<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number 0-16594
MEDICAL TECHNOLOGY SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 59-2740462
-------- ----------
(State or other jurisdiction of (I.R.S. Employer ID Number)
incorporation or organization)
12920 Automobile Boulevard, Clearwater, Florida 34622
-----------------------------------------------------
(address of principal executive offices)
Registrant's telephone number, including area code: (813) 576-6311
--------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 of 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (for shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at September 30, 1996
----- ---------------------------------
<S> <C>
Common Stock, $.01 par value 5,903,788
Preferred Stock, $.0001 par value 6,500,000
</TABLE>
<PAGE> 2
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I - Financial Information
- ------------------------------
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1996 and September 30,1996 .............................. 1
Consolidated Statements of Operations -
Three months and Six months ended September 30, 1996 and 1995 ..... 2
Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
Six months ended September 30, 1996 ................................ 3
Consolidated Statements of Cash Flow -
Six months ended September 30, 1996 and 1995 ....................... 4
Notes to Consolidated Financial Statements ............................. 5 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................ 8 - 9
Part II - Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K ....................................... 10
Signature ............................................................. 10
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
September 30, March 31,
1996 1996
---- ----
Current Assets: (Unaudited)
<S> <C> <C>
Cash ................................................... $ 1,545 $ 965
Accounts Receivable, Net ............................... 3,326 3,260
Income Taxes ........................................... 0 880
Inventories ........................................... 2,292 2,445
Prepaids and Other ..................................... 288 264
-------- --------
Total Current Assets ................................... 7,451 7,814
Property and Equipment, Net ................................... 4,428 4,917
Other Assets:
Goodwill, Net ......................................... 933 971
MedServ Development and Related Software, Net ......... 215 170
Patents, Net ........................................... 541 565
Other, Net ............................................. 232 232
-------- --------
Total Other Assets ..................................... 1,921 1,938
-------- --------
Total Assets ................................................... $ 13,800 $ 14,669
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt ................... $ 190 $ 168
Accounts Payable-Trade and Accrued Liabilities ......... 1,759 2,240
-------- --------
Total Current Liabilities ............................. 1,949 2,408
Liabilities Subject to Compromise ............................... -0- 30,457
Long-Term Debt, Less Current Maturities ......................... 27,049 350
-------- --------
Total Liabilities ............................................... 28,998 33,215
-------- --------
Stockholders' Equity (Deficit):
Voting Preferred Stock ................................. 1 1
Common Stock ........................................... 59 55
Capital in Excess of Par Value ......................... 8,430 8,320
Retained Earnings (Deficit) ........................... (23,357) (26,591)
Less: Treasury Stock ................................... (331) (331)
-------- --------
Total Stockholders' Equity (Deficit) ................. (15,198) (18,546)
-------- --------
Total Liabilities and Stockholders' Equity ..................... $ 13,800 $ 14,669
======== ========
a) Liabilities Subject to Compromise consist of the following:
Secured Debt ........................................... $ -0- $ 28,158
Trade and Other Miscellaneous Claims ................. -0- 2,299
-------- --------
$ -0- $ 30,457
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands; except Earnings Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Net Sales and Services ............................... $ 4,755 $ 4,288 $ 9,637 $ 8,256
Costs and Expenses:
Cost of Sales ....................................... 2,492 2,496 5,338 4,581
Selling, General and Administrative ................. 1,501 2,918 2,837 4,810
Loss on Early Retirement of Fixed Assets ............. -0- 3,000 -0- 3,000
Project and Product Development ..................... -0- 1,574 -0- 1,574
Loss on Inventory Revaluation ....................... -0- 513 -0- 513
Depreciation and Amortization ....................... 341 451 680 704
Interest, Net ....................................... (9) 614 (11) 1,178
------- -------- ------- --------
Total Costs and Expenses ................. 4,325 11,566 8,844 16,360
------- -------- ------- --------
Income (Loss) from Continuing Operations Before Income
Taxes and Extraordinary Gain ......................... 430 (7,278) 793 (8,104)
Income Tax (Benefit) ................................. -0- (40) -0- (353)
------- -------- ------- --------
Income (Loss) from Continuing Operations Before
Extraordinary Gain ................................... 430 (7,238) 793 (7,751)
Income (Loss) from Discontinued Operations, Net of
Income Tax ........................................... -0- (4,461) -0- (4,433)
------- -------- ------- --------
Net Income (Loss) Before Extraordinary Gain ............. $ 430 $(11,699) $ 793 $(12,184)
Extraordinary Gain - Adjustment of debt upon emergence
from Bankruptcy ..................................... 2,441 -0- 2,441 -0-
------- -------- ------- --------
Net Income (Loss) ..................................... $ 2,871 $(11,699) $ 3,234 $(12,184)
======= ======== ======= ========
Net Earnings (Loss) per Common Share (Primary and
Fully Diluted):
Continuing Operations ............................... $ .07 $ (1.81) $ .14 $ (1.94)
Discontinued Operations ............................. .00 (1.12) .00 (1.11)
Extraordinary Gain ................................... .43 .00 .44 .00
------- -------- ------- --------
Net Income (Loss) ................................... $ .50 $ (2.93) $ .58 $ (3.05)
======= ======== ======= ========
Weighted average Common Shares outstanding .............. 5,680 3,993 5,563 3,993
======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED SEPTEMBER 30, 1996
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------------------------------------------------
Number $.01 Capital in Retained
of Par Excess of Earnings Treasury
Shares Value Par Value (Deficit) Stock Total
--------- -------------------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31,1996 ........... 5,485,335 $ 55 $8,320 $(26,591) $(331) $(18,547)
Net Income for Three Months
Ended June 30, 1996 ............. 363 363
------------------------------------------------------------------------
Balance, June 30, 1996 ........... 5,485,335 $ 55 $8,320 $(26,228) $(331) $(18,184)
Stock Issued ..................... 458,453 4 110 114
Net Income for Three Months
Ended September 30, 1996 ........ 2,871 2,871
------------------------------------------------------------------------
Balance, September 30, 1996 ...... 5,943,788 $ 59 $8,430 $(23,357) $(331) $(15,199)
========================================================================
</TABLE>
<TABLE>
<CAPTION>
VOTING PREFERRED STOCK
-------------------------------------------------------
Number $.0001
of Par
Shares Value
--------- ------
<S> <C> <C> <C>
Balance, March 31, 1996 6,500,000 $ 1 $ 1
--------- ------ ---------
Balance, September 30, 1996 6,500,000 $ 1 $ 1
--------- ------ ---------
Total Stockholders' Equity (Deficit),
September 30, 1996 $ (15,198)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1996 1995
------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income ..................................................... $ 3,234 $ (7,751)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization. ................................ 680 704
Loss on Disposal of Fixed Assets .............................. 0 3,000
Project and Product Development Expenses, Net .................. 0 1,174
Extraordinary Gain ............................................ (2,441) -0-
(Increase) Decrease in:
Accounts Receivable ........................................ (66) 1,783
Income Taxes Receivable .................................... 880 -0-
Inventories ................................................ 153 (217)
Prepaid Expenses and Other Assets .......................... (24) (171)
Increase (Decrease) in:
Accounts Payable and Other Accrued Liabilities .............. (482) 7
Income Taxes Payable and Deferred Taxes .................... -0- (250)
------- --------
Total Adjustments ................................................ (1,300) 6,030
------- --------
Net Cash Provided (Used) by Continuing Operations ................ 1,934 (1,721)
------- --------
Net Cash Provided by Discontinued Operations .................... -0- (110)
------- --------
INVESTING ACTIVITIES
Expended for Property and Equipment .......................... (111) (510)
Expended for Software Development ............................ -0- (247)
Expended for Product Development .............................. (63) (80)
Expended for Patents and Other Assets ........................ -0- (931)
------- --------
Net Cash Used by Investing Activities ........................ (174) (1,768)
------- --------
FINANCING ACTIVITIES
Payments on Notes Payable, Long-Term Debt .................... (1,294) (14,590)
Net Proceeds from Line of Credit .............................. -0- 18,034
Issuance of Common Stock ...................................... 114 5
------- --------
Net cash (Used) Provided by Financing Activities .............. (1,180) 3,449
------- --------
NET INCREASE (DECREASE) IN CASH .................................. 580 (150)
CASH AT BEGINNING OF PERIOD ...................................... 965 613
------- --------
CASH AT END OF PERIOD ............................................ $ 1,545 $ 463
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the year ended March 31, 1997. The unaudited condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K for the year ended March 31, 1996.
NOTE B - CHAPTER 11 REORGANIZATION MATTERS
During the fourth quarter of fiscal 1996, the Company filed voluntary
petitions for relief under Chapter 11 ("Chapter 11") of Title 11 of the United
States Bankruptcy Code in the Middle District of Florida, Tampa Division (the
"Bankruptcy Court") for four of its subsidiaries (MTS debtors). On September 4,
1996, plans of reorganization for the MTS debtors were confirmed by the
Bankruptcy Court. As part of the plans of reorganization for the MTS debtors,
certain liabilities have been compromised by creditors of the Company as
follows:
Secured Claims (Bank) - Bank notes payable, line of credit, accrued
interest and other charges and expenses, in the amount of approximately
$28,000,000 have been combined and restructured into two separate promissory
notes (Plan Note I and Plan Note II).
Plan Note I, in the stated principal amount of approximately
$27,000,000, provides for a portion of the principal amount, $15,000,000, to be
due and payable as follows:
a) Interest at the rate of 7.5% for a period of two (2) years
ending September 1, 1998.
b) Installments of principal and interest at the rate of 7.5%
payable monthly for a period of ten (10) years ending September 1, 2006. At
which time, the then outstanding principal amount is due and payable in full.
The monthly installments of principal and interest are calculated based on the
principal amount amortized in level monthly payments over twenty (20) years.
Plan Note I further provides that the net sales proceeds from the sale
of one of the MTS debtors (Vangard Labs, Inc.) will be paid to the bank. In
addition, certain other mandatory prepayments of the stated principal amount
are required upon the occurrence of a capital transaction in which any of the
Company's subsidiaries are sold, as well as upon the receipt of any proceeds
resulting from certain causes of action commenced by the Company. Plan Note I
also provides that the full stated principal amount shall be due and payable
upon the occurrence of specified major events of default.
Plan Note II, in the stated principal amount of $1,000,000 provided
for payment of $750,000 on or about the date of the confirmation of the plans
of reorganization of the MTS debtors. The Company made the payment of $750,000
on or about September 5, 1996 and in accordance with the terms of Plan Note II,
the stated principal amount was deemed fully satisfied.
As noted above, there exists the possibility that additional
prepayments and payments will be made towards the bank debt. At present the
quantification of these amounts, if any, cannot be determined. The amount of
debt forgiveness currently recognizable cannot be determined until any
additional payments, if any, are known and it is determined to be highly
unlikely that certain events of default, as defined in the amended and restated
loan agreement, will occur. In addition, no amounts of interest expense will be
recorded until it is determined that the principal payments, the additional
prepayments and the interest payments in the aggregate exceed the carrying
value of the Company's bank debt.
Unsecured Claims (Trade Creditors) - The holders of approximately
$2,300,000 of trade and other miscellaneous claims elected to receive payment
of their claims under one of the three options which were provided for in the
plans of reorganization. The Company has determined that the net present value
of the amounts, discounted at an annual rate of 10%, to be paid to these
creditors is $407,000.
5
<PAGE> 8
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE B - CHAPTER 11 REORGANIZATION MATTERS, CONTINUED
Unsecured Claims (Other) - In March 1995, the Company entered into an
agreement relating to the acquisition of certain clinical laboratory accounts
for its Medical Technology Laboratories, Inc. subsidiary. The Company reached
a compromise with the seller which reduced the acquisition indebtedness to
$500,000. The net present value of this indebtedness, discounted at an annual
rate of 10%, is approximately $286,000.
The adjustment of unsecured claims resulted in a reduction of the
amount of these claims in the amount of $2,441,000. This amount has been
classified as an extraordinary gain in the Company's consolidated statement of
operations and statement of cash flow for the six months ended September 30,
1996.
NOTE C - DISCONTINUED OPERATIONS
As part of a corporate restructuring strategy, the Company plans to
concentrate its resources on its medication card business and the medication
dispensing technology products which have been developed and are presently
marketable. Although the clinical diagnostic laboratory business has been
identified as a non-core business, its operations are a source of cash to
support future debt obligations of the Company. The Company's generic drug
repackaging subsidiary, Vangard Labs, Inc. whose production operations were
suspended on January 3, 1996 and subsequently filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code in the Middle District of
Florida on February 22, 1996, will be divested, and as a result, has been
treated as a discontinued operation. A liquidating plan of reorganization for
Vangard Labs, Inc. was confirmed by the Bankruptcy Court on September 4, 1996.
The liquidating plan provides for Vangard Labs, Inc. to be sold and the
proceeds from the sale will be paid to the Company's bank in accordance with
Plan Note I referred to in Note B. In addition, the Glasgow Pharmaceutical
Corporation (GPC) joint venture with Creighton Pharmaceutical Corporation, a
wholly owned subsidiary of Sandoz Pharmaceuticals, Inc. is considered a
discontinued operation primarily because of its dependence upon Vangard
production capabilities.
The net assets and operating results of the discontinued operations
were segregated in the consolidated financial statements for all periods
presented.
NOTE D - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
------------- ---------
(In Thousands)
<S> <C> <C>
Raw Materials $ 847 $ 661
Finished Good and Work in Progress 1,445 1,784
------- -------
$ 2,292 $ 2,445
======= =======
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out) or
market.
6
<PAGE> 9
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
NOTE E - EARNINGS PER SHARE
The Company calculates its fully diluted earnings per share under the
modified treasury stock method. The utilization of the modified treasury stock
method for the six months ended September 30, 1996 is antidilutive. As such,
the Company has presented its fully diluted earnings per share based upon the
weighted average number of shares outstanding.
NOTE F - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
---- ----
(In Thousands)
<S> <C> <C>
Note payable; interest at bank prime plus 1/2%; or LIBOR rate plus
2 1/4%; payable $93,000 per month plus interest, maturing
September, 1998 (see Plan Note I and II) ............................ $ 0 $ 10,398
Bank line of credit, interest at bank prime plus 1/2%, or LIBOR
rate plus 2%; interest payable monthly; principal maturing
September, 1996 (see Plan Note I and II) ............................. 0 16,862
Notes Payable Bank (Plan Note I and II as described in Note B) .......... 26,416 0
Seller Financing Under Tampa Pathology Acquisition Agreement, face
value of $500,000 discounted at 10%, with variable monthly payments
until satisfied (see Note B) .......................................... 286 871
Other Notes and Agreements; interest and principal payable monthly and
annual at various amounts through June 1998 ........................... 537 545
-------- --------
Total Long-Term Debt .................................................... 27,239 28,676
Less Current Portion .................................................... (190) (168)
Subject to Compromise ................................................... 0 (28,158)
-------- --------
LONG-TERM DEBT DUE AFTER 1 YEAR ......................................... $ 27,049 $ 350
======== ========
</TABLE>
The following is a schedule by year of the principal payments
required on these notes payable and long-term debts exclusive of debt subject
to compromise as of September 30, 1996:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
1997 ......................................... $ 190
1998 ......................................... $ 347
</TABLE>
The above bank loans and line of credit are collateralized by the
Company's accounts receivables, inventory, equipment and intangibles. The
prime rate at September 30, 1996 was 8.25%.
NOTE G - UNCERTAINTIES
The accompanying condensed consolidated financial statements have been
prepared on the basis that the Company will continue as a going concern. As
discussed in the Company's Form 10-K for the fiscal year ended March 31, 1996,
certain conditions raised substantial doubt as to the Company's ability to
continue as a going concern.
On September 4, 1996 the Company's major subsidiaries emerged from
bankruptcy. In addition, the Company was successful in restructuring its
indebtedness with its principal secured lender. These events have contributed
to the results of operations for the six months ended September 30, 1996,
however, the ability of the Company to continue as a going concern is dependent
on, among other things, future profitable operations, ability to generate
sufficient cash flow from operations and the ability to obtain financing
sources to meet future obligations.
NOTE H SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Six Moths Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
Cash Paid:
Interest................................................. $ -0- $ 567
Income taxes (net of refund) ............................ (880) -0-
Non-Cash Financing and Investing Activities:
Restructured Debt:
Carrying value before reorganization ................... $ 3,133 $ -0-
Forgiveness (see Note B) ............................... 2,441 -0-
------- -------
Adjusted carrying value ................................ $ 692 $ -0-
======= =======
</TABLE>
NOTE I - INCOME TAXES
As discussed in Note B, on September 4, 1996 the Chapter 11 plans of
reorganization for four MTS debtors were approved by the Bankruptcy Court.
This resulted in an approximate $2.4 million reduction in unsecured claims
during the quarter ended September 30, 1996. The related income has been
excluded from taxable income pursuant to Internal Revenue Code (IRC) Section
108 through the reduction of certain tax attributes including net operating
losses. The current taxability of the potential debt forgiveness related to
the secured bank claim under review by management. The Company currently
believes that such amounts, if any, would also be excluded from taxable income
under IRC Section 108, again through a reduction of tax attributes including net
operating losses.
The remaining taxable income for the quarter and the six months ended
September 30, 1996 has been substantially offset by the existing net operating
loss carryforwards.
At September 30, 1996, the Company has net operating losses available
of approximately $20,000,000, subject to any reductions related to the
resolution of the above matter (see paragraph one). A tax benefit has not
been recorded for these losses since it is not yet more likely than not that
these benefits will be realized by reducing future taxable income.
7
<PAGE> 10
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 and 1995
Net sales for the three months ended September 30, 1996 increased 11%
from $4,288,000 to $4,755,000 during the same period the previous year. The
increase in net sales resulted primarily from increased sales of MTS Packaging,
Inc. products through wholesale distribution and increased installations of
pharmacy systems by the Company's Performance Pharmacy Systems, Inc.
subsidiary.
Gross profit increased $471,000 (26%) for the three months ended
September 30, 1996 compared to the same period the prior year. The gross
profit margin for the three months ended September 30, 1996 was 47.6% compared
to 41.8% the previous year. The increase in gross profit margin resulted
primarily from the incremental profit contribution of the increased Performance
Pharmacy installations.
Selling, general and administrative expenses decreased $1,417,000
(48.6%) for the three months ended September 30, 1996 as compared to the prior
year. The decrease resulted from cost reduction measurers which the Company
instituted during its Chapter 11 reorganization. These cost reductions
included significant reductions in sales and administrative personnel.
Depreciation and amortization expense decreased $110,000 (24.4%) for
the three months ended September 30, 1996. During fiscal 1996, the Company
made a comprehensive review of the carrying value of certain assets and
adjusted them downward to reflect their estimated value. As a result,
depreciation and amortization expense relating to those assets was reduced in
fiscal 1997. This decrease was partially offset by an increase in depreciation
and amortization expense which resulted from a reduction in the useful lives of
property and equipment to reflect technological changes.
Interest expense for the three months ended September 30, 1996 was
eliminated as a result of the modification and restructuring of the bank debt.
Until such time that the Company's principal, interest and other cash payments
exceed the carrying value of the bank debt, no interest expense will be
recognized (see Note B to the financial statements). Accordingly, all cash
payments of interest will be accounted for as reductions of the carrying amount
of the debt. As a result, nominal interest payments of $81,250, which were
payable by the Company during the three months ended September 30, 1996, will
be applied toward the principal amount of the debt.
Net income from continuing operations and before extraordinary items
for the three months ended September 30, 1996 was $430,000 compared to a loss
of $7,238,000 in the prior year. The increase in net income resulted from
increases in revenue and gross profits, and reductions in selling, general and
administrative expenses, depreciation expense and interest expense. In
addition, the Company made significant downward adjustments to the carrying
value of certain assets during the three months ended September 30, 1995.
Extraordinary income for the three months ended September 30, 1996 was
$2,441,000. This amount represents the adjustment of the unsecured claims held
by the creditors of the Company's subsidiaries pursuant to the plans of
reorganization approved by the Bankruptcy Court.
Six Months Ended September 30, 1996 and 1995
Net sales for the six months ended September 30, 1996 increased 16.7%
from $8,256,000 to $9,637,000 during the same period the previous year. The
increase in net sales resulted primarily from increased sales of MTS Packaging,
Inc. products, increased installations of pharmacy systems by Performance
Pharmacy Systems, Inc. and an increase in the number of physicians serviced by
Medical Technology Laboratories, Inc.
Gross profit increased $624,000 (17.0%) for the six months ended
September 30, 1996 compared to the same period the prior year. The gross
profit margin for the six months ended September 30, 1996 was 44.6% compared to
44.5% the previous year. The increase in gross profit resulted primarily from
the gross profit margin realized on increased sales for each of the Company's
subsidiaries.
8
<PAGE> 11
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
Six Months Ended September 30, 1996 and 1995, Continued
Selling, general and administrative expenses decreased $1,973,000
(41%) for the six months ended September 30, 1996 compared to the previous
year. The decrease resulted from cost reduction measures the Company
instituted during its Chapter 11 reorganization.
Depreciation and amortization expense decreased $24,000 (3.4%) for the
six months ended September 30, 1996 compared to the previous year. The reasons
for the decrease in depreciation and amortization for the six months ended
September 30, 1996 are substantially the same as those outlined in the
comparative quarterly discussions.
Interest expense was eliminated during the six months ended September
30, 1996 compared to $1,178,000 the previous year. The reasons for the
elimination of interest expense during the six months ended September 30, 1996
are substantially the same as those outlined in the comparative quarterly
discussions.
Net income from continuing operations and before extraordinary items
was $793,000 for the six months ended September 30, 1996 compared to a net loss
of $7,751,000 the previous year. The reasons for the decrease in net income
from continuing operations for the six months ended September 30, 1996 are
substantially the same as those outlined in the comparative quarterly
discussions.
Extraordinary income for the six months ended September 30, 1996 was
$2,441,000 and is explained in the comparative quarterly discussions.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from continuing operations for the six months ended
September 30, 1996 was $1,934,000 compared to $1,721,000 used during the
previous year. Cash was provided from continuing operations primarily as a
result of profitable operations, decreases in inventories and the receipt of
income tax refunds.
Investing activities utilized $174,000 during the six months ended
September 30, 1996 compared to $1,768,000 the previous year. The decrease
resulted from the fact that the Company significantly reduced its capital
equipment and project development activities as compared to the prior year.
Financing activities used $1,180,000 during the six months ended
September 30, 1996 compared to providing $3,449,000 the previous year. The
Company made certain payments amounting to approximately $450,000 to its
secured lender during the first three months of the current year as part of the
Chapter 11 reorganization of its principal subsidiaries. These payments were
authorized by the Bankruptcy Court as adequate protection for the secured
lender pursuant to a continuing order which allowed the Company to utilize the
collateral as a Debtor in Possession under the jurisdiction of the Bankruptcy
Court. In addition, the Company paid $750,000 on or about September 4, 1996
pursuant to its restructured loan agreement with its secured lender which is
discussed in Note B included in the Company's condensed consolidated financial
statements contained herein.
The Company had working capital of $5,502,000 as of September 30, 1996
and has no other source of working capital other than that which is generated
from operations.
Included in the Company's working capital is $250,000 which has been
placed in escrow with the Company's legal counsel to be utilized for payments
to unsecured creditors, claims and other administrative costs pursuant to the
plans of reorganization of the Company's principal subsidiaries.
The accompanying condensed consolidated financial statements have been
prepared on the basis that the Company will continue as a going concern. As
discussed in the Company's Form 10-K for the fiscal year ended March 31, 1996,
certain conditions raised substantial doubt as to the Company's ability to
continue as a going concern.
On September 4, 1996 the Company's major subsidiaries emerged from
bankruptcy. In addition, the Company was successful in restructuring its
indebtedness with its principal secured lender. These events have contributed
to the results of operation for the six months ended September 30, 1996,
however, the ability of the Company to continue as a going concern is dependent
on, among other things, future profitable operations, ability to generate
sufficient cash flow from operations and the ability to obtain financing sources
to meet future obligations.
9
<PAGE> 12
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) 2.2 - Plan of Reorganization dated July 5, 1996 filed in the U.S.
Bankruptcy Court by Vangard Labs, Inc.
2.3 - Plan of Reorganization dated July 12, 1996 filed in the U.S.
Bankruptcy Court by MTS Packaging Systems, Inc. and Medical Technology
Laboratories, Inc.
10.10 - Second Amended and Restated Loan and Security Agreement dated
September 5, 1996 between SouthTrust Bank of Alabama and the
Registrant.
27 - Financial Data Schedule (for SEC use only)
(B) Form 8-K dated October 28, 1996 incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Quarterly Report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the County of Pinellas, State
of Florida, on the 11th day of November, 1996.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: /s/ Michael P. Conroy
-----------------------------------------
Michael P. Conroy
Vice President & Chief Financial Officer
10
<PAGE> 1
EXHIBIT 2.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
IN RE: )
)
VANGARD LABS, INC., ) CASE NO: 96-02054-8G1
CHAPTER 11 )
)
DEBTOR. )
LIQUIDATING PLAN OF VANGARD LABS, INC.
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
DATED: July 5, 1996
Domenic L. Massari, III, Esq.
Massari & Bell, P.A.
One Urban Centre, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
(813) 282-3255
Attorneys for
VANGARD LABS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INTRODUCTION 1
ARTICLE I DEFINITIONS AND INTERPRETATION 2
A. DEFINITIONS. 2
1. "ADMINISTRATIVE CLAIM" 2
2. "AFFILIATED ENTITIES" 2
3. "AGENCY AGREEMENT" 2
4. "ALLOWED" 2
5. "ALLOWED" 2
6. "ALLOWED ADMINISTRATIVE CLAIM" 2
7. "BALLOT DATE" 2
8. "BANKRUPTCY CODE" 2
9. "BANKRUPTCY COURT" 3
10. "BANKRUPTCY RULES" 3
11. "BAR DATE" 3
12. "BUSINESS DAY" 3
13. "CART-WARE" 3
14. "CASH" 3
15. "CAUSES OF ACTION" 3
16. "CHAPTER 11 CASE" 3
17. "CLAIM" 3
18. "CLOSING" 3
19. "CLOSING DATE" 3
20. "COLLATERAL" 3
21. "CONFIRMATION DATE" 3
22. "CONFIRMATION HEARING" 3
23. "CONFIRMATION ORDER" 4
24. "CONTESTED" 4
25. "DEBTOR" 4
26. "DISALLOWED" 4
27. "DISCLOSURE STATEMENT" 4
28. "EFFECTIVE DATE" 4
29. "EQUITY INTEREST" 4
30. "ESTATE" 4
31. "ESTATE ASSETS" 4
32. "EXCESS CASH FLOW" 4
33. "FEE APPLICATION" 4
34. "FEE CLAIM" 4
35. "FILING DATE" 4
36. "FINAL ORDER" 4
37. "JOINT PLAN" 5
38. "LABS" 5
39. "LIEN" 5
40. "LOAN DOCUMENTS" 5
41. "MAJOR DEFAULT" 5
42. "MMS" 5
43. "MMT" 5
44. "MRG" 5
45. "MTS" 5
46. "MTS MORTGAGE" 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
47. "NET SALES PROCEEDS" 5
48. "NON-COMPETITION AGREEMENT" 5
49. "OBJECTION DEADLINE" 5
50. "OTHER SECURED CLAIM" 5
51. "PACKAGING" 5
52. "PATENT ASSIGNMENT" 6
53. "PERSON" 6
54. "PERFORMANCE PHARMACY" 6
55. "PLAN" 6
56. "PLAN DOCUMENTS" 6
57. "PLAN DOCUMENTS ORDER" 6
58. "PLAN NOTE I" 6
59. "PLAN NOTE II" 7
60. "PLAN TRUSTEE" 8
61. "PLAN TRUST AGREEMENT" 8
62. "PRIORITY NON-TAX CLAIM" 8
63. "PRIORITY TAX CLAIM" 8
64. "PROFESSIONAL PERSONS" 8
65. "PRO RATA SHARE" 8
66. "REORGANIZED DEBTOR" 8
67. "SALES CLOSING DATE" 8
68. "SCHEDULES" 8
69. "SECURED CLAIM" 9
70. "SIEGEL FAMILY PARTNERSHIP" 9
71. "SIEGEL FAMILY TRUST" 9
72. "SIEGEL GUARANTY" 9
73. "SOFTWARE COMPANIES" 9
74. "SOUTHTRUST" 9
75. "SOUTHTRUST CLAIM" 9
76. "UNSECURED CLAIM" 9
77. "VANGARD ASSETS" 9
78. "VANGARD LICENSE" 9
79. "VANGARD MORTGAGE" 10
80. "VANGARD POST-PETITION LOAN" 10
81. "VANARD PURCHASE PRICE" 10
B. APPLICATION OF DEFINITIONS AND RULES OF CONSTRUCTION
CONTAINED IN THE BANKRUPTCY CODE 10
C. EXHIBITS AND PLAN DOCUMENTS. 10
ARTICLE II CLASSIFICATION OFCLAIMS AND EQUITY INTERESTS 10
A. CLAIMS AND EQUITY INTERESTS CLASSIFIED 10
B. ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS 10
C. CLAIMS AND EQUITY INTERESTS 10
ARTICLE III IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND
EQUITY INTERESTS 11
A. UNIMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS 11
B. IMPAIRED CLASSES OF CLAIMS 11
C. IMPAIRMENT CONTROVERSIES 11
ARTICLE IV PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY
INTERESTS CLASSIFIED IN THE PLAN 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
A. CLASS 1 (PRIORITY NON-TAX CLAIMS) 11
B. CLASS 2 (SOUTHTRUST CLAIM) 11
C. CLASS 3 (UNSECURED CLAIMS) 12
D. CLASS 4 (SUBORDINATED CLAIMS) 13
E. CLASS 5 (EQUITY INTERESTS) 13
ARTICLE V PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS 13
A. ADMINISTRATIVE CLAIMS 13
1. Time for Filing Administrative Claims 13
2. Time for Filing Fee Claims 13
3. Allowance of Administrative Claims 13
4. Payment of Allowed Administrative Claims 13
5. Payment of Vangard Post-Petition Loan 13
(a) Excess Cash Flow 13
(b) Sale of Vangard Assets 14
B. PRIORITY TAX CLAIMS 14
ARTICLE VI ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF
REJECTION BY ONE OR MORE CLASSES OF
CLAIMS OR EQUITY INTERESTS 14
A. CLASSES ENTITLED TO VOTE 14
B. CLASS ACCEPTANCE REQUIREMENT 14
ARTICLE VII MEANS FOR IMPLEMENTATION OF THE PLAN 14
A. ALLOWANCE OF CLAIMS 14
B. RESTRUCTURE OF SOUTHTRUST DEBT 14
C. OPERATION OF THE DEBTOR; MRG 15
D. PLAN TRUSTEE 15
1. Appointment 15
2. Duties and Responsibilities 15
3. Exculpation of the Plan Trustee 15
E. OFFICERS AND BOARD OF DIRECTORS 15
F. SALE OF VANGARD ASSETS 15
1. Employment of MRG as Broker 15
2. Sale of Vangard Assets Free and Clear of
Liens, Claims and Encumbrances 15
3. Right of SouthTrust to Credit Bid 16
4. Distribution of Vangard Purchase Price 16
(i) Payment of Vangard Post-Petition Loan 16
(ii) Payment of MRG Commission 16
(iii) Payment to Holders of Allowed Unsecured
Claims on a Pro Rata Basis 16
(iv) Net Sales Proceeds to SouthTrust 16
G. NON-COMPETITION AGREEMENT AND VANGARD LICENSE 16
H. VESTING 17
J. INCOME TAX REFUND 17
K. DATE OF DISTRIBUTIONS 17
L. DISTRIBUTIONS TO BE MADE BY PLAN TRUSTEE 17
M. MEANS OF CASH PAYMENT 17
N. DELIVERY OF DISTRIBUTIONS 17
O. DISTRIBUTIONS UNDER FIVE DOLLARS 18
P. TIME BAR TO CASH PAYMENTS 18
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Q. DISPOSITION OF UNDELIVERABLE FUNDS 18
R. EXPENSES INCURRED ON OR AFTER ENTRY OF THE
CONFIRMATION ORDER AND CLAIMS OF THE PLAN
TRUSTEE 18
S. SUBSTANTIAL CONSUMMATION 18
ARTICLE VIII PROCEDURES FOR RESOLVING AND TREATING CONTESTED
CLAIMS 19
A. OBJECTION DEADLINE 19
B. NO DISTRIBUTIONS PENDING ALLOWANCE 19
C. DISTRIBUTIONS AFTER ALLOWANCE 19
D. UNPAID CLAIMS RESERVE 19
ARTICLE IX TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED
LEASES 20
A. REJECTED IF NOT ASSUMED 20
B. BAR TO REJECTION DAMAGES 20
ARTICLE X CONDITIONS TO CONFIRMATION 20
ARTICLE XI WAIVER OF CERTAIN RIGHTS 21
ARTICLE XII MISCELLANEOUS PROVISIONS 21
A. NOTICE OF ENTRY OF CONFIRMATION ORDER AND RELEVANT
DATES 21
B. COMPLIANCE WITH TAX REQUIREMENTS 21
C. COMPLIANCE WITH ALL APPLICABLE LAWS 21
D. DISCHARGE OF CLAIMS 22
E. EFFECT OF CONFIRMATION ORDER 22
F. NO DISCHARGE OF NON-DEBTOR OBLIGATIONS 22
G. PAYMENT OF STATUTORY FEES 22
H. BINDING EFFECT 22
I. NOTICES 22
J. GOVERNING LAW 23
K. TRANSFER TAXES 23
ARTICLE XIII RETENTION OF JURISDICTION 23
A. RETENTION OF JURISDICTION 23
B. MODIFICATION OF THE PLAN 24
</TABLE>
iv
<PAGE> 6
EXHIBITS
A Patent Registrations and Applications
B List of Major Defaults
C Executory Contracts and Leases to be Assumed
__ Resolution of Sole Shareholder and Directors Approving Liquidating Plan
__ Non-Compete Agreement
__ Siegel Guaranty
__ Plan Trust Agreement
__ Patent Assignment
__ Vangard License
v
<PAGE> 7
LIQUIDATING PLAN OF VANGARD LABS, INC.
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
Pursuant to section 1121(a) of the Bankruptcy Code, Vangard Labs, Inc.
("Debtor") proposes the following liquidating plan ("Plan") in its bankruptcy
case.
INTRODUCTION
This is a liquidating Plan. The Debtor intends, pursuant to this Plan, to
sell all of the Estate Assets, other than the Causes of Action, on a going
concern basis as soon as possible. After the sale, the Debtor will cease
operation.
On September 23, 1993, the Debtor, together with the Debtor's parent
corporation, Medical Technology Systems, Inc. ("MTS"), certain other
subsidiaries of MTS and Todd E. Siegel, entered into an Amended and Restated
Loan and Security Agreement with SouthTrust Bank of Alabama, National
Association ("SouthTrust"). Pursuant to the Amended and Restated Loan and
Security Agreement and the other Loan Documents, as defined below, the Debtor
and the other members of the Borrowing Group (as defined therein), jointly and
severally, owe SouthTrust in excess of $28,000,000, as of the Filing Date. The
indebtedness evidenced by the Loan Documents is secured by all Estate Assets,
as defined below, and by all other collateral of the other members of the
Borrowing Group described in the Loan Documents.
Pursuant to this Plan and the Joint Plan of Packaging and Labs (as those
terms are defined in this Plan), the Debtor, MTS and all other subsidiaries of
MTS will execute and deliver amended and restated promissory notes, designated
in this Plan as "Plan Note I" and "Plan Note II", in the aggregate Stated
Principal Amount of $28,257,857.67. As specified in this Plan and in the Plan
Documents, however, under certain circumstances (including, without limitation,
the full and complete compliance with all of the terms and conditions of the
Plan Documents), the Debtor may be released from its further obligations under
Plan Note I and Plan Note II, except as otherwise provided in Article IV of the
Plan, by selling its business (all the Vangard Assets) in the manner described
herein and distributing the Net Sales Proceeds as described in Article VII of
the Plan. The sale shall be free and clear of all liens, claims and
encumbrances, and shall be subject to the approval of SouthTrust. The Net
Sales Proceeds, when paid to SouthTrust, shall be applied to reduce the Stated
Principal Amount of Plan Note I, but shall not reduce the Amortization
Principal Amount. Likewise, any proceeds derived from Causes of Action, when
paid to SouthTrust, shall be applied to reduce the Stated Principal Amount of
Plan Note I.
