is reasonably
satisfactory to the Agent.
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(k) Key Person Life Insurance. MTS shall obtain, within 60 days after
the Closing Date, and thereafter continuously maintain in effect with an
insurer acceptable to Agent, insurance upon the life of Xxxx X. Xxxxxx in
the amount of $4,000,000, Xxxxxxx X. Xxxxxx, in the amount of $1,500,000
and Xxxxxxx Xxxxxxxxx, in the amount of $1,500,000 (each a "Life Insurance
Policy" and collectively, the "Life Insurance Policies").
(l) Xxxxxx License Agreement. The Borrowers shall remain in compliance
of their obligations under the Xxxxxx License Agreement (giving effect to
any applicable cure or grace periods therein).
(m) Preferred Stock Documents. The Borrowers and the Guarantors shall
remain in compliance of their obligations under the Preferred Stock
Documents (giving effect to any applicable cure or grace periods therein).
(n) Subordinated Debt Documents. The Borrowers and the Guarantors
shall remain in compliance of their obligations under the Subordinated Debt
Documents (giving effect to any applicable cure or grace periods therein).
(o) Borrower Subsidiaries. At such time that the assets of any
Guarantor have a value of at least $100,000, valued at the higher of the
book value and fair market value thereof, such Guarantor shall promptly
become a Borrower hereunder, and shall enter into such documentation,
including a joinder agreement to this Agreement and an allonge to any
then-existing promissory notes, and shall provide to Agent an opinion of
counsel with respect to the enforceability of such documents, and shall
execute or provide to Agent such further documentation as Agent in its sole
discretion may require.
13. NEGATIVE COVENANTS. Until payment and satisfaction in full of all
Liabilities and termination of this Agreement, unless any Borrower or any
Guarantor obtains Agent's prior written consent waiving or modifying any of such
Obligor's covenants hereunder in any specific instance, each Borrower and each
Guarantor, as applicable, agrees as follows:
(a) Guaranties. No Borrower or Guarantor shall assume, guarantee or
endorse, or otherwise become liable in connection with, the obligations of
any Person, except by endorsement of instruments for deposit or collection
or similar transactions in the ordinary course of business, except that
each Guarantor may enter into a guaranty of the Subordinated Debt, so long
as such guaranty is subordinated in a manner satisfactory to the Agent in
its sole discretion to any guaranty by such Guarantor of the Liabilities.
(b) Indebtedness. No Borrower or Guarantor shall create, incur, assume
or become obligated (directly or indirectly), for any loans or other
indebtedness of borrowed money other than the Loans, except that each such
Obligor may (i) borrow money from a Person other than Agent on an unsecured
and subordinated basis if a subordination agreement in favor of Agent and
in form and substance satisfactory to Agent is executed and delivered to
Agent relative thereto; (ii) maintain its present indebtedness listed on
Schedule 11(n) hereto; (iii) incur unsecured indebtedness to trade
creditors in the ordinary course of its business; (iv) incur purchase money
indebtedness or capitalized lease obligations not in excess of $100,000 in
the aggregate each Fiscal Year in connection with Capital Expenditures
35
permitted pursuant to Section 14 hereof; (v) incur indebtedness under
agreements pursuant to which any Borrower is hedging against increases in
interest rates on such Borrower's outstanding floating rate indebtedness;
provided that the aggregate amount so hedged at any time shall not exceed
the amount of such Borrower's floating rate indebtedness outstanding at
such time; and (vi) incur the Subordinated Debt, so long as such Obligors
have entered into the Subordination Agreement.
(c) Liens. No Borrower or Guarantor shall grant or permit to exist
(voluntarily or involuntarily) any lien, claim, security interest or other
encumbrance whatsoever on any of its assets, other than Permitted Liens .
(d) Mergers, Sales, Acquisitions, Subsidiaries and Other Transactions
Outside the Ordinary Course of Business. No Borrower or Guarantor shall (i)
enter into any merger or consolidation; provided that a Guarantor may merge
with and into another Guarantor or into a Borrower and any Borrower may
merge with and into another Borrower, so long as the Borrowers provide
Agent at least thirty (30) days prior written notice thereof; (ii) change
the state of such Obligor's incorporation or enter into any transaction
which has the effect of changing the state of such Obligor's incorporation
other than as a result of a transaction permitted under clause (i); (iii)
sell, transfer lease or otherwise dispose of any of its assets other than
in the ordinary course of business; provided, however, that MTS and
Packaging may transfer assets between themselves and to those Subsidiaries
acting as Guarantors or Borrowers at such time, so long as (a) no Default
or Event of Default has occurred, or would occur as a result of such
transfer, (b) MTS shall deliver written notice to Agent at least thirty
(30) days prior to any such transfer and (c) such Subsidiary must be
engaged in the Business; (iv) purchase the stock, other equity interests or
all or a material portion of the assets of any Person or division of such
Person other than in accordance with Section 13(f) hereof; (v) enter into
any other transaction outside the ordinary course of such Obligor's
business, including, without limitation, any purchase, redemption or
retirement of any shares of any class of its stock or any other equity
interest, and any issuance of any shares of, or warrants or other rights to
receive or purchase any shares of, any class of its stock or any other
equity interest; provided, that MTS may, solely for purposes of
administrative efficiency, repurchase in the aggregate up to $50,000 of its
common stock from shareholders holding fractional shares or fewer than 100
shares of its common stock, so long as (a) no Default or Event of Default
shall have occurred prior to, or shall occur after giving effect to, any
such repurchase and (b) MTS shall have sufficient excess availability at
such time, as determined by Agent in its sole discretion, or (vi) create or
form any Subsidiaries or enter into any joint ventures or partnerships with
any other Person; provided that MTS may create new Subsidiaries so long as
(a) no default has occurred prior to, or would occur as a result of, such
creation, (b) MTS delivers written notice of such creation at least thirty
(30) days prior thereto, (c) such new Subsidiary is engaged in the
Business, and (iv) promptly upon its creation, each such new Subsidiary
becomes a Guarantor or a Borrower. If such Subsidiary is created with
assets the value of which equals or exceeds $100,000, as measured by the
higher of the book value and the fair market value thereof, such new
Subsidiary shall become a Borrower immediately upon its creation. Any such
newly-created Subsidiary shall execute appropriate documentation in order
to evidence its obligations as a Guarantor or Borrower, as the case may be,
such as a guaranty or a joinder to this Agreement and an allonge to any
then existing promissory notes, and it shall provide an enforceability
opinion with respect to such documents, certified articles of incorporation
and an officer's certificate, and shall execute or provide such further
documentation as Agent may require in its sole discretion. Such Subsidiary
shall in all cases grant to Agent a blanket perfected first priority
security interest in all of its assets, subject only to Permitted Liens,
and MTS shall pledge the capital stock or other equity interests of such
Subsidiary to Agent and deliver the stock certificates and blank stock
powers therefor. Notwithstanding the foregoing, under no circumstances
shall any Obligor transfer assets to or merge with or into LifeServ
Technologies, Inc., Medical Technologies Laboratories, Inc. or any
Subsidiary thereof.
