SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made effective as of the
26th day of June, 2002, by and among EUREKA I, L.P., a Delaware limited
partnership (the "Subordinated Lender"), MEDICAL TECHNOLOGY SYSTEMS, INC., a
Delaware corporation ("MTS"), and MTS PACKAGING SYSTEMS, INC., a Florida
corporation ("Packaging, and collectively with MTS, the "Borrower") and LASALLE
BUSINESS CREDIT, INC., Agent (the "Senior Lender").
BACKGROUND
A. MTS has entered into a Securities Purchase Agreement of even date
herewith (the "Purchase Agreement") with the Subordinated Lender under the terms
of which MTS will issue to the Subordinated Lender, and the Subordinated Lender
will purchase from MTS, $4,000,000 principal amount of senior subordinated
notes, warrants to purchase 566,517 shares of MTS common stock, and 2,000 shares
of MTS Series A Convertible Participating Preferred Stock. MTS's obligations
under the Subordinated Notes and the Purchase Agreement will be guaranteed by
Packaging. The Subordinated Lender is interested in the welfare of the Borrower,
and will benefit if the Senior Lender extends or maintains credit to the
Borrower.
B. The Borrower has requested that the Senior Lender extend and maintain
credit facilities to it. The Senior Lender is willing to do so; provided that
this Agreement is executed.
NOW, THEREFORE, the parties hereto, as an inducement for the Senior Lender
to extend and maintain credit to the Borrower, and with the understanding that
the Senior Lender is relying upon the provisions of this Agreement and intending
to be legally bound hereby, agree as follows:
1. Definitions. The following words and phrases as used in capitalized
form in this Agreement, whether in singular or plural, shall have the
meanings indicated:
(a) "Blockage Period" shall mean the period commencing on the
date of delivery by the Senior Lender to the Subordinated Lender of
written notice (a "Blockage Notice") of the existence of a Senior Debt
Default and Senior Lender's determination to impose a Blockage Period,
and expiring at the earlier to occur of (1) the date Senior Lender
elects in writing to terminate such Blockage Period; (2) 180 days
after the delivery of such Notice; (3) the date on which the Senior
Debt Default is waived in writing by the Senior Lender or is cured; or
(4) the date on which the number of days elapsed in such Blockage
Period together with the total number of days of any other Blockage
Period which occurred within 360 days of the initiation of such
Blockage Period equals 180 days. No Senior Debt Default, other than a
default in payment under the Senior Loan Documents, that existed on
the day of delivery of any Blockage Notice to the Subordinated Lender
shall be, or be made, the basis for a subsequent Blockage Notice.
(b) "Default Notice" shall have the meaning provided in Section
4(b) below.
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(c) "Payment Default" shall mean an event of default under the
Subordinated Debt Documents caused by the failure of the Borrowers to
make a Scheduled Subordinated Debt payment within any applicable cure
period.
(d) "Scheduled Subordinated Debt" shall mean: (a) the principal
of, premium, if any, and all interest payable pursuant to the
Subordinated Notes and all fees, costs and expenses (including
attorney's fees and legal expenses) related thereto, (b) all sums
payable by the Borrower to the Subordinated Lender under or pursuant
to the Purchase Agreement, (c) all other sums payable under the
Subordinated Debt Documents and (d) all increases of principal of any
of the foregoing (subject to the consents required herein) and all
extensions, amendments, replacements and renewals of any of the
foregoing.
(e) "Scheduled Subordinated Debt Payment" shall have the meaning
provided in Section 2(b) below.