1
<PAGE> 8
ARTICLE I
DEFINITIONS AND INTERPRETATION
A. DEFINITIONS.
The capitalized terms used herein shall have the respective meanings set
forth below:
1. "ADMINISTRATIVE CLAIM" shall mean a Claim incurred by the Debtor (or
its Estate) on or after the Filing Date and before the Effective Date for a cost
or expense of administration of the Chapter 11 Cases entitled to priority under
sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without
limitation, Claims, Fee Claims, Claims for cure payments under section 365(a)(1)
of the Bankruptcy Code, obligations incurred after the Filing Date by Debtor in
the ordinary course of business, any actual and necessary expenses of preserving
the Estate Assets, any fees or charges assessed against the Debtor's Estate
under section 1930, chapter 123 of title 28 of the United States Code, and other
Claims as ordered by the Bankruptcy Court.
2. "AFFILIATED ENTITIES" shall mean Medical Technology Systems, Inc., MTS
Packaging Systems, Inc., Medical Technology Laboratories, Inc., Vangard
Pharmaceutical Packaging, Inc., Clearwater Medical Services, Inc., MTS Sales &
Marketing, Inc., Cart-Ware, Inc., Performance Pharmacy Systems, Inc.,
Medication Management Technologies, Inc., Medication Management Systems, Inc.,
and Systems Professionals, Inc.
3. "AGENCY AGREEMENT" shall mean the Exclusive Agency Agreement, dated
as of April 19, 1996, between the Debtor and MRG, under which MRG was engaged as
the Debtor's Agent to perform certain services in connection with the sale of
the Vangard Assets.
4. "ALLOWED" when used with respect to any Claim, except for a Claim
that is an Administrative Claim, shall mean a Claim (i) to the extent it is not
a Contested Claim as of the Effective Date; or (ii) to the extent it is a
Contested Claim as of the Effective Date, proof of which was timely filed with
the Bankruptcy Court, and (a) as to which no objection was filed by the
Objection Deadline, unless such Claim is to be determined in a forum other than
the Bankruptcy Court, in which case such Claim shall not become allowed until
determined by Final Order of such other forum and allowed by Final Order of the
Bankruptcy Court; (b) as to which an objection was filed by the Objection
Deadline, to the extent allowed by a Final Order; or (c) which otherwise becomes
an Allowed Claim as provided in the Plan. In the event a proof of claim is
filed by a creditor for an amount less than the amount set forth in the
Schedules then the amount set forth in the proof of claim shall constitute the
maximum amount of such creditor's Allowed Claim.
5. "ALLOWED" when used with respect to any Equity Interest shall mean an
Equity Interest, proof of which was timely and properly filed or, if no proof
of interest was filed, which has been listed by the Debtor on its Schedules as
liquidated in amount and not disputed or contingent, and, in either case, as to
which no objection to the allowance thereof has been filed by the Objection
Deadline or as to which any objection has been filed by the Objection Deadline,
to the extent allowed by Final Order or as may therein be determined by Order
of the Bankruptcy Court.
6. "ALLOWED ADMINISTRATIVE CLAIM" shall mean an Administrative Claim
that is allowed pursuant to the procedures set forth in Article V of the Plan.
7. "BALLOT DATE" shall mean the date set by the Bankruptcy Court when all
ballots to accept or reject this Plan must be filed with the clerk of the
Bankruptcy Court.
8. "BANKRUPTCY CODE" shall mean title 11 of the United States Code, as
now in effect or as amended.
2
<PAGE> 9
9. "BANKRUPTCY COURT" shall mean the United States Bankruptcy Court
for the Middle District of Florida, or such other court having jurisdiction over
the Chapter 11 Case.
10. "BANKRUPTCY RULES" shall mean the Federal Rules of Bankruptcy
Procedure which govern the forms of process, writs, pleadings, and motions, and
the practice and procedure in cases under the Bankruptcy Code, as prescribed by
the United States Supreme Court pursuant to 28 U.S.C. Section 2075, and the
Local Rules of the Bankruptcy Court.
11. "BAR DATE" shall mean the date fixed by order of the Bankruptcy
Court by which a proof of claim must be filed against the Debtor with the clerk
of the Bankruptcy Court; to wit, ______________, 1996. With respect to damages
resulting from the rejection of an executory contract or unexpired lease under
the Plan, the Bar Date shall mean the date which is thirty (30) days following
the entry of the Confirmation Order in accordance with Article XI.B of the Plan.
12. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
legal holiday as defined in Bankruptcy Rule 9006(a).
13. "CART-WARE" shall mean Cart-Ware, Inc., one of the Affiliated
Entities.
14. "CASH" shall mean legal tender of the United States of America or cash
equivalents.
15. "CAUSES OF ACTION" means all causes of action of any kind held at
any time by the Debtor against any party or parties, including, without
limitation, all causes of action held by the Debtor as of the Filing Date, all
causes of action held by the Debtor arising after the Filing Date, and including
any rights arising under sections 542, 544, 545, 547, 548, 549 or 550 of the
Bankruptcy Code.
16. "CHAPTER 11 CASE" shall mean the Debtor's case under Chapter 11 of the
Bankruptcy Code pending before the Bankruptcy Court and styled In re Vangard
Labs, Inc., Case No. 96-02054.
17. "CLAIM" shall mean (a) any right to payment from the Debtor, whether
or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured; (b) any right to an equitable remedy for breach of performance if
such breach gives rise to a right of payment from the Debtor, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured; or (c) any Lien
against the Estate Assets.
18. "CLOSING" shall mean the consummation of (i) the transactions among
the Debtor, the Affiliated Entities and SouthTrust in connection with the
amendment and restatement of the Loan Documents in the manner provided in the
Plan Documents and (ii) the other transactions described in this Plan and the
Plan Documents, and at which the Plan Documents to be executed and delivered by
such parties under this Plan and the Joint Plan shall be executed and delivered.
19. "CLOSING DATE" shall mean the date on which the Closing occurs, which
shall be (a) the Confirmation Date, (b) at SouthTrust's election, two business
days after the conditions described in Article XI, Sections 1, 3, 4, 5 and 6 of
this Plan are satisfied or waived in writing by SouthTrust, or (c) such other
date as SouthTrust and the Debtor shall agree in writing.
20. "COLLATERAL" shall mean all Estate Assets and all assets of the
Affiliated Entities.
21. "CONFIRMATION DATE" shall mean the date on which the Confirmation
Order becomes a Final Order.
22. "CONFIRMATION HEARING" shall mean the hearing held by the Bankruptcy
Court, as it may be continued from time to time, at which the Debtor shall seek
confirmation of the Plan.
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<PAGE> 10
23. "CONFIRMATION ORDER" shall mean the order of the Bankruptcy Court
confirming the Plan in accordance with Chapter 11 of the Bankruptcy Code.
24. "CONTESTED" when used with respect to a Claim, shall mean a Claim
(i) that is listed in the Schedules as disputed, contingent or unliquidated;
(ii) that is listed in the Schedules as undisputed, liquidated, and not
contingent and as to which a proof of Claim has been filed with the Bankruptcy
Court, to the extent the proof of Claim exceeds the scheduled amount; (iii) that
is not listed in the Schedules, but as to which a proof of claim has been filed
with the Bankruptcy Court; or (iv) as to which an objection has been filed
before the Objection Deadline; provided, that a Claim that is Allowed by Final
Order, or pursuant to the Plan, on or before the Objection Deadline, shall not
be a Contested Claim to the extent such Claim is Allowed.
25. "DEBTOR" shall mean Vangard Labs, Inc.
26. "DISALLOWED" when used with respect to a Claim, shall mean a Claim to
the extent 10 days has expired since it has been disallowed by order of the
Bankruptcy Court, unless proper application for a stay of such order has been
made within such 10 day period, in which case the Claim shall be disallowed 30
days after entry of the order disallowing such Claim, unless prior to the
expiration of such period, a stay is obtained with respect to the order
disallowing the Claim.
27. "DISCLOSURE STATEMENT" shall mean the Disclosure Statements pursuant
to section 1125 of the Bankruptcy Code filed by the Debtor in the Chapter 11
Case, as approved by Order of the Bankruptcy Court.
28. "EFFECTIVE DATE" shall mean the Sale Closing Date, as defined herein.
29. "EQUITY INTEREST" shall mean any share or other instrument evidencing
an ownership interest in the Debtor, whether or not transferable or denominated
"stock", or similar security, and any warrant or right, other than a right to
convert, to purchase, sell, or subscribe to a share, security, or interest in
the Debtor, or any other obligation of the Debtor determined to be an Equity
Interest by the Bankruptcy Court.
30. "ESTATE" shall mean the estates created with respect to the Debtor
pursuant to section 541 of the Bankruptcy Code upon the commencement of the
Chapter 11 Case.
31. "ESTATE ASSETS" shall mean all of the assets that are included in the
Estate, including Causes of Action.
32. "EXCESS CASH FLOW" shall mean all of the Debtor's Cash after payment
of expenses incurred in compliance with budgets approved by SouthTrust, and
expenses and compensation to the Plan Trustee in accordance with the Plan Trust
Agreement.
33. "FEE APPLICATION" shall mean an application of a Professional Person
under section 330 or 503 of the Bankruptcy Code for allowance of compensation
and reimbursement of expenses in the Chapter 11 Case.
34. "FEE CLAIM" shall mean a Claim under section 330 or 503 of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses in
the Chapter 11 Case.
35. "FILING DATE" shall mean the date on which the voluntary petition was
filed by the Debtor commencing the Chapter 11 Case; to wit; February 21, 1996.
36. "FINAL ORDER" shall mean (i) an order of the Bankruptcy Court as to
which the time to appeal, petition for certiorari, or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari, or
other proceedings for reargument or rehearing shall then be pending or as to
which any right to appeal, petition for certiorari, reargue, or rehearing shall
have been waived in writing in form and substance satisfactory to SouthTrust or,
(ii) in the event that an appeal, writ of certiorari, reargument, or rehearing
thereof
4
<PAGE> 11
has been sought, such order of the Bankruptcy Court shall have been affirmed by
the highest court to which such order was appealed, or certiorari has been
denied, or from which reargument or rehearing was sought, and the time to take
any further appeal, petition for certiorari or move for reargument or rehearing
shall have expired; provided, that no order shall fail to be a Final Order
solely because of the possibility that a motion pursuant to Rule 60 of the
Federal Rules of Civil Procedure, as made applicable by Rule 9024 of the
Bankruptcy Rules, may be filed with respect to such order.
37. "JOINT PLAN" shall mean the First Amended and Restated Joint Plan of
Reorganization proposed and filed by Packaging and Labs on July 9, 1996 in
their respective chapter 11 cases, as amended or modified.
38. "LABS" shall mean Medical Technology Laboratories, Inc.
39. "LIEN" shall have the meaning assigned to it in section 101(37) of the
Bankruptcy Code.
40. "LOAN DOCUMENTS" shall mean the Amended and Restated Loan and Security
Agreement dated September 28, 1993 among SouthTrust, the Debtor, the Affiliated
Entities and Todd E. Siegel, as amended prior to the Filing Date, and all
promissory notes, guaranties, collateral and security agreements and all other
ancillary agreements, documents and instruments executed and delivered in
connection therewith or pursuant thereto.
41. "MAJOR DEFAULT" shall mean an event of default under Plan Note I, Plan
Note II or the related Plan Documents which is listed on Exhibit B to this
Plan.
42. "MMS" shall mean Medication Management Systems, Inc., one of the
Affiliated Entities.
43. "MMT" shall mean Medication Management Technologies, Inc., one of the
Affiliated Entities.
44. "MRG" shall mean Management Resources Group, Inc., a Georgia
corporation.
45. "MTS" shall mean Medical Technology Systems, Inc., the sole
shareholder of the Debtor.
46. "MTS MORTGAGE" shall mean the second mortgage in favor of SouthTrust
on real property located in Glasgow, Kentucky and owned by MTS, to be executed
and delivered by MTS on the Closing Date, which shall be subordinate only to
the first mortgage in favor of SouthTrust which secures the Vangard
Post-Petition Loan.
47. "NET SALES PROCEEDS" shall mean the Vangard Purchase Price, after
payment of (a) the Vangard Post-Petition Loan, (b) the commission payable to MRG
pursuant to the Agency Agreement, and (c) the payment described in Article IV.E.
to holders of Unsecured Claims.
48. "NON-COMPETITION AGREEMENT" shall mean the Agreement Not To Compete,
in form and substance acceptable to SouthTrust, the Debtor and Todd E. Siegel,
to be entered into on the Closing Date by each, the Siegel Family Partnership,
the Siegel Family Trust and Todd E. Siegel, in favor of the Debtor, the
Reorganized Debtor and any purchaser of the Vangard Assets under this Plan. The
Non-Competition Agreement shall be a Plan Document and shall be filed with the
Bankruptcy Court prior to the Confirmation Hearing.
49. "OBJECTION DEADLINE" shall mean the date that is the thirtieth (30th)
day following the Confirmation Date, or such other date as may be ordered by the
Bankruptcy Court.
50. "OTHER SECURED CLAIM" shall mean a Secured Claim other than the
SouthTrust Claim.
51. "PACKAGING" shall mean MTS Packaging Systems, Inc.
5
<PAGE> 12
52. "PATENT ASSIGNMENT" shall mean the assignment of the patents and
patent applications listed or described on Exhibit A hereto, as additional
collateral for Plan Note I and Plan Note II, in form and substance acceptable to
SouthTrust, which shall be filed of record with the U.S. Patent and Trademark
Office.
53. "PERSON" shall mean an individual, corporation, partnership, joint
venture, trust, estate, unincorporated association, unincorporated
organization, governmental entity, or political subdivision thereof, or any
other entity.
54. "PERFORMANCE PHARMACY" shall mean Performance Pharmacy Systems, Inc.,
one of the Affiliated Entities.
55. "PLAN" shall mean this Plan of Reorganization filed and proposed by
the Debtor.
56. "PLAN DOCUMENTS" shall mean the documents that aid in effectuating and
implementing the Plan, including but not limited to, the Non-Competition
Agreement, [the Plan Trust Agreement,] the Vangard License, Plan Note I, Plan
Note II, the Siegel Guaranty, the Patent Assignment, the MTS Mortgage, the
Vangard Mortgage and all documents, agreements and instruments which amend,
restate, or amend and restate the Loan Documents, all of which shall be
executed and delivered on the Closing Date. The Plan Documents shall be
submitted to the Bankruptcy Court at least fifteen (15) days prior to
commencement of the Confirmation Hearing, for approval by the Bankruptcy Court
contemporaneously with confirmation of this Plan.
57. "PLAN DOCUMENTS ORDER" shall mean the order of the Bankruptcy Court
approving the Plan Documents as described in Article X, Sections 1 and 3 of
this Plan.
58. "PLAN NOTE I" shall mean the amended and restated promissory note to
be executed and delivered by the Debtor and all Affiliated Entities on the
Closing Date, having a Stated Principal Amount of $27,257,857.67 and an
Amortization Principal Amount of $15,000,000, under which, among other things:
(a) Accrued interest on the Amortization Principal Amount, at the
rate of 7.5% per annum, from the date of entry of the confirmation
order with respect to the Joint Plan, to the Closing Date will be
paid on the Closing Date;
(b) Monthly payments of accrued interest, at the rate of 7.5% per
annum, on the outstanding balance of the Amortization Principal
Amount will be due and payable on the first day of each calendar
month, commencing on the first day of the first full calendar
month following the Closing Date, through the twenty-fourth (24th)
month following the Closing Date;
(c) The outstanding balance of the Amortization Principal Amount
will be amortized, based on a twenty-year amortization at the rate
of 7.5% per annum, with monthly payments of principal and accrued
interest in equal monthly installments over an eight (8) year
period, commencing on the first day of the twenty-fifth (25th)
month following the Closing Date, and on the first day of each
calendar month thereafter, with all remaining principal and
interest being due and payable on the first day of the first full
calendar month following the tenth (10th) anniversary of the
Closing Date;
(d) In the event of a Capital Transaction (as defined in Plan
Note I) with respect to Labs, Labs will be released from liability
under Plan Note I (and its assets and capital stock released from
the security interests therein granted in the Plan Documents) upon
the payment to SouthTrust of $2,000,000 of the proceeds from such
Capital Transaction, provided that no event of default under the
Plan Documents shall have occurred and be continuing;
(e) In the event of a Capital Transaction (as defined in Plan
Note I) with respect to any one or more of the Software Companies,
all of the Software Companies will be released from liability
under Plan Note I (and their respective assets and capital stock
released from the security interests therein granted in the Plan
Documents) upon the payment to SouthTrust of $1,000,000
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of the proceeds from such Capital Transaction, provided that no event of
default under the Plan Documents shall have occurred and be continuing;
(f) Any sums paid to SouthTrust under clauses (d) or (e) of this
definition shall be applied against accrued and unpaid interest on
the Amortization Principal Amount and then to such Amortization
Principal Amount;
(g) In the event of a Capital Transaction as described in clause
(d) or (e) above, SouthTrust will be paid a premium over the
amounts set forth therein as follows: (i) if the Capital
Transaction occurs in the first year of the term of Plan Note I, a
premium of 50% of the Net Proceeds (as defined in Plan Note I)
from such Capital Transaction, (ii) if the Capital Transaction
occurs in the second year of the term of Plan Note I, a premium of
40% of the Net Proceeds from such Capital Transaction, (iii) if
the Capital Transaction occurs in the third year of the term of
Plan Note I, a premium of 30% of the Net Proceeds from such
Capital Transaction, (iv) if the Capital Transaction occurs in the
fourth year of the term of Plan Note I, a premium of 20% of the
Net Proceeds from such Capital Transaction, and (v) if the Capital
Transaction occurs in the fifth year of the term of Plan Note I, a
premium of 10% of the Net Proceeds from such Capital Transaction;
(h) The following amounts, when paid to SouthTrust will be
applied against the difference between the Amortization Principal
Amount and the Stated Principal Amount: (i) the Net Sales
Proceeds, and (ii) the premium payments to SouthTrust made under
clause (g) of this definition; and
(i) Payments of the Amortization Principal Amount made to
SouthTrust as described in subparagraph (c) above will be credited
against the release prices described in
subparagraphs (d) and (e) above, as follows: an amount equal to
75% of principal payments made will be credited (i) first, against
the release price described in subparagraph (e) until an aggregate
of $1,000,000 in principal payments have been made, and (ii) then,
against the release price described in subparagraph (d) until an
aggregate of $2,000,000 in additional principal payments have been
made.
Plan Note I will be secured by all Estate Assets and all other collateral
described in the Loan Documents and the Plan Documents, will be unconditionally
guaranteed pursuant to the Siegel Guaranty, and will provide that any default
or event of default under Plan Note II will constitute an event of default
under Plan Note I. In addition, Plan Note I and the related Plan Documents
will contain provisions, in form and substance acceptable to SouthTrust in all
respects, under which the Debtor and the Affiliated Entities will waive certain
rights to object or seek to stop or stay any foreclosure upon any Major Default
and the expiration of any applicable cure period, and will consent to the grant
of relief from the automatic stay in any future bankruptcy case, all as
described in Article XI of this Plan.
1. "PLAN NOTE II" shall mean the amended and restated promissory note
to be executed and delivered by the Debtor and all Affiliated Entities on the
Closing Date, having an original principal amount of $1,000,000, under which,
among other things:
(j) Commencing on the date which is six (6) months after the
Closing Date, the Debtor and the Affiliated Entities shall pay to
SouthTrust on a monthly basis 15% of their Excess Cash Flow, as
defined in Plan Note II, until (i) the principal amount of Plan
Note II has been paid in full, or (ii) the fifth anniversary of
the first payment under Plan Note II, whichever occurs first;
(k) The following amounts, when paid to SouthTrust, will be
applied against the outstanding principal of Plan Note II: (i)
the payment described in Article IV, Section B(d) of the Plan, and
(ii) the tax refund proceeds described in Article IV, Section B(e)
of the Plan;
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(l) In the event that the payment described in Article IV,
Section B(d) is paid when due on the Closing Date and the payment
described in Article IV, Section 8(e) is made to SouthTrust on or
prior to the date which is six (6) months after the Closing Date,
then Plan Note II will be deemed fully satisfied and will be
cancelled; and
(m) In the event that Labs or the Software Companies are released
from its or their obligations under Plan Note I, as described in
the definition of Plan Note I, such entity or entities shall also
be released from its or their obligations under Plan Note II.
Plan Note II will be secured by all Estate Assets and by all other collateral
described in the Loan Documents and the Plan Documents, will provide that any
default or event of default under Plan Note I will constitute an event of
default under Plan Note II, and in all other respects will contain similar
provisions to those contained in Plan Note I. In addition, the Debtor's
Affiliate Entities shall be entitled to have the collateral for Plan Notes I
and II released and SouthTrust's claim satisfied for payment of an amount less
than the Stated Principal Amount in accordance with the terms of the Joint Plan
and the underlying documents effectuating these Plans.
1. "PLAN TRUSTEE" shall mean the Person selected by SouthTrust, subject to
approval of the Bankruptcy Court, to serve as the trustee under this Plan and
the Plan Trust Agreement on and after the date of entry of the Confirmation
Order, through the date on which distributions to holders of Allowed Claims are
made under this Plan.
2. "PLAN TRUST AGREEMENT" shall mean the trust agreement, in form and
substance acceptable to SouthTrust, to be entered into under the Plan and to be
effective upon the entry of the Confirmation Order, pursuant to which the Plan
Trustee shall consummate the sale transaction contemplated in this Plan. The
Plan Trust Agreement shall expressly authorize the Plan Trustee to execute and
deliver a purchase and sale agreement, in form and substance acceptable to
SouthTrust, to the purchaser of the Vangard Assets and to execute and deliver
any and all other documents, instruments and agreements on behalf of the Debtor
which are necessary or appropriate, in the discretion of SouthTrust, to
consummate the sale of the Vangard Assets as provided in this Plan. The Plan
Trust Agreement shall also authorize the Plan Trustee to hold, manage, liquidate
and distribute the Estate Assets and the proceeds thereof, pursuant to this
Plan, the Confirmation Order and any other Final Order of the Bankruptcy Court.
The Plan Trust Agreement shall be a Plan Document.
3. "PRIORITY NON-TAX CLAIM" shall mean any Claim accorded priority in
right of payment under Section 507(a)(3)(4)(6) or (7) of the Bankruptcy Code.
4. "PRIORITY TAX CLAIM" shall mean a Claim of a governmental unit of the
kind specified in Section 507(a)(8) of the Bankruptcy Code.
5. "PROFESSIONAL PERSONS" shall mean Persons retained or to be compensated
pursuant to Sections 327, 328, 330, 503(b), and 1103 of the Bankruptcy Code.
6. "PRO RATA SHARE" shall mean the proportion that the amount of an
Allowed Claim in a particular class of Claims bears to the aggregate amount of
all Claims in such class of Claims, including Contested Claims, but not
including Disallowed Claims.
7. "REORGANIZED DEBTOR" means the Debtor as it may exist after the Closing
Date.
8. "SALES CLOSING DATE" shall mean the date on which the sale of the
Vangard Assets, as described in this Plan, is consummated.
9. "SCHEDULES" shall mean the schedules of assets and liabilities and the
statement of financial affairs filed by the Debtor as required by Section 521
of the Bankruptcy Code and the Official Bankruptcy Forms of the Bankruptcy
Rules, as such schedules may from time to time have been amended prior to the
filing of this Plan.
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10. "SECURED CLAIM" shall mean (i) a Claim secured by a Lien on Estate
Assets, but only to the extent of the value of the Collateral that secures
payment of the Claim; or (ii) a Claim allowed under the Plan as a Secured Claim.
11. "SIEGEL FAMILY PARTNERSHIP" shall mean Siegel Family Limited
Partnership, a Florida limited partnership.
12. "SIEGEL FAMILY TRUST" shall mean The Siegel Family Revocable Trust,
and any successor trust(s) heretofore or hereafter formed pursuant to trust
documents originally executed by Harold Siegel, including, without limitation,
The Todd Siegel Q-TIP Trust, The Mindy Jo Barth Q-TIP Trust and The Siegel
By-Pass Trust.
13. "SIEGEL GUARANTY" shall mean the Guaranty to be executed and
delivered by Mr. Todd E. Siegel on the Closing Date to SouthTrust
unconditionally guaranteeing all of the Debtor's and the Affiliated Entities'
obligations and liabilities to SouthTrust under Plan Note I.
14. "SOFTWARE COMPANIES" shall mean Performance Pharmacy, Cart-Ware, MMS
and MMT.
15. "SOUTHTRUST" shall mean SouthTrust Bank, National Association, a
national banking association.
16. "SOUTHTRUST CLAIM" shall mean the Claim held by SouthTrust against the
Debtor in the amount of $28,257,857.67, which is secured by Liens
on all Estate Assets and by all other collateral described in the Loan
Documents. The SouthTrust Claim shall not include the Vangard Post-Petition
Loan (as defined hereafter).
17. "UNSECURED CLAIM" shall mean any Claim other than the SouthTrust
Claim, Other Secured Claims, Administrative Claims, Priority Tax Claims and
Priority Non-Tax Claims.
18. "VANGARD ASSETS" shall mean all of the Estate Assets (other than
Causes of Action and the Debtor's rights to any tax refunds described in this
Plan, which shall be retained by the Debtor and treated in the manner set forth
in this Plan), together with (i) the real and personal property in Glasgow,
Kentucky, that is currently owned of record by MTS and is subject to a mortgage
securing the Vangard Post-Petition Loan, (ii) all other assets currently used or
usable by the Debtor in connection with its business, whether owned of record by
MTS or by any other Affiliated Entity, and (iii) all of the Debtor's rights in
and to the Non-Competition Agreement and the Vangard License.
19. "VANGARD LICENSE" shall mean the license agreement among the Siegel
Family Trust, the Affiliated Entities and the Debtor, to be executed under this
Plan and effective upon entry of the Confirmation Order, in form and substance
acceptable to SouthTrust, under which the Siegel Family Trust and the Affiliated
Entities shall grant to the Debtor (and to any assignee of the Debtor which
purchases the Vangard Assets pursuant to this Plan) a non-exclusive, world-wide
royalty-free license and/or sublicense (to the extent necessary to permit the
Debtor, the Reorganized Debtor and any purchaser of the Vangard Assets to
continue to conduct the business of the Debtor in the manner conducted as of the
Closing Date and the Sale Closing Date) to use the patents and patent rights
listed on Exhibit A to this Plan, for all purposes relating to the business of
the Debtor and the Reorganized Debtor, as such business is constituted as of the
Closing Date and the Sale Closing Date. The Vangard License shall be a Plan
Document, shall be filed with the Bankruptcy Court prior to the Confirmation
Hearing, and shall constitute a non-exclusive license; provided, that the Siegel
Family Trust and the Affiliated Entities shall not be permitted to use such
patents and patent rights, or to grant any other license to such patents and
patent rights to any other Person, for any purpose which would compete with the
use thereof by the Debtor, the Reorganized Debtor and the purchaser of the
Vangard Assets. The term of the Vangard License shall extend until the
expiration of the last to expire of the patent registrations and applications
listed on Exhibit A, including any continuation or continuation-in-part with
respect to any such registration or application.
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20. "VANGARD MORTGAGE" shall mean the second mortgage in favor of
SouthTrust on real property located in Glasgow, Kentucky, and owned by the
Debtor, to be executed and delivered by the Debtor on the Closing Date, which
shall be subordinate only to the first mortgage in favor of SouthTrust which
secures the Vangard Post-Petition Loan.
21. "VANGARD POST-PETITION LOAN" shall mean the loan made by SouthTrust
to the Debtor after the Filing Date in the amount of up to $600,000.00.
22. "VANGARD PURCHASE PRICE" shall mean the purchase price (however
designated or denominated, prior to any deductions of any kind, that is received
in connection with the sale of the Vangard Assets.
B. APPLICATION OF DEFINITIONS AND RULES OF CONSTRUCTION
CONTAINED IN THE BANKRUPTCY CODE.
Words and terms defined in Section 101 of the Bankruptcy Code shall have
the same meaning when used in the Plan, unless a different definition is given
in the Plan. The rules of construction contained in Section 102 of the
Bankruptcy Code shall apply to the construction of the Plan.
C. EXHIBITS AND PLAN DOCUMENTS.
All Exhibits to the Plan, and all Plan Documents, whether or not attached
as Exhibits to the Plan, are incorporated into and are a part of the Plan as if
set forth in full herein.
ARTICLE II
CLASSIFICATION OF
CLAIMS AND EQUITY INTERESTS
A. CLAIMS AND EQUITY INTERESTS CLASSIFIED.
For purposes of organization, voting, and all confirmation matters, except
as otherwise provided herein, all Claims (except for Administrative Claims and
Priority Tax Claims), and all Equity Interests shall be classified as set forth
in Article II of the Plan. A Claim or Equity Interest is classified in a
particular class only to the extent that the Claim or Equity Interest qualifies
within the description of that class and is classified in other classes to the
extent that any remainder of the Claim or Equity Interest qualifies within the
description of such other classes. A Claim or Equity Interest is also
classified within a particular class only to the extent that such Claims or
Equity Interests is an Allowed Claim or an Allowed Equity Interest in that
class and has not been paid, released or otherwise satisfied prior to the
Effective Date.
B. ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS.
As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative
Claims and Priority Tax Claims shall not be classified for purposes of voting
or receiving distributions under the Plan. Rather, all such Claims shall be
treated separately as unclassified Claims pursuant to the terms set forth in
Article V of this Plan.
C. CLAIMS AND EQUITY INTERESTS.
The Plan classifies the Claims and Equity Interests as follows:
1. Class 1: Priority Non-Tax Claims.
2. Class 2: SouthTrust Bank Claim
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3. Class 3: Unsecured Claims.
4. Class 4: Subordinated Claims.
5. Class 5: Equity Interests.
ARTICLE III
IDENTIFICATION OF IMPAIRED CLASSES
OF CLAIMS AND EQUITY INTERESTS
A. UNIMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS.
Classes 1 and 5 are not impaired under the Plan.
B. IMPAIRED CLASSES OF CLAIMS.
With the exception of the unimpaired classes specified in Article III.A of
this Plan, all classes of Claims and Equity Interests are impaired under the
Plan.
C. IMPAIRMENT CONTROVERSIES.
If a controversy arises as to whether any Claim or Equity Interest, or any
class of Claims or class of Equity Interests, is impaired under the Plan within
the meaning of Section 1124 of the Bankruptcy Code, the Bankruptcy Court shall,
after notice and hearing, determine such controversy.
ARTICLE IV
PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY
INTERESTS CLASSIFIED IN THE PLAN
The classes of Claims and Equity Interests shall be treated as follows:
A. CLASS 1 (PRIORITY NON-TAX CLAIMS).
Each holder of an Allowed Priority Non-Tax Claim shall receive on the
Effective Date Cash in the amount of such holder's Allowed Priority Non-Tax
Claim.
B. CLASS 2 (SOUTHTRUST CLAIM).
1. Upon entry of the Confirmation Order, the SouthTrust Claim shall be
Allowed in the amount of $28,257,857.67. SouthTrust shall retain the Liens,
security interests and pledges securing its Claim as of the Filing Date and, at
the Closing on the Closing Date, the Loan Documents shall be amended and
restated in their entirety pursuant to the Plan Documents. Pursuant to the
Plan Documents, SouthTrust shall receive on the Closing Date:
(a) Plan Note I;
(b) Plan Note II;
(c) the Siegel Guaranty;
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(d) A one-time Cash distribution equal to $250,000.00 from Packaging
and Labs pursuant to the Joint Plan filed by Packaging and Labs;
(e) an assignment, as additional collateral securing Plan Note I and
Plan Note II, of all tax refunds due the Debtor and Affiliated Entities with
respect to tax years prior to and including 1996;
(f) the Patent Assignment; and
(g) the other Plan Documents to which SouthTrust is a party or which
identify SouthTrust as a beneficiary.
2. Pursuant to this Plan and the Plan Documents, SouthTrust shall receive
the payments called for in Plan Note I and Plan Note II in the amounts and at
the times set forth therein, and shall also receive (a) $500,000.00 of the
proceeds of the tax refunds described in Article IV, Section B.1.(e) of this
Plan and in the Joint Plan, within seven (7) Business Days after receipt
thereof by the Debtor or any of the Affiliated Entities, (b) ninety percent
(90%) of the proceeds of all Causes of Action of the Debtor or relating,
directly or indirectly, to the Debtor's business or assets, until SouthTrust
shall have received from the Debtor and the Affiliated Entities, payments with
respect to the SouthTrust Claim (not including accrued interest) totalling
$28,257,857.67, subject to the Debtor's absolute right to satisfy SouthTrust's
claim by paying the amortization principal amount and abiding by certain other
covenants contained in the Joint Plan, (c) one-half (1/2) of the proceeds
derived from all other Causes of Action of the Affiliated Entities, and (d) all
the Net Sales Proceeds on the Sales Closing Date. Upon the sale of the Vangard
Assets in the manner set forth in this Plan, the Liens on the Vangard Assets
which secure the SouthTrust Claim shall attach to the Vangard Purchase Price;
provided, that SouthTrust shall release its Lien on a portion of the Vangard
Purchase Price to permit the payments called for in Article VII, Sections
E.5(ii) and (iii) to be made. Upon SouthTrust's receipt of the Net Sales
Proceeds, the Stated Principal Amount of Plan Note I shall be reduced by the
amount of the Net Sales Proceeds, but the Amortization Principal Amount of Plan
Note I shall not be affected. Upon such receipt, the Debtor shall have no
remaining liability under Plan Note I and Plan Note II other than its
obligation to pay to SouthTrust the tax refund proceeds referred to in clause
(a) of this Section B.2, and its obligation to pay to SouthTrust the portion of
proceeds from Causes of Action as described in clause (b) of this Section B.2.
3. Notwithstanding the payment of the Net Sales Proceeds to SouthTrust on
the Sales Closing Date, the Debtor shall not be released of its obligation to
satisfy the requirements stated in Section B.2.(a) and (b) above. The proceeds
of any tax refunds described in Section 2, above, which are paid to SouthTrust
shall be applied to reduce the indebtedness under Plan Note II. Any proceeds
received from Causes of Actions which are paid to SouthTrust shall be applied
to reduce the Stated Principal Amount of Plan Note I, but such payment shall
not affect the Amortization Principal Amount of Plan Note I.
4. In addition to the foregoing, if the Vangard Post-Petition Loan is
fully paid prior to the Sale Closing Date, the Debtor shall pay to SouthTrust
all of its Excess Cash Flow on a monthly basis. Except as otherwise provided
in Plan Note II, such payments shall be applied against the Stated Principal
Amount of Plan Note I. In no event shall any such payments reduce, or be
applied against, the Amortization Principal Amount of Plan Note I.
C. CLASS 3 (UNSECURED CLAIMS).
As full treatment for, and in full settlement of, the Allowed Class 3
Claims, each holder of a Class 3 Allowed Claim shall receive its Pro Rata Share
of (a) a portion of the Vangard Purchase Price equal to the greater of (i)
$50,000.00 Cash, and (ii) Cash equal to 10% of that portion of the Vangard
Purchase Price which is in excess of $4,000,000.00, payable, in either case, on
the Sale Closing Date and (b) ten percent (10%) of the net proceeds (if any)
derived from the Causes of Action of the Debtor, until payments made by the
Debtor and the Affiliated Entities with respect to the SouthTrust Claim (not
including accrued interest) shall have aggregated $28,257,857.67, at which time
100% of remaining proceeds from such Causes of Action shall be paid to the
holders of Allowed Class 3 Claims on a pro rata basis.
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D. CLASS 4 (SUBORDINATED CLAIMS).
The Claims of Insiders shall be subordinated to all other Claims and the
holders of Insider Claims shall not receive any payments or distributions on
account of such Claims.
E. CLASS 5 (EQUITY INTERESTS).
Holders of Equity Interests shall retain the stock of the Debtor.
However, because all assets of the Debtor are being sold or otherwise
distributed under this Plan, the Equity Interests under the Plan and are
impaired.
ARTICLE V
PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS
A. ADMINISTRATIVE CLAIMS. All Administrative Claims shall be treated as
follows:
1. TIME FOR FILING ADMINISTRATIVE CLAIMS. The holder of an Administrative
Claim, other than (i) a Fee Claim or (ii) a liability incurred and paid in the
ordinary course of business by the Debtor, must file with the Bankruptcy Court
and serve on the Debtor and its counsel, notice of such Administrative Claim
within ten days after the Confirmation Date or such other date as the
Bankruptcy Court may fix. Such notice must include at a minimum (i) the name
of the holder of the Claim, (ii) the amount of the Claim, and (iii) the basis
of the Claim. Failure to file this notice timely and properly shall result in
the Administrative Claim being forever barred and discharged.