36
(e) Dividends and Distributions. No Borrower or Guarantor shall
declare or pay any dividend or other distribution (whether in cash or in
kind) on any class of its stock; provided, that MTS may make payments of
Permitted Dividends so long as no Default or Event of Default has occurred
prior to, or would occur after giving effect to, such payment, and
Subsidiaries of MTS may pay dividends to MTS.
(f) Investments; Loans. No Borrower or Guarantor shall purchase or
otherwise acquire, or contract to purchase or otherwise acquire, the
obligations or stock of any Person (an "Investment") other than direct
obligations of the United States; nor shall any Borrower or any Guarantor
lend or otherwise advance funds to any Person except for advances made to
employees, officers and directors for travel and other expenses arising in
the ordinary course of business; provided, however, that (a) MTS may make
Investments in Packaging, and (b) MTS and Packaging may make Investments in
any Subsidiary of MTS acting as a Guarantor or Borrower at such time, so
long as (i) no Default or Event of Default has occurred, or would occur as
a result of such Investment, (ii) MTS shall deliver written notice at least
thirty (30) days prior to the making of any such Investment and (iii) such
Subsidiary must be engaged in the Business. Notwithstanding the foregoing,
under no circumstances shall any Obligor make an Investment in or lend or
otherwise advance funds to LifeServ Technologies, Inc., Medical
Technologies Laboratories, Inc. or any Subsidiary thereof.
(g) Fundamental Changes, Line of Business. No Borrower or Guarantor
shall amend its organizational documents without the prior written consent
of the Agent, which consent shall not be unreasonably withheld, or change
its Fiscal Year or enter into a new line of business materially different
from the Business.
(h) Equipment. No Borrower or Guarantor shall (i) permit any of its
Equipment to become a Fixture to real property unless such real property is
owned by such Obligor and is subject to a mortgage in favor of Agent, or
(ii) permit any Equipment to become an accession to any other personal
property unless such personal property is subject to a first priority lien
in favor of Agent.
(i) Use of Proceeds. Neither Borrower nor any Affiliate shall use any
portion of the proceeds of the Loans, either directly or indirectly, for
the purpose of (i) purchasing any securities underwritten or privately
placed by ABN AMRO Securities (USA) Inc. ("AASI"), an affiliate of Agent,
(ii) purchasing from AASI any securities in which AASI makes a market, or
(iii) refinancing or making payments of principal, interest or dividends on
any securities issued by Borrower or any Affiliate, and underwritten,
privately placed or dealt in by AASI.
37
(j) Affiliate Transactions. Expect as set forth on Schedule 11(i)
hereto or as permitted pursuant to Section 11(c) hereof, no Borrower or
Guarantor shall conduct, permit or suffer to be conducted, transactions
with Affiliates for the purchase or sale of Inventory or services other
than in the ordinary course of business pursuant to terms that are less
favorable to such Obligor than the terms upon which such transfers or
transactions would have been made had they been made to or with a Person
that is not an Affiliate.
(k) Subordinated Debt Payments. No Borrower or Guarantor shall make
any payments of principal or interest on the Subordinated Debt; provided,
however, that, so long as no Default or Event of Default has occurred, or
would occur as a result of such payment, the Borrowers may make scheduled
payments of interest on the Subordinated Debt to the extent permitted by
the terms of the Subordination Agreement .
(l) Certain Warrant and Preferred Stock Provisions. No Borrower shall
or Guarantor make any make-whole payment in cash with respect to either the
Warrant Shares or the shares of common stock to be issued upon conversion
of any of the shares of Preferred Stock.