(f) "Senior Debt" shall mean all liabilities and obligations of
any nature, whether primary, secondary, absolute, contingent, sole,
joint, several or joint and several, and all interest thereon (whether
or not such interest is enforceable or recoverable in any bankruptcy
or similar proceeding), and all fees, costs and expenses (including
attorney's fees and legal expenses) related thereto, now or at any
time or times hereafter existing, contracted or incurred, of or by the
Borrower to the Senior Lender, including without limitation, the
obligations of the Borrower under the Senior Loan Agreement and the
other Senior Loan Documents, and all increases, decreases, extensions,
amendments, replacements and renewals of any of such liabilities and
obligations. Without limiting the foregoing, the Senior Lender shall
have the option to make advances and provide financing in the future
to the Borrower or to a receiver, trustee or other fiduciary appointed
by a court in any insolvency or court proceeding for the Borrower or
to the Borrower as a debtor-in-possession. The Subordinated Lender
consents to the financing of the Borrower or such fiduciary or
debtor-in-possession after such insolvency or court proceeding, and
agrees that such financing shall be included within the Senior Debt
and the subordination and other restrictions and provisions of this
Agreement shall be applicable thereto. Notwithstanding the foregoing,
the principal amount of the indebtedness included in the definition of
Senior Debt shall not without the written consent of Subordinated
Lender, which consent shall not be unreasonably withheld, be increased
(in each case exclusive of any increases resulting solely from the
capitalization of accrued but unpaid interest or fees) from that
currently provided for in the Senior Loan Agreement as in effect on
the date hereof, except for increases of up to $1,500,000 in the
principal amount of revolving credit borrowings under the Senior Loan
Agreement and additional term loans in an aggregate principal sum not
to exceed $425,000; provided that (1) such additional term loans are
for the purchase of equipment or (2) the aggregate amount of other
additional term loans advanced is otherwise supported by the value of
fixed assets. In connection with the foregoing determination of Senior
Debt, the amount of principal repayments of term loans shall not be
included as Senior Debt.
(g) "Senior Debt Default" shall mean the occurrence of a Default
or an Event of Default under the Senior Loan Agreement or the other
Senior Loan Documents.
(h) "Senior Loan Agreement" shall mean that certain Loan and
Security Agreement of even date herewith by and between the Senior
Lender and the Borrower.
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(i) "Senior Loan Documents" shall mean the Loan Documents, as
defined in the Senior Loan Agreement.
(j) "Series A Preferred Stock" means the Series A Convertible
Participating Preferred Stock, par value $0.001 per share of MTS.
(k) "Standstill Period" shall mean the period commencing on the
date of delivery of a Default Notice and expiring upon the earlier of
(i) 180 days after delivery of such Default Notice and (ii) the date
on which all existing Payment Defaults are cured with the written
consent of Senior Lender.
(l) "Subordinated Debt" shall mean all liabilities and
obligations of any nature, whether primary, secondary, absolute,
contingent, sole, joint, several or joint and several, and all
interest thereon and all fees, costs and expenses (including
attorney's fees and legal expenses) related thereto, now or at any
time or times hereafter existing, contracted or incurred, of the
Borrower to the Subordinated Lender, including without limitation, the
Scheduled Subordinated Debt.
(m) "Subordinated Debt Documents" shall mean the Note Purchase
Agreement, the Subordinated Note and all other documents described on
Exhibit A attached hereto.
(n) "Subordinated Notes" shall mean the Senior Subordinated Notes
of MTS issued and outstanding from time to time under the Purchase
Agreement, in the aggregate principal amount of $4,000,000.00.
2. Subordination.
(a) The Subordinated Lender hereby subordinates all of the
Subordinated Debt, and all claims and demands arising therefrom, to all of
the Senior Debt. The Subordinated Lender agrees, except as otherwise
provided herein that all of the Senior Debt shall be paid before the
Subordinated Lender shall be paid anything (of any kind or character) on
account of the principal of or interest on any of the Subordinated Debt, or
any other sums constituting Subordinated Debt or payable in connection
therewith. Until all of the Senior Debt is paid, satisfied, performed and
complied with in full and this Agreement is terminated, the Borrower will
not make, and the Subordinated Lender will not demand or accept, either
directly or indirectly, payment (of any kind or character) of all or any
part of the Subordinated Debt without the prior written consent of the
Senior Lender.
(b) Notwithstanding the terms of subsection (a), the Borrower may (1)
make regularly scheduled non-accelerated monthly payments of non-default
interest due pursuant to the terms of the Subordinated Notes (each a
"Scheduled Subordinated Debt Payment") to the Subordinated Lender; provided
that neither a Standstill Period nor a Blockage Period is in effect and (2)
make regular payments of dividends on the Series A Preferred Stock so long
as Senior Lender has not delivered to Subordinated Lender a notice that a
Senior Debt Default exists. Whether or not a Standstill Period or a
Blockage Period is in effect, the Subordinated Lender may receive
additional Warrants and Preferred Stock in accordance with the Subordinated
Loan Documents.