2. TIME FOR FILING FEE CLAIMS. Each Professional Person who holds or
asserts an Administrative Claim that is a Fee Claim incurred before the
Confirmation Date must file with the Bankruptcy Court and serve on all parties
required to receive notice a Fee Application within 30 days after the
Confirmation Date. The failure to file the Fee Application timely shall result
in the Fee Claim being forever barred and discharged.
3. ALLOWANCE OF ADMINISTRATIVE CLAIMS. An Administrative Claim with
respect to which notice has been properly filed pursuant to Article V.A.1 of
this Plan shall become an Allowed Administrative Claim if no objection is filed
within twenty days of the filing and service of notice of such Administrative
Claim. If an objection is filed within such twenty-day period, the
Administrative Claim shall become an Allowed Administrative Claim only to the
extent allowed by Final Order. An Administrative Claim that is a Fee Claim,
and with respect to which a Fee Application has been properly filed pursuant to
Article V.A.2 of the Plan, shall become an Allowed Administrative Claim only to
the extent allowed by Final Order.
4. PAYMENT OF ALLOWED ADMINISTRATIVE CLAIMS. Each holder of an Allowed
Administrative Claim, except the Vangard Post-Petition Loan, shall receive (i)
payment of the Allowed Administrative Claim on the Effective Date, or (ii) such
other treatment as may be agreed upon by such holder; provided, that an
Administrative Claim representing a liability incurred in the ordinary course
of business by the Debtor may be paid in the ordinary course of business.
5. PAYMENT OF VANGARD POST-PETITION LOAN.
(a) Excess Cash Flow. Until the Sale Closing Date, the Debtor shall pay
to SouthTrust all Excess Cash Flow. Payments of Excess Cash Flow shall be
applied, first, against accrued and unpaid interest and principal under the
Vangard Post-Petition Loan. If the Vangard Post-Petition Loan is paid in full
prior to the Sale Closing Date, the Debtor shall continue to pay its Excess
Cash Flow to Southtrust as provided in Article IV.B.4. Payments of Excess Cash
Flow shall be made to SouthTrust on the fifteenth (15th) day of each month,
beginning with the month immediately following the Confirmation Date, and shall
continue each month until the Sale Closing Date.
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(b) Sale of Vangard Assets. If the Vangard Post-Petition Loan has not
been paid in full prior to the Sale Closing Date, it shall be paid in full on
the Sale Closing Date from the Vangard Purchase Price.
B. PRIORITY TAX CLAIMS.
All Allowed Priority Tax Claims shall be treated as follows. Each holder
of an Allowed Priority Tax Claim remaining unpaid on the Confirmation Date
shall receive at the sole option of Debtor (i) the amount of such holder's
Allowed Priority Tax Claim in one Cash payment on the Effective Date; (ii) the
amount of such holder's Allowed Priority Tax Claim, with post-confirmation
interest thereon, in equal annual Cash payments on each anniversary of the
Effective Date, until the sixth anniversary of the date of assessment of such
Claim; or (iii) such other treatment as may be agreed by Debtor and such
holder.
ARTICLE VI
ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF
REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS
A. CLASSES ENTITLED TO VOTE.
Each impaired class of Claims or Equity Interests shall be entitled to
vote separately to accept or reject the Plan. Unimpaired classes of Claims or
Equity Interests shall not be entitled to vote to accept or reject the Plan.
B. CLASS ACCEPTANCE REQUIREMENT.
A class of Claims shall have accepted the Plan it if is accepted by at
least two-thirds (2/3) in dollar amount and more than one-half (1/2) in number
of the holders of Claims in such class that have timely and properly voted on
the Plan. A class of Equity Interests shall have accepted the Plan it if is
accepted by at least two-thirds (2/3) in amount of the holders of Equity
Interests in such class that have timely and properly voted on the Plan.
ARTICLE VII
MEANS FOR IMPLEMENTATION OF THE PLAN
A. ALLOWANCE OF CLAIMS.
The SouthTrust Claim shall be deemed an Allowed Claim upon the entry of
the Confirmation Order and shall not thereafter be subject to any further
objection or dispute.
B. RESTRUCTURE OF SOUTHTRUST DEBT.
1. This Plan provides for the restructure of the debt on which the
SouthTrust Claim is based by amending and restating the Loan Documents in their
entirety. The Plan Documents governing this restructuring are subject to
SouthTrust's approval. As part of the restructuring, SouthTrust will retain
its Liens, security interests and pledges and receive additional collateral.
On the Closing Date the Plan Documents will be executed and delivered. The
Loan Documents shall remain in full force and effect except as amended and
restated in accordance with the provisions of the Plan.
2. Upon their execution and delivery on the Closing Date, the Plan
Documents shall be fully effective and, in the event of any inconsistency
between the terms and conditions of this Plan and those contained in any of the
Plan Documents, the terms and conditions contained in the Plan Documents shall
prevail.
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C. OPERATION OF THE DEBTOR; MRG.
On March 12, 1996, MRG was employed by the Debtor, with the approval of
the Bankruptcy Court, to operate and manage the day to day affairs of the
Debtor. MRG shall continue to operate and manage the day to day affairs of the
Debtor until the Vangard Assets are sold and the Sales Closing Date occurs.
D. PLAN TRUSTEE.
1. APPOINTMENT. On or before the Effective Date, SouthTrust shall select
a person to serve as Plan Trustee. The appointment of the Plan Trustee shall
be subject to the approval of the Bankruptcy Court. The Plan Trustee shall
serve from the Closing Date until the Sales Closing Date.
2. DUTIES AND RESPONSIBILITIES. The Plan Trustee shall take no action or
be responsible for any matters other than (a) to take all actions and execute
and deliver all instruments and documents necessary or appropriate in
connection with the sale of the Vangard Assets, including, without limitation,
all actions required or provided for by the Agency Agreement; (b) take all
actions and execute and deliver all instruments and documents necessary or
appropriate to make distributions as provided in this Plan; (c) make the
distributions contemplated by the Plan; (d) comply with the Plan and with the
Plan Trustee's obligations hereunder; (e) in its reasonable discretion, employ
or retain professionals to represent it with respect to its responsibilities
under the Plan; (f) as soon as practicable after the Sales Closing Date, file
with the Bankruptcy Court a report describing all distributions made; and (g)
exercise such other powers as may be vested in the Plan Trustee pursuant to the
Plan Trust Agreement, orders of the Bankruptcy Court, and this Plan.
3. EXCULPATION OF THE PLAN TRUSTEE. From and after the entry of the
Confirmation Order, the Plan Trustee, together with its officers, directors,
employees, agents and representatives, shall be and hereby are exculpated by
all Persons, holders of Claims and Equity Interests, and parties-in-interest,
from and against, any and all claims, causes of action and other assertions of
liability arising, directly or indirectly, from the discharge of the powers and
duties conferred on the Plan Trustee by the Plan Trust Agreement, this Plan,
any order of the Bankruptcy Court, or any applicable law, except solely for
actions or omissions of the Plan Trustee which constitute (a) intentional
breach of fiduciary duty, (b) gross negligence, or (c) willful misconduct. No
holder of a Claim or an Equity Interest, or any representative thereof, shall
have or pursue any claim or cause of action (i) against the Plan Trustee, or
its officers, directors, employees, agents or representatives, for making
payments in accordance with the Plan, or relating to the liquidation of assets
to make such payments, or (ii) against any holder of a Claim for receiving or
retaining payments or transfers of assets as provided in the Plan.
E. OFFICERS AND BOARD OF DIRECTORS.
Todd Siegel shall be the sole director and chief executive officer of the
Reorganized Debtor. He will not receive any compensation. Except as provided
hereinabove, the Board of Directors shall continue to be responsible for the
management and operation of the Debtor.
F. SALE OF VANGARD ASSETS.
1. EMPLOYMENT OF MRG AS BROKER. On April 19, 1996, MRG was engaged by the
Debtor, with the approval of the Bankruptcy Court, to serve as the Debtor's
agent to solicit offers from third parties to purchase the Vangard Assets and
to perform other tasks related to the proposed sale of the Vangard Assets. MRG
will continue such activities in accordance with the Agency Agreement, and upon
the sale of the Vangard Assets in accordance with this Plan, MRG will be
compensated in the manner and in the amount set forth in the Agency Agreement.
MRG may be replaced as sales agent by SouthTrust, upon notice to MRG, the Plan
Trustee and the Bankruptcy Court, and any replacement agent selected by
SouthTrust in its sole and absolute discretion shall be bound by the terms and
conditions of the Agency Agreement, unless otherwise agreed by SouthTrust, with
the approval of the Bankruptcy Court.
2. SALE OF VANGARD ASSETS FREE AND CLEAR OF LIENS, CLAIMS AND
ENCUMBRANCES. The Vangard Assets shall be sold as soon as practicable on a
going concern basis. If the Plan Trustee determines, with the
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advice and consent of SouthTrust, that it is not possible to sell the Vangard
Assets on a going concern basis, the Plan Trustee, with the prior written
consent of SouthTrust, and subject to Bankruptcy Court approval, shall be
permitted to sell the Vangard Assets in any commercially reasonable manner.
Under the provisions of the Agency Agreement, MRG is required to notify
SouthTrust and the Debtor of the identity of all potential purchasers of the
Vangard Assets and the proposed terms and conditions of such sale. Upon the
selection of the purchaser of the Vangard Assets by SouthTrust, the Plan
Trustee or such purchaser shall prepare a purchase and sale agreement, which
shall be subject to the approval of SouthTrust, in its sole and absolute
discretion. If the terms and conditions contained in such purchase and sale
agreement (including the proposed purchase price) are approved by SouthTrust,
then such purchase and sale agreement shall be presented to the Bankruptcy
Court for approval, and upon such approval the Vangard Assets shall be sold to
the purchaser named therein, free and clear of all Liens, claims, encumbrances
and interests of whatever kind and nature, including, without limitation, the
Liens of SouthTrust which secure the SouthTrust Claim and SouthTrust's claims
under the Vangard Post-Petition Loan, pursuant to Sections 363(b) and (f) of
the Bankruptcy Code; provided, that SouthTrust shall have the right to credit
bid at any such sale in the manner set forth in Section E.3 of this Article
VII. Upon the sale of the Vangard Assets, the Liens, claims and encumbrances
on the Vangard Assets shall attach to the Vangard Purchase Price and the
holders of such Liens, claims and encumbrances shall be treated in the manner
set forth in this Plan. Upon such sale, the Vangard Purchase Price shall be
distributed by the Plan Trustee in the manner set forth in Section E.4 of this
Article VII, and in accordance with Article VIII.
3. RIGHT OF SOUTHTRUST TO CREDIT BID. Notwithstanding any provision to
the contrary contained in this Plan, at any sale of the Vangard Assets
conducted in accordance with this Plan, SouthTrust shall be entitled to bid at
such sale in accordance with the provisions of Section 363(k) of the Bankruptcy
Code and, if SouthTrust is the purchaser at any such sale, SouthTrust shall be
entitled to offset against the purchase price all or any portion of the
SouthTrust Claim.
4. DISTRIBUTION OF VANGARD PURCHASE PRICE. The Plan Trustee shall
distribute the Vangard Purchase Price in the manner and in order as follows:
(i) Payment of Vangard Post-Petition Loan. On the Sale Closing Date,
the Plan Trustee shall pay, or shall cause the payment of, an amount equal to
all principal outstanding under the Vangard Post-Petition Loan, together with
all accrued and unpaid interest thereon through the date of distribution,
directly to SouthTrust. Upon SouthTrust's receipt of such payment, the Debtor's
obligations under the Vangard Post-Petition Loan shall be deemed fully
satisfied.
(ii) Payment of MRG Commission. Subject to the provisions of
Article VIII of this Plan, on the Sale Closing Date, the Plan Trustee shall pay,
or shall cause the payment of the commission due to MRG in accordance with the
Agency Agreement (the "MRG Commission").
(iii) Payment to Holders of Allowed Unsecured Claims on a Pro Rata
Basis. Subject to the provisions of Article VIII of this Plan, on the Sale
Closing Date, or as soon thereafter as is practicable, the Plan Trustee shall
pay, or shall cause the payment of, the amount called for in Article IV, Section
E. of this Plan, to the holders of Allowed Class 4 Unsecured Claims. Such
payment shall be made to the holders of Allowed Class 4 Unsecured Claims on a
Pro Rata basis.
(iv) Net Sales Proceeds to SouthTrust. On the Sale Closing Date, the
Plan Trustee shall pay, or shall cause the payment of, the Net Sales Proceeds
directly to SouthTrust. Upon SouthTrust's receipt of such payment and the other
payments to be made to SouthTrust on the Closing Date as provided in Article IV,
Section B.1, the Debtor shall have no further obligation under Plan Note I or
Plan Note II, except as otherwise provided in Article IV, Section B.2.
SouthTrust shall be responsible for payment of the fees and expenses of the Plan
Trustee.
G. NON-COMPETITION AGREEMENT AND VANGARD LICENSE.
On the Closing Date, the Debtor, the Siegel Family Partnership, the Siegel
Family Trust and Todd E. Siegel shall enter into the Non-Competition Agreement
on mutually agreeable terms and conditions.
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H. VESTING.
On the Closing Date, all of the Estate Assets shall vest in the
Reorganized Debtor free and clear of all liens and encumbrances except the
liens and encumbrances of SouthTrust and except as otherwise provided in this
Plan. The Estate Assets shall remain subject to all existing Claims until the
consummation of the sale of the Vangard Assets as provided in this Plan;
provided, that entry of the Confirmation Order shall enjoin all holders of
Claims against the Debtor from taking any action to assert, enforce or collect
on such Claims, except as otherwise expressly provided in this Plan, in the
Plan Documents and in the documents evidencing the Vangard Post-Petition Loan.
The Reorganized Debtor shall continue to operate until the Vangard Assets are
sold, as provided in this Plan, and shall be dissolved at the time and in the
manner set forth in Section G. of this Article VII.
I. CAUSES OF ACTION.
The Plan Trustee and the Debtor shall control the Causes of Action
throughout the term of the Plan Trust Agreement; provided, that if the Debtor
and the Plan Trustee cannot agree on prosecution of a Cause of Action, such
dispute shall be submitted to the Bankruptcy Court. Ninety Percent (90%) of
the net proceeds derived from all Causes of Action shall be distributed to
SouthTrust as provided in Article IV.B.2. The remaining 10% of such net
proceeds (and any excess proceeds otherwise payable to SouthTrust after
SouthTrust has received (exclusive of interest) payments on the SouthTrust
Claim totalling $28,257,857.67) will be distributed to the holders of Class 3
Unsecured Claims, on a pro rata basis, until the holders of such Claims have
received, in the aggregate, payment of 100% of their Allowed Claims, at which
time, any remaining proceeds from such Causes of Action shall be paid to the
holder of the Equity Interests in the Debtor.
J. INCOME TAX REFUND.
Siegel, MTS and the Debtor shall take all appropriate steps to timely
complete and file with the U.S. Internal Revenue Service (and applicable state
taxing authorities) appropriate requests for tax refunds for 1996 and all prior
tax years. Within seven (7) Business Days of receipt of such refunds by the
Debtor or Affiliated Entities, the Debtor and the Affiliated Entities shall pay
to SouthTrust a portion of the proceeds thereof equal to $500,000.00.
K. DATE OF DISTRIBUTIONS.
Any distributions and deliveries to be made under the Plan on account of
an Allowed Claim or Equity Interests shall be made on the Sales Closing Date,
except that the Plan Documents and the initial Cash distribution to SouthTrust
must be delivered on the Closing Date.
L. DISTRIBUTIONS TO BE MADE BY PLAN TRUSTEE.
The Plan Trustee shall make all distributions provided for in this Plan,
other than the distributions to be made to SouthTrust on the Closing Date and
the distribution to SouthTrust of the tax refund proceeds referred to above,
which may be made by any of the Affiliated Entities; provided, that, in the
event that the purchaser of the Vangard Assets expressly assumes liability for
any Allowed Claim against the Debtor, all distributions to be made to the
holder of such Allowed Claim shall be made directly by such purchaser.
M. MEANS OF CASH PAYMENT.
Cash payments made pursuant to the Plan shall be in U.S. funds, by check
drawn on a domestic bank, or by wire transfer from a domestic bank.
N. DELIVERY OF DISTRIBUTIONS.
Subject to Bankruptcy Rule 9010, distributions and deliveries to holders
of Allowed Claims and Allowed Equity Interests shall be made at the address of
each such holder as set forth on the proofs of claim or proofs of interest
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is filed by such holders (or at the last known addresses of such holders if no
proof of claim or proof of interest is filed or if the Plan Trustee has been
notified of a change of address), except as otherwise provided in this Plan.
If any holder's distribution is returned as undeliverable, no further
distributions to such holder shall be made unless and until the Plan Trustee is
notified of such holder's then current address, at which time all missed
distributions shall be made to such holder without interest. Amounts in
respect of undeliverable distributions (the "Undeliverable Funds") shall be
returned to the Plan Trustee, until such distributions are claimed. All claims
for undeliverable distributions shall be made on or before the one hundred and
eightieth (180th) day following the Confirmation Date. After such date, all
Claims in respect of Undeliverable Funds shall be discharged and forever
barred.
O. DISTRIBUTIONS UNDER FIVE DOLLARS.
No distribution of less than five dollars ($5.00) shall be made by the
Plan Trustee to the holder of any Claim unless a request therefor is made in
writing to the Plan Trustee. If, as a result of this provision, an interim
distribution is not made to any holder of a Claim, such holder nevertheless
shall receive subsequent interim or final distributions from the Estate
provided that the aggregate amount of such holder's previous unpaid
distributions plus the amount of the interim or final distribution then to be
made is not less than five dollars ($5.00).
P. TIME BAR TO CASH PAYMENTS.
Checks issued pursuant to this Plan, in respect of Allowed Claims shall be
null and void if not negotiated within ninety (90) days after the date of
issuance thereof. Requests for reissuance of any check shall be made directly
to the Plan Trustee by the holder of the Allowed Claim with respect to which
such check originally was issued. Any claim in respect of such a voided check
shall be made on or before the 180th day following one hundred fifty days after
the date of issuance of such check. After such date, all Claims in respect of
void checks shall be discharged and forever barred.
Q. DISPOSITION OF UNDELIVERABLE FUNDS.
All Undeliverable Funds not claimed by the deadlines set forth in Sections
N. and O. of this Article VII shall be distributed by the Plan Trustee to
creditors in accordance with the terms and provisions of Article IV of this
Plan.
R. EXPENSES INCURRED ON OR AFTER ENTRY OF THE CONFIRMATION ORDER AND CLAIMS
OF THE PLAN TRUSTEE.
Except as otherwise ordered by the Bankruptcy Court, or as otherwise
provided for in the Agency Agreement, the amount of any expenses incurred by
the Plan Trustee on or after the date of entry of the Confirmation Order and
any compensation to be paid to the Plan Trustee under the Plan Trust Agreement
may be paid in the ordinary course of business from Estate Assets, subject to
the approval of SouthTrust, and, to the extent such compensation is unpaid as
of the Sale Closing Date, such unpaid amount may be withheld from the Vangard
Purchase Price until such compensation and expenses have been fully paid.
Consequently, amounts actually received by holders of Allowed Claims may be
less than the gross distributions provided for under this Plan to the extent
that expenses incurred by the Plan Trustee after the date of entry of the
Confirmation Order are unpaid as of the Sale Closing Date.
S. SUBSTANTIAL CONSUMMATION.
Substantial consummation of this Plan, within the meaning of section 1101
of the Bankruptcy Code, shall occur upon the final distribution of the Vangard
Purchase Price in the manner set forth in this Article VII and in Article VIII.
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ARTICLE VIII
PROCEDURES FOR RESOLVING AND TREATING CONTESTED CLAIMS
A. OBJECTION DEADLINE.
As soon as practicable, but in no event later than the Objection Deadline,
objections to Claims shall be filed with the Bankruptcy Court and served upon
the holders of each of the Claims to which objections are made.
B. NO DISTRIBUTIONS PENDING ALLOWANCE.
Notwithstanding any other provision of the Plan, no payment or
distribution shall be made with respect to any Claim to the extent it is a
Contested Claim unless and until such Contested Claim becomes an Allowed Claim.
C. DISTRIBUTIONS AFTER ALLOWANCE.
Payments and distributions to each holder of a Contested Claim, to the
extent that such Claim ultimately becomes an Allowed Claim, shall be made in
accordance with the provisions of the Plan governing the class of Claims to
which the respective holder belongs.
D. UNPAID CLAIMS RESERVE.
1. Except to the extent the Bankruptcy Court shall determine that a good
and sufficient reserve for Contested Claims is less than the full amount
thereof, in determining the amount of the distributions due to the holders of
Allowed Claims and to be reserved for Contested Claims, the calculations
required by Articles IV and V of the Plan shall be made as if all Contested
Claims were Allowed Claims in the full amount claimed by the holders thereof.
2. On the Sale Closing Date, the distributions reserved for the holders of
Contested Claims shall not be delivered to the claimants, but shall be retained
by the Plan Trustee and deposited into a segregated account (hereinafter the
"Unpaid Claims Reserve"). The Unpaid Claims Reserve shall be held in trust by
the Plan Trustee as escrow agent for the benefit of the holders of Contested
Claims. Any sums not expended by the Plan Trustee from the Unpaid Claims
Reserve shall be distributed to the holders of Allowed Claims as provided in
Article IV, and any remaining funds shall be returned to the Reorganized
Debtor.
3. All cash held in the Unpaid Claims Reserve shall be invested in such
investments as permitted under Section 345 of the Bankruptcy Code. The
earnings on such investments shall be held in trust in the Unpaid Claims
Reserve and shall be distributed only in the manner set forth below.
4. At such time as a Contested Claim becomes an Allowed Claim, the
distributions due on account of such Allowed Claim shall be released from the
Unpaid Claims Reserve and delivered to the holder of such Allowed Claim,
including all amounts of interest or other earnings attributable to said
portion of the Unpaid Claims Reserve represented by the subsequently Allowed
disputed Claim.
5. The sole source of funding for payment to Unsecured Creditors and
establishment of the Unpaid Claims Reserve shall be from the $50,000
contributed from the Vangard closing, 10% of the Net Sales Proceeds in excess
of $4,000,000 received from the Vangard closing and 10% of the amounts received
from Causes of Action. From these sources, no more than 100% of the Contested
Claims shall be paid into the Unpaid Claims Reserve.
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ARTICLE IX
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. REJECTED IF NOT ASSUMED.
The Plan constitutes and incorporates a motion to reject all prepetition
executory contracts and unexpired leases within the meaning of Section 365 of
the Bankruptcy Code to which the Debtor is a party, except for an executory
contract or lease that: (a) has been assumed or rejected pursuant to Final
Order of the Bankruptcy Court; or (b) is specifically designated on Exhibit C
to the Plan as an executory contract or lease to be assumed; or (c) is the
subject of a motion to assume or reject that is pending before the Bankruptcy
Court on the Confirmation Date; or (d) is the subject of a motion to extend the
time for assumption or rejection that is pending before the Bankruptcy Court on
the Confirmation Date. The Plan also constitutes and incorporates a motion to
assume the executory contracts and leases designated on Exhibit C. The
Confirmation Order shall automatically constitute the approval, effective as of
the Effective Date, of such rejections and assumptions of executory contracts
and leases. Any monetary amounts by which the contracts and leases to be
assumed under the Plan are in default shall be satisfied by delivery of a
single Cash payment on the Effective Date.
B. BAR TO REJECTION DAMAGES.
If the rejection of any executory contract or unexpired lease by operation
of the Confirmation Order or otherwise results in damages to the other party or
parties to such contract or lease, a Claim for such damages, if not heretofore
evidenced by a filed proof of claim, shall be forever barred and shall not be
enforceable against the Debtor, its Estate or its properties or agents,
successors, or assigns, unless a proof of claim is filed with the Bankruptcy
Court and served upon counsel for the Debtor on or before thirty days after
entry of the Confirmation Order.
ARTICLE X
CONDITIONS TO CONFIRMATION
The Plan shall not be effective until the following conditions have been
either satisfied or waived in writing by SouthTrust:
1. Each of the Plan Documents, the transactions contemplated therein, and
all of the terms and conditions contained therein, shall have been approved in
all respects by the Bankruptcy Court, and the Bankruptcy Court shall have
authorized and directed the Debtor, the Affiliated Entities, the Siegel Family
Trust, the Siegel Family Partnership and Todd E. Siegel to execute and deliver
the Plan Documents to which they are parties on the Closing Date;
2. The Closing shall have occurred on the Closing Date;
3. The Confirmation Order providing for the waiver of rights and relief
from the automatic stay described in Article XII, and described in more detail
in the Plan Documents, and the order approving the Plan Documents as provided
in section 1, above (the "Plan Documents Order"), shall have been signed by the
Bankruptcy Court and duly entered on the docket in the Chapter 11 Case by the
clerk of the Bankruptcy Court, in each case in form and substance acceptable to
SouthTrust;
4. No appeal or stay of the Confirmation Order or the Plan Documents Order
shall have occurred;
5. The Joint Plan shall have been confirmed by the Bankruptcy Court, and
all conditions to the effectiveness of the Joint Plan shall have been satisfied
or waived in writing by SouthTrust; and
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6. The Debtor shall have been authorized by the Bankruptcy Court to
execute the Plan Documents and to enter into the transactions contemplated
therein and shall have executed and delivered the Plan Documents.
ARTICLE XI
WAIVER OF CERTAIN RIGHTS
In addition to the other provisions to be contained therein, Plan Note I,
Plan Note II and certain of the other Plan Documents will contain provisions,
in form and substance acceptable to SouthTrust in all respects, under which (i)
the Debtor, the Affiliated Entities and Siegel will agree that, upon the
occurrence of a Major Default and the expiration of any applicable cure period,
they will not be entitled to take any action to seek to stop or stay any
foreclosure or other exercise of legal or equitable rights and remedies by the
holder of Plan Note I or Plan Note II, and (ii) in the event that any
bankruptcy case is filed by or against the Debtor, the Affiliated Entities or
Siegel, or which otherwise has jurisdiction over the SouthTrust Claim, Plan
Note I, Plan Note II or the other Plan Documents, SouthTrust will automatically
be entitled to relief from the automatic stay provisions of Section 362 of the
Bankruptcy Code or any successor or similar law, and the debtor in any such
bankruptcy case shall, and shall be deemed to, consent and agree not to oppose
the filing by such holder of a motion for such relief.
Nothing contained in the Plan Documents or in this Article XI shall be
construed or deemed to preclude the exercise by SouthTrust of any and all
remedies available at law or in equity upon any default or Event of Default
under Plan Note I, Plan Note II, or the related Plan Documents.
ARTICLE XII
MISCELLANEOUS PROVISIONS
A. NOTICE OF ENTRY OF CONFIRMATION ORDER AND RELEVANT DATES.
Promptly upon entry of the Confirmation Order, the Debtor shall serve on
all parties in interest, all holders of Claims, and all holders of Equity
Interests, notice of the entry of the Confirmation Order and all relevant
deadlines and dates under the Plan, including, but not limited to, the deadline
for filing notice of Administrative Claims (Article V.A. hereof), and the
deadline for filing rejection damage claims (Article X.B. hereof).
B. COMPLIANCE WITH TAX REQUIREMENTS.
In connection with the Plan, the Debtor and the Plan Trustee shall comply
with all applicable withholding and reporting requirements imposed by federal,
state, local, and foreign taxing authorities and all distributions hereunder
shall be subject to such withholding and reporting requirements.
C. COMPLIANCE WITH ALL APPLICABLE LAWS.
If notified by any governmental authority that they are in violation of
any applicable law, rule, regulation, or order of such governmental authority
relating to its business, the Debtor and the Plan Trustee shall take whatever
action as may be required to comply with such law, rule, regulation, or order;
provided, that nothing contained herein shall require such compliance if the
legality or applicability of any such requirement is being contested in good
faith, and, if appropriate, an adequate reserve for such requirement has been
set aside.
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D. DISCHARGE OF CLAIMS.
Except as otherwise provided herein or in the Confirmation Order, the
rights afforded in the Plan and the payments and distributions to be made
hereunder shall be in complete exchange for, and in full satisfaction,
discharge and release of, all existing debts and Claims of any kind, nature or
description whatsoever against the Debtor or its assets or property; and upon
the Effective Date, all existing Claims against the Debtor shall be, and shall
be deemed to be, exchanged, satisfied, discharged and released in full; and all
holders of Claims shall be precluded from asserting against the Debtor, or its
assets or property, any other or further Claim based upon any act or omission,
transaction or other activity of any kind or nature that occurred prior to the
Effective Date, whether or not such holder filed a proof of claim.
E. EFFECT OF CONFIRMATION ORDER.
Except as provided for in the Plan or in the Confirmation Order, the
Confirmation Order shall be a judicial determination of discharge of the Debtor
effective as of the Effective Date, to the extent permitted by section 1141 of
the Bankruptcy Code, from all debts that arose before the Confirmation Date and
any liability on a Claim that is determined under section 502 of the Bankruptcy
Code as if such Claim had arisen before the Effective Date, whether or not a
proof of claim based on any such date or liability is filed under section 501
of the Bankruptcy Code and whether or not a Claim based on such debt or
liability is allowed under section 502 of the Bankruptcy Code.
F. NO DISCHARGE OF NON-DEBTOR OBLIGATIONS.
Except as otherwise expressly provided in the Plan Documents, nothing
contained in this Plan shall be deemed to affect the liabilities, obligations
or property of any Person or entity who may be obligated on a Claim against the
Debtor by virtue of a guaranty agreement or otherwise. Specifically, this Plan
shall not affect, or prejudice SouthTrust's rights to pursue the obligations
and liabilities of the Affiliated Entities or any guarantor to SouthTrust under
any promissory note, guaranty, security agreement, assignment or pledge of
collateral or similar loan document.
G. PAYMENT OF STATUTORY FEES.
All fees payable pursuant to Section 1930 of title 28 of the United States
Code, as determined by the Bankruptcy Court at the Confirmation Hearing shall
be paid on or before the Effective Date.
H. BINDING EFFECT.
The Plan shall be binding upon and inure to the benefit of the Debtor,
the holders of all Claims, the holders of all Equity Interests, and their
respective successors and assigns.
I. NOTICES.
Any notice required or permitted to be provided under the Plan shall be in
writing and served by either (a) certified mail, return receipt requested,
postage prepaid, (b) hand delivery, or (c) reputable overnight delivery
service, freight prepaid, to be addressed as follows:
Domenic L. Massari, III, Esq.
Massari, Bell, Jacobs, Forlizzo & Neal
One Urban Centre, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
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With a copy to:
Todd E. Siegel
12920 Automotive Boulevard
Clearwater, Florida 34622
and
John Stanton
P.O. Box 24567
Tampa, Florida 33623
J. GOVERNING LAW.
Unless a rule of law or procedure is supplied by federal law (including
the Bankruptcy Code and Bankruptcy Rules), the internal laws of the State of
Kentucky shall govern the construction and implementation of the Plan;
provided, that the Plan Documents shall be governed by and construed in
accordance with the law of the State of Alabama without regard to principles of
conflicts of laws.
K. TRANSFER TAXES.
The transfer of any Estate Assets or any Vangard Assets, including the
transfers embodied in the Plan Documents or the Loan Documents and the making
or delivery of any instrument of transfer pursuant to this Plan, including
deeds and articles of transfer, shall not be taxed under any law imposing a
stamp tax, transfer tax, sales tax, or similar tax, pursuant to section 1146(c)
of the Bankruptcy Code.
ARTICLE XIII
RETENTION OF JURISDICTION
A. RETENTION OF JURISDICTION.
The Bankruptcy Court shall retain and have exclusive jurisdiction of all
matters arising out of, and related to, the Chapter 11 Case and the Plan
pursuant to, and for the purposes of, sections 105(a) and 1142 of the
Bankruptcy Code and for, among other things, the following purposes:
(1) To hear and determine pending applications for the assumption or
rejection of executory contracts or unexpired leases, if any are pending, and
the allowance of Claims resulting therefrom;
(2) To determine any and all pending adversary proceedings, applications,
and contested matters;
(3) To ensure that distributions to holders of Allowed Administrative
Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed
Unsecured Claims, Allowed Secured Claims (including in particular the
SouthTrust Claim), and Allowed Equity Interests are accomplished as provided
herein;
(4) To hear and determine any timely objections to Administrative Claims
or to proofs of Claim and Equity Interests filed, both before and after the
Confirmation Date, including any objections to the classification of any Claim
or Equity Interest, and to allow or disallow any Contested Claim or Equity
Interest, in whole or in part;
(5) To enter and implement such orders as may be appropriate in the event
the Confirmation Order is for any reason stayed, revoked, modified, or vacated;
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(6) To issue such orders in aid of execution of the Plan, to the extent
authorized by section 1142 of the Bankruptcy Code, including, without
limitation, such orders necessary or appropriate to approve the sale of the
Vangard Assets as provided in this Plan, and to implement the auction
contingency described in Article VII, Section E.3;
(7) To consider any modifications of the Plan, to cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(8) To hear and determine all applications for compensation and
reimbursement of expenses of professionals under sections 330, 331, and 503(b)
of the Bankruptcy Code incurred prior to the Effective Date;
(9) To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Plan;
(10) To recover all assets of the Debtor and property of the Estate, where
located;
(11) To enforce and interpret the terms and conditions of the Plan
Documents, including, without limitation, the waivers and agreements contained
in the Plan Documents and described in Article XII of this Plan;
(12) To hear and determine matters concerning state, local and federal
taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;
(13) To hear any other matter not inconsistent with the Bankruptcy Code;
and
(14) To enter a final decree closing the Chapter 11 Case.
B. MODIFICATION OF THE PLAN.
Modifications of the Plan may be proposed in writing by the Debtor at any
time before confirmation, provided that the Plan, as modified, meets the
requirements of sections 1122 and 1123 of the Bankruptcy Code, and the Debtor
shall have complied with section 1125 of the Bankruptcy Code. The Plan may be
modified at any time after confirmation and before substantial consummation,
provided that the Plan, as modified, meets the requirements of sections 1122
and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a
hearing, confirms the Plan as modified, under section 1129 of the Bankruptcy
Code, and the circumstances warrant such modifications. A holder of a Claim or
Equity Interest that has accepted or rejected the Plan shall be deemed to have
accepted or rejected, as the case may be, such Plan as modified, unless, within
the time fixed by the Bankruptcy Court, such holder changes its previous
acceptance or rejection.
Dated this 5th day of July, 1996.
Respectfully submitted,
VANGARD LABS, INC.
By: /s TODD E. SIEGEL
----------------------------------
Its President
Domenic L. Massari
OF COUNSEL:
MASSARI & BELL, P.A.
One Urban Centre, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
(813) 282-3255
24
<PAGE> 1
EXHIBIT 2.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
IN RE: )
)
MTS PACKAGING SYSTEMS, INC., ) CASE NO: 96-00077-8
) CHAPTER 11
)
IN RE: )
)
MEDICAL TECHNOLOGY ) CASE NO: 96-00078-8G1
LABORATORIES, INC., ) CHAPTER 11
)
DEBTORS. )
FIRST AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
DATED: July 12, 1996
Domenic L. Massari, III, Esq.
Massari & Bell, P.A.