14. FINANCIAL COVENANTS. MTS and its Subsidiaries shall maintain and keep
in full force and effect each of the financial covenants set forth below:
(a) Tangible Net Worth. MTS and its Subsidiaries on a consolidated
basis shall maintain at all times during each time period set forth below a
Tangible Net Worth of not less than the amount set forth below opposite
each such time period:
Period Tangible Net Worth
------ ------------------
As of March 31, 2002 and at all $400,000
times until June 29, 2002
As of June 30, 2002 and at all $4,000,000
times until December 30, 2002
As of December 31, 2002 and at all $4,200,000
times until March 30, 2003
As of March 31, 2003 $4,600,000
As of April 1, 2003 and at all The greater of (i) $4,600,000 and
times until Xxxxx 00, 0000 (xx) 95% of Tangible Net Worth at
March at March 31, 2003
As of March 31, 2004 $800,000 plus the greater of (i)
$4,600,000 and (ii) 95% of Tangible
Net Worth at March 31, 2003 (the
2004 Tangible Net Worth Requirement")
38
As of April 1, 2004 and at all The greater of (i) the 2004 Tangible
times until March 30, 2005 NetWorth Requirement and (ii) 95% of
Tangible Net Worth at March 31, 2004
As of March 31, 2005 $800,000 plus the greater of (i) the
2004 Tangible Net Worth Requirement
and (ii) 95% of Tangible Net Worth at
March 31, 2004 (the "2005 Tangible
Net Worth Requirement")
As of April 1, 2005 and at all The greater of (i) the 2005 Tangible
times thereafter Net Worth Requirement and (ii) 95% of
Tangible Net Worth at Xxxxx 00, 0000
(x) Debt Service Coverage Ratio. MTS and its Subsidiaries on a
consolidated basis will maintain a Debt Service Coverage Ratio for each
time period set forth below of not less than the ratio set forth below
opposite each such time period:
Measuring Period Debt Service Coverage Ratio
---------------- ---------------------------
Fiscal quarter ending September 30, 2002 1.10:1.00
Two fiscal quarters ending December 31, 2002 1.10:1.00
Twelve months ending March 31, 2003, 1.25:1.00
March 31, 2004 and March 31, 2005
Fiscal quarter ending June 30, 2003, September 1.10:1.00
30 and December 31 of each year, in each case
together with the three preceding fiscal quarters
(c) Interest Coverage Ratio. MTS and its Subsidiaries on a
consolidated basis will maintain an Interest Coverage Ratio for each time
period set forth below of not less than the ratio set forth below opposite
each such time period:
Measuring Period Interest Coverage Ratio
---------------- -----------------------
Fiscal quarter ending September 30, 2003 2.20:1.00
Two fiscal quarters ending December 31, 2002 2.20:1.00
Fiscal quarter ending March 31, 2003, and each 2.20:1.00
each fiscal quarter thereafter, in each case with
the preceding three fiscal quarters
39
(d) Capital Expenditure Limitations. MTS and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures in excess of One
Million Eight Hundred Thousand Dollars ($1,800,000.00) during any one
Fiscal Year, commencing with the Fiscal Year ending March 31, 2003.
15. DEFAULT. The occurrence of any one or more of the following events
shall constitute an "Event of Default" by the Borrowers and Guarantors
hereunder; provided, however, that once an Event of Default occurs, it shall be
deemed to continue until such time as it shall been waived in writing by Agent:
(a) Payment. The failure of any Obligor to pay when due, declared due,
or demanded by agent, any of the Liabilities; provided, however, that with
respect to any payment other than a payment of principal, interest or the
fees set forth herein, the failure to pay such amount by the earlier of
three days after the due date specifically set forth in any request for
payment therefor.
(b) Breach of this Agreement and the Other Agreements. The failure of
any Obligor to perform, keep or observe any of the covenants, conditions,
promises, agreements or obligations of such Obligor under this Agreement or
any of the Other Agreements (other than those specifically enumerated in
Section 15 hereof), and such failure continues unremedied for a period of
fifteen (15) days after the earlier of (i) notice from the Agent to
Borrowers of the existence of such failure, or (ii) the date any Authorized
Officer of any Borrower knows of the existence of such failure; provided
that, in the event such failure is incapable of remedy or consists of a
default of any of the financial covenants contained in Section 14 hereof,
or was willfully caused or permitted by any Borrower, Borrowers shall not
be entitled to any notice or grace hereunder.
(c) Breaches or Amendments of Other Obligations. A default or event of
default or breach under, or other failure of any Obligor to perform, keep
or observe any of the covenants, conditions, promises, agreements or
obligations of such Obligor (after the expiration of any applicable cure or
grace periods) under: (i) any of the Subordinated Debt Documents or
Preferred Stock Documents, or any of the Subordinated Debt Documents or
Preferred Stock Documents shall be amended or modified in any respect
prohibited hereunder without Agent's prior written consent; or (ii) any
other agreement with any Person, if such failure is reasonably likely to
have a Material Adverse Effect.
(d) Breach of Representations and Warranties. The making or furnishing
by any Obligor to Agent of any representation, warranty, certificate,
schedule, report or other communication within or in connection with this
Agreement or the Other Agreements or in connection with any other agreement
between such Obligor and Agent or Lender, which is untrue or misleading in
any respect.
40
(e) Loss of Collateral. The uninsured (subject to reasonable
deductibles) loss, theft, damage or destruction of, or (except as permitted
hereby) sale, lease or furnishing under a contract of service of, any of
the Collateral.
(f) Levy, Seizure or Attachment. The making or any attempt by any
Person to make any levy, seizure or attachment upon any of the Collateral
if either (i) there is an imminent risk of forfeiture or (ii) such levy,
seizure or attachment remains undischarged or unstayed for ten or more
days.