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(c) The Subordinated Lender hereby subordinates all of its right,
title, lien, security interest and remedies in all of the Subordinated Debt
Collateral (as defined in Section 7(c)), and all products and proceeds
thereof and all guaranties of any of the Subordinated Debt to the Senior
Lender and the Senior Lender's right, title, lien, security interest and
remedies therein and all products and proceeds thereof and all guaranties
thereof. The Subordinated Lender agrees that all rights, liens, security
interests and remedies in any of the Subordinated Debt Collateral granted
to the Senior Lender and all rights of the Senior Lender against any
guarantors of the Subordinated Debt shall have priority over all rights,
liens, security interests and remedies granted to the Subordinated Lender
therein, and all rights of the Subordinated Lender against any such
guarantor, regardless of the time or order of attachment, the time, order
or manner of perfection, or the time or order of filing of any mortgage,
assignment, security agreement, financing statement or other document
purporting to create, attach or perfect a lien or security interest in
assets or property which is or is deemed to constitute Subordinated Debt
Collateral.
(d) The right of the Senior Lender to enforce the subordination
provisions and any other provisions hereof shall not in any way be
prejudiced or impaired by any act or failure to act on the part of the
Senior Lender, the Borrower or the Subordinated Lender, or by any
noncompliance by the Borrower or the Subordinated Lender with the terms,
provisions and covenants of this Agreement.
3. In Furtherance of Subordination.
(a) Upon any distribution of any of the assets of the Borrower, any
guarantor of any of the Subordinated Debt or any collateral securing the
Subordinated Debt, upon or in connection with any dissolution, winding up,
liquidation, arrangement or reorganization of the Borrower, any guarantor
of any of the Subordinated Debt or any other person or entity, or upon any
assignment for the benefit of creditors or any other marshalling of the
assets and/or liabilities of the Borrower or any guarantor of any of the
Subordinated Debt or otherwise, any payment, dividend or distribution of
any kind (whether in cash, securities or other property) which would
otherwise be payable or deliverable with respect to the Subordinated Debt,
shall be paid or delivered directly to the Senior Lender for application
(in the case of cash) to or as collateral (in the case of securities or
other property) for the Senior Debt. Notwithstanding the foregoing, in any
bankruptcy, reorganization, receivership or other similar proceeding, the
Subordinated Lender may receive debt or equity securities of MTS or any
successor provided for by a plan of reorganization that are subordinated to
securities received by the Senior Lender under such plan at least to the
same extent that the Subordinated Debt is subordinated to the payment of
all Senior Debt then outstanding (including all limitations on rights of
action set forth in this Agreement and all other obligations and
restrictions imposed hereunder).
(b) If any proceeding described in subsection (a) is commenced, the
Senior Lender is irrevocably authorized (in its own name or in the name of
the Subordinated Lender or otherwise), but shall have no obligation, to
demand, xxx for, collect and receive all such payments, dividends and
distributions referred to in subsection (a), give acquittances therefor,
file claims, proofs of claim and take such other actions (including without
limitation, voting the Subordinated Debt) as it may deem necessary or
advisable.
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4. Limitations on the Subordinated Lender's Rights.
(a) Without the prior written consent of the Senior Lender, the
Subordinated Lender agrees that, except as expressly permitted in
subsection (b) below, the Subordinated Lender will not: (i) demand or
accelerate any of the Subordinated Debt, (ii) institute any court
proceedings against the Borrower, any investors in or owners of the
Borrower or any guarantor of any of the Subordinated Debt to collect any
Subordinated Debt, (iii) exercise any right or remedy against the Borrower,
any guarantor of any of the Subordinated Debt or any of such guarantor's
assets, or any right or remedy against any of the Subordinated Debt
Collateral or against any pledgor or grantor of Subordinated Debt
Collateral, (iv) advance additional principal amounts of the Subordinated
Debt or (v) amend or modify any of the Subordinated Debt Documents in a way
(1) that is more restrictive on the Borrower or any guarantor; (2)
increases the cost to such Borrower or any guarantor; or (3) reduces the
time for payment of any obligations due thereunder.