Florida Bar No.: 0238988
One Urban Centre, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
(813) 282-3255
Attorneys for
MTS PACKAGING SYSTEMS, INC.
and
MEDICAL TECHNOLOGY
LABORATORIES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
INTRODUCTION 1
ARTICLE I DEFINITIONS AND INTERPRETATION 2
<S> <C>
A. Definitions 2
1. Administrative Claim 2
2. Affiliated Entities 2
3. Allowed 2
4. Allowed 2
5. Allowed Administrative Claim 2
6. Ballot Date 2
7. Bankruptcy Code 2
8. Bankruptcy Court 2
9. Bankruptcy Rules 2
10. Bar Date 3
11. Business Day 3
12. Cart-Ware 3
13. Cash 3
14. Causes of Action 3
15. Chapter 11 Cases 3
16. Claim 3
17. Closing 3
18. Closing Date 3
19. Collateral 3
20. Confirmation Date 3
21. Confirmation Hearing 3
22. Confirmation Order 3
23. Contested 3
24. Debtors 4
25. Disallowed 4
26. Disclosure Statement 4
27. Effective Date 4
28. Equity Interest 4
29. Estate 4
30. Estate Assets 4
31. Fee Application 4
32. Fee Claim 4
33. Filing Date 4
34. Final Order 4
35. Joint Plan 4
36. Labs 4
37. Lien 5
38. Loan Documents 5
39. Major Default 5
40. MMS 5
41. MMT 5
42. MTS 5
43. MTS Mortgage 5
44. Objection Deadline 5
45. Other Secured Claim 5
46. Packaging 5
47. Patent Assignment 5
48. Person 5
</TABLE>
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<TABLE>
<S> <C> <C>
49. Performance Pharmacy 5
50. Plan Documents 5
51. Plan Documents Order 5
52. Plan Note I 5
53. Plan Note II 7
54. Priority Non-Tax Claim 7
55. Priority Tax Claim 8
56. Professional Persons 8
57. Pro Rata Share 8
58. Reorganized Debtors 8
59. Schedules 8
60. Secured Claim 8
61. Siegel 8
62. Siegel Family Partnership 8
63. Siegel Guaranty 8
64. Software Companies 8
65. SouthTrust 8
66. SouthTrust Claim 8
67. Tampa Pathology 8
68. Tampa Pathology Claim 8
69. Tampa Pathology Motion 8
70. Unsecured Claim 9
71. Vangard Labs 9
72. Vangard Mortgage 9
73. Vangard Plan 9
B. Application of Definitions and Rules of Construction
Contained in the Bankruptcy Code 9
ARTICLE II CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS 9
A. Claims and Equity Interests Classified 9
B. Administrative Claims and Priority Tax Claims 9
C. Claims and Equity Interests 9
1. Class 1A: Priority Non-Tax Claims against Packaging 9
2. Class 1B: Priority Non-Tax Claims against Labs 10
3. Class 2: SouthTrust Bank Claim 10
4. Class 3: Other Secured Claims 10
5. Class 4: Tampa Pathology Claim against Labs 10
6. Class 5: Unsecured Claims against Packaging 10
7. Class 6: Unsecured Claims against Labs 10
8. Class 7: Subordinated Claims 10
9. Class 8: Equity Interests 10
D. Separate Classification of Other Secured Claims 10
ARTICLE III IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS
AND EQUITY INTERESTS 10
A. Unimpaired Classes of Claims and Equity Interests 10
B. Impaired Classes of Claims 10
C. Impairment Controversies 10
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IV PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY
INTERESTS CLASSIFIED IN THE JOINT PLAN 10
A. Class 1A (Priority Non-Tax Claims against Packaging) 11
B. Class 1B (Priority Non-Tax Claims against Labs) 11
C. Class 2 (SouthTrust Claim) 11
D. Class 3 (Other Secured Claims) 12
E. Class 4 (Tampa Pathology Claim against Labs) 12
F. Class 5 (Unsecured Claims against Packaging) 12
G. Class 6 (Unsecured Claims against Labs) 13
H. Class 7 (Subordinated Claims) 13
I. Class 8 (Equity Interests) 13
ARTICLE V PROVISIONS FOR TREATMENT OF UNCLASSIFIED
CLAIMS 13
A. Administrative Claims 13
1. Time for Filing Administrative Claims 13
2. Time for Filing Fee Claims 14
3. Allowance of Administrative Claims 14
4. Payment of Allowed Administrative Claims 14
B. Priority Tax Claims 14
ARTICLE VI ACCEPTANCE OR REJECTION OF THE JOINT PLAN:
EFFECT OF REJECTION BY ONE OR MORE CLASSES
OF CLAIMS OR EQUITY INTERESTS 14
A. Classes Entitled to Vote 14
B. Class Acceptance Requirement 14
ARTICLE VII MEANS FOR IMPLEMENTATION OF THE JOINT PLAN 15
A. Allowance of Claims 15
B. Restructure of SouthTrust Debt 15
C. Operation of the Debtors 15
D. Vesting 15
E. Income Tax Refund 15
F. Compromise and Settlement Between Labs and Tampa Pathology 15
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
G. Payment by MTS to Retain Equity Interests; Issuance of MTS Debentures 15
ARTICLE VIII PROVISIONS GOVERNING DISTRIBUTIONS 16
A. Date of Distributions 16
B. Distributions to be Made by Debtors 16
C. Means of Cash Payment 16
D. Delivery of Distributions 16
E. Distributions Under Five Dollars 16
F. Time Bar to Cash Payments 17
G. Disposition of Undeliverable Funds 17
ARTICLE IX PROCEDURES FOR RESOLVING AND TREATING
CONTESTED CLAIMS 17
A. Objection Deadline 17
B. No Distributions Pending Allowance 17
C. Distributions After Allowance 17
ARTICLE X TREATMENT OF EXECUTORY CONTRACTS AND
UNEXPIRED LEASES 17
A. Rejected If Not Assumed 17
B. Bar to Rejection Damages 18
ARTICLE XI CONDITIONS TO CONFIRMATION 18
ARTICLE XII WAIVER OF CERTAIN RIGHTS 18
ARTICLE XIII MISCELLANEOUS PROVISIONS 19
A. Notice of Entry of Confirmation Order and Relevant Dates 19
B. Compliance with Tax Requirements 19
C. Compliance with All Applicable Laws 19
D. Discharge of Claims 19
E. Effect of Confirmation Order 19
F. No Discharge of Non-Debtor Obligations 20
G. Payment of Statutory Fees 20
H. Binding Effect 20
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
I. Notices 20
J. Governing Law 20
K. Transfer Taxes 20
ARTICLE XIV RETENTION OF JURISDICTION 21
A. Retention of Jurisdiction 21
B. Modification of the Joint Plan 22
</TABLE>
v
<PAGE> 7
EXHIBITS
A Patent Registrations and Applications
B Executory Contracts and Leases to be Assumed
vi
<PAGE> 8
FIRST AMENDED AND RESTATED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
Pursuant to section 1121(a) of the Bankruptcy Code, MTS Packaging Systems,
Inc. and Medical Technology Laboratories, Inc. ("Debtors") propose the
following First Amended and Restated Joint Plan of Reorganization ("Joint
Plan") in their bankruptcy cases.
INTRODUCTION
On September 23, 1993, the Debtors, together with the Debtors' parent
corporation, Medical Technology Systems, Inc. ("MTS"), certain other
subsidiaries of MTS and Todd E. Siegel, entered into an Amended and Restated
Loan and Security Agreement with SouthTrust Bank of Alabama, National
Association ("SouthTrust"). Pursuant to the Amended and Restated Loan and
Security Agreement and the other Loan Documents, as defined below, the Debtors
and the other members of the Borrowing Group (as defined therein), jointly and
severally, owed SouthTrust in excess of $28,000,000, as of the Filing Date.
The indebtedness evidenced by the Loan Documents is secured by all Estate
Assets, as defined below, and by all other collateral of the other members of
the Borrowing Group described in the Loan Documents.
This Joint Plan is being filed by the Debtors jointly in order to, among
other things, (i) facilitate the restructuring of the indebtedness evidenced by
the Loan Documents, (ii) amend and restate the Loan Documents in the manner set
forth in the Plan Documents (as defined below), which will be executed and
delivered by the Debtors, MTS, all other subsidiaries of MTS and Todd E.
Siegel, and (iii) establish the separate treatment of all other Claims against
the Debtors. Pursuant to this Joint Plan, the Debtors, MTS and all other
subsidiaries of MTS will execute and deliver amended and restated promissory
notes, designated in this Joint Plan as "Plan Note I and II", in the aggregate
Stated Principal Amount of $28,257,857.67. As specified in this Joint Plan and
in the Plan Documents, however, under certain circumstances (including, without
limitation, the full and complete compliance with all of the terms and
conditions of the Plan Documents), the Debtors, MTS and the other subsidiaries
of MTS may satisfy Plan Note I and Plan Note II upon payment to SouthTrust of
(i) all of the proceeds from the sale of Vangard Labs, Inc. pursuant to its
plan of reorganization, (ii) pending such sale, all of the excess cash flow
generated by Vangard Labs, Inc., (iii) upon Plan Note II, $250,000.00 on the
Closing Date and either $500,000.00 within six months thereafter or monthly
cash flow payments totaling $750,000.00, (iv) $15,000,000, plus accrued
interest thereon under Plan Note I, (v) a portion of the proceeds, as specified
in this Joint Plan and the Vangard Plan, of all Causes of Action, and (vi) a
portion of the proceeds derived from Capital Transactions, as defined in the
Plan Documents.
Despite the fact that this Joint Plan is filed jointly, the creditors of
Packaging and Labs, other than SouthTrust, may receive different treatment
under the Joint Plan. Likewise, although this Joint Plan is a joint plan of
reorganization for both of the Debtors, the assets of the Debtors, and the
treatment and payment of most Claims (and in particular, unsecured Claims)
against the Debtors, are in fact separate. Each Creditor must look only to the
specific Debtor to whom its Claim relates for payment and satisfaction of such
creditor's Claim.
The legal effect of confirmation of this Joint Plan will be to confirm a
separate plan of reorganization for each of Packaging and Labs. Other than
SouthTrust, to whom the Debtors are obligated jointly and severally, the
creditors of Packaging will obtain under the Joint Plan specific rights against
Packaging only, and the creditors of Labs will obtain under the Joint Plan
specific rights against Labs only.
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<PAGE> 9
ARTICLE I
DEFINITIONS AND INTERPRETATION
A. DEFINITIONS.
The capitalized terms used herein shall have the respective meanings set
forth below:
1. "ADMINISTRATIVE CLAIM" shall mean a Claim incurred by the Debtors (or
their Estates) on or after the Filing Date and before the Effective Date for a
cost or expense of administration of the Chapter 11 Cases entitled to priority
under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without
limitation, Claims, Fee Claims, Claims for cure payments under section
365(a)(1) of the Bankruptcy Code, obligations incurred after the Filing Date by
Debtors in the ordinary course of business, any actual and necessary expenses
of preserving the Estate Assets, any fees or charges assessed against the
Debtors' Estates under section 1930, chapter 123 of title 28 of the United
States Code, and other Claims as ordered by the Bankruptcy Court.
2. "AFFILIATED ENTITIES" shall mean Medical Technology Systems, Inc.,
Vangard Pharmaceutical Packaging, Inc., Vangard Labs, Inc., Clearwater Medical
Services, Inc., MTS Sales & Marketing, Inc., Cart-Ware, Inc., Performance
Pharmacy Systems, Inc., Medication Management Technologies, Inc., Medication
Management Systems, Inc., and Systems Professionals, Inc.
3. "ALLOWED" when used with respect to any Claim, except for a Claim that
is an Administrative Claim, shall mean a Claim (i) to the extent it is not a
Contested Claim as of the Effective Date; or (ii) to the extent it is a
Contested Claim as of the Effective Date, proof of which was timely filed with
the Bankruptcy Court, and (a) as to which no objection was filed by the
Objection Deadline, unless such Claim is to be determined in a forum other than
the Bankruptcy Court, in which case such Claim shall not become allowed until
determined by Final Order of such other forum and allowed by Final Order of the
Bankruptcy Court; (b) as to which an objection was filed by the Objection
Deadline, to the extent allowed by a Final Order; or (c) which otherwise
becomes an Allowed Claim as provided in the Joint Plan. In the event a proof
of claim is filed by a creditor for an amount less than the amount set forth in
the Schedules then the amount set forth in the proof of claim shall constitute
the maximum amount of such creditor's Allowed Claim.
4. "ALLOWED" when used with respect to any Equity Interest shall mean an
Equity Interest, proof of which was timely and properly filed or, if no proof
of interest was filed, which has been listed by the Debtors on their Schedules
as liquidated in amount and not disputed or contingent, and, in either case, as
to which no objection to the allowance thereof has been filed by the Objection
Deadline or as to which any objection has been filed by the Objection Deadline,
to the extent allowed by Final Order or as may therein be determined by Order
of the Bankruptcy Court.
5. "ALLOWED ADMINISTRATIVE CLAIM" shall mean an Administrative Claim that
is allowed pursuant to the procedures set forth in Article V of the Joint Plan.
6. "BALLOT DATE" shall mean the date set by the Bankruptcy Court when all
ballots to accept or reject this Joint Plan must be filed with the clerk of the
Bankruptcy Court.
7. "BANKRUPTCY CODE" shall mean title 11 of the United States Code, as now
in effect or as amended.
8. "BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for
the Middle District of Florida, or such other court having jurisdiction over
the Chapter 11 Cases.
9. "BANKRUPTCY RULES" shall mean the Federal Rules of Bankruptcy Procedure
which govern the forms of process, writs, pleadings, and motions, and the
practice and procedure in cases under the Bankruptcy Code, as prescribed by the
United States Supreme Court pursuant to 28 U.S.C. Section 2075, and the Local
Rules of the Bankruptcy Court.
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10. "BAR DATE" shall mean the date fixed by order of the Bankruptcy Court
by which a proof of claim must be filed against the Debtors with the clerk of
the Bankruptcy Court; to wit, ______________, 1996. With respect to damages
resulting from the rejection of an executory contract or unexpired lease under
the Joint Plan, the Bar Date shall mean the date which is thirty (30) days
following the entry of the Confirmation Order in accordance with Article XI.B
of the Joint Plan.
11. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
legal holiday as defined in Bankruptcy Rule 9006(a).
12. "CART-WARE" shall mean Cart-Ware, Inc., one of the Affiliated
Entities.
13. "CASH" shall mean legal tender of the United States of America or cash
equivalents.
14. "CAUSES OF ACTION" means all causes of action of any kind held at any
time by the Debtors or any of the Affiliated Entities arising before the
Closing Date against any party or parties, including, without limitation, any
rights arising under sections 542, 544, 545, 547, 548, 549 or 550 of the
Bankruptcy Code.
15. "CHAPTER 11 CASES" shall mean the Debtors' cases under Chapter 11 of
the Bankruptcy Code pending before the Bankruptcy Court and styled In re
Medical Technology Laboratories, Inc., Case No. 96-00078 and In re MTS
Packaging Systems, Inc., Case No. 96-00077.
16. "CLAIM" shall mean (a) any right to payment from the Debtors, whether
or not such right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured; (b) any right to an equitable remedy for breach of
performance if such breach gives rise to a right of payment from the Debtors,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, or unsecured; or
(c) any Lien against the Estate Assets.
17. "CLOSING" shall mean the consummation of the transactions among the
Debtors, the Affiliated Entities and SouthTrust in connection with the
amendment and restatement of the Loan Documents in the manner provided in the
Plan Documents, and at which the Plan Documents to be executed and delivered by
such parties under this Joint Plan shall be executed and delivered.
18. "CLOSING DATE" shall mean the date on which the Closing occurs, which
shall be (a) the Confirmation Date, (b) at SouthTrust's election, two business
days after the conditions described in Article XI, Sections 2, 3 and 4 of this
Joint Plan are satisfied or waived in writing by SouthTrust, or (c) such other
date as SouthTrust and the Debtors shall agree in writing.
19. "COLLATERAL" shall mean all Estate Assets and all assets of the
Affiliated Entities.
20. "CONFIRMATION DATE" shall mean the date on which the Confirmation
Order becomes a Final Order.
21. "CONFIRMATION HEARING" shall mean the hearing held by the Bankruptcy
Court, as it may be continued from time to time, at which the Debtors shall
seek confirmation of the Joint Plan.
22. "CONFIRMATION ORDER" shall mean the order of the Bankruptcy Court
confirming the Joint Plan in accordance with Chapter 11 of the Bankruptcy Code.
23. "CONTESTED" when used with respect to a Claim, shall mean a Claim (i)
that is listed in the Schedules as disputed, contingent or unliquidated; (ii)
that is listed in the Schedules as undisputed, liquidated, and not contingent
and as to which a proof of Claim has been filed with the Bankruptcy Court, to
the extent the proof of Claim exceeds the scheduled amount; (iii) that is not
listed in the Schedules, but as to which a proof of claim has been filed with
the Bankruptcy Court; or (iv) as to which an objection has been filed before
the Objection Deadline;
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provided, that a Claim that is Allowed by Final Order, or pursuant to the Joint
Plan, on or before the Objection Deadline, shall not be a Contested Claim to
the extent such Claim is Allowed.
24. "DEBTORS" shall mean Medical Technology Laboratories, Inc. and MTS
Packaging Systems, Inc.
25. "DISALLOWED" when used with respect to a Claim, shall mean a Claim to
the extent 10 days has expired since it has been disallowed by order of the
Bankruptcy Court, unless proper application for a stay of such order has been
made within such 10 day period, in which case the Claim shall be disallowed 30
days after entry of the order disallowing such Claim, unless prior to the
expiration of such period, a stay is obtained with respect to the order
disallowing the Claim.
26. "DISCLOSURE STATEMENT" shall mean the Disclosure Statements pursuant
to section 1125 of the Bankruptcy Code filed by the Debtors in the Chapter 11
Cases, as approved by Orders of the Bankruptcy Court.
27. "EFFECTIVE DATE" shall mean the tenth Business Day following the date
upon which the Confirmation Order becomes a Final Order.
28. "EQUITY INTEREST" shall mean any share or other instrument evidencing
an ownership interest in the Debtors, whether or not transferable or
denominated "stock", or similar security, and any warrant or right, other than
a right to convert, to purchase, sell, or subscribe to a share, security, or
interest in the Debtors, or any other obligation of the Debtors determined to
be an Equity Interest by the Bankruptcy Court.
29. "ESTATE" shall mean the estates created with respect to the Debtors
pursuant to section 541 of the Bankruptcy Code upon the commencement of the
Chapter 11 Cases.
30. "ESTATE ASSETS" shall mean all of the assets that are included in the
Estates of the Debtors, including Causes of Action.
31. "FEE APPLICATION" shall mean an application of a Professional Person
under section 330 or 503 of the Bankruptcy Code for allowance of compensation
and reimbursement of expenses in the Chapter 11 Cases.
32. "FEE CLAIM" shall mean a Claim under section 330 or 503 of the
Bankruptcy Code for allowance of compensation and reimbursement of expenses in
the Chapter 11 Cases.
33. "FILING DATE" shall mean the date on which the voluntary petition was
filed by the Debtors commencing the Chapter 11 Cases; to wit; January 3, 1996.
34. "FINAL ORDER" shall mean (i) an order of the Bankruptcy Court as to
which the time to appeal, petition for certiorari, or move for reargument or
rehearing has expired and as to which no appeal, petition for certiorari, or
other proceedings for reargument or rehearing shall then be pending or as to
which any right to appeal, petition for certiorari, reargue, or rehearing shall
have been waived in writing in form and substance satisfactory to SouthTrust
or, (ii) in the event that an appeal, writ of certiorari, reargument, or
rehearing thereof has been sought, such order of the Bankruptcy Court shall
have been affirmed by the highest court to which such order was appealed, or
certiorari has been denied, or from which reargument or rehearing was sought,
and the time to take any further appeal, petition for certiorari or move for
reargument or rehearing shall have expired; provided, that no order shall fail
to be a Final Order solely because of the possibility that a motion pursuant to
Rule 60 of the Federal Rules of Civil Procedure, as made applicable by Rule
9024 of the Bankruptcy Rules, may be filed with respect to such order.
35. "JOINT PLAN" shall mean this Joint Plan of Reorganization filed and
proposed by the Debtors.
36. "LABS" shall mean Medical Technology Laboratories, Inc., a debtor
herein.
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37. "LIEN" shall have the meaning assigned to it in section 101(37) of the
Bankruptcy Code.
38. "LOAN DOCUMENTS" shall mean the Amended and Restated Loan and Security
Agreement dated September 28, 1993 among SouthTrust, the Debtors, the
Affiliated Entities and Todd E. Siegel, as amended prior to the Filing Date,
and all promissory notes, guaranties, collateral and security agreements and
all other ancillary agreements, documents and instruments executed and
delivered in connection therewith or pursuant thereto.
39. "MAJOR DEFAULT" shall mean an event of default under Plan Note I, Plan
Note II or the related Plan Documents as defined in the Loan Agreementd.
40. "MMS" shall mean Medication Management Systems, Inc., one of the
Affiliated Entities.
41. "MMT" shall mean Medication Management Technologies, Inc., one of the
Affiliated Entities.
42. "MTS" shall mean Medical Technology Systems, Inc., the sole
shareholder of the Debtors.
43. "MTS MORTGAGE" shall mean the second mortgage in favor of SouthTrust
on real property located in Glasgow, Kentucky and owned by MTS, to be executed
and delivered by MTS on the Closing Date.
44. "OBJECTION DEADLINE" shall mean the date that is the thirtieth (30th)
day following the Confirmation Date, or such other date as may be ordered by
the Bankruptcy Court.
45. "OTHER SECURED CLAIM" shall mean a Secured Claim other than the
SouthTrust Secured Claim.
46. "PACKAGING" shall mean MTS Packaging Systems, Inc., a debtor herein.
47. "PATENT ASSIGNMENT" shall mean the assignment of the patents and
patent applications listed or described in the Settlement Agreement hereto, as
additional collateral for the Plan Note, in form and substance acceptable to
SouthTrust, which shall be filed of record with the U.S. Patent and Trademark
Office.
48. "PERSON" shall mean an individual, corporation, partnership, joint
venture, trust, estate, unincorporated association, unincorporated
organization, governmental entity, or political subdivision thereof, or any
other entity.
49. "PERFORMANCE PHARMACY" shall mean Performance Pharmacy Systems, Inc.,
one of the Affiliated Entities.
50. "PLAN DOCUMENTS" shall mean the documents that aid in effectuating and
implementing the Plan, including but not limited to, Plan Note I, Plan Note II,
the Siegel Guaranty, the Stock Pledge, the Patent Assignment, the MTS Mortgage,
the Vangard Mortgage and all documents, agreements and instruments which amend,
restate, or amend and restate the Loan Documents, all of which shall be
executed and delivered on the Closing Date. The Plan Documents shall be
submitted to the Bankruptcy Court at least fifteen (15) days prior to
commencement of the Confirmation Hearing, for approval by the Bankruptcy Court
contemporaneously with confirmation of this Joint Plan.
51. "PLAN DOCUMENTS ORDER" shall mean the order of the Bankruptcy Court
approving the Plan Documents as described in Article XI, Sections 1 and 3 of
this Joint Plan.
52. "PLAN NOTE I" shall mean the amended and restated promissory note to
be executed and delivered by the Debtors and all Affiliated Entities on the
Closing Date, having a Stated Principal Amount of $27,257,857.67 and an
Amortization Principal Amount of $15,000,000, under which, among other things:
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(a) Accrued interest on the Amortization Principal Amount, at the
rate of 7.5% per annum, from the date of entry of the Confirmation
Order to the Closing Date will be paid on the Closing Date;
(b) Monthly payments of accrued interest, at the rate of 7.5% per
annum, on the outstanding balance of the Amortization Principal
Amount will be due and payable on the first day of each calendar
month, commencing on the first day of the first full calendar
month following the Closing Date, through the twenty-fourth (24th)
month following the Closing Date;
(c) The outstanding balance of the Amortization Principal Amount
will be amortized, based on a twenty-year amortization at the rate
of 7.5% per annum, with monthly payments of principal and accrued
interest in equal monthly installments over an eight (8) year
period, commencing on the first day of the twenty-fifth (25th)
month following the Closing Date, and on the first day of each
calendar month thereafter, with all remaining principal and
interest being due and payable on the first day of the first full
calendar month following the tenth (10th) anniversary of the
Closing Date;
(d) In the event of a Capital Transaction (as defined in the Plan
Documents) with respect to Labs, or application of principal
payments as described in paragraph (i), below, Labs will be
released from liability under Plan Note I, except for amounts
becoming due under paragraph (g) below and amounts becoming due on
account of Causes of Action (and its assets and capital stock
released from the security interests therein granted in the Plan
Documents) upon the payment to SouthTrust of $2,000,000 of the
proceeds from such Capital Transaction (less the amount credited
under paragraph (i), below), provided that no event of default
under the Plan Documents shall have occurred and be continuing;
(e) In the event of a Capital Transaction (as defined in the Plan
Documents) with respect to any one or more of the Software
Companies, or application of principal payments as described in
paragraph (i), below, all of the Software Companies will be
released from liability under Plan Note I, except for amounts
becoming due under paragraph (g) below and amounts becoming due on
account of Causes of Action (and their assets and capital stock
released from the security interests therein granted in the Plan
Documents) upon the payment to SouthTrust of $1,000,000 of the
proceeds from such Capital Transaction (less the amount credited
under paragraph (i), below), provided that no event of default
under the Plan Documents shall have occurred and be continuing;
(f) Any sums paid to SouthTrust under clauses (d) or (e) of this
definition shall be applied against accrued and unpaid interest on
the Amortization Principal Amount and then to such Amortization
Principal Amount;
(g) In the event of a Capital Transaction as described in clause
(d) or (e) above, SouthTrust will be paid a premium over the
amounts set forth therein as follows: (i) if the Capital
Transaction occurs in the first year of the term of Plan Note I, a
premium of 50% of the Net Proceeds (as defined in the Plan
Documents) from such Capital Transaction, (ii) if the Capital
Transaction occurs in the second year of the term of Plan Note I,
a premium of 40% of the Net Proceeds from such Capital
Transaction, (iii) if the Capital Transaction occurs in the third
year of the term of Plan Note I, a premium of 30% of the Net
Proceeds from such Capital Transaction, (iv) if the Capital
Transaction occurs in the fourth year of the term of Plan Note I,
a premium of 20% of the Net Proceeds from such Capital
Transaction, and (v) if the Capital Transaction occurs in the
fifth year of the term of Plan Note I, a premium of 10% of the Net
Proceeds from such Capital Transaction;
(h) The following amounts, when paid to SouthTrust will be
applied against the difference between the Amortization Principal
Amount and the Stated Principal Amount: (i) the Net Sales Proceeds
paid to SouthTrust from the sale of the Vangard Assets (as defined
in the Vangard Plan), after repayment in full of all outstanding
amounts owed by Vangard Labs to
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SouthTrust under certain post-petition financing provided by SouthTrust
to Vangard Labs, (ii) the premium payments to SouthTrust made under
clause (g) of this definition, and (iii) proceeds payable to SouthTrust
from Causes of Action; and
(i) Payments of the Amortization Principal Amount made to
SouthTrust as described in subparagraph (c) above will be credited
against the release prices described in subparagraphs (d) and (e)
above, as follows: an amount equal to 75% of principal payments
made will be credited (i) first, against the release price
described in subparagraph (e) until an aggregate of $1,000,000 in
principal payments have been applied to satisfy the release price
set forth in paragraph (e), and (ii) then, against the release
price described in subparagraph (d) until an aggregate of
$2,000,000 in additional principal payments have been applied to
satisfy the release price set forth in subparagraph (d).
Plan Note I will be secured by all Estate Assets and all other Collateral
described in the Loan Documents and the Plan Documents, will be unconditionally
guaranteed pursuant to the Siegel Guaranty, and will provide that any default
or event of default under Plan Note II will constitute an event of default
under Plan Note I. In addition, Plan Note I and the related Plan Documents
will contain provisions, in form and substance acceptable to SouthTrust in all
respects, under which the Debtors and the Affiliated Entities will waive
certain rights to object or seek to stop or stay any foreclosure upon any Major
Default and the expiration of any applicable cure period, and will consent to
the grant of relief from the automatic stay in any future bankruptcy case, all
as described in Article XII of this Joint Plan.
53. "PLAN NOTE II" shall mean the amended and restated promissory note to
be executed and delivered by the Debtors and all Affiliated Entities on the
Closing Date, having an original principal amount of $1,000,000, under which,
among other things:
(a) Commencing 6 months after the closing date, the Debtors
and the Affiliated Entities shall pay to SouthTrust on a monthly
basis 15% of their Excess Cash Flow, as defined in Plan Note II,
until (i) the principal amount of Plan Note II has been paid in
full, or (ii) the fifth anniversary of the date payments commence,
whichever occurs first;
(b) The following amounts, when paid to SouthTrust, will be
applied against the outstanding principal of Plan Note II: (i)
the payment described in Article IV, Section C.1(d) of the Joint
Plan, and (ii) the tax refund proceeds described in Article IV,
Section C.1(e) of the Joint Plan;
(c) In the event that the payment described in Article IV,
Section C.1(d) is paid when due on the Closing Date and the
payment described in Article IV, Section C.2 in the amount of at
least $500,000 or any combination of the two totalling $750,000 is
made to SouthTrust on or prior to the date which is six (6) months
after the Closing Date, then Plan Note II will be deemed fully
satisfied and will be cancelled; and
(d) In the event that Labs or the Software Companies are
released from its or their obligations under Plan Note I, as
described in the definition of Plan Note I, such entity or
entities shall also be released from its or their obligations
under Plan Note II.
Plan Note II will be secured by all Estate Assets and by all other collateral
described in the Loan Documents and the Plan Documents, will provide that any
default or event of default under Plan Note I will constitute an event of
default under Plan Note II, and in all other respects will contain similar
provisions to those contained in Plan Note I.
54. "PRIORITY NON-TAX CLAIM" shall mean any Claim accorded priority in
right of payment under Section 507(a)(3)(4)(6) or (7) of the Bankruptcy Code.
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55. "PRIORITY TAX CLAIM" shall mean a Claim of a governmental unit of the
kind specified in Section 507(a)(8) of the Bankruptcy Code.
56. "PROFESSIONAL PERSONS" shall mean Persons retained or to be
compensated pursuant to Sections 327, 328, 330, 503(b), and 1103 of the
Bankruptcy Code.
57. "PRO RATA SHARE" shall mean the proportion that the amount of an
Allowed Claim in a particular class of Claims bears to the aggregate amount of
all Claims in such class of Claims, including Contested Claims, but not
including Disallowed Claims.
58. "REORGANIZED DEBTORS" means the Debtors as they may exist after the
Confirmation Date.
59. "SCHEDULES" shall mean the schedules of assets and liabilities and the
statement of financial affairs filed by the Debtors as required by Section 521
of the Bankruptcy Code and the Official Bankruptcy Forms of the Bankruptcy
Rules, as such schedules may from time to time have been amended prior to the
filing of this Joint Plan.
60. "SECURED CLAIM" shall mean (i) a Claim secured by a Lien on Estate
Assets, but only to the extent of the value of the Collateral that secures
payment of the Claim; or (ii) a Claim allowed under the Joint Plan as a Secured
Claim.
61. "SIEGEL" shall mean Todd E. Siegel, an individual.
62. "SIEGEL FAMILY PARTNERSHIP" shall mean Siegel Family Limited
Partnership, a Florida limited partnership.
63. "SIEGEL GUARANTY" shall mean the Guaranty to be executed and delivered
by Mr. Todd E. Siegel on the Closing Date to SouthTrust unconditionally
guaranteeing all of the Debtors' and the Affiliated Entities' obligations and
liabilities to SouthTrust under Plan Note I and Plan Note II.
64. "SOFTWARE COMPANIES" shall mean Performance Pharmacy, Cart-Ware, MMS
and MMT.
65. "SOUTHTRUST" shall mean SouthTrust Bank of Alabama, National
Association, a national banking association.
66. "SOUTHTRUST CLAIM" shall mean the Claim held by SouthTrust against the
Debtors in the amount of $28,257,857.67, which is secured by Liens on all
Estate Assets and by all other collateral described in the Loan Documents.
67. "TAMPA PATHOLOGY" shall mean Independent Clinical Laboratories, Inc.,
a Florida corporation d/b/a Tampa Pathology Laboratory.
68. "TAMPA PATHOLOGY CLAIM" shall mean the Claim asserted by Tampa
Pathology against Labs, which is based upon amounts claimed to be due and owing
under that certain Purchase Agreement between Labs and Tampa Pathology, dated
as of March 17, 1995, and which is more particularly described in the proof of
claim filed by Tampa Pathology.
69. "TAMPA PATHOLOGY MOTION" shall mean the joint motion for approval of
compromise and settlement of claims, filed (or to be filed not less than 30
days prior to the Confirmation Hearing) with the Bankruptcy Court by Labs and
Tampa Pathology, pursuant to which Labs and Tampa Pathology request the
Bankruptcy Court's approval of a compromise and settlement of the Tampa
Pathology Claim.
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70. "UNSECURED CLAIM" shall mean any Claim other than the SouthTrust
Claim, Other Secured Claims, Administrative Claims, Priority Tax Claims and
Priority Non-Tax Claims.
71. "VANGARD LABS" shall mean Vangard Labs, Inc.
72. "VANGARD MORTGAGE" shall mean the second mortgage in favor of
SouthTrust on real property located in Glasgow, Kentucky, and owned by Vangard
Labs to be executed and delivered by Vangard Labs, Inc. on the Closing Date.
73. "VANGARD PLAN" shall mean the Liquidating Plan filed and proposed by
Vangard in Case No. 96-02054-8G1.
B. APPLICATION OF DEFINITIONS AND RULES OF CONSTRUCTION
CONTAINED IN THE BANKRUPTCY CODE.
Words and terms defined in Section 101 of the Bankruptcy Code shall have
the same meaning when used in the Joint Plan, unless a different definition is
given in the Joint Plan. The rules of construction contained in Section 102 of
the Bankruptcy Code shall apply to the construction of the Joint Plan.
C. EXHIBITS AND PLAN DOCUMENTS.
All Exhibits to the Joint Plan, and all Plan Documents, whether or not
attached as Exhibits to the Joint Plan, are incorporated into and are a part of
the Joint Plan as if set forth in full herein.
ARTICLE II
CLASSIFICATION OF
CLAIMS AND EQUITY INTERESTS
A. CLAIMS AND EQUITY INTERESTS CLASSIFIED.
For purposes of organization, voting, and all confirmation matters, except
as otherwise provided herein, all Claims (except for Administrative Claims and
Priority Tax Claims), and all Equity Interests shall be classified as set forth
in Article II of the Joint Plan. A Claim or Equity Interest is classified in a
particular class only to the extent that the Claim or Equity Interest qualifies
within the description of that class and is classified in other classes to the
extent that any remainder of the Claim or Equity Interest qualifies within the
description of such other classes. A Claim or Equity Interest is also
classified within a particular class only to the extent that such Claims or
Equity Interests is an Allowed Claim or an Allowed Equity Interest in that
class and has not been paid, released or otherwise satisfied prior to the
Effective Date.
B. ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS.
As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative
Claims and Priority Tax Claims shall not be classified for purposes of voting
or receiving distributions under the Joint Plan. Rather, all such Claims shall
be treated separately as unclassified Claims pursuant to the terms set forth in
Article V of this Joint Plan.
C. CLAIMS AND EQUITY INTERESTS.
The Joint Plan classifies the Claims and Equity Interests as follows:
1. Class 1A: Priority Non-Tax Claims against Packaging.
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2. Class 1B: Priority Non-Tax Claims Against Labs.
3. Class 2: SouthTrust Bank Claim
4. Class 3: Other Secured Claims.
5. Class 4: Tampa Pathology Claim against Labs.
6. Class 5: Unsecured Claims against Packaging.
7. Class 6: Unsecured Claims against Labs.
8. Class 7: Subordinated Claims.
9. Class 8: Equity Intersts.
D. SEPARATE CLASSIFICATION OF OTHER SECURED CLAIMS.
Although placed in one category for purposes of convenience, each Claim
that is determined to be an Other Secured Claim against the Debtors shall be
treated as though in a separate class for purposes of voting and receiving
distributions under the Joint Plan.
ARTICLE III
IDENTIFICATION OF IMPAIRED CLASSES
OF CLAIMS AND EQUITY INTERESTS
A. UNIMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS.
Classes 1A, 1B, and 3 are not impaired under the Joint Plan.
B. IMPAIRED CLASSES OF CLAIMS.
With the exception of the unimpaired classes specified in Article III.A of
this Joint Plan, all classes of Claims and Equity Interests are impaired under
the Joint Plan.
C. IMPAIRMENT CONTROVERSIES.
If a controversy arises as to whether any Claim or Equity Interest, or any
class of Claims or class of Equity Interests, is impaired under the Joint Plan
within the meaning of Section 1124 of the Bankruptcy Code, the Bankruptcy Court
shall, after notice and hearing, determine such controversy.
ARTICLE IV
PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY
INTERESTS CLASSIFIED IN THE JOINT PLAN
The classes of Claims and Equity Interests shall be treated as follows:
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A. CLASS 1A (PRIORITY NON-TAX CLAIMS AGAINST PACKAGING).
Each holder of an Allowed Priority Non-Tax Claim against Packaging shall
receive on the Effective Date Cash in the amount of such holder's Allowed
Priority Non-Tax Claim.
B. CLASS 1B (PRIORITY NON-TAX CLAIMS AGAINST LABS).
Each holder of an Allowed Priority Non-Tax Claim against Labs shall
receive on the Effective Date Cash in the amount of such holder's Allowed
Priority Non-Tax Claim.