(g) Bankruptcy or Similar Proceedings. The commencement of any
proceedings in bankruptcy by or against any Obligor or for the liquidation
or reorganization of any Obligor, or alleging that such Obligor is
insolvent or unable to pay its debts as they mature, or for the
readjustment or arrangement of any Obligor's debts, whether under the
United States Bankruptcy Code or under any other law, whether state or
federal, now or hereafter existing, for the relief of debtors, or the
commencement of any analogous statutory or non-statutory proceedings
involving any Obligor (each, together with the appointment of a receiver
and any of the other actions constituting a Default in clause (h) below, a
"Proceeding"); provided, however, that if such commencement of proceedings
against such Obligor is involuntary, such action shall not constitute an
Event of Default unless such proceedings are not dismissed within thirty
(30) days after the commencement of such proceedings; provided further
that, upon the occurrence of an Event of Default under this clause (g) with
respect to any Guarantor which has assets the value of which is less than
$50,000, as measured by the higher of book value and market value thereof,
at such time, and to which no assets have been transferred by any Borrower
or other Guarantor at any time subsequent to the Closing Date, the remedies
provided the Agent in Section 16 hereof shall be solely with respect to
such Guarantor and such Guarantor's assets, so long as the liability or
obligation owing by such Guarantor which caused such Proceeding to be
commenced arose prior to the Closing Date and no Borrower or Guarantor at
any time prior to the Closing Date had any knowledge thereof or is also in
any manner and to any extent responsible for such liability or obligation.
(h) Appointment of Receiver. The appointment of a receiver or trustee
for any Obligor, for any of the Collateral or for any substantial part of
any Obligor's assets or the institution of any proceedings for the
dissolution, or the full or partial liquidation, or the merger or
consolidation, of any Obligor which is a corporation, limited liability
company or a partnership; provided, however, that if such appointment or
commencement of proceedings against such Obligor is involuntary, such
action shall not constitute an Event of Default unless such appointment is
not revoked or such proceedings are not dismissed within thirty (30) days
after the commencement of such proceedings; provided further that, upon the
occurrence of an Event of Default under this clause (h) with respect to any
Guarantor which has assets the value of which is less than $50,000, as
measured by the higher of book value and market value thereof, at such
time, and to which no assets have been transferred by any Borrower or other
Guarantor at any time subsequent to the Closing Date, the remedies provided
the Agent in Section 16 hereof shall be solely with respect to such
Guarantor and such Guarantor's assets, so long as the liability or
obligation owing by such Guarantor which caused any Proceeding under this
clause (h) to be commenced arose prior to the Closing Date and no Borrower
or Guarantor at any time prior to the Closing Date had any knowledge
thereof or is also in any manner and to any extent responsible for such
liability or obligation.
41
(i) Judgment. The entry of any judgment or order in excess of $50,000
against any Obligor which remains unsatisfied or undischarged and in effect
for thirty (30) days after such entry without a stay of enforcement or
execution.
(j) Dissolution of Obligor. The dissolution or winding up of any
Obligor; provided, that a Guarantor may be dissolved, so long as the Agent
is given at least ten (10) days prior written notice and such Guarantor has
no assets at the time; and if such Guarantor has assets, such assets must
promptly be transferred to a Borrower or any other Guarantor.
(k) Default or Revocation of Guaranty. The occurrence of an event of
default (after the expiration of applicable cure or grace periods) under,
or the revocation or termination of, any agreement, instrument or document
executed and delivered by any Person to Agent pursuant to which such Person
has guaranteed to Agent the payment of all or any of the Liabilities or has
granted Agent a security interest in or lien upon some or all of such
Person's real and/or personal property to secure the payment of all or any
of the Liabilities.
(l) Criminal Proceedings. The institution in any court of a criminal
proceeding against any Obligor alleging the commission of a felony, or the
indictment of any Obligor for any felony.
(m) Change of Control. A Change of Control shall have occurred.
(n) Change of Management. Any Borrower fails to cause its business to
be managed by its present senior management team, or, in the event any
member shall cease to serve for any reason, a replacement who is reasonably
acceptable to Agent.
(o) Termination of Life Insurance Policies. Any of the Life Insurance
Policies shall be terminated, or the Life Insurance Policies shall be
scheduled to terminate within thirty (30) days, and the Borrowers shall not
have delivered a satisfactory renewal thereof to Agent; or the Borrowers
shall fail to pay any premium on any of any of the Life Insurance Policies
when due; or the Borrowers shall take any other action that impairs the
value of any of any of the Life Insurance Policies.
(p) Material Adverse Effect. A Material Adverse Effect shall have
occurred.
(q) Xxxxxx License Agreement. There shall occur a breach of or an
event of default (beyond any applicable cure or grace periods) under the
Xxxxxx License Agreement or it shall be materially amended or modified in a
manner adverse to the Borrowers or it shall be terminated (other than in
connection with any acquisition by a Borrower of direct ownership of the
rights currently licensed to MTS thereunder).
16. REMEDIES UPON AN EVENT OF DEFAULT.
(a) Upon the occurrence of an Event of Default described in Section
15(g) or 15(h) hereof, all of the Liabilities shall immediately and
automatically become due and payable, without notice of any kind. Upon the
occurrence of any other Event of Default, all Liabilities may, at the
option of Agent, and without demand, notice or legal process of any kind,
be declared, and immediately shall become, due and payable.
42
(b) Upon the occurrence of an Event of Default, Agent may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in
lieu of, any rights and remedies expressly granted in this Agreement or in
any of the Other Agreements, and all of Agent's rights and remedies shall
be cumulative and non-exclusive to the extent permitted by law. In
particular, but not by way of limitation of the foregoing, Agent may,
without notice, demand or legal process of any kind, take possession of any
or all of the Collateral (in addition to Collateral of which it already has
possession), wherever it may be found, and for that purpose may pursue the
same wherever it may be found, and may enter onto any of the Borrowers' or
Guarantor's premises where any of the Collateral may be, and search for,
take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Agent shall have the right
to store the same at any of the Borrowers' premises without cost to Agent.