(b) Upon the occurrence and during the continuance of a Payment
Default, Subordinated Lender may send to Senior Lender notice of such
Payment Default (a "Default Notice") and on the date Senior Lender receives
such Default Notice a Standstill Period shall be invoked. If a Standstill
Period or a Blockage Period expires and a Payment Default is continuing as
of such date, the Subordinated Lender may notify the Senior Lender in
writing that it intends to take all or any of the types of actions set
forth in subsection 4(a)(i) through (iii) above (such notice, a "Remedy
Notice"); provided that the Subordinated Lender may only take any or all of
the actions specified in the Remedy Notice if (1) such Payment Default is
not cured during the 45 day period immediately following receipt by the
Senior Lender of such Remedy Notice (such period, the "Waiting Period") and
(2) the Senior Lender shall not have commenced any action of the type set
forth in subsection 4(a)(iii) above during the Waiting Period (such
actions, collectively, the "Foreclosure Actions"). In the event Senior
Lender commences Foreclosure Actions after the expiration of any Waiting
Period, and notifies Subordinated Lender in writing of such fact,
Subordinated Lender will immediately cease and desist from continuing
Foreclosure Actions initiated by it.
(c) The Subordinated Lender agrees that neither the expiration of the
Blockage Period nor the exercise by the Subordinated Lender of any rights
pursuant to subsection (b) above terminates, limits or restricts the terms
of the subordination of the Subordinated Debt to the Senior Debt or the
terms of the subordination of the Subordinated Lender's liens and security
interest in the Subordinated Debt Collateral to the Senior Lender's liens
and security interests in the Subordinated Debt Collateral. Without
limiting the generality of the foregoing any sums collected by Subordinated
Lender after commencement of Foreclosure Actions shall be deemed a payment
prohibited hereunder and be paid over to Senior Lender in accordance with
provisions of section 5 below.
5. Payments To the Subordinated Lender.
In the event that the Subordinated Lender receives any dividend,
distribution or payment referred to in Section 3 hereof (other than subordinated
securities permitted to be received pursuant to Section 3(a)), or receives any
payment (of any kind or character) of any Subordinated Debt or security therefor
in violation of this Agreement, the Subordinated Lender will (a) not credit such
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payments against the Subordinated Debt, (b) segregate such dividend,
distribution or payment from its other funds and property and hold it in trust
for the benefit of the Senior Lender, (c) notify the Senior Lender immediately
thereof, and (d) immediately pay and deliver the same to the Senior Lender in
precisely the form received, except for any requisite endorsement or assignment,
which the Subordinated Lender will make, and authorizes the Senior Lender or any
of its officers or employees to make such, in the event that the Subordinated
Lender does not make the same. The Senior Lender will apply any such moneys so
received by it in reduction of the Senior Debt and hold any property other than
moneys so received by it as collateral security for the Senior Debt. In the
event that the Subordinated Lender shall obtain any lien, judgment or decree
against the Borrower, the Subordinated Lender will immediately assign the same
to the Senior Lender, or xxxx the same to the Senior Lender's use. Upon payment
and satisfaction in full of the Senior Debt in cash, the Subordinated Lender
shall be subrogated to the Senior Lender's rights with respect to the Senior
Debt. For purposes of such subrogation, as among the Borrower, its creditors
other than the Senior Lender, and the Subordinated Lender, no payment or
distribution made to the Senior Lender by virtue of this Agreement which
otherwise would have been made to the Subordinated Lender, and no payment over
to the Senior Lender pursuant to this Agreement of funds the Subordinated Lender
would otherwise be entitled to retain, shall be deemed to be a payment by the
Borrower on account of the Senior Debt.
6. Senior Lender's Rights. Without notice to the Subordinated Lender, and
without affecting or releasing any obligation or agreement of the Subordinated
Lender under this Agreement or the subordination provided herein, the Senior
Lender may at any time or times do any of the following with respect to any of
the Senior Debt: (a) amend, modify, alter or waive any of the terms of the
Senior Loan Agreement and the other Senior Loan Documents, (b) renew or extend
the time for payment of all or any part thereof, (c) increase (subject to the
limitations stated in the definition of Senior Debt) or decrease the amount
thereof, (d) accept additional collateral security or guaranties therefor, and
sell, exchange, fail to perfect, release or otherwise deal with all or any part
of any such collateral or guaranties, (e) release any party primarily or
secondarily obligated thereon, (f) grant indulgences and take or refrain from
taking any action with regard to the collection or enforcement thereof, and (g)
take any action which might otherwise constitute a defense to or a discharge of
the Borrower or any guarantor of the Senior Debt. Nothing contained in this
Agreement shall impair any right of the Senior Lender with respect to any of the
Senior Debt or any collateral security or guaranties therefor or the proceeds
thereof.