C. CLASS 2 (SOUTHTRUST CLAIM).
1. Upon entry of the Confirmation Order, the SouthTrust Claim shall be
Allowed in the amount of $28,257,857.67. SouthTrust shall retain the Liens,
security interests and pledges securing its Claim as of the Filing
Date and, at the Closing on the Closing Date, the Loan Documents shall be
amended and restated in their entirety pursuant to the Plan Documents.
Pursuant to the Plan Documents, SouthTrust shall receive on the Closing Date:
(a) Plan Note I;
(b) Plan Note II;
(c) the Siegel Guaranty;
(d) A one-time Cash distribution equal to $250,000.00;
(e) an assignment, as additional collateral securing Plan Note I and Plan
Note II, of all tax refunds due the Debtors and Affiliated Entities with
respect to tax years prior to and including 1996:
(f) the Patent Assignment; and
(g) the other Plan Documents.
2. Pursuant to this Joint Plan and the Plan Documents, SouthTrust shall
receive the payments called for in Plan Note I and Plan Note II in the amounts
and at the times set forth therein, and shall also receive (a) $500,000.00 of
the proceeds of the tax refunds described in Section B.1.(e) of this Joint
Plan, within seven Business Days after receipt thereof by any of the Debtors or
Affiliated Entities, which amount will be applied against amounts outstanding
under Plan Note II, and (b) one-half (1/2) of the proceeds derived from all
Causes of Action of the Debtors and the Affiliated Entities, other than Vangard
Labs, and 90% of the proceeds derived from Causes of Action of Vangard Labs.
3. Unless a Major Default has occurred and is continuing, SouthTrust's
liens and security interests in the Estate Assets other than Causes of Action
shall be released upon (a) the payment of the Amortization Principal Amount of
Plan Note I and all accrued interest thereon in accordance with the Plan
Documents, (b) payment of all amounts owed under Plan Note II, and (c)
SouthTrust's receipt of the Net Sales Proceeds from the sale of the Vangard
Assets, as such terms are defined in the Vangard Plan.
4. The SouthTrust Claim will be satisfied on and as of the tenth
anniversary of the Closing Date, if, and only if, (a) the Amortization
Principal Amount of Plan Note I, all accrued interest thereon, and all amounts
owed under Plan Note II are fully paid in accordance with the Plan Documents,
(b) the Net Sales Proceeds from the sale of the Vangard Assets are paid to
SouthTrust in accordance with the Vangard Plan, (c) all mandatory partial
prepayments under Plan Note I resulting from Causes of Action or Capital
Transactions (as defined in the Plan Documents) are fully paid in accordance
with the Plan Documents, and (d) no Major Default shall have occurred and be
continuing.
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D. CLASS 3 (OTHER SECURED CLAIMS).
Each Other Secured Claim, including the Allowed Secured Claim of the
Pinellas County Tax Collector, will be dealt with as though a separate class
and will be treated as follows. At the option of the Debtors, each holder of
an Allowed Other Secured Claim, including Allowed Secured Claim of the Pinellas
County Tax Collector, shall retain its lien and either be paid the full amount
of its Allowed Other Secured Claim on the Effective Date, or the legal,
equitable and contractual rights to which said Allowed Other Secured Claim
entitles the holder thereof shall remain unaltered by the Joint Plan.
E. CLASS 4 (TAMPA PATHOLOGY CLAIM AGAINST LABS).
As full and complete treatment for, and in full and complete settlement
of, the Tampa Pathology Claim, Tampa Pathology shall receive, from Labs, the
payments described in the Tampa Pathology Motion.
F. CLASS 5 (UNSECURED CLAIMS AGAINST PACKAGING).
1. As full treatment for, and in full settlement of, the Allowed Class 5
Claims against Packaging, each holder of a Class 5 Allowed Claims shall receive
one of the following, pursuant to the election described in Section F.2, below:
(a) A one-time Cash payment in an amount equal to 15% of such Class 5
Allowed Claim, which shall be paid on the date which is six (6) months after
the Effective Date;
(b) An amount equal to 30% of such Class 5 Allowed Claim, payable as
follows: (i) an amount equal to 5% of such Class 5 Allowed Claim on the first
anniversary of the Effective Date, plus (ii) an amount equal to 5% of such
Class 5 Allowed Claim on the second anniversary of the Effective Date, plus
(iii) an amount equal to 20% of such Class 5 Allowed Claim on the third
anniversary of the Effective Date; or
(c) An amount equal to 100% of such Class 5 Allowed Claim, payable as
follows: (i) equal payments, each of which will be in an amount equal to 5% of
such Class 5 Allowed Claim, commencing on the second anniversary of the
Effective Date, and on each anniversary thereafter through and including the
sixth anniversary of the Effective Date, plus (ii) equal payments, each of
which will be in an amount equal to 15% of such Class 5 Allowed Claim,
commencing on the seventh anniversary of the Effective Date, and on each
anniversary thereafter through and including the eleventh anniversary of the
Effective Date.
2. In order to make an election to accept treatment (a), (b) or (c), each
holder of a Class 5 Allowed Claim must indicate its election on the ballot
which is attached to this Joint Plan and return it completed on or prior to the
Ballot Date. In the event that any holder of a Class 5 Allowed Claim does not
properly designate an election on its ballot, or does not return its ballot on
or prior to the Ballot Date, such holder shall be deemed to have made the
election to receive treatment of its Class 5 Allowed Claim in accordance with
subparagraph (a), above.
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G. CLASS 6 (UNSECURED CLAIMS AGAINST LABS).
1. As full treatment for, and in full settlement of, the Allowed Class 6
Claims against Labs, each holder of a Class 6 Allowed Claim shall receive one
of the following, pursuant to the election described in Section G.2, below:
(a) A one-time Cash payment in an amount equal to 15% of such Class 6
Allowed Claim, which shall be paid on the date which is six (6) months after
the Effective Date;
(b) An amount equal to 30% of such Class 6 Allowed Claim, payable as
follows: (i) an amount equal to 5% of such Class 6 Allowed Claim on the first
anniversary of the Effective Date, plus (ii) an amount equal to 5% of such
Class 6 Allowed Claim on the second anniversary of the Effective Date, plus
(iii) an amount equal to 20% of such Class 6 Allowed Claim on the third
anniversary of the Effective Date; or
(c) An amount equal to 100% of such Class 6 Allowed Claim, payable as
follows: (i) equal payments, each of which will be in an amount equal to 5% of
such Class 6 Allowed Claim, commencing on the second anniversary of the
Effective Date, and on each anniversary thereafter through and including the
sixth anniversary of the Effective Date, plus (ii) equal payments, each of
which will be in an amount equal to 15% of such Class 6 Allowed Claim,
commencing on the seventh anniversary of the Effective Date, and on each
anniversary thereafter through and including the eleventh anniversary of the
Effective Date.
2. In order to make an election to accept treatment (a), (b) or (c), each
holder of a Class 6 Allowed Claim must indicate its election on the ballot
which is attached to this Joint Plan and return it completed on or prior to the
Ballot Date. In the event that any holder of a Class 6 Allowed Claim does not
properly designate an election on its ballot, or does not return its ballot on
or prior to the Ballot Date, such holder shall be deemed to have made the
election to receive treatment of its Class 6 Allowed Claim in accordance with
subparagraph (a), above.
H. CLASS 7 (SUBORDINATED CLAIMS).
The Claims of Insiders shall be subordinated to all other Claims and the
holders of Insider Claims shall not receive any payments or distributions on
account of such Claims until the SouthTrust Claim has been paid in full.
I. CLASS 8 (EQUITY INTERESTS).
MTS, the holder of all Equity Interests in each of the Debtors, shall
retain such Equity Interests by virtue of the provisions set forth herein.
ARTICLE V
PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS
A. ADMINISTRATIVE CLAIMS. All Administrative Claims shall be treated as
follows:
1. TIME FOR FILING ADMINISTRATIVE CLAIMS. The holder of an Administrative
Claim, other than (i) a Fee Claim or (ii) a liability incurred and paid in the
ordinary course of business by the Debtors, must file with the Bankruptcy Court
and serve on the Debtors and their respective counsel, notice of such
Administrative Claim within ten days after the Confirmation Date or such other
date as the Bankruptcy Court may fix. Such notice must include at a minimum
(i) the name of the holder of the Claim, (ii) the amount of the Claim, and
(iii) the basis of the Claim. Failure to file this notice timely and properly
shall result in the Administrative Claim being forever barred and discharged.
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2. TIME FOR FILING FEE CLAIMS. Each Professional Person who holds or
asserts an Administrative Claim that is a Fee Claim incurred before the
Confirmation Date must file with the Bankruptcy Court and serve on
all parties required to receive notice a Fee Application within 30 days after
the Confirmation Date. The failure to file the Fee Application timely shall
result in the Fee Claim being forever barred and discharged.
3. ALLOWANCE OF ADMINISTRATIVE CLAIMS. An Administrative Claim with
respect to which notice has been properly filed pursuant to Article V.A.1 of
this Joint Plan shall become an Allowed Administrative Claim if no objection is
filed within twenty days of the filing and service of notice of such
Administrative Claim. If an objection is filed within such twenty-day period,
the Administrative Claim shall become an Allowed Administrative Claim only to
the extent allowed by Final Order. An Administrative Claim that is a Fee
Claim, and with respect to which a Fee Application has been properly filed
pursuant to Article V.A.2 of the Joint Plan, shall become an Allowed
Administrative Claim only to the extent allowed by Final Order.
4. PAYMENT OF ALLOWED ADMINISTRATIVE CLAIMS. Each holder of an Allowed
Administrative Claim shall receive (i) payment of the Allowed Administrative
Claim on the Effective Date, or (ii) such other treatment as may be agreed upon
by such holder; provided, that an Administrative Claim representing a liability
incurred in the ordinary course of business by the Debtors may be paid in the
ordinary course of business.
B. PRIORITY TAX CLAIMS.
All Allowed Priority Tax Claims shall be treated as follows. Each holder
of an Allowed Priority Tax Claim remaining unpaid on the Confirmation Date
shall receive at the sole option of Debtors (i) the amount of such holder's
Allowed Priority Tax Claim in one Cash payment on the Effective Date; (ii) the
amount of such holder's Allowed Priority Tax Claim, with post-confirmation
interest thereon, in equal annual Cash payments on each anniversary of the
Effective Date, until the sixth anniversary of the date of assessment of such
Claim; or (iii) such other treatment as may be agreed by Debtors and such
holder.
ARTICLE VI
ACCEPTANCE OR REJECTION OF THE JOINT PLAN; EFFECT OF
REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS
A. CLASSES ENTITLED TO VOTE.
Each impaired class of Claims or Equity Interests shall be entitled to
vote separately to accept or reject the Joint Plan. Unimpaired classes of
Claims or Equity Interests shall not be entitled to vote to accept or reject
the Joint Plan.
B. CLASS ACCEPTANCE REQUIREMENT.
A class of Claims shall have accepted the Joint Plan it if is accepted by
at least two-thirds (2/3) in dollar amount and more than one-half (1/2) in
number of the holders of Claims in such class that have timely and properly
voted on the Joint Plan. A class of Equity Interests shall have accepted the
Joint Plan it if is accepted by at least two-thirds (2/3) in amount of the
holders of Equity Interests in such class that have timely and properly voted
on the Joint Plan.
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ARTICLE VII
MEANS FOR IMPLEMENTATION OF THE JOINT PLAN
A. ALLOWANCE OF CLAIMS.
The SouthTrust Claim shall be deemed an Allowed Claim upon the entry of
the Confirmation Order and shall not thereafter be subject to any further
objection or dispute.
B. RESTRUCTURE OF SOUTHTRUST DEBT.
1. This Joint Plan provides for the restructure of the debt on which the
SouthTrust Claim is based, by amending and restating the Loan Documents in
their entirety. The Plan Documents governing this restructuring are subject to
SouthTrust's approval. As part of the restructuring, SouthTrust will retain
its Liens, security interests and pledges and receive additional collateral.
On the Closing Date the Plan Documents will be executed and delivered. The
Loan Documents shall remain in full force and effect except as amended and
restated in accordance with the provisions of the Joint Plan.
2. Upon their execution and delivery on the Closing Date, the Plan
Documents shall be fully effective and, in the event of any inconsistency
between the terms and conditions of this Joint Plan and those contained in any
of the Plan Documents, the terms and conditions contained in the Plan Documents
shall prevail.
C. OPERATION OF THE DEBTORS.
The Debtors shall continue to operate and manage their affairs after the
Confirmation Date. Todd Siegel will remain chairman and chief executive
officer of the Debtors. John Stanton and Michael Conroy will continue to have
day-to-day operational control or oversight of the Debtors' affairs.
D. VESTING.
Immediately following the restructure of the SouthTrust Claim in the
manner set forth in Article IV of this Joint Plan on the Closing Date, all of
the Estate Assets shall vest in the Reorganized Debtors free and clear of all
liens and encumbrances except the liens and encumbrances of SouthTrust and
except as otherwise provided in this Joint Plan.
E. INCOME TAX REFUND.
Siegel, MTS and the Debtors shall take all appropriate steps to timely
complete and file with the U.S. Internal Revenue Service (and applicable state
taxing authorities) appropriate requests for tax refunds for 1996 and all prior
tax years. Within seven Business Days of receipt of such refunds by any of the
Debtors or Affiliated Entities, the Debtors and the Affiliated Entities shall
pay to SouthTrust a portion of the proceeds thereof equal to $500,000.00, which
shall be applied to satisfy Plan Note II as provided herein.
F. COMPROMISE AND SETTLEMENT BETWEEN LABS AND TAMPA PATHOLOGY.
Not less than 30 days prior to the Confirmation Hearing, Labs will file
the Tampa Pathology Motion with the Bankruptcy Court and will request the
approval of the compromise and settlement described therein between Labs and
Tampa Pathology.
G. PAYMENT BY MTS TO RETAIN EQUITY INTERESTS; ISSUANCE OF MTS DEBENTURES.
1. On or prior to the Closing Date, MTS shall pay to the Debtors the
aggregate sum of $200,000.00, as needed or shall guaranty all Plan payments to
unsecured creditors, in exchange for the retention by MTS of the Equity
Interests in the Debtors. This sum, when paid to the Debtors, shall be used
solely to fund Cash payments to
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the holders of Allowed Class 5 and Class 6 Claims and Allowed Administrative
Expenses. In any event, MTS shall retain 100% equity interest in the Debtors.
2. In order to fund the payment described in Section G.1, above, MTS may
issue and sell certain debentures to an unrelated entity, which debentures will
be subordinate in right of payment and in all other respects to the payment of
the SouthTrust Claim, and will be secured by a second and subordinate pledge of
the outstanding capital stock of the Debtors and all other subsidiary
corporations of MTS, except Vangard Labs. Upon request of SouthTrust, the
holder of such debentures will enter into a subordination agreement with
SouthTrust containing terms and conditions acceptable in all respects to
SouthTrust. In the event that such a subordination agreement is executed and
delivered, it shall be included within the definition of Plan Documents in this
Joint Plan.
ARTICLE VIII
PROVISIONS GOVERNING DISTRIBUTIONS
A. DATE OF DISTRIBUTIONS.
Any distributions and deliveries to be made under the Joint Plan on
account of an Allowed Claim or Equity Interests shall be made on the Effective
Date with respect to such Allowed Claim or Equity Interest, except that the
Plan Documents and the initial Cash distribution to SouthTrust must be
delivered on the Closing Date, and distributions to holders of Allowed Class 5
and Class 6 Claims shall be made on the dates set forth in Article IV, Sections
E. and F. of this Joint Plan.
B. DISTRIBUTIONS TO BE MADE BY DEBTORS.
The Debtors shall make all distributions provided for in this Joint Plan.
C. MEANS OF CASH PAYMENT.
Cash payments made pursuant to the Joint Plan shall be in U.S. funds, by
check drawn on a domestic bank, or by wire transfer from a domestic bank.
D. DELIVERY OF DISTRIBUTIONS.
Subject to Bankruptcy Rule 9010, distributions and deliveries to holders
of Allowed Claims and Allowed Equity Interests shall be made at the address of
each such holder as set forth on the proofs of claim or proofs of interest
filed by such holders (or at the last known addresses of such holders if no
proof of claim or proof of interest is filed or if the Debtors have been
notified of a change of address), except as otherwise provided in this Article
VIII.D of the Joint Plan. If any holder's distribution is returned as
undeliverable, no further distributions to such holder shall be made unless and
until the Debtors, are notified of such holder's then current address, at which
time all missed distributions shall be made to such holder without interest.
Amounts in respect of undeliverable distributions (the "Undeliverable Funds")
shall be returned to the Debtors, until such distributions are claimed. All
claims for undeliverable distributions shall be made on or before the one
hundred and eightieth (180th) day following the Confirmation Date. After such
date, all Claims in respect of Undeliverable Funds shall be discharged and
forever barred.
E. DISTRIBUTIONS UNDER FIVE DOLLARS.
No distribution of less than five dollars ($5.00) shall be made by the
Debtors to the holder of any Claim unless a request therefor is made in writing
to the Debtors. If, as a result of this provision, an interim distribution is
not made to any holder of a Claim, such holder nevertheless shall receive
subsequent interim or final distributions from the Estates provided that the
aggregate amount of such holder's previous unpaid distributions plus the amount
of the interim or final distribution then to be made is not less than five
dollars ($5.00).
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F. TIME BAR TO CASH PAYMENTS.
Checks issued by the Debtors, in respect of Allowed Claims shall be null
and void if not negotiated within ninety days after the date of issuance
thereof. Requests for reissuance of any check shall be made directly to the
Debtors by the holder of the Allowed Claim with respect to which such check
originally was issued. Any claim in respect of such a voided check shall be
made on or before the 180th day following one hundred fifty days after the date
of issuance of such check. After such date, all Claims in respect of void
checks shall be discharged and forever barred.
G. DISPOSITION OF UNDELIVERABLE FUNDS.
All Undeliverable Funds not claimed by the deadlines set forth in Article
VIII.D and .F above shall be distributed by the Debtors to creditors in
accordance with the terms and provisions of Article IV of this Joint Plan.
ARTICLE IX
PROCEDURES FOR RESOLVING AND TREATING CONTESTED CLAIMS
A. OBJECTION DEADLINE.
As soon as practicable, but in no event later than the Objection Deadline,
objections to Claims shall be filed with the Bankruptcy Court and served upon
the holders of each of the Claims to which objections are made.
B. NO DISTRIBUTIONS PENDING ALLOWANCE.
Notwithstanding any other provision of the Joint Plan, no payment or
distribution shall be made with respect to any Claim to the extent it is a
Contested Claim unless and until such Contested Claim becomes an Allowed Claim.
C. DISTRIBUTIONS AFTER ALLOWANCE.
Payments and distributions to each holder of a Contested Claim, to the
extent that such Claim ultimately becomes an Allowed Claim, shall be made in
accordance with the provisions of the Joint Plan governing the class of Claims
to which the respective holder belongs.
ARTICLE X
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. REJECTED IF NOT ASSUMED.
The Joint Plan constitutes and incorporates a motion to reject all
prepetition executory contracts and unexpired leases within the meaning of
Section 365 of the Bankruptcy Code to which the Debtors are a party, except for
an executory contract or lease that: (a) has been assumed or rejected pursuant
to Final Order of the Bankruptcy Court; or (b) will be furnished ten (10) days
prior to Confirmation; or (c) is the subject of a motion to assume or reject
that is pending before the Bankruptcy Court on the Confirmation Date. The
Confirmation Order shall automatically constitute the approval, effective as of
the Effective Date, of such rejections and assumptions of executory contracts
and leases. Any monetary amounts by which the contracts and leases to be
assumed under the Joint Plan are in default shall be satisfied by delivery of a
single Cash payment on the Effective Date.
17
<PAGE> 25
B. BAR TO REJECTION DAMAGES.
If the rejection of any executory contract or unexpired lease by operation
of the Confirmation Order or otherwise results in damages to the other party or
parties to such contract or lease, a Claim for such damages, if not heretofore
evidenced by a filed proof of claim, shall be forever barred and shall not be
enforceable against the Debtors, their Estates or their properties or agents,
successors, or assigns, unless a proof of claim is filed with the Bankruptcy
Court and served upon counsel for the Debtors on or before thirty days after
entry of the Confirmation Order.
ARTICLE XI
CONDITIONS TO CONFIRMATION
The Joint Plan shall not be effective until the following conditions have
been either satisfied or waived in writing by SouthTrust:
1. Each of the Plan Documents, the transactions contemplated therein, and
all of the terms and conditions contained therein, shall have been approved in
all respects by the Bankruptcy Court, and the Bankruptcy Court shall have
authorized the Affiliated Entities and Siegel to execute and deliver the Plan
Documents to which they are parties on the Closing Date;
2. The Closing shall have occurred on the Closing Date;
3. The Confirmation Order providing for the waiver of rights and relief
from the automatic stay described in Article XII, and described in more detail
in the Plan Documents, and the order approving the Plan Documents as provided
in section 1, above (the "Plan Documents Order"), shall have been signed by the
Bankruptcy Court and duly entered on the docket in the Chapter 11 Cases by the
clerk of the Bankruptcy Court, in each case in form and substance acceptable to
SouthTrust;
4. No appeal or stay of the Confirmation Order or the Plan Documents Order
shall have occurred;
5. Vangard Labs shall have been authorized by the Bankruptcy Court to
execute the Plan Documents and to enter into the transactions contemplated
therein and shall have executed and delivered the Plan Documents; and
6. The Tampa Pathology Motion shall have been approved by the Bankruptcy
Court in an order, in form and substance acceptable to SouthTrust, and no
appeal or stay with respect to such order shall have occurred.
ARTICLE XII
WAIVER OF CERTAIN RIGHTS
In addition to the other provisions to be contained therein, Plan Note I,
Plan Note II and certain of the other Plan Documents will contain provisions,
in form and substance acceptable to SouthTrust in all respects, under which (i)
the Debtors, the Affiliated Entities and Siegel will agree that, upon the
occurrence of a Major Default and the expiration of any applicable cure period,
they will not be entitled to take any action to seek to stop or stay any
foreclosure or other exercise of legal or equitable rights and remedies by the
holder of Plan Note I or Plan Note II, and (ii) in the event that (a) any
bankruptcy case is filed by or against any of the Debtors, the Affiliated
Entities or Siegel, or which otherwise has jurisdiction over the SouthTrust
Claim, Plan Note I, Plan Note II, or the other Plan Documents, and (b) any such
bankruptcy case, or any action or omission by any of the Debtors, the
Affiliated Entities or Siegel in connection therewith (including, without
limitation, any failure to timely comply with their payment or other
obligations under the Plan Documents or under this Joint Plan) impairs, or
affects
18
<PAGE> 26
adversely the Collateral or the rights and remedies of SouthTrust, then
SouthTrust will automatically be entitled to relief from the automatic stay
provisions of Section 362 of the Bankruptcy Code or any successor or similar
law, and the debtor in any such bankruptcy case shall, and shall be deemed to,
consent and agree not to oppose the filing by such holder of a motion for such
relief.
Nothing contained in the Plan Documents or in this Article XII shall be
construed or deemed to preclude the exercise by SouthTrust of any and all
remedies available at law or in equity upon any default or event of default
under Plan Note I, Plan Note II, or the related Plan Documents.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
A. NOTICE OF ENTRY OF CONFIRMATION ORDER AND RELEVANT DATES.
Promptly upon entry of the Confirmation Order, the Debtors shall serve on
all parties in interest, all holders of Claims, and all holders of Equity
Interests, notice of the entry of the Confirmation Order and all relevant
deadlines and dates under the Joint Plan, including, but not limited to, the
deadline for filing notice of Administrative Claims (Article V.A. hereof), and
the deadline for filing rejection damage claims (Article X.B. hereof).
B. COMPLIANCE WITH TAX REQUIREMENTS.
In connection with the Joint Plan, the Debtors shall comply with all
applicable withholding and reporting requirements imposed by federal, state,
local, and foreign taxing authorities and all distributions hereunder shall be
subject to such withholding and reporting requirements.
C. COMPLIANCE WITH ALL APPLICABLE LAWS.
If notified by any governmental authority that they are in violation of
any applicable law, rule, regulation, or order of such governmental authority
relating to its business, the Debtors shall take whatever action as may be
required to comply with such law, rule, regulation, or order; provided, that
nothing contained herein shall require such compliance if the legality or
applicability of any such requirement is being contested in good faith, and, if
appropriate, an adequate reserve for such requirement has been set aside.
D. DISCHARGE OF CLAIMS.
Except as otherwise provided herein or in the Confirmation Order, the
rights afforded in the Joint Plan and the payments and distributions to be made
hereunder shall be in complete exchange for, and in full satisfaction,
discharge and release of, all existing debts and Claims of any kind, nature or
description whatsoever against the Debtors or any of their assets or property;
and upon the Effective Date, all existing Claims against the Debtors shall be,
and shall be deemed to be, exchanged, satisfied, discharged and released in
full; and all holders of Claims shall be precluded from asserting against the
Debtors, or any of their assets or property, any other or further Claim based
upon any act or omission, transaction or other activity of any kind or nature
that occurred prior to the Effective Date, whether or not such holder filed a
proof of claim.
E. EFFECT OF CONFIRMATION ORDER.
Except as provided for in the Joint Plan, the Confirmation Order shall be
a judicial determination of discharge of the Debtors effective as of the
Effective Date, to the extent permitted by section 1141 of the Bankruptcy Code,
from all debts that arose before the Confirmation Date and any liability on a
Claim that is determined under section 502 of the Bankruptcy Code as if such
Claim had arisen before the Effective Date, whether or not a proof of claim
based on any such date or liability is filed under section 501 of the
Bankruptcy Code and whether or not a Claim based on such debt or liability is
allowed under section 502 of the Bankruptcy Code.
19
<PAGE> 27
F. NO DISCHARGE OF NON-DEBTOR OBLIGATIONS.
Except as otherwise expressly provided in the Plan Documents, nothing
contained in this Joint Plan shall be deemed to affect the liabilities,
obligations or property of any Person or entity who may be obligated on a Claim
against the Debtors by virtue of a guaranty agreement or otherwise.
Specifically, this Joint Plan shall not affect, or prejudice SouthTrust's
rights to pursue the obligations and liabilities of the Affiliated Entities or
any guarantor to SouthTrust under any promissory note, guaranty, security
agreement, assignment or pledge of collateral or similar loan document.
G. PAYMENT OF STATUTORY FEES.
All fees payable pursuant to Section 1930 of title 28 of the United States
Code, as determined by the Bankruptcy Court at the Confirmation Hearing shall
be paid on or before the Effective Date.
H. BINDING EFFECT.
The Joint Plan shall be binding upon and inure to the benefit of the
Debtors, the holders of all Claims, the holders of all Equity Interests, and
their respective successors and assigns.
I. NOTICES.
Any notice required or permitted to be provided under the Joint Plan shall
be in writing and served by either (a) certified mail, return receipt
requested, postage prepaid, (b) hand delivery, or (c) reputable overnight
delivery service, freight prepaid, to be addressed as follows:
Domenic L. Massari, III, Esq.
Massari & Bell, P.A.
One Urban Centre, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
With a copy to:
Todd E. Siegel
12920 Automobile Boulevard
Clearwater, Florida 34622
and
John Stanton
P.O. Box 24567
Tampa, Florida 33623
J. GOVERNING LAW.
Unless a rule of law or procedure is supplied by federal law (including
the Bankruptcy Code and Bankruptcy Rules), the internal laws of the State of
Florida shall govern the construction and implementation of the Joint Plan;
provided, that the Plan Documents shall be governed by and construed in
accordance with the law of the State of Alabama without regard to principles of
conflicts of laws.
K. TRANSFER TAXES.
The transfer of any Estate Assets, including the transfers embodied in the
Plan Documents or the Loan Documents and the making or delivery of any
instrument of transfer pursuant to this Joint Plan, including deeds
20
<PAGE> 28
and articles of transfer, shall not be taxed under any law imposing a stamp
tax, transfer tax, sales tax, or similar tax, pursuant to section 1146(c) of
the Bankruptcy Code.
ARTICLE XIV
RETENTION OF JURISDICTION
A. RETENTION OF JURISDICTION.
The Bankruptcy Court shall retain and have exclusive jurisdiction of all
matters arising out of, and related to, the Chapter 11 Case and the Joint Plan
pursuant to, and for the purposes of, sections 105(a) and 1142 of the
Bankruptcy Code and for, among other things, the following purposes:
(1) To hear and determine pending applications for the assumption or
rejection of executory contracts or unexpired leases, if any are pending, and
the allowance of Claims resulting therefrom;
(2) To determine any and all pending adversary proceedings, applications,
and contested matters;
(3) To ensure that distributions to holders of Allowed Administrative
Claims, Allowed Priority Tax Claims, Allowed Priority Non-Tax Claims, Allowed
Unsecured Claims, Allowed Secured Claims (including in particular the
SouthTrust Claim), and Allowed Equity Interests are accomplished as provided
herein;
(4) To hear and determine any timely objections to Administrative Claims
or to proofs of Claim and Equity Interests filed, both before and after the
Confirmation Date, including any objections to the classification of any Claim
or Equity Interest, and to allow or disallow any Contested Claim or Equity
Interest, in whole or in part;
(5) To enter and implement such orders as may be appropriate in the event
the Confirmation Order is for any reason stayed, revoked, modified, or vacated;
(6) To issue such orders in aid of execution of the Joint Plan, to the
extent authorized by section 1142 of the Bankruptcy Code;
(7) To consider any modifications of the Joint Plan, to cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(8) To hear and determine all applications for compensation and
reimbursement of expenses of professionals under sections 330, 331, and 503(b)
of the Bankruptcy Code incurred prior to the Effective Date;
(9) To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Joint Plan;
(10) To recover all assets of the Debtors and property of the Estate,
where located;
(11) To enforce and interpret the terms and conditions of the Plan
Documents, including, without limitation, the waivers and agreements contained
in the Plan Documents and described in Article XII of this Joint Plan;
(12) To hear and determine matters concerning state, local and federal
taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;
(13) To hear any other matter not inconsistent with the Bankruptcy Code;
and
(14) To enter a final decree closing the Chapter 11 Cases.
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<PAGE> 29
B. MODIFICATION OF THE JOINT PLAN.
Modifications of the Joint Plan may be proposed in writing by the Debtors
at any time before confirmation, provided that the Joint Plan, as modified,
meets the requirements of sections 1122 and 1123 of the Bankruptcy Code, and
the Debtors shall have complied with section 1125 of the Bankruptcy Code. The
Joint Plan may be modified at any time after confirmation and before
substantial consummation, provided that the Joint Plan, as modified, meets the
requirements of sections 1122 and 1123 of the Bankruptcy Code and the
Bankruptcy Court, after notice and a hearing, confirms the Joint Plan as
modified, under section 1129 of the Bankruptcy Code, and the circumstances
warrant such modifications. A holder of a Claim or Equity Interest that has
accepted or rejected the Joint Plan shall be deemed to have accepted or
rejected, as the case may be, such plan as modified, unless, within the time
fixed by the Bankruptcy Court, such holder changes its previous acceptance or
rejection.
Dated this 12th day of July, 1996.
Respectfully submitted,
MEDICAL TECHNOLOGY LABORATORIES,
INC.
By: /s/ TODD E. SIEGEL
----------------------------
Its: President
----------------------------
MTS PACKAGING SYSTEMS, INC.
By: /s/ TODD E. SIEGEL
----------------------------
Its: President
----------------------------
OF COUNSEL:
DOMENIC L. MASSARI, III
MASSARI & BELL, P.A.
One Urban Centre, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
(813) 282-3255
22
<PAGE> 1
EXHIBIT 10.10
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
AMONG
MEDICAL TECHNOLOGY SYSTEMS, INC.,
CLEARWATER MEDICAL SERVICES, INC.,
MEDICAL TECHNOLOGY LABORATORIES, INC.,
MTS PACKAGING SYSTEMS, INC.,
PERFORMANCE PHARMACY SYSTEMS, INC.,
VANGARD LABS, INC.,
VANGARD PHARMACEUTICAL PACKAGING, INC.,
CART-WARE, INC.,
MEDICATION MANAGEMENT SYSTEMS, INC.,
MEDICATION MANAGEMENT TECHNOLOGIES, INC.,
MTS SALES & MARKETING, INC., and
SYSTEMS PROFESSIONALS, INC.,
AS BORROWERS,
TODD E. SIEGEL,
AS GUARANTOR
AND
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION,
AS LENDER
DATED AS OF
SEPTEMBER 5, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NO.
<S> <C>
ARTICLE I. DEFINITIONS 3
1.1 Defined Terms 3
1.2 Accounting Terms 17
1.3 Construction of Terms 17
ARTICLE II. THE LOAN 17
2.1 History of the Loan 17
2.2 Assumption of Direct Liability by MTS Subsidiaries; Amendment
and Restatement 17
2.3 Amendment, Restatement and Consolidation of Indebtedness;
Agreement Not a Novation 17
2.4 Plan Note I 18
(E) Payment or Satisfaction of Remaining MTS Debt 20
(F) Satisfaction of Remaining MTS Debt 23
2.5 Plan Note II 23
2.6 Additional Terms of Plan Notes 25
2.7 Payment to the Lender 25
ARTICLE III. CONDITIONS PRECEDENT 26
3.1 Documents Required Before Closing 26
3.2 Certain Events 28
3.3 Legal Matters 28
ARTICLE IV. COLLATERAL SECURITY 29
4.1 Composition of the Collateral; Security Interests Granted
Pursuant to Original SouthTrust Loan Documents 29
4.2 Rights in Property Held by the Lender 29
4.3 Rights in Property Held by Any of the Borrowers or by the Lender 29
4.4 Priority of Liens 30
4.5 Financing Statements 30
4.6 Lien Waivers 31
4.7 Chattel Paper or Instruments 31
4.8 Release of Certain Collateral in Certain Events 32
ARTICLE V. REPRESENTATIONS AND WARRANTIES 34
5.1 Original 34
5.2 Survival 37
5.3 SouthTrust Closing Certificate Regarding Borrowers'
Representations and Warranties 37
ARTICLE VI. THE BORROWERS' COVENANTS 37
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
6.1 Affirmative Covenants 37
6.2 Negative Covenants 43
6.3 Financial Covenants 47
ARTICLE VII. DEFAULT 48
7.1 Events of Default 48
7.2 Acceleration 52
7.3 Remedies 53
7.4 Right of Set-Off 54
7.5 Waiver of Right To Stay Foreclosure Upon Occurrence of
Major Default 55
7.6 Relief from Automatic Stay 55
7.7 Acknowledgment of the Borrowers and Guarantor 56
ARTICLE VIII. MISCELLANEOUS 56
8.1 Construction 56
8.2 Further Assurance 56
8.3 Indemnity 56
8.4 Enforcement and Waiver by the Lender 56
8.5 Expenses of the Lender 56
8.6 Notices 57
8.7 Waiver by the Borrowers 58
8.8 Participation 58
8.9 Governing Law 58
8.10 Submission to Jurisdiction; Waivers 58
8.11 Release 60
8.12 Binding Effect, Assignment 60
8.13 Entire Agreement, Amendments 60
8.14 Severability 60
8.15 Headings 61
8.16 Counterparts 61
8.17 Seal 61
</TABLE>
ii
<PAGE> 4
SCHEDULE OF EXHIBITS
Exhibit A - Plan Note I
Exhibit B - Plan Note II
Exhibit C - Closing Certificate
Exhibit D - Collateral Patent Assignment
Exhibit E - Amended and Restated Collateral Patent, Trademark,
Copyright and License Assignment
Exhibit F - Compliance Certificate
Exhibit G - Guaranty Agreement
Exhibit H - MTS Mortgage
Exhibit I - Existing Liens
Exhibit J - [Reserved]
Exhibit K - Second Amended and Restated Stock Pledge Agreement
Exhibit L - Existing Subordinated Indebtedness
Exhibit M - Subordination Agreement
Exhibit N - Vangard Mortgage
Exhibit O - Certificate of Secretary
Exhibit P - Opinion of Borrowers' Counsel
Exhibit Q - Amendment and Ratification of Royalty Subordination
Agreement
Exhibit R - Amendment and Ratification of Three-Party Agreement
Exhibit S - Qualification to Do Business
Exhibit T - Places of Business - Locations of the Collateral
Exhibit U - Mergers, Acquisitions and Certain Changes
Exhibit V - Claims, Litigation, Etc.