At Agent's request, each Borrower shall assemble the Collateral and make it
available to Agent at one or more places to be designated by Agent and
reasonably convenient to Agent and the Borrowers. The Borrowers recognize
that if the Borrowers fail to perform, observe or discharge any of their
Liabilities under this Agreement or the Other Agreements, no remedy at law
will provide adequate relief to Agent, and agrees that Agent shall be
entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages. Any notification of
intended disposition of any of the Collateral required by law will be
deemed to be a reasonable authenticated notification of disposition if
given at least ten (10) calendar days prior to such disposition. Agent may
disclaim any warranties that might arise in connection with the sale, lease
or other disposition of the Collateral and has no obligation to provide any
warranties at such time. Any Proceeds of any disposition by Agent of any of
the Collateral may be applied by Agent to the payment of expenses in
connection with the Collateral, including, without limitation, legal
expenses and reasonable attorneys' fees actually incurred, and any balance
of such proceeds may be applied by Agent toward the payment of such of the
Liabilities, and in such order of application, as Agent may from time to
time elect.
(c) Without limiting the rights of Agent or Lender under applicable
law, Agent and Lender have a right of set-off, a lien against and a
security interest in all property of the Borrowers and the Guarantors now
or at any time in the possession of Agent or Lender or any affiliate of
Agent or Lender in any capacity whatsoever, including but not limited to
any balance of any deposit, trust or agency account, or any other bank
account, as security for all Liabilities. At any time and from time to time
following the occurrence and during the continuance of a Default or an
Event of Default, Agent may without notice or demand, set off and apply or
cause to be set-off and applied any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Agent, Lender or any affiliate of Agent
or Lender to or for the credit of any Borrower or any Guarantor against any
or all of the Liabilities.
17. CONDITIONS PRECEDENT. Agent and Lender shall be under no obligation to
consummate the transactions contemplated by this Agreement until each of the
conditions listed in this Section 17 has been satisfied. Whenever a condition
contained herein requires delivery of an agreement or other document to Agent,
each such agreement or other document shall be in form and substance
satisfactory to Agent in its reasonable discretion.
43
(a) Lender shall have received each agreement, document and instrument
duly executed by each of the Borrowers and Guarantors party thereto, and
each other agreement, opinion, report, approval, consent, certificate and
other document set forth on the closing document list attached hereto as
Schedule 17(a) (the "Closing Document List");
(b) The Preferred Stock shall have been issued to Eureka and/or
certain of its Affiliates on terms and conditions reasonably acceptable to
the Agent and MTS shall have received at least $2,000,000 in cash proceeds
therefrom.
(c) The Subordinated Debt shall have been issued to the Subordinated
Lender on terms and conditions reasonably acceptable to the Agent and MTS
shall have received at least $4,000,000 in cash proceeds therefrom.
(d) The Subordination Agreement shall have been duly executed by all
parties thereto.
(e) A payoff letter from South Trust Bank of Alabama, National
Association ("South Trust Bank"), together with such other documents,
instruments and agreements as may be required by Agent (including, without
limitation, UCC-3 termination statements) to effectuate the termination of
the South Trust Bank credit facility with the Borrowers and the Guarantors,
as applicable, and the release of the lien of South Trust Bank on any and
all of Borrowers' and Guarantors' assets and to evidence the discharge of
all debts, liabilities and obligations of the Borrowers and the Guarantors,
to South Trust Bank and its Affiliates.
(f) The Borrowers shall cause to be executed in favor of Agent and
delivered to Agent a Landlord's Agreement from each lessor of the leased
properties set forth on Exhibit A;
(g) The Borrowers shall cause the Xxxxxx Family Trust to have entered
into a Trademark Patent Security Agreement with Agent granting a lien and
security interest in all of the intellectual property licensed by the
Xxxxxx Family Trust to the Borrowers.
(h) The Borrowers shall cause each bailee, warehouseman, or similar
party at any warehouse set forth in Exhibit A to execute and deliver to
Agent a Warehouseman's Letter;
(i) The Borrowers shall execute and deliver to Agent a Patent Security
Agreement;
(j) The Borrowers shall execute and deliver to Agent a Trademark
Security Agreement;
(k) The Borrowers shall deliver to Agent (i) historical financial
statements as required by Agent, including but not limited to draft
financial statements for the Fiscal Year ended March 31, 2002, and a
monthly statement for the month of April 2002; (ii) projections of MTS and
its Subsidiaries, on a consolidated basis forecasting its operating results
for the Fiscal Year ending March 31, 2003, which projections shall include
consolidated balance sheets, profit and loss statements, cash receipts and
disbursements and availability, all prepared on a monthly basis;
44
(l) The Borrowers shall deliver Agent an appraisal of the Borrowers'
Equipment, showing an aggregate appraised value on an orderly liquidation
and forced liquidation basis of not less than Eight Hundred Ninety-One
Thousand Dollars ($891,000), which appraisal must be in form and content
satisfactory to the Agent and performed by Dove Bid Valuation Services,
Inc.;
(m) The Borrowers shall deliver to Agent copies of all other material,
including the Xxxxxx License Agreement, and contracts and agreements of the
Borrowers as Agent may require;
(n) The Borrowers shall deliver to Agent copies of all real estate
leases to which any Borrower is a party;
(o) Since March 31, 2002, no event shall have occurred which has had
or could reasonably be expected to have a Material Adverse Effect, as
determined by Agent in its sole discretion;
(p) Agent shall have received payment in full of all fees and expenses
payable to it by the Borrowers or any other Person in connection herewith,
on or before disbursement of the initial Loans hereunder or out of the
proceeds of such initial Loans;
(q) Agent shall have determined that, immediately after giving effect
to the making of the initial Loans requested to be made on the date hereof,
the Borrowers shall have Minimum Net Availability of not less than Five
Hundred Thousand Dollars ($500,000);
(r) The Obligors shall have executed and delivered to Agent all such
other documents, instruments and agreements which Agent determines are
reasonably necessary to consummate the transactions contemplated hereby and
under the Other Agreements.