7. Representations. The Subordinated Lender represents and warrants to the
Senior Lender that:
(a) The Scheduled Subordinated Debt constitutes all of the now
existing liabilities of any nature whatsoever of the Borrower to the
Subordinated Lender. There is no event of default or event which, with the
giving of notice, passage of time or both, would constitute an event of
default existing under the Scheduled Subordinated Debt.
(b) The Subordinated Lender is the owner and holder of the
Subordinated Note, which has not been transferred or encumbered. The
Borrower or the Subordinated Lender has delivered to the Senior Lender a
true and complete copy of the Subordinated Note, which has not been amended
or modified.
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(c) The Scheduled Subordinated Debt is secured by a lien and security
interest in the assets of the Borrower and certain intellectual property
held by the Xxxxxx Family Trust, all as further described in the Purchase
Agreement (collectively the "Subordinated Debt Collateral"). The Borrower
and Subordinated Lender have delivered to the Senior Lender true and
complete copies of all loan agreements, security agreements, mortgages,
guaranties and other documents collateral to or securing the Scheduled
Subordinated Debt, none of which has been amended or modified.
(d) The execution, delivery and performance by the Subordinated Lender
of this Agreement, the consummation of the transactions contemplated herein
and the fulfillment and compliance with the respective terms, conditions
and provisions contained herein will not conflict with or result in a
breach of, or constitute a default under, any of the terms, conditions or
provisions of any applicable statute, law, rule, regulation or ordinance,
or any judgment, or order of any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
or any indenture, mortgage, loan or credit agreement, instrument or other
agreement to which the Subordinated Lender is a party or by which the
Subordinated Lender is bound or affected.
(e) This Agreement has been duly executed and delivered by the
Subordinated Lender and constitutes the valid and binding obligation of the
Subordinated Lender, enforceable in accordance with its terms, except as
enforceability may be limited by any bankruptcy, insolvency,
reorganization, moratorium or other laws or equitable principles affecting
creditors' rights generally.
(f) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority is required in
connection with the execution, delivery or performance by the Subordinated
Lender of this Agreement.
8. Covenants.
(a) The Subordinated Lender and the Borrower each agree that the only
evidence of the Scheduled Subordinated Debt which will be permitted to
exist will be the Subordinated Notes, the Purchase Agreement and the other
Subordinated Debt Documents.
(b) The Subordinated Lender and the Borrower agree that the Borrower
will not give or permit to be given, and the Subordinated Lender will not
accept, any security or guaranty for any Subordinated Debt without the
prior written consent of the Senior Lender, except for the Subordinated
Debt Collateral, which shall only secure the Scheduled Subordinated Debt,
and except for guarantees by subsidiaries of MTS required by the Purchase
Agreement. The Subordinated Lender agrees that, upon receiving any security
or guaranty not permitted by the preceding sentence, the Subordinated
Lender will immediately assign and deliver the same to the Senior Lender.
(c) The Subordinated Lender will give the Senior Lender immediate
written notice of any event of default of which it has knowledge or any
event of which the Subordinated Lender has knowledge, which might, upon the
passage of time or the giving of notice or both, constitute a default or
event of default under any of the Subordinated Debt Documents.
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(d) The Subordinated Lender will permit the Senior Lender to inspect
and copy all books, records, instruments and documents evidencing or
pertaining to the Subordinated Debt. The Borrower consents to such
inspection.
(e) In the event that the Subordinated Lender at any time has any
indebtedness or other obligations owing to the Borrower for any reason,
including without limitation any accounts receivable owing to the Borrower,
the Subordinated Lender will under no circumstances offset the indebtedness
or other obligations owing to the Borrower against any of the Subordinated
Debt.
(f) The Senior Lender agrees to deliver to the Subordinated Lender a
copy of all written notices of default or event of default provided by the
Senior Lender to the Borrower, and the Senior Lender agrees, with the
Borrower's consent, that, following receipt of such notice, the
Subordinated Lender may, but shall not be obligated, to cure such default
or event of default to the same extent and within the same cure period, if
any, as is available to the Borrower under the Senior Loan Agreement and
the other Senior Loan Documents. All costs and expenses incurred by the
Subordinated Lender in curing such default or event of default shall be
added to the Subordinated Debt.