Exhibit W - Material Adverse Changes
Exhibit X - Certain Tax Matters
Exhibit Y - Compliance with Laws
Exhibit Z - Existing Indebtedness
Exhibit AA - Material Leases, Contracts and Commitments
Exhibit BB - Certain ERISA Matters
Exhibit CC - Compliance with Environmental Laws
Exhibit DD - Patents, Trademarks, Copyrights and Licenses
Exhibit EE - Certain Agreements Regarding Inventory
iii
<PAGE> 5
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT,
dated September ____, 1996, made by and among MEDICAL TECHNOLOGY SYSTEMS, INC.,
a Delaware corporation ("MTS"), the following subsidiaries of MTS: CLEARWATER
MEDICAL SERVICES, INC., a Florida corporation ("Clearwater Medical"), MEDICAL
TECHNOLOGY LABORATORIES, INC., a Florida corporation ("MTS Labs"), MTS
PACKAGING SYSTEMS, INC., a Florida corporation ("MTS Packaging"), PERFORMANCE
PHARMACY SYSTEMS, INC., a Florida corporation ("Performance Pharmacy"), VANGARD
LABS, INC., a Kentucky corporation ("Vangard Labs"), and VANGARD
PHARMACEUTICAL PACKAGING, INC., a Florida corporation ("Vangard
Pharmaceutical"), CART-WARE, INC., a Florida corporation ("Cart-Ware"),
MEDICATION MANAGEMENT SYSTEMS, INC., a Florida corporation ("MMS"), MEDICATION
MANAGEMENT TECHNOLOGIES, INC., a Florida corporation ("MMT"), MTS SALES &
MARKETING, INC., a Florida corporation ("MTS Sales"), and SYSTEMS
PROFESSIONALS, INC., a Florida corporation ("Systems Professionals")
(collectively referred to herein as the "MTS Subsidiaries" and, together with
MTS, as the "Borrowers"), TODD E. SIEGEL ("Siegel" or the "Guarantor"), and
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, a national banking
association (the "Lender" or "SouthTrust"),
W I T N E S E T H:
WHEREAS, MTS and, as guarantors, each of the MTS Subsidiaries
and Siegel, are indebted to the SouthTrust for principal, accrued interest,
fees, charges and expenses totalling in excess of $28,257,857.67, under (i) the
Amended and Restated Revolving Loan Note, dated as of September 28, 1993,
issued by MTS and payable to the order of SouthTrust, as heretofore amended,
modified and increased (the "Original Revolving Note"), and (ii) the Amended
and Restated Term Loan Note, dated as of September 28, 1993, issued by MTS and
payable to the order of SouthTrust, as heretofore amended, modified and
increased (the "Original Term Note") (collectively, the "Original Notes"), and
(iii) all other obligations under the Amended and Restated Loan and Security
Agreement among SouthTrust, the Borrowers and Siegel, dated as of September 28,
1993, as heretofore amended and modified by (a) the First Amendment to Amended
and Restated Loan and Security Agreement, dated as of April 25, 1994, (b) the
Second Amendment to Amended and Restated Loan and Security Agreement, dated as
of May 18, 1994, (c) the Third Amendment to Amended and Restated Loan and
Security Agreement, dated as of March 28, 1995, and (d) the Master Loan
Modification Agreement, dated as of August 9, 1995, but effective as of March
28, 1995 (as so amended and modified, the "Original SouthTrust Loan Agreement"
and, together with all other instruments, security agreements, guaranties,
pledge agreements and related documents delivered in connection therewith, the
"Original SouthTrust Loan Documents"); and
1
<PAGE> 6
WHEREAS, Siegel and each of the MTS Subsidiaries guaranteed
the full and timely payment of all amounts owed by MTS to SouthTrust pursuant
to the Original Notes and the other Original SouthTrust Loan Documents, and in
connection with the transactions contemplated in the Original SouthTrust Loan
Agreement and pursuant thereto, each of the Borrowers granted to the SouthTrust
a first priority security interest in all of the Borrowers' assets, all as more
fully described in the Original SouthTrust Loan Documents; and
WHEREAS, certain defaults and Events of Default occurred under
the Original SouthTrust Loan Documents prior to the filing of the petitions for
relief described below; and
WHEREAS, on January 3, 1996, MTS Labs, MTS Packaging and MTS
Sales filed voluntary petitions for relief under applicable provisions of the
United States Bankruptcy Code (as heretofore or hereafter amended, the
"Bankruptcy Code") in the United States Bankruptcy Court for the Middle
District of Florida, Tampa Division (the "Bankruptcy Court"), and on February
21, 1996, Vangard Labs filed a similar petition for relief in the Bankruptcy
Court; and
WHEREAS, on July 12, 1996, MTS Labs and MTS Packaging filed
their "First Amended and Restated Joint Plan of Reorganization Under Chapter 11
of the United States Bankruptcy Code" (the "Joint Plan") in the Bankruptcy
Court, and on August 6, 1996, Vangard Labs filed the "Amended and Restated
Liquidating Plan of Vangard Labs, Inc." in the Bankruptcy Court (the "Vangard
Plan"); and
WHEREAS, on September 4, 1996, the Bankruptcy Court entered
orders confirming the Joint Plan and the Vangard Plan (collectively, the
"Plans"), under applicable provisions of the Bankruptcy Code (the "Confirmation
Orders"), and also entered orders approving this Second Amended and Restated
Loan and Security Agreement and the other Plan Documents (as defined in the
Plans), and authorizing and directing the Borrowers to enter into the Plan
Documents and to consummate the transactions contemplated herein and therein;
and
WHEREAS, the Plans and the Confirmation Orders provide, among
other things, for (i) the amendment and restatement of the Original SouthTrust
Loan Documents in the manner provided herein, (ii) the MTS Subsidiaries'
assumption of direct liability, as co-obligors, for all amounts owed under the
Original Notes in the manner provided herein, and (iii) the execution and
delivery by Borrowers of amended and restated promissory notes in favor of
SouthTrust, designated in the Plans as "Plan Note I" and "Plan Note II";
NOW, THEREFORE, for and in consideration of the premises and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each of the Borrowers, Siegel and the Lender hereby
agree as follows:
2
<PAGE> 7
ARTICLE 1. DEFINITIONS
1.1 DEFINED TERMS.
As used herein:
"ACCOUNTS", "CHATTEL PAPER", "CONTRACTS", "DOCUMENTS",
"EQUIPMENT", "FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS",
"INVENTORY" and other similar terms not specifically defined herein shall have
the same respective meanings as are given to those terms in the Uniform
Commercial Code as currently adopted and in effect in the State of Alabama.
"ACCOUNT DEBTOR" means any Person who is obligated on an
Account, Chattel Paper or General Intangible.
"ACCRUAL RATE" means 8.25% per annum.
"AFFILIATE" shall mean Siegel, the Siegel Family Trust, the
Siegel Family Partnership, JADE Partners, and any other Person (A) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, any one or more of the
Borrowers, or (B) twenty percent (20%) or more of the equity interest of which
is held beneficially or of record by any one or more of the Borrowers, or (C)
any officer or director of any one or more of the Borrowers. The term
"CONTROL" means the possession, directly or indirectly, of the power to cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this Second Amended and Restated Term Loan
and Security Agreement, as amended or supplemented from time to time.
"BANKRUPTCY CASES" means the proceedings commenced in the
Bankruptcy Court by MTS Packaging, MTS Sales, MTS Labs and Vangard Labs, and
described in the Recitals to this Agreement.
"BANKRUPTCY CODE" has the meaning given to such term in the
Recitals to this Agreement.
"BANKRUPTCY COURT" has the meaning given to such term in the
Recitals to this Agreement.
"BENEFIT PLAN" means a defined benefit pension plan under
ERISA for the Unfunded Plan Liabilities of which the Borrowers, or any of them,
could be held liable by the Pension Benefit Guaranty Corporation upon
termination of the Plan.
3
<PAGE> 8
"BORROWER" and "BORROWERS" means MTS, Clearwater Medical, MTS
Labs, MTS Packaging, Performance Pharmacy, Vangard Labs, Vangard
Pharmaceutical, Cart-Ware, MMS, MMT, MTS Sales, and Systems Professionals.
"BUDGET" and "BUDGETS" means the operating budgets to be
prepared by the Borrowers and delivered to the Lender pursuant to Section
6.1(A)(8) hereof.
"CAPITAL TRANSACTION" means (A) any sale, transfer or
disposition of all or substantially all the assets or business of any of the
Borrowers, whether by merger, sale, transfer, exchange or other disposition of
capital stock or assets, consolidation, or otherwise, (B) any refinance of the
indebtedness evidenced by the Plan Notes, and (C) any offering, issuance or
sale of any capital stock or other securities of any of the Borrowers through a
private placement or public offering.
"CART-WARE" means Cart-Ware, Inc., a Florida corporation.
"CASH FLOW" means, as to any Person, the aggregate of: (A) Net
income after taxes (or the net deficit, as applicable), and (B) Amounts that
were deducted for (i) Amortization of intangible assets, (ii) Depreciation and
depletion, and (iii) Income taxes and interest expense; all as shown by the
income statement of such Person, calculated in accordance with Generally
Accepted Accounting Principles.
"CAUSES OF ACTION" means all causes of action of any kind held
at any time by the Borrowers (or any of them), arising before the Closing Date,
against any party or parties, including all causes of action held by MTS
Packaging, MTS Labs, MTS Sales or Vangard Labs, under sections 542, 544, 545,
547, 548, 549 or 550 of the Bankruptcy Code.
"CLEARWATER MEDICAL" means Clearwater Medical Services, Inc.,
a Florida corporation.
"CLOSING" means the time and place of actual execution and
delivery of this Agreement, the Plan Notes, the Security Documents and the
other Plan Documents.
"CLOSING CERTIFICATE" means a certificate in the form of
EXHIBIT C to this Agreement, dated the date of Closing, and signed on behalf of
each of the Borrowers by the president or a vice-president of such Borrower.
"CLOSING DATE" means the date on which the Closing occurs.
"COLLATERAL" means the property and rights, and any proceeds,
in whatever form, thereof, described in Sections , , and hereof and in the
Security Documents.
"COLLATERAL PATENT ASSIGNMENT" means that certain Collateral
Patent Assignment duly authorized and executed by the Siegel Family Trust and
in substantially the form of EXHIBIT
4
<PAGE> 9
D, attached hereto and incorporated herein as such Collateral Patent Assignment
may hereafter be supplemented and amended.
"COLLATERAL TRADEMARK ASSIGNMENT" means that certain Amended
and Restated Collateral Patent, Trademark, Copyright and License Assignment
duly authorized and executed by the Borrowers and in substantially the form of
EXHIBIT E, attached hereto and incorporated herein, as such Collateral
Trademark Assignment may hereafter be supplemented and amended.
"COMPLIANCE CERTIFICATE" means a certificate in the form of
EXHIBIT F to this Agreement which is delivered with respect to the Borrowers
pursuant to Section hereof.
"CONSOLIDATED" refers to the consolidation of the accounts of
a Person and its Consolidated Entities on a balance sheet and statement of
income and retained earnings in accordance with Generally Accepted Accounting
Principles.
"CONSOLIDATED ENTITIES" means any Person the financial
statements of which are appropriately consolidated with those of MTS under
GAAP, and "Consolidated Entities" means all of them.
"CURRENT ASSETS" and "CURRENT LIABILITIES" mean, at any time,
all assets or liabilities, respectively, that, in accordance with Generally
Accepted Accounting Principles consistently applied, should be classified as
current assets or current liabilities, respectively, on a balance sheet of a
Person.
"DEFAULT" and "EVENT OF DEFAULT" each mean the occurrence of
any event described in Section 7.1 hereof.
"DEFAULT RATE" means 10.75% per annum.
"DOLLARS" and "$" each mean United States Dollars.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response Compensation and Liability Act of 1980 (CERCLA), as amended (42 U.S.C.
Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Sections 1801, et seq.), the Resource Conservation and Recovery Act
(RCRA), as amended (42 U.S.C. Sections 6901, et seq.), the Clean Water Act, as
amended (33 U.S.C. Sections 1251, et seq.), the Clean Air Act, as amended (42
U.S.C. Sections 7401, et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. Sections 2601, et seq.), the Emergency Planning and Community
Right-to-Know Act (EPCRA) (42 U.S.C. Sections 11001, et seq.), and the rules and
regulations adopted and publications promulgated pursuant thereto, and the rules
and regulations of the Occupational Safety and Health Administration (OSHA)
pertaining to occupational exposure to asbestos, as amended, and any other
federal, state or local environmental law, ordinance, rule, or regulation now or
hereafter in effect.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and in effect from time to time, and the regulations
promulgated by the Department of Labor or the Pension Benefit Guaranty
Corporation thereunder.
"EXCESS CASH FLOW" means the net sales of MTS Packaging and
MTS Labs, calculated and determined in accordance with Generally Accepted
Accounting Principles, less, in each case to the extent actually incurred by
MTS Packaging and MTS Labs (and without duplication), (i) cost of sales, (ii)
selling, general and administrative expenses, (iii) capital expenditures and
(iv) interest charges, but before taxes, depreciation and amortization charges,
in each case calculated and determined in accordance with GAAP; provided, that,
for purposes of determining Excess Cash Flow for any period, the amounts of
cost of sales, selling, general and administrative expenses, capital
expenditures and interest charges shall not exceed the respective amounts
thereof for such period as reflected in the Budgets required under Section
6.1(A)(8) of this Agreement to be delivered by the Borrowers to the Lender from
time to time.
"FINANCIAL STATEMENTS" means the (i) audited Consolidated
balance sheet of MTS and its Subsidiaries as of March 31, 1996, and
Consolidated statements of income and retained earnings and Cash Flow of MTS
and its Subsidiaries for the year ended on such date, and (ii) the unaudited
Consolidated balance sheet of MTS and its Subsidiaries as of June 30, 1996, and
the related Consolidated statements of income, retained earnings and Cash Flow
of MTS and its Subsidiaries for the quarter then ended, all as furnished to the
Lender, and shall also mean any such balance sheets and statements as may
hereafter be delivered by any of the Borrowers to Lender.
"FIXED ASSETS" means, at any time, all assets (other than
Current Assets) that should, in accordance with Generally Accepted Accounting
Principles consistently applied, be classified as assets on a balance sheet of
the Borrowers.
"FIXED CHARGE COVERAGE" means the quotient which is obtained
by dividing (i) the sum of the Consolidated net income of the Borrowers (after
provision for federal and state income taxes) for the 12-month period preceding
the applicable date plus the interest, lease and rental expenses of the
Borrowers for the same period plus the sum of non-cash expenses or allowances
for such period (including, without limitation, amortization or write-down of
intangible assets, depreciation, depletion and deferred taxes and expenses) by
(ii) the sum of the current portion of the Long-Term Liabilities of the
Borrowers as of the applicable date;
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" and "GAAP" each
mean generally accepted principles of accounting in effect from time to time in
the United States, applied in a manner which is, except as otherwise disclosed
to Lender in writing, consistent with those used in preparing such financial
statements as have theretofore been furnished to the Lender by the Borrowers.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or
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<PAGE> 11
administrative functions of or pertaining to government, which has or asserts
jurisdiction over the Lender or any of the Borrowers, or over the property of
any of them.
"GUARANTOR" means Todd E. Siegel and each other Person who has
guaranteed, or hereafter guarantees all or any portion of the Borrowers'
obligations hereunder, and "GUARANTORS" means all of such Persons,
collectively.
"GUARANTY AGREEMENT" means the guaranty of payment and
performance of the Obligations, substantially in the form of EXHIBIT G hereto,
made with the Lender by the Guarantor, as such Guaranty Agreement may be
hereafter supplemented or amended.
"HAZARDOUS MATERIALS" means any asbestos, urea formaldehyde
foam insulation, flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related or
unrelated substances or materials defined, regulated, controlled, limited or
prohibited in any Environmental Laws.
"INDEBTEDNESS" means, as to any Person, all items of
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or contingent, joint or several, including, but without
limitation:
(A) All indebtedness guaranteed, directly or indirectly,
in any manner, or endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse;
(B) All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or otherwise:
(1) to purchase such indebtedness; or
(2) to purchase, sell or lease (as lessee or lessor)
property, products, materials or supplies or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
indebtedness or to assure the owner of the indebtedness against loss; or
(3) to supply funds to or in any other manner invest
in the debtor;
(C) All indebtedness secured by (or for which the holder
of such indebtedness has a right, contingent or otherwise, to be secured by)
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and
(D) All indebtedness incurred as the lessee of Goods or
services under leases that, in accordance with Generally Accepted Accounting
Principles, should not be reflected on the lessee's balance sheet.
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<PAGE> 12
"JADE PARTNERS" means JADE Partners, a Florida general
partnership.
"JOINT PLAN" has the meaning given such term in the Recitals
to this Agreement.
"LAWS" means all ordinances, statutes, rules, regulations,
orders, injunctions, judgments, writs or decrees of any government or political
subdivision or agency thereof, or any court or similar entity established by
any thereof.
"LENDER" means SouthTrust Bank of Alabama, National
Association, its successors and assigns.
"LIABILITIES" means all Indebtedness and all other items that,
in accordance with Generally Accepted Accounting Principles consistently
applied, should be classified as liabilities on a balance sheet of a Person.
"LONG-TERM LIABILITIES" means Liabilities less the portion
thereof that constitutes Current Liabilities.
"MAJOR DEFAULT" means an Event of Default described in Section
7.1(A) hereof.
"MATURITY DATE" means with respect to Plan Note I, September
1, 2006, and with respect to Plan Note II, March 15, 2002.
"MMS" means Medication Management Systems, Inc., a Florida
corporation.
"MMT" means Medication Management Technologies, Inc., a
Florida corporation.
"MTS" means Medical Technology Systems, Inc., a Delaware
corporation.
"MTS LABS" means Medical Technology Laboratories, Inc., a
Florida corporation.
"MTS LABS COLLATERAL" means all Collateral owned by MTS Labs
(or in which MTS Labs has any interest), all Pledged Notes of MTS Labs, and all
stock certificates of MTS Labs in the Lenders possession.
"MTS MORTGAGE" means that certain Real Estate Mortgage
substantially in the form attached hereto as EXHIBIT H, as such MTS Mortgage
may be hereafter supplemented or amended.
"MTS PACKAGING" means MTS Packaging Systems, Inc., a Florida
corporation.
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"MTS PACKAGING COLLATERAL" means all Collateral owned by MTS
Packaging (or in which MTS Packaging has any interest), all Pledged Notes of
MTS Packaging and all stock certificates of MTS Packaging in the Lender's
possession.
"MTS SALES" means MTS Sales & Marketing, Inc., a Florida
corporation.
"MTS SUBSIDIARIES" means Clearwater Medical, MTS Labs, MTS
Packaging, Performance Pharmacy, Vangard Labs, Vangard Pharmaceutical,
Cart-Ware, MMS, MMT, MTS Sales, and Systems Professionals.
"NET PROCEEDS" means,
(A) with respect to any Capital Transaction, the gross
proceeds received or derived from such Capital Transaction, whether in cash,
stock or other property, less (i) all expenses (not including any payments or
consideration of any kind paid to any Affiliate of any Borrower) which are
directly and actually incurred by Borrowers in connection with such Capital
Transaction, and which are approved in writing by the Lender, and (ii) if such
Capital Transaction constitutes a sale of all of the capital stock, or all or
substantially all of the assets, of MTS Labs or any of the Software Companies,
and if prior to such Capital Transaction, all or any portion of the
Amortization Principal Amount has been refinanced in compliance with all
applicable provisions of this Agreement (including Section 6.2(H)), the amount
required to repay such refinanced Indebtedness; provided, that the amount
deducted pursuant to this clause shall not exceed $2,000,000.00 in the case of
a Capital Transaction with respect to MTS Labs or $1,000,000.00 in the case of
a Capital Transaction with respect to one or more of the Software Companies;
and,
(B) with respect to any Causes of Action, "NET PROCEEDS"
means the gross proceeds derived from any such Cause of Action, whether
pursuant to jury verdict, judgment or settlement, less all reasonable legal
fees, expenses and court costs actually incurred by the Borrowers which are
directly related to the prosecution of such Causes of Action.
"NET WORKING CAPITAL" means, at any time, the amount by which
Current Assets exceed Current Liabilities.
"NET WORTH" means, at any time, Stockholders' Equity, less the
sum of:
(A) Any surplus resulting from any write-up of assets
subsequent to the date of Closing;
(B) Any amount at which shares of capital stock of the
Borrowers appear as an asset on the Borrowers' balance sheet; and
(C) Loans and advances to stockholders, directors,
officers or employees, of the Borrowers or any Affiliate.
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<PAGE> 14
"NOTE PLEDGE AGREEMENT" means the duly authorized and executed
second amended and restated note pledge agreement, dated as of April 25, 1994,
as heretofore amended, as amended effective as of the Closing Date, and as the
same may be hereafter supplemented or amended.
"OBLIGATIONS" means the obligations, whether joint or several
of the Borrowers:
(A) To pay the principal of and interest on the Plan
Notes in accordance with the terms thereof and to satisfy all of their other
Liabilities to the Lender, whether hereunder or otherwise, whether now existing
or hereafter incurred, matured or unmatured, direct or contingent, joint or
several, including any extensions, modifications, and renewals thereof and
substitutions therefor;
(B) To repay to the Lender all amounts advanced by the
Lender hereunder, under any of the Security Documents or otherwise on behalf of
any of the Borrowers, including, but without limitation, advances for principal
or interest payments to prior secured parties, mortgagees, or lienors, or for
taxes, levies, insurance, rent, repairs to or maintenance or storage of any of
the Collateral;
(C) To reimburse the Lender, on demand, for all of the
Lender's expenses and costs, including the reasonable fees and expenses of its
counsel pursuant to Section 8.5 hereof, in connection with the preparation,
administration, amendment, modification, and enforcement of this Agreement and
the documents required or contemplated hereunder, including, without
limitation, any such fees and expenses incurred in connection with any
proceeding brought or threatened to enforce payment of any of the obligations
referred to in the foregoing paragraphs (A) and (B);
(D) To comply with each and every covenant of the
Borrowers (or any of them) contained in this Agreement, the Security Documents,
the other Plan Documents and the Plans.
"ORIGINAL SOUTHTRUST INDEBTEDNESS" means the Indebtedness of
the Borrowers to SouthTrust under the Original SouthTrust Loan Documents,
aggregating $28,257,857.67 as of the Petition Date.
"OTHER DEFAULT" means an Event of Default described in Section
7.1(B) hereof.
"PARTICIPANT" means The Daiwa Bank, Limited and any other
bank, financial institution, Affiliate of the Lender, or other entity which
has heretofore purchased an interest in the Original Notes or which purchases
an interest in the Plan Notes (or either of them), at any time.
"PAY RATE" means 7.5% per annum.
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<PAGE> 15
"PERFORMANCE PHARMACY" means Performance Pharmacy Systems,
Inc., a Florida corporation.
"PERMITTED LIENS" means:
(A) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of
business to secure payment of utility and similar charges incurred in the
ordinary course of business, shipments of inventory purchased on normal trade
terms, and workers' compensation, or to participate in any fund in connection
with workers' compensation, unemployment insurance, old-age pensions or other
social security programs;
(C) Liens of mechanics, materialmen, warehousemen,
carriers, or other like liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable;
(D) Good faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other
than for the repayment of borrowed money) or leases, not in excess of ten
percent (10%) of the aggregate amount due thereunder, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other similar bonds
required in the ordinary course of business;
(E) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property by any of the Borrowers in the
operation of their respective business, and none of which is violated in any
material respect by existing or proposed structures or land use;
(F) Liens in favor of the Lender;
(G) Existing liens set forth or described on EXHIBIT I
attached hereto and incorporated herein;
(H) Purchase money security interests granted to secure
not more than one hundred percent (100%) of the purchase price of assets the
purchase of which does not violate this Agreement or any instrument or document
contemplated hereunder; and
(I) The following, if the validity or amount thereof is
being contested in good faith by appropriate and lawful proceedings, so long as
levy and execution thereon have been stayed and continue to be stayed and they
do not, in the aggregate, materially detract from the value of the property of
any of the Borrowers, or materially impair the use thereof in the operation of
their respective business;
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<PAGE> 16
(1) Claims or liens for taxes, assessments or
charges due and payable and subject to interest or penalty;
(2) Claims, liens and encumbrances upon, and
defects of title to, real or personal property, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; and
(3) Claims or liens of mechanics, materialmen,
warehousemen, carriers, or other like liens.
"PERSON" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, court or government or political subdivision or agency thereof, and
any other legal entity.
"PETITION DATE" means the date on which MTS Packaging, MTS
Labs and MTS Sales filed petitions for relief under Chapter 11 of the
Bankruptcy Code, which occurred on January 3, 1996.
"PLAN DOCUMENTS" means this Agreement, the Plan Notes, the
Security Documents, and the other documents, instruments and agreements defined
in either of the Plans as "Plan Documents."
"PLAN NOTE I" means the amended and restated promissory note
issued by the Borrowers under this Agreement, substantially in the form of
EXHIBIT A, hereto and described in Section 2.4 hereof, and includes any
amendment to such note and any promissory note given in extension or renewal
of, or in substitution for, such note.
"PLAN NOTE II" means the amended and restated promissory note
issued by the Borrowers under this Agreement, substantially in the form of
EXHIBIT B, hereto and described in Section 2.5 hereof, and includes any
amendment to such note and any promissory note given in extension or renewal
of, or in substitution for, such note.
"PLAN NOTES" means, collectively, Plan Note I and Plan Note II.
"PLANS" means, collectively, the Joint Plan and the Vangard
Plan.
"PLEDGED NOTES" has the meaning given to such term in the
Note Pledge Agreement.
"PLEDGED STOCK" has the meaning given to such term in the
Stock Pledge Agreement.
"RECORDS" means correspondence, memoranda, tapes, discs,
microfilm, microfiche, papers, books and other documents, or transcribed
information of any type, whether
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<PAGE> 17
expressed in ordinary or machine language, and all filing cabinets, computer
hardware and other containers in which any of the foregoing is stored,
maintained or updated.
"REGULATION U" means Regulation U of the Board of Governors of
the Federal Reserve System as now or from time to time hereafter in effect and
shall include any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by banks for the
purpose of purchasing or carrying margin stocks applicable to member banks of
the Federal Reserve System.
"REMAINING MTS DEBT" has the meaning set forth in Section
2.4(E) of this Agreement.
"ROYALTY SUBORDINATION AGREEMENT" means that certain Royalty
Subordination Agreement dated as of April 25, 1994, between the Siegel Family
Trust and the Lender, as heretofore amended, as amended on the Closing Date,
and as the same may be hereafter supplemented or amended.
"SECURITY DOCUMENTS" means the Guaranty Agreement, the MTS
Mortgage, the Collateral Trademark Assignment, the Stock Pledge Agreement, the
Subordination Agreement(s), the Note Pledge Agreement, the Collateral Patent
Assignment, the Vangard Mortgage, the Royalty Subordination Agreement, the
Three-Party Agreement, and any documents required or contemplated under Article
IV of this Agreement, whether delivered at or after the Closing, together with
any other documents or agreements, now or hereinafter in effect, which secure
(A) the payment of the Indebtedness evidenced by the Plan Notes or (B) the
performance of the Obligations of the Borrowers hereunder.
"SIEGEL" means Todd E. Siegel, an individual.
"SIEGEL FAMILY PARTNERSHIP" shall mean the Siegel Family
Limited Partnership, a Florida limited partnership.
"SIEGEL FAMILY TRUST" shall mean The Siegel Family Revocable
Trust, and any successor trust(s) heretofore or hereafter formed pursuant to
trust documents originally executed by Harold Siegel, including, without
limitation, The Todd Siegel Q-TIP Trust, The Mindy Jo Barth Q-TIP Trust, The
Siegel Family Q-TIP Trust and The Siegel Family By-Pass Trust.
"SOFTWARE COMPANIES" means, collectively, Cart-Ware, MMS, MMT
and Performance Pharmacy.
"SOFTWARE COMPANIES COLLATERAL" means all Collateral owned by
the Software Companies (or in which they, or any of them, have any interest),
all Pledged Notes of the Software Companies and all stock certificates of the
Software Companies in the Lender's possession.
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<PAGE> 18
"STATED PRINCIPAL AMOUNT" has the meaning set forth in Section
2.4 of this Agreement.
"STOCK PLEDGE AGREEMENT" means the duly authorized and
executed second amended and restated stock pledge agreement substantially in
the form of EXHIBIT K, attached hereto and incorporated herein, as such Stock
Pledge Agreement may be hereafter supplemented or amended.
"STOCKHOLDERS' EQUITY" means, at any time, the sum of the
following accounts set forth in a balance sheet of any Borrower (or, in the
case of MTS, in a Consolidated balance sheet of MTS and all Consolidated
Entities), prepared in accordance with Generally Accepted Accounting Principles
consistently applied:
(A) The par or stated value of all outstanding capital
stock;
(B) Capital surplus; and
(C) Retained earnings.
"SUBORDINATED INDEBTEDNESS" means all Indebtedness incurred at
any time by the Borrowers or any of them, the repayment of which is
subordinated to the Obligations in form and manner satisfactory to the Lender.
All existing Subordinated Indebtedness is so specified in EXHIBIT L.
"SUBORDINATION AGREEMENT" means an agreement in the form of
EXHIBIT M, duly executed, or to be executed, by the purchasers and holders of
any debentures or similar securities issued pursuant to the Joint Plan, and the
"SUBORDINATION AGREEMENTS" means all of such agreements pursuant to which the
Indebtedness owing by the Borrowers to such Persons, and the liens of such
Persons on all collateral (if any) therefor, is subordinated to the Obligations
owing by the Borrowers to the Lender and the liens of Lender on all Collateral
therefor.
"SUBSIDIARY" means any corporation of which more than fifty
percent (50%) of the outstanding voting securities shall, at the time of
determination, be owned directly, or indirectly through one or more
intermediaries, by any of the Borrowers.
"SUBSIDIARY GUARANTY AGREEMENT" means collectively, the
Subsidiary Guaranty, dated as of September 28, 1993, among certain of the MTS
Subsidiaries in favor of SouthTrust, the Subsidiary Guaranty, dated as of April
25, 1994, among certain of the MTS Subsidiaries in favor of SouthTrust, and the
Subsidiary Guaranty, dated as of March 28, 1995, among all of the MTS
Subsidiaries in favor of SouthTrust.
"SYSTEMS PROFESSIONALS" means Systems Professionals, Inc., a
Florida corporation.
"TANGIBLE NET WORTH" means, at any time, Stockholders' Equity,
less the sum of:
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(A) Any surplus resulting from any write-up of assets
subsequent to the Closing Date;
(B) Goodwill, including any amounts, however designated
on a balance sheet of any of the Borrowers, representing the excess of the
purchase price paid for assets or stock acquired over the value assigned
thereto on the books of any Borrower;
(C) Patents, trademarks, trade names and copyrights;
(D) Any amount at which shares of capital stock of any
Borrower appear as an asset on any Borrowers' balance sheet;
(E) Loans and advances to stockholders, directors,
officers or employees of any of the Borrowers;
(F) Deferred expenses; and
(G) Any other amount in respect of an asset that, in
accordance with Generally Accepted Accounting Principles, is considered as an
intangible asset on a balance sheet of any of the Borrowers.
"THREE PARTY AGREEMENT" means that certain Three Party
Agreement among the Lender, MTS and the Siegel Family Trust, dated as of March
28, 1995, as amended on the Closing Date, and as the same may be hereafter
supplemented or amended.
"UNFUNDED PLAN LIABILITIES" with regard to any Benefit Plan
means the excess of the current value of the Benefit Plan's benefits guaranteed
under ERISA over the current value of the Benefit Plan's assets allocable to
such benefits.
"VANGARD COLLATERAL" means (i) all Collateral owned by Vangard
Labs (or in which Vangard Labs has any interest), all Pledged Notes of Vangard
Labs and Vangard Pharmaceutical, all stock certificates of Vangard Labs,
Vangard Pharmaceutical and, if sold pursuant to the Vangard Plan, Glasgow
Pharmaceutical Corporation, which are in the Lender's possession, and (ii) if
sold pursuant to the Vangard Plan, the property subject to the MTS Mortgage.
"VANGARD EXCESS CASH FLOW" means all cash of Vangard Labs, as
of any date of determination, after payment of expenses incurred in compliance
with the Vangard Plan.
"VANGARD LABS" means Vangard Labs, Inc., a Kentucky
corporation.
"VANGARD MORTGAGE" that certain real estate mortgage
substantially in the form attached hereto as EXHIBIT N, as such Vangard
Mortgage may be hereafter supplemented or amended.
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<PAGE> 20
"VANGARD PHARMACEUTICAL" means Vangard Pharmaceutical
Packaging, Inc., a Florida corporation.
"VANGARD PLAN" has the meaning given such term in the Recitals
to this Agreement.
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<PAGE> 21
1.2 ACCOUNTING TERMS. Accounting terms used and not otherwise
defined in this Agreement have the meanings determined by, and all calculations
with respect to accounting or financial matters unless otherwise provided
herein shall be computed in accordance with, Generally Accepted Accounting
Principles.
1.3 CONSTRUCTION OF TERMS. Whenever used in this Agreement, the
singular number shall include the plural and the plural the singular, and
pronouns of one gender shall include all genders. References herein to
articles, sections, paragraphs or subparagraphs or the like shall refer to the
corresponding articles, sections, paragraphs or subparagraphs or the like of
this Agreement. The words "hereof", "herein", and terms of similar import
shall refer to this entire Agreement. Unless the context clearly requires
otherwise, the use of the words "including", "such as", or terms of similar
meaning, shall not be construed to imply the exclusion of any other particular
elements.
ARTICLE 2. THE LOAN
2.1 HISTORY OF THE LOAN. Pursuant to the provisions of the
Original SouthTrust Loan Agreement, the Lender has heretofore made certain
loans to MTS, which are evidenced by the Original Revolving Note and the
Original Term Note and the other Original SouthTrust Loan Documents. Certain
defaults and events of default have occurred under the Original SouthTrust Loan
Documents and, as reflected in the Recitals to this Agreement, MTS Packaging,
MTS Labs, MTS Sales and Vangard Labs have filed petitions for relief under
Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. As of January 3,
1996, the date on which the first of these petitions was filed in the
Bankruptcy Court, the outstanding principal, accrued interest, costs and
related charges under the Original Notes was $28,257,857.67.
2.2 ASSUMPTION OF DIRECT LIABILITY BY MTS SUBSIDIARIES; AMENDMENT
AND RESTATEMENT. MTS is primarily liable under the Original Notes, and each of
the MTS Subsidiaries is liable for all amounts owed under the Original Notes
pursuant to the Subsidiary Guaranty Agreement. Each of the MTS Subsidiaries
hereby (i) ratifies and confirms the Subsidiary Guaranty Agreement and its
obligations thereunder, and (ii) acknowledges its unconditional joint and
several liability under the Original Notes and the Original SouthTrust Loan
Documents. Each of the MTS Subsidiaries hereby assumes direct liability,
jointly and severally as co-obligors with each other and with MTS, under the
Original Revolving Note, the Original Term Note and the other Original
SouthTrust Loan Documents. In accordance with the Plans, the Borrowers, Siegel
and SouthTrust have agreed to amend and restate the Original Notes and the
Original SouthTrust Loan Documents in the manner contemplated herein, and
otherwise to enter into the transactions contemplated by this Agreement.
2.3 AMENDMENT, RESTATEMENT AND CONSOLIDATION OF INDEBTEDNESS;
AGREEMENT NOT A NOVATION.
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(A) The parties hereby agree that the Original SouthTrust
Indebtedness shall be consolidated, and the Original Notes shall be amended and
restated in their entirety in the manner set forth herein and in the Plan
Notes. The parties agree further that this Agreement shall constitute an
amendment and restatement in its entirety of the Original SouthTrust Loan
Agreement. Notwithstanding any provision to the contrary contained herein, in
the Plans, in the Plan Notes or the other Plan Documents, or in any other
document or instrument, the execution and delivery of this Agreement, the Plan
Notes and the other instruments and documents executed in connection therewith
are not intended to, and shall not, constitute an accord and satisfaction of,
or a novation with respect to, the Original SouthTrust Indebtedness.
(B) From and after the date hereof, the Original
SouthTrust Indebtedness of the Borrowers shall be evidenced by Plan Note I and
Plan Note II, and shall be governed by this Agreement, the Plan Notes and the
Security Documents. The payment and other terms of Plan Note I and Plan Note
II shall be as set forth therein and in Sections 2.4 through 2.7 hereof.
2.4 PLAN NOTE I. At the Closing, the Borrowers shall execute and
deliver Plan Note I to the Lender to evidence the Borrowers' obligations to
repay a portion of the Original SouthTrust Indebtedness equal to the Stated
Principal Amount.