(s) The Borrowers and Guarantors, as applicable, shall deliver
evidence that they are in compliance with all applicable federal and state
legal requirements deemed material by Agent, including environmental laws,
rules and regulations, and there shall not be a default or event of default
under any of its material obligations to third parties or contracts (to the
extent such obligations will continue after the Closing Date).
18. INDEMNIFICATION. The Borrowers agree to defend (with counsel
satisfactory to Agent), protect, indemnify and hold harmless Agent and Lender,
each affiliate or subsidiary of Agent and Lender, and each of their respective
officers, directors, employees, attorneys and agents (each an "Indemnified
Party") from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature (including, without limitation, the disbursements and the
reasonable fees of counsel actually incurred for each Indemnified Party in
connection with any investigative, administrative or judicial proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on, incurred by, or asserted against, any Indemnified Party
(whether direct, indirect or consequential and whether based on any federal,
state or local laws or regulations, including, without limitation, securities
laws and regulations, Environmental Laws and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any manner
45
relating to or arising out of this Agreement or any Other Agreement, or any act,
event or transaction related or attendant thereto, the making or issuance and
the management of the Loans or any Letters of Credit or the use or intended use
of the proceeds of the Loans or any Letters of Credit; provided, however, that
the Borrowers shall not have any obligation hereunder to any Indemnified Party
with respect to matters caused by or resulting from the willful misconduct or
gross negligence of such Indemnified Party. To the extent that the undertaking
to indemnify set forth in the preceding sentence may be unenforceable because it
is violative of any law or public policy, the Borrowers shall satisfy such
undertaking to the maximum extent permitted by applicable law. Any liability,
obligation, loss, damage, penalty, cost or expense covered by this indemnity
shall be paid to each Indemnified Party within 10 days after demand, and,
failing prompt payment, shall, together with interest thereon at the highest
rate then applicable to Loans hereunder from the date incurred by each
Indemnified Party until paid by the Borrowers, be added to the Liabilities of
the Borrowers and be secured by the Collateral. The provisions of this Section
18 shall survive the satisfaction and payment of the other Liabilities and the
termination of this Agreement.
19. NOTICE. All written notices and other written communications with
respect to this Agreement shall be sent by certified (return receipt requested)
or overnight mail, by a nationally recognized overnight courier service, by
telecopy or delivered in person, and in the case of Agent shall be sent to it at
c/o LaSalle Business Credit, Inc., 0000 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxxxxxx,
XX 00000, Attention: Xxxxxxx X. Xxxxxx, facsimile number: (000) 000-0000, with a
copy to Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP, 0000 Xxxx Xxxxxx, 00xx Xxxxx,
Xxxxxxxxxxxx, XX 00000-0000, Attention: Xxxxx X. Xxxxxx, Esq., facsimile number:
(000) 000-0000; and in the case of the Borrowers shall be sent to them at the
notice address set forth on Schedule A hereto, or as otherwise directed by the
Borrowers in writing. All notices shall be deemed given upon actual receipt
thereof or refusal of delivery.
20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION. This Agreement
and the Other Agreements to which they are party are submitted by the Borrowers
and the Guarantors to Agent for Agent's acceptance or rejection at Agent's
principal place of business as an offer by Borrower to borrow monies from Agent
and Lender now and from time to time hereafter, and shall not be binding upon
Agent or Lender or become effective until accepted by Agent, in writing, at said
place of business. If so accepted by Agent and Lender, this Agreement and the
Other Agreements shall be deemed to have been made at said place of business.
THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL LAWS OF THE COMMONWEALTH OF PENNSYLVANIA AS TO INTERPRETATION,
ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS,
INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND OTHER
CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE COMMONWEALTH OF PENNSYLVANIA, WHICH SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS
LOCATED. If any provision of this Agreement shall be held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or remaining provisions of this Agreement.
46
To induce Agent and Lender to accept this Agreement, the Borrowers and the
Guarantors irrevocably agree that, subject to Agent's sole and absolute
election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL
SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF PHILADELPHIA,
COMMONWEALTH OF PENNSYLVANIA. THE BORROWERS AND THE GUARANTORS HEREBY CONSENT
AND SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS LOCATED
WITHIN SAID CITY AND STATE. Each Borrower and each Guarantor agrees that all
service of process may be made upon such Obligor. The Borrowers and Guarantors
agree that all service of process may be made upon such Obligor by mail or
messenger directed to such Obligor at the address provided on the Schedule A
hereto. THE BORROWER AND EACH GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH OBLIGOR BY
AGENT IN ACCORDANCE WITH THIS SECTION.
21. MODIFICATION AND BENEFIT OF AGREEMENT. This Agreement and the Other
Agreements may not be modified, altered or amended except by an agreement in
writing signed by the Borrowers, Guarantors or such other Persons who are a
party to such Other Agreement and Agent. No Borrower or Guarantor may sell,
assign or transfer this Agreement, or the Other Agreements or any portion
thereof, including, without limitation, such Borrower's rights, titles,
interest, remedies, powers or duties hereunder and thereunder. Each Borrower and
each Guarantor hereby consents to Agent's sale, assignment, transfer or other
disposition, at any time and from time to time hereafter, of this Agreement, or
the Other Agreements, or of any portion thereof, or participations therein,
including, without limitation, Agent's rights, titles, interest, remedies,
powers and/or duties and agrees that it shall execute and deliver such documents
as Agent may request in connection with any such sale, assignment, transfer or
other disposition.