(g) The Senior Lender agrees to accept from the Subordinated Lender,
at any time while a Senior Debt Default exists, payment in full of all
indebtedness and obligations of the Borrower to the Senior Lender, and the
Borrower hereby consents and agrees to such acceptance by the Senior
Lender. Upon receipt of such payment in full to the Senior Lender from the
Subordinated Lender, the Senior Lender will assign to the Subordinated
Lender, without recourse or warranty, all of the rights of the Senior
Lender in and to the Senior Loan Agreement and the other Senior Loan
Documents, and any Standstill Period or Blockage Period shall forthwith
terminate. Nothing in this subsection requires the Subordinated Lender to
make any such payment to the Senior Lender.
9. Limitation on Consent to Payment or Granting of Security. In the event
that the Senior Lender consents in writing to the making of a payment on account
of the Subordinated Debt or to the granting of collateral security or any
guaranties on account of the Subordinated Debt, which payment or grant would
otherwise be prohibited pursuant to Sections 2 or 8 hereof, such consent shall
be deemed to be a consent to the payment or grant specifically referred to in
such written consent and shall not be construed as a waiver of Sections 2 or 8
hereof generally as to all future payments or grants. A consent by the Senior
Lender to any request shall not be deemed to be a consent to future similar
requests.
10. Subordination Legend. The Subordinated Lender and the Borrower shall
cause each instrument or agreement that at any time evidences or secures all or
any portion of the Subordinated Debt, including the Subordinated Note, to be
conspicuously marked as follows:
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"This instrument/agreement is subject to the terms of a Subordination
Agreement dated as of June __, 2002 in favor of LaSalle Business
Credit, Inc., which Subordination Agreement is incorporated herein by
reference. Notwithstanding any contrary statement contained herein, no
payment on account of the principal, interest or other obligations
arising hereunder, and no rights granted herein, shall become due or
be paid or exercised except in accordance with the terms of such
Subordination Agreement."
11. Conditions to Assignment.
(a) The Subordinated Lender agrees that the Subordinated Lender will
not assign or deliver to any person or entity, other than the Senior
Lender, any portion of the Subordinated Debt or any evidence thereof or
security or guaranty therefor unless and until such assignee agrees in
writing addressed to the Senior Lender that such assignee will be bound by
the terms and conditions of this Agreement to the same extent and in the
same manner as the Subordinated Lender. Any assignee that so agrees shall
have the same rights as the Subordinated Lender hereunder. In the event the
Subordinated Lender does so without such agreement, the Subordinated Lender
will immediately become liable to the Senior Lender in the amount so
assigned, and such assignment shall be null and void.
(b) The Subordinated Lender has also joined in this agreement as
holder of the Series A Preferred Stock for the purpose of agreeing to the
provisions of Section 2(b) above and the provisions of this Section 11(b).
The Subordinated Lender agrees that it will not sell, assign or transfer
the Series A Preferred Stock unless the assignee or purchaser agrees in
writing to be bound by the terms hereof.
12. Termination. This Agreement will continue in full force and effect so
long as any Senior Debt remains outstanding, and thereafter, even if there is no
longer any Senior Debt remaining unpaid and unsatisfied, so long as the Senior
Lender, or any successor or assignee of the Senior Lender, has any agreement or
understanding with the Borrower pursuant to which the Senior Lender or such
successor or assignee may extend credit to the Borrower. To the extent any
payment or payments of any Senior Debt or any Subordinated Debt received by the
Senior Lender are subsequently invalidated, declared to be fraudulent or
preferential, set aside or are required to be repaid to a trustee, receiver or
other person or entity under any bankruptcy act, state or federal law, common
law or equitable cause, then this Agreement will be revived and continued in
full force and effect. This Agreement may not be terminated except by an
instrument in writing signed by the Senior Lender.