(A) Stated Principal Amount; Amortization Principal
Amount. Plan Note I shall be in the stated principal amount of $27,257,857.67
(the "Stated Principal Amount"). A portion of the Stated Principal Amount,
equal to $15,000,000.00 (the "Amortization Principal Amount"), together with
interest thereon at the Pay Rate, commencing on September 4, 1996, shall be
paid as follows:
(i) At the Closing, Borrowers shall pay to the
Lender an amount equal to accrued interest on the Amortization
Principal Amount at the Pay Rate from September 4, 1996, to
and including the Closing Date.
(ii) On October 1, 1996, and on the first day of
each calendar month thereafter through and including September
1, 1998, the Borrowers shall pay to the Lender accrued
interest on the then outstanding balance of the Amortization
Principal Amount at the Pay Rate.
(iii) Installments of principal and interest,
calculated in the manner provided in Section 2.4(A)(iv)
hereof, shall be due and payable on a monthly basis, with the
first such installment being due and payable on the first day
of October, 1998, and continuing thereafter on the first day
of each and every calendar month until September 1, 2006, at
which time the then-outstanding balance of the Amortization
Principal Amount, together with accrued and
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unpaid interest thereon at the Pay Rate, shall be due and
payable in full.
(iv) The monthly installments of the Amortization
Principal Amount and interest thereon under Plan Note I shall
be calculated based on the Amortization Principal Amount being
amortized in level monthly payments at an assumed interest
rate equal to the Pay Rate over an assumed period of twenty
(20) years.
(B) Mandatory Partial Prepayments Applied Against
Amortization Principal Amount. In addition to the monthly installments
referred to above, the Borrowers shall make mandatory partial prepayments of
the Amortization Principal Amount as follows:
(i) If, at any time prior to the Maturity Date,
any Capital Transaction occurs which involves, directly or indirectly,
any one or more of the Software Companies, then the Borrowers shall
pay to the Lender an amount equal to $1,000,000.00; provided, that
there shall be credited against such amount, an amount equal to
seventy-five percent (75%) of the aggregate amount of principal
payments theretofore made by Borrowers with respect to the
Amortization Principal Amount, up to a maximum credit amount of
$1,000,000.00 (the amount payable under this Section 2.4(B)(i) is
referred to as the "Software Companies Release Payment"); and
(ii) If, at any time prior to the Maturity Date,
any Capital Transaction occurs which involves, directly or indirectly,
MTS Labs (or any Subsidiary thereof), then the Borrowers shall pay to
the Lender an amount equal to $2,000,000.00; provided, that there
shall be credited against such amount, an amount equal to seventy-five
percent (75%) of the aggregate amount of principal payments
theretofore made by Borrowers with respect to the Amortization
Principal Amount in excess of $1,000,000.00, up to a maximum credit
amount of $2,000,000.00 (the amount payable under this Section
2.4(B)(ii) is referred to as the "MTS Labs Release Payment");
Mandatory prepayments made by Borrowers under this Section 2.4(B) shall be due
and payable on the date on which the relevant Capital Transaction is
consummated, shall be applied in the manner set forth in Section 2.4(C) hereof,
and shall have the effect set forth in Sections 4.8(B) and (C) hereof. The
Software Companies Release Payment and the MTS Labs Release Payment,
respectively, shall each be payable only once, upon the consummation of the
first Capital Transaction including any of the Software Companies or MTS Labs,
as the case may be.
(C) Application of Prepayments of Amortization Principal
Amount. All prepayments under Plan Note I with respect to the Amortization
Principal Amount (whether mandatory partial prepayments under Section 2.4(B) or
optional prepayments under Section 2.4(D)) shall be applied, first to accrued
interest on the then outstanding Amortization Principal Amount, and then to
installments of principal in inverse order of their maturity. In the event of a
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partial prepayment, the monthly installments of principal and interest due and
payable under Section 2.4(A) hereof after any such partial prepayment shall
continue in the aggregate amount calculated as set forth above, but the
portions of each such monthly installment which are applied to the payment of
interest and the reduction of principal shall be adjusted, based on the balance
of the Amortization Principal Amount which remains outstanding after such
partial prepayment.
(D) Optional Prepayment of Amortization Principal Amount.
The Borrowers shall have the right, at their option, without premium or
penalty, to prepay the Amortization Principal Amount of Plan Note I, in whole
or in part, and all unpaid accrued interest thereon (through the date of such
payment), at any time and from time to time; provided, that no such prepayment
shall be permitted unless (a) at the time of any such prepayment no default or
Event of Default hereunder, under Plan Note I, under Plan Note II, under any of
the Security Documents or under the Plans, shall have occurred and be
continuing, (b) the Lender shall have received at least 30 days' prior written
notice of each such prepayment, (c) all such prepayments shall be applied in
the manner specified in Section 2.4(C), and (d) no prepayment in full of the
Amortization Principal Amount under Plan Note I shall be permitted unless,
contemporaneously with such prepayment, all remaining amounts owed under Plan
Note II (if any) are also prepaid.
(E) Payment or Satisfaction of Remaining MTS
Debt. The difference between the Stated Principal Amount at any time
outstanding under Plan Note I and the outstanding amount of the Amortization
Principal Amount is referred to herein as the "Remaining MTS Debt." As of the
date hereof, the principal amount of the Remaining MTS Debt is $12,257,857.67.
In addition to all other payments called for in this Agreement, the Borrowers
shall make mandatory partial prepayments of the Remaining MTS Debt at the times
and in the amounts set forth in this Section 2.4(E).
(i) Payment and Application of Net Sales Proceeds
of the Vangard Assets; Vangard Excess Cash Flow. The parties acknowledge that
the Vangard Plan contemplates the sale of all of the Vangard Assets (as defined
in the Vangard Plan). The Borrowers shall pay, or cause to be paid, the Net
Sales Proceeds (as defined in the Vangard Plan) to the Lender within the time
period specified in the Vangard Plan and, upon such payment, the Stated
Principal Amount (and the Remaining MTS Debt) shall be reduced by the amount of
the Net Sales Proceeds so paid. In addition, from the Closing Date through the
date on which the Vangard Assets are sold in accordance with the Vangard Plan,
the Vangard Excess Cash Flow shall be paid to the Lender on a monthly basis, on
or prior to the 15th day of each month, and such payments shall be applied to
reduce the Stated Principal Amount (and the Remaining MTS Debt).
(ii) Mandatory Prepayment With Respect to Capital
Transactions.
(a) Upon the occurrence of any Capital
Transaction which involves, directly or indirectly, any one or more of the
Software Companies, then, in addition to any amounts payable under Section
2.4(B)(i) hereof, the Borrowers shall pay the following amounts to the Lender
on the date on which each such Capital Transaction is consummated:
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(1) If the Capital Transaction occurs on
or prior to September ___, 1997, an amount equal to (A) 50% of
the Net Proceeds from such Capital Transaction, or (B) if the
Software Companies Release Payment is also payable in
connection with such Capital Transaction, 50% of the portion
of the Net Proceeds from such Capital Transaction which is in
excess of the Software Companies Release Payment;
(2) If the Capital Transaction occurs
after September ____, 1997, but on or prior to September ____,
1998, an amount equal to (A) 40% of the Net Proceeds from such
Capital Transaction, or (B) if the Software Companies Release
Payment is also payable in connection with such Capital
Transaction, 40% of the portion of the Net Proceeds from such
Capital Transaction which is in excess of the Software
Companies Release Payment;
(3) If the Capital Transaction occurs
after September ____, 1998, but on or prior to September ____,
1999, an amount equal to (A) 30% of the Net Proceeds from such
Capital Transaction, or (B) if the Software Companies Release
Payment is also payable in connection with such Capital
Transaction, 30% of the portion of the Net Proceeds from such
Capital Transaction which is in excess of the Software
Companies Release Payment;
(4) If the Capital Transaction occurs
after September ____, 1999, but on or prior to September ____,
2000, an amount equal to (A) 20% of the Net Proceeds from such
Capital Transaction, or (B) if the Software Companies Release
Payment is also payable in connection with such Capital
Transaction, 20% of the portion of the Net Proceeds from such
Capital Transaction which is in excess of the Software
Companies Release Payment; and
(5) If the Capital Transaction occurs
after September ____, 2000, but on or prior to September ____,
2001, an amount equal to (A) 10% of the Net Proceeds from such
Capital Transaction, or (B) if the Software Companies Release
Payment is also payable in connection with such Capital
Transaction, 10% of the portion of the Net Proceeds from such
Capital Transaction which is in excess of the Software
Companies Release Payment.
(b) Upon the occurrence of any Capital
Transaction which involves, directly or indirectly, MTS Labs (or any Subsidiary
thereof), then, in addition to any amounts payable under Section 2.4(B)(ii)
hereof, the Borrowers shall pay the following amounts to the Lender on the date
on which each such Capital Transaction is consummated:
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(1) If the Capital Transaction occurs on
or prior to September ______, 1997, an amount equal to (A) 50%
of the Net Proceeds from such Capital Transaction, or (B) if
the MTS Labs Release Payment is also payable in connection
with such Capital Transaction, 50% of the portion of the Net
Proceeds from such Capital Transaction which is in excess of
the MTS Labs Release Payment;
(2) If the Capital Transaction occurs
after September ____, 1997, but on or prior to September ____,
1998, an amount equal to (A) 40% of the Net Proceeds from such
Capital Transaction, or (B) if the MTS Labs Release Payment is
also payable in connection with such Capital Transaction, 40%
of the portion of the Net Proceeds from such Capital
Transaction which is in excess of the MTS Labs Release Payment;
(3) If the Capital Transaction occurs
after September ____, 1998, but on or prior to September ____,
1999, an amount equal to (A) 30% of the Net Proceeds from such
Capital Transaction, or (B) if the MTS Labs Release Payment is
also payable in connection with such Capital Transaction, 30%
of the portion of the Net Proceeds from such Capital
Transaction which is in excess of the MTS Labs Release Payment;
(4) If the Capital Transaction occurs
after September ____, 1999, but on or prior to September ____,
2000, an amount equal to (A) 20% of the Net Proceeds from such
Capital Transaction, or (B) if the MTS Labs Release Payment is
also payable in connection with such Capital Transaction, 20%
of the portion of the Net Proceeds from such Capital
Transaction which is in excess of the MTS Labs Release Payment;
and
(5) If the Capital Transaction occurs
after September ____, 2000, but on or prior to September ____,
2001, an amount equal to (A) 10% of the Net Proceeds from such
Capital Transaction, or (B) if the MTS Labs Release Payment is
also payable in connection with such Capital Transaction, 10%
of the portion of the Net Proceeds from such Capital
Transaction which is in excess of the MTS Labs Release Payment.
(iii) Mandatory Prepayment With Respect to Certain
Causes of Action. If the Borrowers (or any one or more of them) commence the
litigation or other prosecution of any Causes of Action at any time or times
prior to the Maturity Date of Plan Note I, the Borrowers shall pay to the
Lender an amount equal to (1) 50% of the Net Proceeds derived from
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each such Cause of Action asserted or held by any of the Borrowers other than
Vangard Labs, and (2) 90% of the Net Proceeds derived from each such Cause of
Action asserted by, held by, or relating to Vangard Labs (including, without
limitation, any Cause of Action relating to Glasgow Pharmaceutical
Corporation), and in each case the amount to which the Lender is entitled shall
be paid within five (5) days after receipt thereof by any Borrower. If
litigation or other prosecution of any such Cause of Action is commenced prior
to the Maturity Date of Plan Note I, but as of such Maturity Date the Borrowers
have not received any recovery therefrom, the Borrowers' Obligation under this
Section 2.4(E)(iii) to pay the applicable portion of the Net Proceeds from such
Cause of Action to the Lender shall survive such Maturity Date and the
termination of this Agreement.
All amounts paid to the Lender under this Section 2.4(E) shall
be applied to reduce the Stated Principal Amount and the Remaining MTS Debt,
but shall not reduce or otherwise affect the Amortization Principal Amount.
(F) Satisfaction of Remaining MTS Debt. If, as of
September 1, 2006, the Borrowers shall have fully and timely paid to the Lender
(a) all payments required to be made under Plan Note I with respect to the
Amortization Principal Amount, including all accrued interest thereon and all
amounts due and payable under Section 2.4(B) hereof, (b) all amounts due and
payable under Section 2.4(E) hereof, (c) all amounts due and payable under Plan
Note II, and (d) all other fees, expenses and other similar amounts due under
this Agreement and the Plan Notes, and provided that no Major Default shall have
occurred and be continuing, then the portion of the Remaining MTS Debt which
remains unpaid, together with all accrued but unpaid interest thereon, shall be
deemed satisfied on and as of September 1, 2006. Upon the satisfaction of the
Remaining MTS Debt in the manner set forth above, the Borrowers shall have no
further Obligations to the Lender hereunder, except as expressly provided in
Sections 2.4(E)(iii) and 8.3 hereof.
2.5 PLAN NOTE II. At the Closing, the Borrowers shall execute and
deliver Plan Note II to the Lender to evidence the Borrowers' obligations to
repay a portion of the Original SouthTrust Indebtedness equal to $1,000,000.00.
(A) Payment Terms. Plan Note II shall be in the original
principal amount of $1,000,000.00, shall accrue interest at the Accrual Rate
(subject to forgiveness in certain events as set forth in Sections 2.5(E) and
2.6(A) hereof), and shall be paid as follows:
(i) At the Closing, the Borrowers shall pay to
the Lender the sum of $250,000.00; and
(ii) Borrowers shall pay to the Lender the sum of
$500,000.00, (a) within seven (7) Business Days after receipt by any
of the Borrowers of refunds of state or federal income taxes referable
to the 1996 tax year and any prior tax year, or (b) on the Closing
Date, if such refunds are received by the Borrowers prior to the
Closing Date; and
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(iii) On the fifteenth (15th) day of March, 1997,
and on the fifteenth (15th) day of each calendar month thereafter
through and including March 15, 2002, the Borrowers shall pay to the
Lender an amount equal to fifteen percent (15%) of the Excess Cash
Flow for the calendar month immediately preceding the date of payment.
(B) Discounted Pay-Off in Certain Events.
Notwithstanding the provisions of Section 2.5(A), if, on or prior to March 15,
1997, the payments theretofore received by the Lender under Plan Note II
aggregate $750,000.00, then, provided that no Major Default shall then have
occurred and be continuing under Plan Note II, under Plan Note I, under this
Agreement or under any of the Security Documents, the Borrowers shall not be
obligated to make any further payments under Plan Note II, and Plan Note II
shall be deemed fully satisfied, on and as of March 15, 1997 or, if earlier,
the date on which payments received by the Lender under Plan Note II aggregate
$750,000.00.
(C) Satisfaction of Plan Note II Prior to Maturity Date
in Certain Events. If the requirements of Section 2.5(B) are not satisfied,
but at any time prior to March 15, 2002, the payments theretofore received by
the Lender under Plan Note II aggregate $1,000,000.00, then, provided that no
Major Default shall then have occurred and be continuing under the Plan Notes,
under this Agreement or under any of the Security Documents, or under the
Plans, the Borrowers shall not be obligated to make any further payments under
Plan Note II, and Plan Note II shall be deemed fully satisfied, on and as of
the date on which the payments received by the Lender under Plan Note II
aggregate $1,000,000.00.
(D) Optional Prepayment. The Borrowers shall have the
right, at their option, without premium or penalty, to prepay Plan Note II, in
whole but not in part, at any time; provided, that (i) at the time of any such
prepayment no default or Event of Default under this Agreement, under the Plan
Notes or under any of the Security Documents, or under the Plans, shall have
occurred and be continuing, and (ii) the Lender shall have received at least
thirty (30) days' prior written notice of each such prepayment. Partial
prepayments shall not be permitted under Plan Note II, except that the
Borrowers may make partial prepayments of principal during the six (6) month
period ending on March 15, 1997, and if, as of March 15, 1997, the payments and
prepayments made by the Borrowers hereunder aggregate $750,000.00, such
payments will have the effect set forth in Section 2.5(B) hereof.
(E) Satisfaction of Plan Note II on Maturity Date. If
(i) all payments described in Section 2.5(A) are timely made and (ii) after
payment of the monthly installment of principal due on March 15, 2002, any
portion of the principal amount of Plan Note II remains unpaid, then, provided
that no Major Default shall have occurred and be continuing under the Plan
Notes, under this Agreement or under any of the Security Documents, then all
remaining principal, together with all accrued and unpaid interest under Plan
Note II, shall be deemed fully paid, and Plan Note II shall be deemed
satisfied, on and as of March 15, 2002.
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2.6 ADDITIONAL TERMS OF PLAN NOTES.
(A) Interest at the Accrual Rate. The Stated Principal
Amount of Plan Note I and the outstanding principal amount of Plan Note II
shall bear interest at the Accrual Rate, from the Petition Date until paid or
deemed satisfied in accordance with the terms of the Plan Notes and applicable
provisions of this Agreement. If, however, the provisions of Sections 2.4 and
2.5 of this Agreement are fully and timely complied with, and provided that no
Major Default shall have occurred and be continuing under the Plan Notes, under
this Agreement or under any of the Security Documents, then the amount
representing the difference between (i) accrued interest on the Stated
Principal Amount of Plan Note I and the outstanding principal amount of Plan
Note II, at the Accrual Rate, and (ii) accrued interest on the Amortization
Principal Amount at the Pay Rate (or the Default Rate, as applicable) which has
been paid by the Borrowers hereunder and under the Plan Notes, shall be
forgiven on and as of the date or dates on which the then remaining Stated
Principal Amount of Plan Note I and the outstanding principal amount of Plan
Note II, as the case may be, are deemed satisfied in accordance with Sections
2.4 and 2.5 of this Agreement.
(B) Calculation of Interest. Interest with respect to
the Plan Notes shall be calculated and payable in the manner set forth in Plan
Note I and Plan Note II, respectively.
(C) Default Rate. At the option of the Lender, if any
installment of interest or principal under Plan Note I, or any payment of
principal under Plan Note II shall not be made as the same becomes due and
payable, interest shall be payable on the principal portion of such defaulted
payment and, to the extent permitted by law, on the interest portion of such
defaulted payment (if any), at the Default Rate, and, if any payment of
principal or interest shall not be made on the date on which any such payment
becomes due, interest shall be payable on the whole of the principal balance
then outstanding of the Stated Principal Amount under Plan Note I, or the then
outstanding balance of Plan Note II, as the case may be, at the Default Rate
for the subsequent duration of such default, whether or not acceleration has
occurred in accordance with Article VII hereof.
(D) If, at any time, the Accrual Rate, the Pay Rate or
the Default Rate shall be deemed by any competent court of law, governmental
agency or tribunal to exceed the maximum rate of interest permitted by any
applicable Laws, then, for such time as such rates would be deemed excessive,
its application shall be suspended and there shall be charged instead the
maximum rate of interest permissible under such Laws, and any excess interest
or charges actually collected by the Lender shall be credited as a partial
prepayment of principal.
2.7 PAYMENT TO THE LENDER. All sums payable to the Lender
hereunder shall be paid directly to the Lender in United States Dollars and
immediately available funds at the place payment is due. If the Lender shall
send the Borrowers statements of amounts due hereunder, such statements shall
be considered correct and conclusively binding on the Borrowers unless the
Borrowers notify the Lender to the contrary within thirty (30) days of their
receipt of any statement which they deem to be incorrect. Alternatively, at
its sole discretion, the Lender may charge against any deposit account of any
of the Borrowers all or any part of any amount due hereunder.
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ARTICLE 3. CONDITIONS PRECEDENT
The obligation of the Lender to consummate the transactions
contemplated in this Agreement is subject to the following conditions precedent:
3.1 DOCUMENTS REQUIRED BEFORE CLOSING. Prior to the execution and
delivery of this Agreement by the Lender, the following instruments and
documents, duly executed by all proper Persons shall have been delivered to
the Lender:
3.1.1. This Agreement;
3.1.2. The Plan Notes;
3.1.3. The financing statements required by Section ;
3.1.4. The lien waivers required by Section ;
3.1.5. A certificate of the corporate secretary of
each of the Borrowers, substantially in the form of EXHIBIT O attached hereto,
dated as of the date of this Agreement, certifying as to the incumbency and
signatures of the officers of the Borrowers signing this Agreement, the Plan
Notes, the Security Documents, and each other document to be delivered pursuant
hereto, together with the following documents attached thereto:
3.1.5.1. A copy of resolutions of the
Borrowers' boards of directors
authorizing the execution, delivery
and performance of this Agreement,
the Plan Notes, the Security
Documents, and each other document
to be delivered pursuant hereto;
3.1.5.2. Copies of the Borrowers' articles or
certificates of incorporation,
certified as of the most recent date
practicable by the judge of probate
in the county in which each such
Borrower's articles or certificate
of incorporation is filed or the
secretary of state of the state
where each such Borrower is
incorporated, as appropriate; and
3.1.5.3. Copies of the bylaws of each of the
Borrowers, as in effect on the
Closing Date;
3.1.6. Certificates, as of the most recent dates
practicable, of the aforesaid secretaries of state, the secretary of state of
each state in which each of the Borrowers is qualified as a foreign corporation
and (to the extent necessary to evidence the good standing of Borrowers
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in such states) the department of revenue or taxation of each of the foregoing
states, as to the good standing of the Borrowers;
3.1.7. Written opinions of Massari & Bell, P.A., and
such other counsel reasonably satisfactory to the Lender, as legal counsel for
the Borrowers and the Guarantor, dated the date of this Agreement and addressed
to the Lender, covering the matters set forth on EXHIBIT P, attached hereto;
3.1.8. The Closing Certificates in the form of
EXHIBIT C to this Agreement.
3.1.9. Copies of all documents evidencing the terms
and conditions of any Indebtedness specified as Subordinated Indebtedness on
EXHIBIT L, including, without limitation, all documents relating to the
"debentures" referred to in Article VII of the Joint Plan;
3.1.10. The Subordination Agreement[s] in the form of
EXHIBIT M attached hereto;
3.1.11. The Guaranty Agreement set forth in EXHIBIT
G, attached hereto and incorporated herein;
3.1.12. The Second Amended and Restated Stock Pledge
Agreement set forth in EXHIBIT K, attached hereto and incorporated herein,
together with (to the extent not already in the possession of Lender)
certificates representing the shares pledged thereby, duly endorsed in blank;
3.1.13. The MTS Mortgage set forth in EXHIBIT H and
the Vangard Mortgage set forth in EXHIBIT N, each of which is attached hereto
and incorporated herein;
3.1.14. The Collateral Trademark Assignment set forth
in EXHIBIT E, the Collateral Patent Assignment set forth in EXHIBIT D, the
amendments to and ratifications of the Royalty Subordination Agreement and the
Three-Party Agreement set forth in EXHIBITS Q AND R, each of which is attached
hereto and incorporated herein;
3.1.15. Copies of all environmental site assessments,
if any, in the possession of Borrowers, of the real property and improvements
covered by the MTS Mortgage and the Vangard Mortgage;
3.1.16. Copies of all appraisals, if any, in the
possession of Borrowers, of the real property and improvements covered by the
MTS Mortgage and the Vangard Mortgage and the equipment owned by the Borrowers;
3.1.17. Copies of the insurance policies described in
Section of this Agreement;
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3.1.18. Certified copies of all required consents,
approvals, and filings, governmental or otherwise; and
3.1.19. The payment of accrued costs and expenses
under Section of this Agreement.
3.2. CERTAIN EVENTS. At the time of the Closing:
3.2.1. No Event of Default shall have occurred and
be continuing, and no event shall have occurred and be continuing that, with
the giving of notice or passage of time or both, would be an Event of Default;
3.2.2. No material adverse change shall have
occurred in the financial condition of any of the Borrowers or any Guarantor
since the Petition Date; and
3.2.3. All conditions to confirmation described in
Article XI of the Joint Plan and Article X of the Vangard Plan shall have been
satisfied; and
3.2.4. All of the Security Documents shall be in
full force and effect.
3.3. LEGAL MATTERS. At the time of the Closing, all legal matters
incidental thereto shall be satisfactory to Messrs. Bradley, Arant, Rose &
White, counsel to the Lender.
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ARTICLE 4. COLLATERAL SECURITY
4.1 COMPOSITION OF THE COLLATERAL; SECURITY INTERESTS GRANTED
PURSUANT TO ORIGINAL SOUTHTRUST LOAN DOCUMENTS. The property in which a
security interest is granted or acknowledged pursuant to the provisions of
Section and hereof or pursuant to the provisions of any Security Document is
herein collectively called the "Collateral." The Collateral, together with all
of the Borrowers' other property of any kind held by the Lender, shall stand as
one general, continuing collateral security for all Obligations and, except as
expressly provided in Section 4.8 hereof, may be retained by the Lender until
all Obligations have been satisfied in full. Each of the Borrowers hereby
acknowledges that, pursuant to the Original SouthTrust Loan Documents, each of
the Borrowers granted to the Lender valid, first priority security interests
and liens on all of the Collateral owned by them (or in which any of them has
any interest) as security for the Indebtedness and obligations evidenced by the
Original SouthTrust Loan Documents. Each of the Borrowers hereby ratifies and
confirms the grant of such security interests and liens in favor of the Lender,
as security for all the Obligations. Each of the Borrowers hereby agrees that
the provisions of Sections 4.2 and 4.3 hereof, in addition to providing for the
present grant of security interests and liens in the Collateral to secure the
full and prompt payment and performance of all Obligations, shall be construed
as (A) a ratification and restatement of their respective grants of security
interests and liens under and pursuant to the Original SouthTrust Loan
Documents as security for the Obligations, and (B) a representation and
warranty by Borrowers that all such security interests and liens remain in full
force and effect as of the Closing Date.
4.2. RIGHTS IN PROPERTY HELD BY THE LENDER. As security for the
prompt satisfaction of all Obligations, each of the Borrowers hereby assigns,
transfers and sets over to the Lender all of the Borrowers' right, title and
interest in and to, and grants the Lender a lien on and a security interest in,
all amounts that may be owing from time to time by the Lender to the Borrowers
in any capacity, including, but without limitation, any balance or share
belonging to the Borrowers (or any of them) of any deposit or other account
with the Lender, which lien and security interest shall be independent of any
right of set-off which the Lender may have.
4.3. RIGHTS IN PROPERTY HELD BY ANY OF THE BORROWERS OR BY THE
LENDER. As further security for the prompt satisfaction of all Obligations, in
addition to any other or further security provided under any of the Security
Documents, each of the Borrowers hereby assigns and transfers to the Lender all
of its right, title and interest in and to, and grants the Lender a lien upon
and security interest in, all of the following property and rights of such
Borrower, wherever located, whether now owned or hereafter acquired, together
with all replacements therefor and proceeds (including, but without limitation,
insurance proceeds) and products thereof (all of which shall constitute
original Collateral under this Agreement):
4.3.1. Accounts and accounts receivable;
4.3.2. Chattel Paper;
4.3.3. Contracts;
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4.3.4. Contract rights;
4.3.5. Documents;
4.3.6. Equipment, including all trucks, automobiles,
motor vehicles and machinery of all classes;
4.3.7. Fixtures;
4.3.8. General Intangibles;
4.3.9. Instruments;
4.3.10. Inventory, including all goods held for sale
or lease or to be furnished under contracts of service, raw materials, work in
process and materials to be used or consumed in Borrowers' business;
4.3.11. The Pledged Stock;
4.3.12. The Pledged Notes;
4.3.13. Furniture;
4.3.14. Patents, trademarks, copyrights and other
intellectual property (including software) and all rights under licenses with
respect to intellectual property of other Persons;
4.3.15. Leasehold improvements;
4.3.16. Interests in partnerships and joint ventures;
4.3.17. Rights as seller of Goods and rights to
returned or repossessed Goods; and
4.3.18. All Records pertaining to any of the
Collateral.
4.4. PRIORITY OF LIENS. The foregoing liens shall be first and
prior liens except for Permitted Liens.
4.5. FINANCING STATEMENTS.
4.5.1. Each of the Borrowers will:
4.5.1.1. Execute such financing statements
(including amendments
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thereto and continuation statements
thereof) in form satisfactory to the
Lender as the Lender may, from time
to time, specify;
4.5.1.2. Pay, or reimburse the Lender for
paying, all costs and taxes of
filing or recording the same in all
public offices designated by the
Lender after the Lender determines
in good faith that such filing or
recording is necessary or desirable
to perfect the Lender's security
interest in the Collateral; and
4.5.1.3. Take such other steps as the Lender
may, from time to time, direct,
including the noting of the Lender's
lien on the Collateral and on any
certificates of title therefor, all
to perfect the Lender's security
interest in the Collateral.
4.5.2. In addition to the foregoing, and not in limitation
thereof:
4.5.2.1. A carbon, photographic, or other
reproduction of this Agreement shall
be sufficient as a financing
statement and may be filed in any
appropriate office in lieu thereof;
and
4.5.2.2. To the extent lawful, the Borrowers
hereby appoint the Lender as their
respective attorney-in-fact (without
requiring the Lender to act as such)
to execute any financing statement
in the name of any of the Borrowers,
and to perform all other acts that
the Lender deems appropriate to
perfect and continue its security
interest in, and to protect and
preserve, the Collateral in
accordance with the provisions of
this Agreement.
4.6. LIEN WAIVERS. Each of the Borrowers will use its best efforts
to cause each landlord of all premises leased by such Borrower, and any
warehouseman or other bailee on whose premises any of the Collateral may be
located, to execute and deliver to the Lender instruments, in form and
substance satisfactory to the Lender, by which such mortgagee, landlord,
warehouseman, or bailee waives his or its rights, if any, in and to all Goods
composing a part of the Collateral.
4.7. CHATTEL PAPER OR INSTRUMENTS. Each of the Borrowers will
deliver immediately to the Lender any Chattel Paper or Instruments arising out
of the Collateral usually, but not exclusively, as proceeds. Further, the
parties hereby agree that such Chattel Paper or Instruments constitute original
Collateral rather than proceeds; but if proceeds, the Lender's security
interest created by this Agreement in the Chattel Paper or Instruments shall
not be claimed merely as proceeds.
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4.8. RELEASE OF CERTAIN COLLATERAL IN CERTAIN EVENTS.
(A) Vangard Labs. Provided that no Major Default
shall have occurred and be continuing hereunder, under the Plan Notes, or under
the Security Documents, the liens, security interests and pledges arising
hereunder or under the Security Documents in favor of the Lender with respect
to the Vangard Collateral shall be released in connection with, and effective
as of the consummation of, the sale of the Vangard Assets (as defined in the
Vangard Plan) in accordance with the Vangard Plan. In connection with such
sale, upon receipt of the Net Sales Proceeds (as defined in the Vangard Plan),
the Lender will execute any and all UCC-3 release statements necessary to
evidence such release which are presented to the Lender by Borrowers or the
purchaser of the Vangard Assets (provided that such release statements are in
form and substance reasonably acceptable to the Lender), and will deliver the
same to MTS or, at its option, to such purchaser, at the closing of such sale.
The Borrowers or the purchaser of the Vangard Assets shall be entitled, at its
or their sole expense, to record or file the same in the applicable filing
offices.
(B) The Software Companies. Provided that no
Major Default shall have occurred and be continuing hereunder, under the Plan
Notes, or under the Security Documents, on and as of the earlier of (i) the
date on which the requirements set forth in Section 4.8(D) have been satisfied,
or (ii) the date on which seventy-five percent (75%) of all principal payments
theretofore paid by the Borrowers to the Lender with respect to the
Amortization Principal Amount, plus all additional amounts (if any) paid to the
Lender pursuant to the provisions of Section 2.4(B)(i), equals, in the
aggregate, $1,000,000.00, the liens, security interests and pledges arising
hereunder or under the Security Documents in favor of the Lender with respect
to the Software Companies Collateral shall be released. Upon the occurrence of
such event, the Lender will execute any and all UCC-3 release statements
necessary to evidence such release which are presented to the Lender by
Borrowers (provided that such release statements are in form and substance
reasonably acceptable to the Lender), and will return the same, together with
the Pledged Notes issued by the Software Companies and all stock certificates
with respect to the Software Companies, to MTS within thirty (30) days after
the Lender's receipt of such release statements. The Borrowers shall be
entitled, at their sole expense, to record or file the same in the applicable
filing offices.
(C) MTS Labs. Provided that no Major Default
shall have occurred and be continuing hereunder, under the Plan Notes, or under
the Security Documents, the liens, security interests and pledges arising
hereunder or under the Security Documents in favor of the Lender with respect
to the MTS Labs Collateral shall be released on and as of the earlier of (i)
the date on which the requirements set forth in Section 4.8(D) have been
satisfied, or (ii) the date on which the following amounts aggregate
$2,000,000.00: (a) seventy-five percent (75%) of all principal payments
theretofore paid by the Borrowers to the Lender with respect to the
Amortization Principal Amount, excluding for purposes of this calculation all
amounts credited under Section 4.8(B), plus (b) all additional amounts (if any)
paid to the Lender pursuant to the provisions of Section 2.4(B)(ii). Upon the
occurrence of such event, the Lender will execute any and all UCC-3 release
statements necessary to evidence such release which are presented to the Lender
by Borrowers (provided that such release statements are in form and substance
reasonably
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acceptable to the Lender), and will return the same, together the Pledged Notes
issued by MTS Labs with all stock certificates with respect to MTS Labs, to MTS
within thirty (30) days after the Lender's receipt of such release statements.
The Borrowers shall be entitled, at their sole expense, to record or file the
same in the applicable filing offices.
(D) MTS Packaging. Provided that no Major
Default shall have occurred and be continuing hereunder, under the Plan Notes,
or under the Security Documents, on and as of the date on which:
(i) the Net Sales Proceeds from the sale of the Vangard
Assets (as such terms are defined in the Vangard Plan) shall have been
fully and timely paid to the Lender in accordance with the Vangard
Plan; and
(ii) the Amortization Principal Amount, and all accrued
interest thereon at the Pay Rate, under Plan Note I and all amounts
due under Plan Note II shall have been fully and timely paid to the
Lender in accordance with the Plan Notes and Sections 2.4 and 2.5
hereof;
the liens, security interests and pledges arising hereunder or under the
Security Documents in favor of the Lender with respect to the MTS Packaging
Collateral shall be released. Upon the occurrence of such event, the Lender
will execute any and all UCC-3 release statements or other documents necessary
to evidence such release which are presented to the Lender by Borrowers
(provided that such release statements and other documents are in form and
substance reasonably acceptable to the Lender), and will return the same,
together with all stock certificates with respect to MTS Packaging, to MTS
within thirty (30) days after the Lender's receipt of such release statements.
The Borrowers shall be entitled, at their sole expense, to record or file the
same in the applicable filing offices.
(E) Release of Collateral Not a Waiver or Release
of the Obligations. In no event shall the Lender's release of its interest in
any Collateral, under this Section 4.8 or otherwise, constitute or be deemed to
constitute a waiver, release or modification of the Obligations of the
Borrowers hereunder or under the Plan Notes or of the obligations of the
Guarantor under the Guaranty, nor shall any such release of Collateral impair
or have any effect upon the Lender's rights hereunder or under the Guaranty, or
its interests in any other Collateral not expressly released by the Lender. In
furtherance of the foregoing, the Guarantor and each of the Borrowers hereby
agree, jointly and severally, that (i) all Obligations then remaining hereunder
or under the Plan Notes shall remain in full force and effect after any such
release of Collateral, (ii) except as otherwise expressly provided in the
Guaranty, the Guaranty shall remain in full force and effect after any such
release of Collateral and will not be, and will not be deemed to be, impaired
by any such release of Collateral, and (iii) the Three-Party Agreement, the
Collateral Patent Assignment and the Subordination Agreement shall remain in
full force and effect after any such release of Collateral.