22. HEADINGS OF SUBDIVISIONS. The headings of subdivisions in this
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the provisions of this Agreement.
23. POWER OF ATTORNEY. Each Borrower and each Guarantor acknowledges and
agrees that its appointment of Agent as its attorney and agent-in-fact for the
purposes specified in this Agreement is an appointment coupled with an interest
and shall be irrevocable until all of the Liabilities are satisfied and paid in
full and this Agreement is terminated.
24. CONFIDENTIALITY. Each Borrower, each Guarantor, Agent and Lender each
hereby agrees and acknowledges that any and all information relating to any
Borrower or Guarantor which is (i) furnished by any Borrower or Guarantor to
Agent or Lender (or to any affiliate of Agent or Lender); and (ii) non-public,
confidential or proprietary in nature, shall be kept confidential by Agent or
Lender or such affiliate in accordance with applicable law; provided, however,
that such information and other credit information relating to such Borrower or
such Guarantor may be distributed by Agent or Lender or such affiliate to its
directors, officers, employees, attorneys, affiliates, assignees, participants,
auditors, agents and regulators, and, upon the order of a court or other
governmental agency having jurisdiction over Agent, Lender or such affiliate, to
any other party. Each Borrower, each Guarantor, Agent and Lender each further
agrees that this provision shall survive the termination of this Agreement.
Notwithstanding the foregoing, each Borrower and each Guarantor hereby consent
to the Agent's publishing a tombstone or similar advertising material relating
to the financing transaction contemplated by this Agreement.
47
25. COUNTERPARTS. This Agreement and any amendments, waivers, consents or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all of which counterparts together
shall constitute but one agreement.
26. ELECTRONIC SUBMISSIONS. Upon not less than thirty (30) days' prior
written notice (the "Approved Electronic Form Notice"), Agent may permit or
require that any of the documents, certificates, forms, deliveries or other
communications, authorized, required or contemplated by this Agreement or the
Other Agreements, be submitted to Agent in "Approved Electronic Form" (as
hereinafter defined), subject to any reasonable terms, conditions and
requirements in the applicable Approved Electronic Forms Notice. For purposes
hereof "Electronic Form" means e-mail, e-mail attachments, data submitted on
web-based forms or any other communication method that delivers machine readable
data or information to Agent, and "Approved Electronic Form" means an Electronic
Form that has been approved in writing by Agent (which approval has not been
revoked or modified by Agent) and sent to the Borrowers or Guarantors in an
Approved Electronic Form Notice. Except as otherwise specifically provided in
the applicable Approved Electronic Form Notice, any submissions made in an
applicable Approved Electronic Form shall have the same force and effect that
the same submissions would have had if they had been submitted in any other
applicable form authorized, required or contemplated by this Agreement or the
Other Agreements.
27. WAIVER OF JURY TRIAL; OTHER WAIVERS.
(a) EACH BORROWER, EACH GUARANTOR, AGENT AND LENDER EACH HEREBY WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING WHICH PERTAINS
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE
LIABILITIES, THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY ANY BORROWER,
ANY GUARANTOR, AGENT OR LENDER OR WHICH, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN THE
BORROWERS AND THE GUARANTORS, ON THE ONE HAND, AND AGENT AND LENDER, ON THE
OTHER HAND. IN NO EVENT SHALL AGENT OR LENDER BE LIABLE FOR LOST PROFITS OR
OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Each Borrower and each Guarantor hereby waives demand,
presentment, protest and notice of nonpayment, and further waives the
benefit of all valuation, appraisal and exemption laws.
48
(c) Each Borrower and each Guarantor hereby waives the benefit of any
law that would otherwise restrict or limit Agent or Lender or any affiliate
of Agent or Lender in the exercise of its respective right, which is hereby
acknowledged and agreed to, to set-off against the Liabilities, without
notice at any time hereafter, any indebtedness, matured or unmatured, owing
by Agent or Lender or such affiliate of Agent or Lender to any Borrower or
any Guarantor, including, without limitation, any deposit account at Agent
or Lender or such affiliate.
(d) EXCEPT AS REQUIRED BY ANY APPLICABLE LAW, EACH BORROWER AND EACH
GUARANTOR HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR
TO THE EXERCISE BY AGENT OR LENDER OF ITS RESPECTIVE RIGHTS TO REPOSSESS
THE COLLATERAL OF SUCH BORROWER OR SUCH GUARANTOR WITHOUT JUDICIAL PROCESS
OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.
(e) Agent's failure, at any time or times hereafter, to require strict
performance by any Borrower or any Guarantor of any provision of this
Agreement or any of the Other Agreements shall not waive, affect or
diminish any right of Agent thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Agent of an Event of
Default under this Agreement or any default under any of the Other
Agreements shall not suspend, waive or affect any other Event of Default
under this Agreement or any other default under any of the Other
Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different kind or character. No delay on the part of Agent
in the exercise of any right or remedy under this Agreement or any Other
Agreement shall preclude other or further exercise thereof or the exercise
of any right or remedy. None of the undertakings, agreements, warranties,
covenants and representations of the Borrowers or Guarantors contained in
this Agreement or any of the Other Agreements, and no Event of Default
under this Agreement or default under any of the Other Agreements shall be
deemed to have been suspended or waived by Agent unless such suspension or
waiver is in writing, signed by a duly authorized officer of Agent and
directed to the Borrowers and Guarantors, as applicable, specifying such
suspension or waiver.
