THIS NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF JUNE
26, 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 EXERCIED EXCEPT IN ACCORDANCE WITH THE TERMS OF SUCH
SUBORDINATION AGREEMENT.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS SUCH
OFFER, SALE, PLEDGE OR TRANSFER IS REGISTERED UNDER THE 1933 ACT OR APPLICABLE
STATE SECURITIES LAWS OR IS EXEMPT FROM SUCH REGISTRATION. TRANSFER OF THESE
SECURITIES IS ALSO SUBJECT TO CERTAIN RESTRICTIONS UNDER THE SECURITIES PURCHASE
AGREEMENT DATED JUNE 26, 2002 BETWEEN THE COMPANY AND EUREKA I, L.P.
Medical Technology Systems, Inc.
14% SENIOR SUBORDINATED NOTE
Note No. 1 $4,000,000
FOR VALUE RECEIVED, Medical Technology Systems, Inc., a Delaware
corporation (herein called the "Company"), hereby promises to pay to Eureka I,
L.P. or its registered assigns (the "Holder"), the principal sum of four million
dollars ($4,000,000), and to pay interest on the unpaid principal amount hereof
at the rate of fourteen percent (14%) per annum, calculated on the basis of a
360-day year and the actual number of days elapsed, until the principal hereof
is paid. The principal of and interest on this Note shall be paid at such times
as are specified herein. Upon surrender hereof, payment of the principal of and
interest on this Note, including any prepayment fee if applicable, will be made
by wire transfer of immediately available funds to the bank account specified by
the Holder.
This Note is issued pursuant to a Securities Purchase Agreement dated June
26, 2002 (the "Purchase Agreement") among the Company, Eureka I, L.P., a
Delaware limited partnership, and Eureka I, L.P., as Collateral Agent, and is
secured by the Security Documents, encumbering property identified therein as
more particularly described in the Security Documents. The term "Security
Documents" has the meaning specified in the Purchase Agreement. All of the
terms, conditions and provisions of the Purchase Agreement and the Security
Documents (including the definitions set forth therein) are incorporated herein
by reference and are hereby made a part hereof, and any breach or violation
2
thereof shall constitute a breach or violation of this Note. This Note is
subject to the terms of a Subordination Agreement referred to herein. This Note
is subject to the following additional provisions:
1. Repayment. The principal of this Note shall be paid on June 26, 2007.
2. Mandatory and Optional Prepayment. The rights and obligations of the
Company to prepay this Note are set forth in the Purchase Agreement.
3. Interest. Interest at the rate stated above shall be payable on the last
day of each calendar month, beginning with the first such date to occur after
the date of this Note.
4. Indemnification. The Company and its subsidiaries shall indemnify, to
the fullest extent permitted by law, the Holder against all losses, claims,
damages, liabilities and expenses (including reasonable attorneys' fees) caused
by, resulting from, arising out of or related to (a) any amendments, waivers or
consents pursuant to the provisions hereof, (b) the enforcement of this Note, or
the collection of amounts due hereunder or the proof or allowability of any
claim arising under this Note, whether in bankruptcy or receivership proceedings
or otherwise, and (c) in any workout, restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or in connection with any foreclosure, collection or
bankruptcy proceedings.
5. Subordination. The indebtedness evidenced by this Note is expressly
subordinated and junior in right of payment to the prior payment in full of all
Senior Debt (as defined below), to the extent and in the manner provided in a
Subordination Agreement dated as of June 26, 2002 (the "Subordination
Agreement"), among the Company, MTS Packaging Systems, Inc., Eureka I, L.P., and
LaSalle Business Credit, Inc., and the Holder, by accepting the same, agrees to
and shall be bound by such subordination and by the Subordination Agreement. The
term "Senior Debt" has the meaning specified in the Subordination Agreement.
6. Amendment and Waiver. The rights and obligations of the Company and the
rights of the Holder of the Note may be amended or modified as provided in the
Purchase Agreement. Defaults and their consequences may be waived as provided in
the Purchase Agreement. Any such consent or waiver shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made upon
this Note.