13. Waivers.
(a) The Subordinated Lender hereby waives, to the extent permitted by
applicable law, any right to notice from the Senior Lender prior to
disposition of any assets of the Borrower or any guarantor or of any
collateral securing any of the Senior Debt. To the extent the Subordinated
Lender is not permitted by applicable law to waive notice, the Subordinated
Lender agrees that five (5) days notice prior to any such disposition shall
be reasonable. The Subordinated Lender agrees not to interfere with any
disposition of assets of the Borrower or any guarantor or any collateral
securing any of the Senior Debt by or at the direction of the Senior Lender
and waives, to the extent permitted by applicable law, the right to
challenge any such disposition as not commercially reasonable.
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(b) The Subordinated Lender waives any right to require the Senior
Lender to marshal any assets of the Borrower or any guarantor or otherwise
to proceed in any fashion against the Borrower, any guarantor or any other
person.
(c) Except for such default notices as provided in Section 8(f) above,
the Subordinated Lender waives notice of any default or event of default by
the Borrower under the Senior Debt and all other notices of any kind, and
waives protest of all notes and other instruments evidencing any of the
Senior Debt.
(d) The Senior Lender is irrevocably authorized to demand and receive
specific performance of this Agreement by the Subordinated Lender, even if
the Borrower has breached its agreements hereunder, at any time upon the
breach by the Subordinated Lender of its agreements hereunder. The
Subordinated Lender irrevocably waives any defense based on the adequacy of
a remedy at law which might be asserted as a bar to such remedy of specific
performance.
14. Releases. The Senior Lender may release any one or more parties
hereto, or the successors or assigns thereof, from any or all obligations
hereunder, and such release, or any release by operation of law, shall not
release any other party hereto from, nor in any way affect, any of the
obligations of any other party under this Agreement, or affect the
subordination of any of the Subordinated Debt to the Senior Debt. In the
event that the Senior Lender releases any of its lien and security interest
in any portion of or all of the Subordinated Debt Collateral in connection
with the sale, lease, exchange, transfer or other disposition thereof so
that the proceeds thereof are used solely to repay any portion of or all of
the Senior Debt or fees, costs and expenses in connection with the sale,
lease, exchange, transfer or disposition thereof, the Subordinated Lender
agrees that, at the request of the Senior Lender, the lien and security
interest of the Subordinated Lender in the Subordinated Debt Collateral
shall be automatically, unconditionally and simultaneously released, and
the Subordinated Lender hereby authorizes, authenticates and ratifies such
termination statements, releases and other documents as the Senior Lender
may execute or file to effectively confirm such release.
15. Notices. All notices, requests and other communications made or
given in connection with this Agreement shall be in writing and, unless
receipt is stated herein to be required, shall be deemed to have been
validly given if delivered personally against receipt or by private
carrier, registered or certified mail, return receipt requested, or by
telecopy with the original forwarded by first class mail, in all cases with
charges prepaid, addressed as follows, or delivered to the individual or
division or department to whose attention notices to a party are to be
addressed, until some other address (or individual or division or
department for attention) shall have been designated by notice given by a
party to the other:
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To the Subordinated Lender: Eureka I, L.P.
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
To the Borrower: Medical Technology Systems, Inc.
00000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, CFO
Telecopy Number:
With a copy to: Xxxxxxx X. Xxxx, Esquire
Xxxxxxxxxx Xxxxxxxx L.L.P.
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Telecopy Number: (000) 000-0000
To the Senior Lender: LaSalle Business Credit, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Vice President
Telecopy Number: Fax (000) 000-0000
With copy to: Wolf, Block, Xxxxxx and Xxxxx-Xxxxx LLP
0000 Xxxx Xxxxxx - 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx
Telecopy Number: (000) 000-0000
To any assignee permitted As informed to the Senior Lender in writing
by Section 11:
16. Submission to Jurisdiction. The Borrower and the Subordinated Lender
hereby consent to the exclusive jurisdiction of any state or federal court
located within the Commonwealth of Pennsylvania, and irrevocably agree that,
subject to the Senior Lender's election, all actions or proceedings relating to
this Agreement or the transactions contemplated hereunder shall be litigated in
such courts, and the Borrower and the Subordinated Lender waive any objection
which they may have based on improper venue or forum non conveniens to the
conduct of any proceeding in any such court. Nothing contained in this Section
shall affect the right of the Senior Lender to serve legal process in any other
manner permitted by law or affect the right of the Senior Lender to bring any
action or proceeding against the Borrower or the Subordinated Lender or their
respective property in the courts of any other jurisdiction.