28. AGENT AND LENDER. The relationship between Agent and Lender in respect
of the transaction contemplated to occur under this Agreement and the Other
Agreements, and the respective rights and obligations of each such party with
respect thereto, shall be governed by separate agency agreements to be entered
into between Agent and Lender.
29. JOINT AND SEVERAL OBLIGATIONS. Each Borrower shall be jointly and
severally liable with each other Borrower for the payment and performance when
due of all Liabilities.
[SIGNATURES ON FOLLOWING PAGE]
49
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
AGENT:
LASALLE BUSINESS CREDIT, INC.
By: _________________________________
Name:
Title:
LENDER:
STANDARD FEDERAL BANK NATIONAL ASSOCIATION
By: _________________________________
Name:
Title:
BORROWERS:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: _________________________________
Name:
Title:
MTS PACKAGING SYSTEMS, INC.
By: _________________________________
Name:
Title:
GUARANTORS:
MEDICATION MANAGEMENT TECHNOLOGIES, INC.
By: _________________________________
Name:
Title:
50
CLEARWATER MEDICAL SERVICES, INC.
By: _________________________________
Name:
Title:
MEDICAL TECHNOLOGY LABORATORIES, INC.
By: _________________________________
Name:
Title:
MEDICATION MANAGEMENT SYSTEMS, INC.
By: _________________________________
Name:
Title:
SYSTEMS PROFESSIONALS, INC.
By: _________________________________
Name:
Title:
CART-XXXX, INC.
By: _________________________________
Name:
Title:
VANGARD PHARMACEUTICAL PACKAGING, INC.
By: _________________________________
Name:
Title:
51
LIFESERV TECHNOLOGIES, INC.
By: _________________________________
Name:
Title:
PERFORMANCE PHARMACY SYSTEMS, INC.
By: _________________________________
Name:
Title:
MTS SALES AND MARKETING, INC.
By: _________________________________
Name:
Title:
EXHIBIT A
BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith by and among MEDICAL TECHNOLOGY SYSTEMS, INC., MTS PACKAGING
SYSTEMS, INC. ("Borrowers"), LASALLE BUSINESS CREDIT, INC. ("Agent") and
STANDARD FEDERAL BANK NATIONAL ASSOCIATION ("Lender").
(A) Each Borrower's Business Locations (please indicate
which location is the principal place of business and at
which locations originals and all copies of each Borrower's
books, records and accounts are kept).
1.
2.
3.
(B) Other locations of Collateral (including, without
limitation, warehouse locations, processing locations,
consignment locations) and all post office boxes of each
Borrower. Please indicate the relationship of such location
to each Borrower (i.e. public warehouse, processor, etc.).
1.
2.
3.
(C) Bank Accounts of each Borrower (other than those at
LaSalle Bank National Association):
Bank (with address) Account Number Type of Account
------------------- -------------- ---------------
1.
2.
3.
EXHIBIT B
COMPLIANCE CERTIFICATE
Attached to and made a part of that certain Loan and Security Agreement, as
it may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "Agreement") of even date herewith between
MEDICAL TECHNOLOGY SYSTEMS, INC., MTS PACKAGING SYSTEMS, INC. ("Borrowers"),
LASALLE BUSINESS CREDIT, INC. ("Agent") and STANDARD FEDERAL BANK NATIONAL
ASSOCIATION ("Lender")
This Certificate is submitted pursuant to Section 11(c) of the Agreement.
The undersigned hereby certifies to Agent that as of the date of this
Certificate:
1. The undersigned is the __________________________ of the Borrowers.
2. There exists no event or circumstance which is or which with the passage of
time, the giving of notice, or both would constitute an Event of Default, as
that term is defined in the Agreement, or, if such an event or circumstance
exists, a writing attached hereto specifies the nature thereof, the period of
existence thereof and the action that Borrowers have taken or proposes to take
with respect thereto.
3. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Borrowers have occurred since
[date of last Compliance Certificate/last financial statements delivered prior
to closing], or, if such a change has occurred, a writing attached hereto
specifies the nature thereof and the action that Borrowers have taken or propose
to take with respect thereto.
4. Borrowers are in compliance with the representations, warranties and
covenants in the Agreement, or, if Borrowers are not in compliance with any
representations, warranties or covenants in the Agreement, a writing attached
hereto specifies the nature thereof, the period of existence thereof and the
action that Borrowers have taken or proposes to take with respect thereto.
5. The financial statements of the Borrowers being concurrently delivered
herewith have been prepared in accordance with GAAP consistently applied and
there have been no material changes in accounting policies or financial
reporting practices of the Borrowers since [date of the last compliance
certificate/date of last financial statements delivered prior to closing] or, if
any such change has occurred, such changes are set forth in a writing attached
hereto.
6. Attached hereto is a true and correct calculation of the financial covenants
contained in the Agreement.
7. The officer executing this Certificate and making the statements contained
herein is making such statements to the best of his/her knowledge, information
and belief. However, in no way does such qualification affect any of the
obligations, representations and warranties of the Borrowers herein or in the
Agreement.
2
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: __________________________________
Title:
MTS PACKAGING SYSTEMS, INC.
By: __________________________________
Title:
3
SCHEDULE 1
Address for Borrowers and Guarantors
00000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, President
Facsimile Number: (000) 000-0000
With a copy to:
Xxxxxxxxxx Xxxxxxxx LLP
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile Number: (000) 000-0000