7. Transfer. Subject to certain limitations set forth in the Purchase
Agreement, the transfer of this Note may be transferred at the principal office
of the Company by surrender thereof for cancellation, endorsed or accompanied by
a written instrument of transfer, duly executed by the registered holder thereof
or its attorney duly authorized in writing, and thereupon the Company shall
issue and deliver, in the name of the transferee or transferees, a new note, for
a like aggregate principal amount, dated as of the date to which interest has
been paid on the Note so transferred.
8. Exchange. Subject to certain limitations set forth in the Purchase
Agreement, this Note is exchangeable at any time upon the request of the Holder
and upon surrender of this Note for such purpose at the principal offices of the
3
Company, the Company will execute and register in the Holder's name in exchange
therefor new notes, in such denomination or denominations (in minimum amounts of
$100,000 and in multiples of $10,000) as may be requested, an aggregate
principal amount equal to the unpaid principal amount of this Note and
substantially in the form thereof, with appropriate insertions and variations,
and dated, and bearing interest from, the date to which interest has been paid
on this Note unless no interest has been paid on this Note, in which case the
new notes shall be dated the date of this Note.
9. Default Rate. Upon the occurrence and during the continuance of an Event
of Default (as defined in Section 8.5 of the Purchase Agreement), including, but
not limited to, after maturity or after judgment, the Company hereby agrees to
pay to the Holder interest on the outstanding principal balance of the Note and,
to the extent permitted by law, overdue interest thereon at the rate of 16% per
annum.
10. Certain Waivers. The Company hereby waives presentment for payment,
protest and demand, and notice of protest, demand and/or dishonor and nonpayment
of this Note, notice of any default under this Note, except as specifically
provided herein, and all other notices or demands otherwise required by law that
the undersigned may lawfully waive. The Company expressly agrees that this Note,
or any payment hereunder, may be extended from time to time, without in any way
affecting the liability of the Company.
11. Governing Law; Jurisdiction; Waiver of Jury Trial. This Note shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to conflict of laws. The Company and the Holder
hereby agree that any action or proceeding arising out of this Note may be
commenced in state or federal court within the Commonwealth of Pennsylvania. The
Company and the Holder waive personal service of process and agree that a
summons and complaint commencing an action or proceeding in any such court shall
be properly served and shall confer personal jurisdiction if served by
registered or certified mail in accordance with the notice provisions set forth
herein. The Company and the Holder hereby waive any and all right to trial by
jury in any legal proceeding arising out of or relating to this Note.
12. Severability. In the event that for any reason one or more of the
provisions of this Note or their application to any person or circumstance shall
be held to be invalid, illegal or unenforceable in any respect or to any extent,
such provisions shall nevertheless remain valid, legal and enforceable in all
such other respects and to such extent as may be permissible. In addition, any
such invalidity, illegality or unenforceability shall not affect any other
provisions of this Note, but this Note shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
13. Notice. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by overnight courier,
facsimile transmission or registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
below or such other address as may hereafter be designated in writing by the
addressee to the other parties:
4
Company: Medical Technology Systems, Inc.
00000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, President
and Chief Executive Officer
Fax: 000-000-0000
5
With copies to: Xxxxxxxxxx Xxxxxxxx LLP
000 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxx, Xx., Esq.
Fax: 000-000-0000
Holder: At the address specified in the Purchase Agreement,
or otherwise in writing by the Holder
All such notices and communications shall be deemed to have been received in the
case of (a) facsimile transmission, on the date sent, (b) personal delivery, on
the date of such delivery, (c) overnight courier, on the first business day
following delivery to such courier and (d) mailing, on the fifth day after the
posting thereof.
Prior to due presentment of this Note for registration of transfer, the
Company and any agent of the Company may treat the Person in whose name this
Note is registered as the owner hereof for all purposes, whether or not this
Note be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
S-1
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: /s/ Xxxx X. Xxxxxx
__________________________________
Name: Xxxx X. Xxxxxx
Title: President, CEO
Attest:_______________________
Secretary
Dated: June 26, 2002