17. Delay or Omission Not Waiver. Neither the failure nor any delay on the
part of the Senior Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or impair any such right, remedy,
power or privilege. No single, partial or full exercise of any rights, remedies,
powers and privileges by the Senior Lender shall preclude further or other
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exercise thereof. No course of dealing between the Senior Lender and the
Borrower or the Subordinated Lender shall operate as or be deemed to constitute
a waiver of the Senior Lender's rights hereunder or affect the duties or
obligations of the Borrower or the Subordinated Lender.
18. Possessory Perfection. Senior Lender agrees to hold the capital stock
(the "Capital Stock") pledged to it under the Senior Loan Documents which is in
its physical possession for the benefit of Subordinated Lender subject to the
rights of Senior Lender. Senior Lender shall use reasonable efforts to turn over
the Stock at such time as the Senior Debt is fully satisfied and this agreement
is terminated but shall have no liability for the failure to do so unless such
failure is the result of willful misconduct or gross negligence.
19. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns. This Agreement may not be modified except in writing executed by the
party against whom enforcement of such modification is sought. The rights
granted to the Senior Lender hereby shall be in addition to any other rights of
the Senior Lender under any other subordination agreement, if any, now or
hereafter outstanding. All rights and remedies of the Senior Lender shall be
cumulative. Wherever the Senior Lender's consent is required or permitted, such
consent shall be at the sole and absolute discretion of the Senior Lender.
20. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
21. Governing Law. This Agreement shall be governed by and construed
according to the laws of the Commonwealth of Pennsylvania without taking into
account conflict of laws principles thereof.
22. Severability. If any provision herein shall for any reason be held
invalid or unenforceable, no other provision hereof shall be affected thereby,
and this Agreement shall be construed as if the invalid or unenforceable
provision had never been a part of it.
23. Entire Agreement. This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof, and there are no
courses of dealing, usages of trade, or other representations, promises, terms
or conditions referring to such subject matter, and no inducements or
representations leading to the execution hereof other than as mentioned herein.
24. Waiver of Right to Trial by Jury. THE BORROWER, THE SUBORDINATED LENDER
AND THE SENIOR LENDER WAIVE ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT
OR INSTRUMENT ATTACHED HERETO, REFERRED TO HEREIN OR DELIVERED IN CONNECTION
HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE BORROWER, THE SUBORDINATED LENDER OR THE SENIOR LENDER WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT ATTACHED HERETO,
13
REFERRED TO HEREIN OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
THE BORROWER, THE SUBORDINATED LENDER AND THE SENIOR LENDER AGREE AND CONSENT
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE BORROWER, THE SUBORDINATED LENDER AND THE SENIOR LENDER TO THE
WAIVER OF THEIR RESPECTIVE RIGHT TO TRIAL BY JURY. THE BORROWER AND THE
SUBORDINATED LENDER ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL REGARDING THIS SECTION, THAT THEY FULLY UNDERSTAND ITS TERMS,
CONTENT AND EFFECT, AND THAT THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS
OF THIS SECTION.
(REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
intending to be legally bound hereby, effective as of the day and year first
above written.
SUBORDINATED LENDER:
EUREKA I, L.P.
By: EUREKA MANAGEMENT, L.P.,
its sole general partner
By: BERWIND CAPITAL PARTNERS, LLC
its sole general partner
By: /s/ Xxxxxxxxx X. Xxxxx
__________________________
Name: Xxxxxxxxx X. Xxxxx
Title: President
HOLDER OF SERIES A PREFERRED STOCK:
EUREKA I, L.P.
By: EUREKA MANAGEMENT, L.P.,
its sole general partner
By: BERWIND CAPITAL PARTNERS, LLC
its sole general partner
By: /s/ Xxxxxxxxx X. Xxxxx
_____________________________
Name: Xxxxxxxxx X. Xxxxx
Title: President
SENIOR LENDER:
LASALLE BUSINESS CREDIT, INC.
By: /s/ Xxxxxxx X. Xxxxxx
_____________________________
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
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BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: /s/ Xxxx Xxxxxx
______________________________
Name: Xxxx Xxxxxx
Title: President
By: /s/ Xxxx Xxxxxx
______________________________
Name: Xxxx Xxxxxx
Title: President
EXHIBIT A
Subordinated Debt Documents