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES
5.1. ORIGINAL. To induce the Lender to enter into this Agreement,
each of the Borrowers and Guarantor, jointly and severally, represents and
warrants to the Lender as follows:
5.1.1. Each of the Borrowers is a corporation duly
organized, validly existing and in good standing under the Laws of the state of
its incorporation; each of the Borrowers has the lawful power to own its
properties and to engage in the business it conducts, and is duly qualified and
in good standing as a foreign corporation in the jurisdictions wherein the
nature of the business transacted by it or property owned by it makes such
qualification necessary; the states in which the Borrowers are qualified to do
business are set forth in EXHIBIT S; the addresses of all places of business
and headquarters of the Borrowers are as set forth in EXHIBIT T and the
addresses of all places where the Collateral is located and a brief description
of the nature of the Collateral at each such location are set forth in EXHIBIT
T;
5.1.2. None of the Borrowers has used any corporate
or fictitious name other than the name for the Borrowers as is used in this
Agreement, which is the same as the name shown, respectively, on the Borrowers'
certificates or articles of incorporation through the date of filing of the
last amendment thereto;
5.1.3. None of the Borrowers is directly or
indirectly controlled by, or acting on behalf of, any Person which is an
"Investment Company," within the meaning of the Investment Company Act of 1940,
as amended;
5.1.4. None of the Borrowers has been the surviving
corporation in a merger, acquired any business, or changed its principal
executive office within five (5) years and one (1) month prior to the date
hereof, except as set forth in EXHIBIT U;
5.1.5. Except for the Defaults and Events of Default
under the Original SouthTrust Loan Documents with respect to which the
Borrowers have notified SouthTrust in writing, none of the Borrowers is in
default with respect to any of its existing Indebtedness, and the making and
performance of this Agreement, the Plan Notes, and the Security Documents will
not (immediately, or with the passage of time, the giving of notice, or both):
5.1.5.1. Violate the charter or by-law
provisions of any of the Borrowers,
or violate any Laws or result in a
default under any contract,
agreement, or instrument to which
any of the Borrowers is a party or
by which any of the Borrowers or its
property is bound; or
5.1.5.2. Result in the creation or imposition
of any security interest in, or lien
or encumbrance upon, any of the
assets of any of the Borrowers,
except in favor of the Lender;
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5.1.6. Each of the Borrowers has the power and
authority to enter into and perform this Agreement, the Plan Notes, and the
Security Documents, and to incur the obligations herein and therein provided
for, and has taken all corporate action necessary to authorize the execution,
delivery, and performance of this Agreement, the Plan Notes, and the Security
Documents;
5.1.7. This Agreement, the Plan Notes and the
Security Documents are, or when delivered will be, valid, binding, and
enforceable against each of the Borrowers in accordance with their respective
terms;
5.1.8. Except as disclosed in EXHIBIT V, hereto,
there is no pending order, notice, claim, litigation, proceeding or
investigation against or affecting any of the Borrowers, whether or not covered
by insurance, that would involve the payment of $50,000.00 or more if adversely
determined;
5.1.9. Each of the Borrowers has good and marketable
title to all of its assets, subject to no security interest, encumbrance or
lien, or claim of any third person except for Permitted Liens;
5.1.10. The Finanical Statements, including any
schedules and notes pertaining thereto, have been prepared in accordance with
Generally Accepted Accounting Principles consistently applied, and fully and
fairly present the financial condition of the Borrowers at the dates thereof
and the results of operations for the periods covered thereby, and there have
been no material adverse changes in the Consolidated financial condition or
business of the Borrowers, or in the financial condition of any of the
Borrowers separately, from the dates of the Financial Statements to the date
hereof, except as reflected on EXHIBIT W;
5.1.11. As of the date of the Financial Statements,
the Borrowers had no material Indebtedness of any nature, including, but
without limitation, liabilities for taxes and any interest or penalties
relating thereto, except to the extent reflected (in a footnote or otherwise)
and reserved against in the Financial Statements or as disclosed in or
permitted by this Agreement; none of the Borrowers knows or has any reasonable
ground to know of any basis for the assertion against it of any material
Indebtedness of any nature not fully reflected and reserved against in the
Financial Statements;
5.1.12. Except as described on EXHIBIT X hereto, or
as otherwise permitted herein, each of the Borrowers has filed all federal,
state and local tax returns and other reports that it is required by Laws to
file prior to the date hereof and which are material to the conduct of its
businesses, has paid or caused to be paid all taxes, assessments and other
governmental charges that are due and payable prior to the date hereof, and has
made adequate provision for the payment of such taxes, assessments or other
charges accruing but not yet payable; none of the Borrowers has any knowledge
of any deficiency or additional assessment in a materially important amount in
connection with any taxes, assessments or charges not provided for on its books
and disclosed in writing to the Lender;
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5.1.13. Except as otherwise disclosed in EXHIBIT Y
hereto, or except to the extent that the failure to comply would not materially
interfere with the conduct of the business of any Borrower, each of the
Borrowers has complied with all applicable Laws with respect to:
5.1.13.1. Any restrictions, specifications, or
other requirements pertaining to
products that any of the Borrowers
manufactures or sells or to the
services that any of the Borrowers
performs;
5.1.13.2. The conduct of their respective
businesses; and
5.1.13.2. The use, maintenance and operation
of the real and personal properties
owned or leased by it in the conduct
of its businesses;
5.1.14. No representation or warranty by the
Borrowers (or any of them) contained herein or in any certificate or other
document furnished by any of the Borrowers pursuant hereto contains any untrue
statement of material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the circumstances
under which it was made;
5.1.15. Each consent, approval or authorization of,
or filing, registration or qualification with, any Person that is required to
be obtained or effected by any of the Borrowers, or the Guarantor in connection
with the execution and delivery of this Agreement, the Plan Notes, and the
Security Documents or the undertaking or performance of any obligation
hereunder or thereunder has been duly obtained or effected;
5.1.16. All existing Indebtedness of the Borrowers:
(1) For money borrowed; or (2) Under any security agreement, mortgage, or
agreement covering the lease by any of the Borrowers as lessee of real or
personal property, is described in EXHIBIT Z, hereto;
5.1.17. Except as described in EXHIBIT AA, hereto,
none of the Borrowers has any material lease, contract or commitment of any
kind (such as employment agreements; collective bargaining agreements; powers
of attorney; distribution arrangements; patent license agreements; contracts
for future purchase or delivery of Goods or rendering of services; bonus,
pension and retirement plans; or accrued vacation pay, insurance and welfare
agreements); to the best of the Borrowers' knowledge, all parties (including
the Borrowers) to all such material leases, contracts and other commitments to
which any of the Borrowers is a party have complied with the provisions of such
leases, contracts and other commitments; no party is in default under any
material lease, contract, or other commitment thereof and no event has occurred
which, but for the giving of notice or the passage of time, or both, would
constitute a default;
5.1.18. The Borrowers' Consolidated federal tax
returns for all years of operation, including the year ended March 31, 1996,
have been filed with the Internal Revenue Service and have not been challenged;
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5.1.19. Except as otherwise described on EXHIBIT BB
hereto, all Pension Plans, as defined in ERISA, of the Borrowers, if any, meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction, each as defined in ERISA,
has occurred with respect to any such Plan;
5.1.20. Except as described in EXHIBIT CC hereto,
each of the Borrowers is in compliance with all Environmental Laws;
5.1.21. All of the Borrowers' stock is duly
authorized, validly issued, fully paid and nonassessable;
5.1.22. Each of the Borrowers owns or has the rights
to use, pursuant to written licenses, all patents, trademarks and copyrights
used or employed in its business and products, each of which is listed on
EXHIBIT DD hereto and copies of which have been delivered to Lender; and
5.1.23. Except as otherwise described on EXHIBIT EE
hereto, the Inventory of each of the Borrowers is not subject to any license
agreement relating to patents, trademarks or copyrights which could directly or
indirectly preclude or render impracticable the realization by the Lender of
the value of such Inventory.
5.2. SURVIVAL. All of the representations and warranties set forth
in Section shall survive until all Obligations are satisfied in full and there
remain no outstanding commitments hereunder.
5.3. SOUTHTRUST CLOSING CERTIFICATE REGARDING BORROWERS'
REPRESENTATIONS AND WARRANTIES. SouthTrust hereby agrees that, at the
Closing, it will deliver to the Borrowers a certificate, in which SouthTrust
will certify that, except as set forth in such certificate (or in any exhibit
thereto), it has no actual knowledge that any representation or warranty of
Borrowers contained in this Article V is false. For purposes of the
certificate described in this Section 5.3, SouthTrust's "knowledge" shall mean
the actual knowledge of J. Scott Hilley, Vice President of SouthTrust.
ARTICLE 6. THE BORROWERS' COVENANTS
The Borrowers, jointly and severally, hereby covenant and
agree with the Lender that, so long as any of the Obligations remains
unsatisfied, unless the Lender otherwise consents in writing, it will comply
and, in the case of MTS, it will cause the other Borrowers to comply, with the
following covenants:
6.1. AFFIRMATIVE COVENANTS.
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6.1.1. Each of the Borrowers will furnish the Lender:
6.1.1.1. Within thirty (30) days after the
close of each calendar month:
6.1.1.1.1. A Consolidated income
statement of all Borrowers
for such period; and
6.1.1.1.2. A Consolidated balance sheet
for all Borrowers as of the
end of such period all in
reasonable detail, subject to
normal year-end audit
adjustments, and certified by
MTS's president or principal
financial officer to have
been prepared in accordance
with Generally Accepted
Accounting Principles
consistently applied by the
Borrowers, except for any
inconsistencies explained in
such certificate;
6.1.1.2. Within sixty (60) days after the
close of each quarterly accounting
period in each fiscal year:
6.1.1.2.1. A Consolidated statement of
Stockholders' Equity and a
Consolidated and consolidating
statement of Cash Flows of
the Borrowers for such
quarterly period;
6.1.1.2.2. Consolidated and
consolidating income
statements of the Borrowers
for such quarterly period; and
6.1.1.2.3. Consolidated and consolidating
balance sheets of the
Borrowers as of the end of
such quarterly period
all in reasonable detail, subject to normal
year-end audit adjustments and certified by
MTS's president or principal financial
officer to have been prepared in accordance
with Generally Accepted Accounting Principles
consistently applied by the Borrowers, except
for any inconsistencies explained in such
certificate; and
6.1.1.2.4. A reconciliation reflecting
a comparison of actual items
of income and expense for
such quarterly period to
amounts reflected in each
Borrower's Budget (as
described in Section
6.1(A)(8) hereof) covering
such quarterly period;
6.1.1.3. Within one hundred five (105) days
after the close of each
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fiscal year, or on or prior to the
date of filing of MTS's Annual
Report on Form 10-K for such fiscal
year with the U.S. Securities and
Exchange Commission, whichever first
occurs:
6.1.1.3.1. A Consolidated statement of
Stockholders' Equity and a
Consolidated statement of
Cash Flows of the Borrowers
for such fiscal year;
6.1.1.3.2. Consolidated and
consolidating income
statements of the Borrowers
for such fiscal year; and
6.1.1.3.3. Consolidated and
consolidating balance sheets
of the Borrower as of the end
of such fiscal year
all in reasonable detail, including all
supporting schedules and comments; the
Consolidated statements and balance sheets to
be audited by an independent certified public
accountant selected by the Borrowers and
acceptable to the Lender, in its sole and
absolute discretion, and certified by such
accountants to have been prepared in
accordance with Generally Accepted Accounting
Principles consistently applied by the
Borrowers, except for any inconsistencies
explained in such certificate; in addition,
the Borrowers will obtain from such
independent certified public accountants and
deliver to the Lender, within the time period
specified above, their written statement that
in making the examination necessary to their
certification they have obtained no knowledge
of any Event of Default by any of the
Borrowers, or disclosing all Events of
Default of which they have obtained
knowledge; provided, however, that in making
their examination such accountants shall not
be required to go beyond the bounds of
generally accepted auditing standards for the
purpose of certifying financial statements;
the Lender shall have the right, from time to
time, to discuss the Borrowers' affairs
directly with the Borrowers' independent
certified public accountant after notice to
the Borrowers and opportunity of the
Borrowers to be present at any such
discussions;
6.1.1.4. Contemporaneously with each monthly,
quarterly and year-end financial
report required by the foregoing
paragraphs, a Compliance Certificate,
wherein in addition to the financial
information reported in such
Compliance Certificate, the
president or principal financial
officer of MTS shall certify that he
has individually reviewed the
provisions of this Agreement and
that a review of the activities of
the
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Borrowers during such year, monthly
or quarterly period, as the case may
be, has been made by or under the
supervision of the signer of such
certificate with a view to
determining whether the Borrowers
have kept, observed, performed and
fulfilled all their respective
obligations under this Agreement,
and that, to the best of his actual
knowledge after due inquiry, the
Borrowers have observed and
performed each and every undertaking
contained in this Agreement and are
not at the time in Default in the
observance or performance of any of
the terms and conditions hereof or,
if any of the Borrowers shall be so
in Default, specifying all such
Defaults and Events of Default of
which he may have knowledge;
6.1.1.5. Promptly after sending or making
available or filing of the same,
copies of all reports, proxy
statements and financial statements
that any of the Borrowers sends or
makes available to its stockholders
and all registration statements and
reports that any of the Borrowers
files with the U.S. Securities and
Exchange Commission or any successor
Person;
6.1.1.6. Within thirty (30) days after the
end of each calendar month, and
contemporaneously with the delivery
of the financial statements referred
to in Section 6.1(A)(1), a true,
accurate and complete aging report
as of the end of such month, in such
form and detail as shall be
satisfactory to the Lender, of all
Accounts of each of the Borrowers,
including an explanation of any
reserves for uncollectability,
discounts, charge-backs or rebates
with respect to such Accounts;
6.1.1.7. Within thirty (30) days after the
end of each calendar month, and
contemporaneously with the delivery
of the financial statements referred
to in Section 6.1(A)(1), a true,
accurate and complete report of each
of the Borrowers' Inventory, in such
form and detail as shall be
satisfactory to the Lender;
6.1.1.8. Not later than ten (10) Business
Days prior to the Closing Date, a
budget and cash flow projection for
each of the Borrowers, reflecting
the reasonably anticipated gross and
net sales, capital expenditures and
operating expenses of all kinds, in
such form and detail as shall be
satisfactory to the Lender, for the
remainder of the fiscal quarter
during which
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the Closing occurs (in each case, a
"Budget"), and after the Closing,
not later than ten (10) Business
Days prior to the expiration of the
then current Budget, a replacement
Budget for the next fiscal quarter;
and
6.1.1.9. Upon the Lender's request, from time
to time, copies of any or all
agreements, contracts, or commitments
of the type referred to in Section
hereof.
6.1.2. Each of the Borrowers will maintain its
Inventory, Equipment, real estate and other properties in good condition and
repair (normal wear and tear excepted), and will pay and discharge or cause to
be paid and discharged when due, the cost of repairs to or maintenance of the
same, and will pay or cause to be paid all rental or mortgage payments due on
such real estate. Each of the Borrowers hereby agrees that, in the event it
fails to pay or cause to be paid any such payments, the Lender may do so and on
demand be reimbursed therefor by the Borrowers. In addition, each of the
Borrowers agrees to reimburse the Lender for any reasonable expenses incurred
by the Lender after the occurrence and during the continuation of any Event of
Default to protect and preserve the Collateral pursuant to Section .
6.1.3. Each of the Borrowers will maintain, or cause
to be maintained, public liability insurance and fire and extended coverage
insurance, naming the Lender as mortgagee and loss payee, as appropriate, on
all tangible assets owned by it, all in such form and amounts as are consistent
with industry practices and with such insurers as may be satisfactory to the
Lender. Such policies shall contain a provision whereby they cannot be canceled
except after ten (10) days' written notice to the Lender. Each of the
Borrowers will furnish to the Lender such evidence of insurance as the Lender
may require. Each of the Borrowers hereby agrees that, in the event it fails
to pay or cause to be paid the premium on any such insurance, the Lender may do
so and be reimbursed by the Borrowers therefor. Each of the Borrowers hereby
assigns to the Lender any returned or unearned premiums that may be due such
Borrower upon cancellation of any such policies for any reason whatsoever and
directs the insurers to pay the Lender any amounts so due at any time when an
Event of Default shall have occurred and be continuing. The Lender is hereby
appointed the Borrowers' attorney-in-fact (without requiring the Lender to act
as such) to, from and after the occurrence and during the continuation of any
Event of Default, endorse any check which may be payable to any of the
Borrowers to collect such returned or unearned premiums or the proceeds of such
insurance, and any amount so collected may be applied by the Lender toward
satisfaction of any of the Obligations.
6.1.4. Each of the Borrowers will pay or cause to be
paid when due, all taxes, water rates, assessments (including assessments for
local improvements) and charges or levies imposed upon it or on any of its
property or which it is required to withhold and pay over, except that the
Borrowers shall be entitled to, in good faith and at their own expense,
diligently contest the same or the validity thereof by and in accordance with
appropriate legal proceedings, so long as such proceedings shall operate to
prevent (a) the collection of such taxes or levy upon and sale or forfeiture of
the subject property to satisfy such taxes or assessments and (b) the
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enforcement of such taxes or assessments against the Borrowers, or any of them,
or their respective assets.
6.1.5. Each of the Borrowers will, when requested so
to do, make available for inspection during such Borrower's normal business
hours by duly authorized representatives of the Lender any of its books and
Records, and will furnish the Lender any information regarding its business
affairs and financial condition within a reasonable time after written request
therefor.
6.1.6. Each of the Borrowers will take all necessary
steps to preserve its corporate existence and franchises and comply with all
present and future Laws applicable to it in the operation of its business, and
all material agreements to which it is subject.
6.1.7. Each of the Borrowers will collect its
Accounts and sell its Inventory only in the ordinary course of business.
6.1.8. Each of the Borrowers will keep accurate and
complete Records of its Accounts, Inventory and Equipment, consistent with
sound business practices.
6.1.9. Each of the Borrowers will give immediate
notice to the Lender of: (1) any litigation proceeding in which it is a party
if an adverse decision therein would require it to pay over more than
$50,000.00 or deliver assets the value of which exceeds such sum (whether or
not the claim is considered to be covered by insurance); and (2) the
institution of any other suit or proceeding involving it that might materially
and adversely affect its operations, financial condition, property or business
prospects.
6.1.10. Within ten (10) days of the Lender's request
therefor, each of the Borrowers will furnish the Lender with copies of federal
income tax returns filed by the Borrowers.
6.1.11. Except when the amount thereof is being
contested in good faith by appropriate proceedings and with adequate reserves
therefor being set aside on the books of the Borrowers, each of the Borrowers
will pay when due (or within applicable grace periods) all Indebtedness, other
than ordinary trade debt, owed to third Persons and, with respect to
Indebtedness which constitutes ordinary trade debt, each of the Borrowers will
pay such Indebtedness within sixty (60) days of its due date. If default be
made by any of the Borrowers in the payment of any principal (or installment
thereof) of, or interest on, any such Indebtedness, the Lender shall have the
right, in its sole and absolute discretion (but shall have no obligation), to
pay such interest or principal for the account of such Borrower and be
reimbursed by the Borrowers therefor.
6.1.12. Each of the Borrowers will notify the Lender
immediately if it becomes aware of the occurrence of any Event of Default or of
any fact, condition or event that only with the giving of notice or passage of
time or both, could become an Event of Default, or if it becomes aware of any
material adverse change in the business prospects, financial condition
(including, without limitation, proceedings in bankruptcy, insolvency,
reorganization, or the
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appointment of a receiver or trustee), or results of operations of any of the
Borrowers, or any Guarantor or of the failure of any of the Borrowers or any
Guarantor to observe any of its undertakings hereunder or under any of the
Security Documents.
6.1.13. Each of the Borrowers will notify the Lender
thirty (30) days in advance of any changes of its name or the name under which
its business is operated, any change in the location of any of its places of
business, and the establishment of any new, or the discontinuance of any
existing, place of business.
6.1.14. Each of the Borrowers will notify the Lender
thirty (30) days in advance of any change in the location or use of any of the
Collateral and within thirty (30) days after any change in condition, aside
from normal wear and tear, of any of the Collateral.
6.1.15. Each of the Borrowers will: (1) fund all its
Pension Plans, if any, as defined in ERISA, in accordance with no less than the
minimum funding standards of Section 302 of ERISA; (2) furnish the Lender,
promptly after the filing of the same, with copies of all reports or other
statements filed with the United States Department of Labor, the Pension
Benefit Guaranty Corporation, or the Internal Revenue Service with respect to
all such Plans; and (3) promptly advise the Lender of the occurrence of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, with
respect to any such Plan.
6.1.16. Each of the Borrowers will comply with all
Environmental Laws, and will handle, store, treat, discharge, and dispose of
any Hazardous Materials only in compliance with all Environmental Laws.
6.1.17. Each of the Borrowers will maintain its
primary deposit account relationship with the Lender.
6.1.18. Each of the Borrowers and the Guarantor will
comply in all respects with the Plans and the Confirmation Orders.
6.2. NEGATIVE COVENANTS. The Borrowers, jointly and severally, do
hereby covenant and agree with the Lender that, so long as any of the
Obligations remain unsatisfied, each of them will, except with the prior
written consent of the Lender, comply, and in the case of MTS, cause the other
Borrowers to comply, at all times with the following negative covenants:
6.2.1. None of Borrowers will enter into any merger,
consolidation, reorganization or recapitalization, reclassify its capital
stock, or liquidate, dissolve, or enter into any other Capital Transaction.
6.2.2. None of the Borrowers will sell, transfer,
lease or otherwise dispose of all or (except in the ordinary course of
business) any material part of its assets, except, with respect to Vangard
Labs, in accordance with the Vangard Plan.
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6.2.3. Except as expressly permitted by Section
6.2(B), none of the Borrowers will sell, lease, transfer, assign, or otherwise
dispose of any of the Collateral except in the ordinary course of business and
as permitted under this Agreement.
6.2.4. Except as expressly permitted by Section
6.2(B), none of the Borrowers will sell, or enter into any agreement to sell,
any of its Accounts.
6.2.5. Except as expressly permitted by Section
6.2(B), none of the Borrowers will sell, or otherwise dispose of, or for any
reason cease operating, any of its divisions or franchises.
6.2.6. None of the Borrowers will mortgage, pledge,
grant or permit to exist a security interest in or lien upon any of its assets
of any kind, now owned or hereafter acquired, except for Permitted Liens.
6.2.7. None of the Borrowers will become liable,
directly or indirectly, as guarantor or otherwise for any obligation of any
other Person, except for (i) the endorsement of commercial paper for deposit or
collection in the ordinary course of business, and (ii) guaranties by one
Borrower of the obligations or Indebtedness of one or more other Borrowers
which is incurred in the ordinary course of business and is permitted to be
incurred under this Agreement.
6.2.8. None of the Borrowers will incur, create,
assume, or permit to exist any Indebtedness except:
6.2.8.1. Existing Indebtedness as set forth
in EXHIBIT Z to the extent shown on
such EXHIBIT Z to be permitted to
exist after the Closing;
6.2.8.2. Trade Indebtedness incurred in the
ordinary course of business
(provided, that none of the
Borrowers shall purchase or
otherwise acquire Inventory except
for cash or upon open account unless
approved in each case by the Lender
in writing);
6.2.8.3. Contingent Indebtedness permitted by
Section;
6.2.8.4. Indebtedness secured by Permitted
Liens;
6.2.8.5. Lease obligations permitted by
Section ;
6.2.8.6. Indebtedness incurred in a
transaction constituting a refinance
of the then outstanding Amortization
Principal Amount under Plan Note I,
accrued interest thereon and all
amounts (if any) then outstanding
under Plan Note II; provided, that
(i) all such outstanding amounts
shall be paid
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in full to the Lender
contemporaneously with the
incurrence of any such Indebtedness,
(ii) the Lender shall have received
advance written notice of prepayment
(if applicable) in accordance with
Sections 2.4(D) and 2.5(D) hereof,
(iii) the Lender shall have received
copies of all agreements, instruments
and other documents evidencing or
relating to such Indebtedness at
least twenty (20) days prior to
incurrence of such Indebtedness, and
(iv) the prior written consent of
Lender to such refinance transaction
shall have been obtained, which
consent shall not be unreasonably
withheld or delayed. The Borrowers
hereby acknowledge and agree that,
if the Lender fails to provide its
prior consent to the incurrence of
such Indebtedness and such failure is
based upon Lender's good faith
determination that the terms and
conditions thereof are likely to (a)
impair or affect adversely the
Borrowers' ability to repay the
amounts owed under Plan Note I and
Section 2.4(E) hereof or (b)
otherwise prejudice the Lender's
remaining rights hereunder, then the
Lender's failure to grant such
consent will not be, and will not be
deemed to be, unreasonable; and
6.2.8.7. Indebtedness of one Borrower to one
or more other Borrowers if (i) such
Indebtedness is incurred in the
ordinary course of business and (ii)
such Indebtedness is expressly
subordinate to the Indebtedness
evidenced by the Plan Notes pursuant
to agreements containing terms
substantially similar to those
contained in the Subordination
Agreement.
6.2.9. None of the Borrowers will declare or pay any
dividends, or make any other payment or distribution on account of its capital
stock.
6.2.10. None of the Borrowers will form any
Subsidiary, make any investment in or, except for loans to other Borrowers
which are permitted by Section 6.2(H)(8) hereof, make any loan in the nature of
any investment to any Person.
6.2.11. None of the Borrowers will make any loan or
advance to any officer, shareholder, director or employee of any of the
Borrowers, except for business travel and similar temporary advances in the
ordinary course of business, nor pay salary to executive and other officers of
Borrowers aggregating more than $400,000.00 per year, on a consolidated basis.
6.2.12. None of the Borrowers will make payments on
account of the purchase or lease of Fixed Assets or otherwise make capital
expenditures that, in the aggregate, in any fiscal year (commencing with the
current fiscal year) will exceed $500,000.00, on a consolidated basis; as used
in this paragraph, the term "lease" means a lease reflected on a balance
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sheet of any of the Borrowers or a lease that should be so reflected under
Generally Accepted Accounting Principles.
6.2.13. None of the Borrowers will pay, in an
aggregate amount in any fiscal year (commencing with the current fiscal year),
lease obligations in excess of $505,000.00; as used in this paragraph, the term
"lease" means a lease that is not reflected on a Consolidated balance sheet of
the Borrowers and should not be so reflected under Generally Accepted
Accounting Principles.
6.2.14. None of the Borrowers will purchase or
otherwise invest in or hold securities, non-operating real estate or other
non-operating assets, except:
6.2.14.1 Direct obligations of the United
States of America;
6.2.14.2. The present investment as of the
Closing in any such assets; and
6.2.14.3. Operating assets that hereafter
become non-operating assets.
6.2.15. None of the Borrowers will (1) issue, redeem,
purchase or retire any of its capital stock or grant or issue any warrant,
right or option pertaining thereto or other security convertible into any of
the foregoing, including, without limitation, any issuance, redemption,
re-purchase or retirement of the "debentures" described in Article VII of the
Joint Plan, or (2) permit any transfer, sale, redemption, retirement, or other
change in the ownership of the outstanding capital stock of any of the MTS
Subsidiaries.
6.2.16. None of the Borrowers will prepay any
Subordinated Indebtedness, Indebtedness for borrowed money, or Indebtedness
secured by any of its assets (except the Obligations), or enter into or modify
any agreement as a result of which the terms of payment of any of the foregoing
Indebtedness are waived or modified.
6.2.17. None of the Borrowers will enter into any
sale-leaseback transaction.
6.2.18. None of the Borrowers will acquire any stock
in, or acquire all or substantially all of the assets of, any Person.
6.2.19. None of the Borrowers will furnish the Lender
any certificate or other document that will contain any untrue statement of
material fact or that will omit to state a material fact necessary to make it
not misleading in light of the circumstances under which it was furnished.
6.2.20. None of the Borrowers will treat, store,
handle, discharge, or dispose of any Hazardous Materials except in compliance
with all Environmental Laws.
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6.2.21. Except for (1) employment arrangements which
comply with the provisions of Section 6.2(K), (2) the payment of royalties to
the Siegel Family Trust in accordance with the Royalty Subordination Agreement,
and (3) transactions which comply with the provisions of Sections 6.2(G),
(H)(8) and (J), none of the Borrowers will enter into any transaction or series
of transactions which involves in the aggregate $2,000.00 or more where any
Affiliate, officer, director or shareholder of any of the Borrowers, or any
family member or Affiliate of the foregoing, is a counter-party to such
transaction; provided that, in any case, such a transaction shall be
arms-length.
6.2.22. None of the Borrowers will enter into any
agreement whereby title to any of the Borrowers' inventory passes to any
transferee prior to delivery by the Borrower.
6.3. FINANCIAL COVENANTS. The Borrowers will maintain at all times:
6.3.1. Consolidated Net Working Capital in the
following minimum amounts:
From the Closing Date through
March 31, 1997.................... $2,000,000
During Fiscal 1998................ $2,500,000
During Fiscal 1999................ $3,000,000
During Fiscal 2000 and
thereafter........................ $3,500,000
6.3.2. Consolidated Tangible Net Deficit not to
exceed the following:
From the Closing Date through
March 31, 1997.................... $20,500,000
During Fiscal 1998................ $20,000,000
During Fiscal 1999................ $19,500,000
During Fiscal 2000 and
thereafter........................ $19,000,000
6.3.3. A ratio of Consolidated Current Assets to
Consolidated Current Liabilities of not less than 1.25 to 1.0; and
6.3.4. Fixed Charge Coverage of not less than 2.0 to
1.0.
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ARTICLE 7. DEFAULT
7.1. EVENTS OF DEFAULT.
(A) Major Defaults. The occurrence of any one or more of
the following events, each of which shall constitute an Event of Default, shall
also constitute a Major Default hereunder:
(1) The Borrowers shall fail to pay when due any
installment of principal, any interest, fee or other amount (including
mandatory prepayments) payable under this Agreement or under any of
the Security Documents or under the Plan Notes, unless such failure is
cured within five (5) days after such due date;
(2) The Borrowers (or any of them) shall fail to
comply with the provisions of Section 6.1(C): (a) which require the
delivery of evidence of insurance, unless such failure is cured within
fifteen (15) days after written notice from Lender, or (b) which
require the maintenance of insurance coverage as provided in Section
6.1(C);
(3) The Borrowers (or any of them) shall fail to
observe or perform the covenants contained in Sections 6.2(A), (B),
(C), (D), (F), (G), (H), (I), (J), (K), (L), (M), (O) or (Q);
(4) The Borrowers (or any of them) shall fail to
remove federal, state or local tax liens covering, in any one instance
or in the aggregate, in excess of $50,000.00 in taxes, assessments or
other governmental charges, on any of the Borrowers' real or personal
property within five (5) days after the earlier of: (a) the date on
which the applicable taxing authority levies on any asset or assets of
any of the Borrowers or otherwise commences enforcement action with
respect to such taxes, or (b) any Borrower receives notice from such
taxing authority of such levy or commencement of enforcement
proceedings;
(5) The Borrowers (or any of them) or any
Guarantor shall make a general assignment for the benefit of its or
any of its or their creditors;
(6) Proceedings in bankruptcy, or for
reorganization of any of the Borrowers or any Guarantor, or for the
readjustment of any of its debts, under the Bankruptcy Code, or any
part thereof, or under any other Laws, whether state or federal, for
the relief of debtors, now or hereafter existing (collectively,
"Bankruptcy Proceedings"), shall be commenced by any of the Borrowers
or any Guarantor, or against any of the Borrowers or any Guarantor by
any other Person, or which otherwise have jurisdiction over the
Indebtedness evidenced by the Plan Notes, this Agreement or the other
Plan Documents (as defined in the Plans) and any such Bankruptcy
Proceedings, or any action or omission by any of the Borrowers or
Guarantor in connection therewith (including, without limitation, any
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<PAGE> 53
failure to timely comply with their payment and other Obligations
hereunder or under the Plan Notes), impairs or affects adversely the
Collateral or the rights and remedies of the Lender hereunder, under
the Plan Notes or under the Security Documents;
(7) Other than the appointment of the Plan
Trustee in accordance with the Vangard Plan, a receiver or trustee
shall be appointed for any of the Borrowers or for any substantial
part of their respective assets, or any proceedings shall be
instituted for the dissolution or the full or partial liquidation of
any of the Borrowers and (i) the Borrowers (or any of them) shall have
sought such appointment or proceedings or shall consent thereto or
not object thereto or (ii) such receiver or trustee shall not be
discharged within thirty (30) days of his appointment or such
proceedings shall not be discharged within thirty (30) days of their
commencement;
(8) The Borrowers (or any of them) shall suffer
final judgments for payment of money aggregating, in any one instance
or in the aggregate, in excess of $200,000.00 and shall not discharge
the same within five (5) days after the earlier of: (a) the date on
which any such judgment creditor or creditors shall commence action to
execute on any such judgment or judgments, or (b) any Borrower
receives notice that execution thereon is or will be commenced;
(9) A judgment creditor or judgment creditors of
any of the Borrowers shall obtain, in connection with the execution of
a final judgment or judgments aggregating, in any one instance or in
the aggregate, in excess of $200,000.00, possession of any of the
Collateral by any means, including, but without limitation, levy,
garnishment, distraint, detinue, replevin or self-help, and the
Borrowers shall not obtain the return of such Collateral within the
earlier of (a) five (5) days from the taking of such possession, or
(b) expiration of the five (5) day period described in Section
7.1(A)(8) hereof;
(10) A court or arbitration panel shall find that
the Borrowers (or any of them) or any Guarantor or any Affiliate
thereof which is a party to, or otherwise bound by, the
Non-Competition Agreement (as defined in the Vangard Plan) has
breached or defaulted in its obligations thereunder;
(11) The Borrowers (or any of them) shall
consummate any Capital Transaction in violation of Section 6.2(A)
hereof;
(12) The validity or enforceability of this
Agreement, the Plan Notes or any of the Security Documents against any
of the Borrowers or the Guarantor, in accordance with their respective
terms, shall be contested by any of the Borrowers, or any Guarantor,
or any Affiliate of MTS;
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(13) Any property of any of the Borrowers or any
Guarantor which has a fair market value in excess of $50,000.00 in the
aggregate is seized by a governmental authority, or a forfeiture
proceeding is commenced against any of the Borrowers or any Guarantor
or any property of any of the Borrowers or any Guarantor, and the
property subjected to such seizure or forfeiture proceeding is not
returned and the subject matter of such proceeding resolved within
five (5) days after the earlier of: (a) the date on which such seizure
or proceeding is commenced, or (b) the date on which any Borrower
receives notice of such seizure or such forfeiture proceeding;
(14) The Borrowers shall fail for any reason to
obtain the waiver of any Other Default in the manner and within the
time period specified in Section 7.2(C) hereof; or
(15) Any financial statement or any representation
or warranty contained in this Agreement or in any of the other Plan
Documents, or otherwise made or delivered by any of the Borrowers or
the Guarantor to SouthTrust, in order to induce SouthTrust to enter
into the transactions contemplated in this Agreement, shall be false,
incorrect or incomplete, in any material respect, when made.
(B) Other Defaults. The occurrence, prior to the date
which is ninety-five (95) days after the satisfaction of all of the
requirements set forth in Section 4.8(D) hereof, of any one or more of the
following events shall constitute a Default or Event of Default hereunder, but
shall not constitute a Major Default:
(1) Any default or event of default (other than a
default which constitutes a Major Default, as specified in Section
7.1(A) above) shall occur under either of the Plans;
(2) The Borrowers (or any of them) shall fail to
remove any federal, state or local tax lien or assessment on any of
the Borrowers' real or personal property within thirty (30) days after
the Borrowers receive notice thereof from any such taxing authority,
except that the Borrowers shall be entitled to, in good faith and at
their own expense, diligently contest the same or the validity thereof
by and in accordance with appropriate legal proceedings, so long as
such proceedings shall operate to prevent (a) the collection of such
taxes or levy upon and sale or forfeiture of the subject property to
satisfy such taxes and (b) the enforcement of such taxes against the
Borrowers, or any of them, or their respective assets;
(3) The Borrowers (or any of them) shall fail to
observe or perform any covenant or obligation to be observed or
performed by it hereunder or under any of the Security Documents
(other than those covenants and obligations that are specified in
other subsections of this Section 7.1), and such failure shall
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continue for five (5) days after the earliest of: (1) notice of such
failure from the Lender; or (2) the Lender is notified of such
failure; or (3) the Lender should have been notified of such failure
pursuant to the provisions of Section , unless such failure can be
cured and, within such five (5) day period, Borrowers either cure such
failure or, if such failure cannot reasonably be cured within such
period, Borrowers take affirmative, tangible and demonstrable steps to
commence such cure and, in fact, cure such failure within thirty (30)
days after the expiration of such five (5) day period;
(4) The Borrowers (or any of them) or any
Guarantor shall fail to pay when due any Indebtedness for borrowed
money to any third Persons and such failure shall continue beyond any
applicable grace period, or the Borrowers (or any of them) shall
suffer to exist any other event of default under any agreement binding
upon the Borrower if such event of default could result in liability
of the Borrowers (or any of them) in excess of $50,000.00;
(5) Any financial statement, representation,
warranty or certificate made or furnished by the Borrowers (or any of
them) to the Lender in connection with this Agreement, or in any
separate statement or document to be delivered hereunder to the
Lender, shall be materially false, incorrect, or incomplete when made;
(6) Other than the Bankruptcy Cases, as the same
are currently pending, Bankruptcy Proceedings shall be commenced (a)
by any of the Borrowers or any Guarantor, or (b) against any of the
Borrowers or any Guarantor by any other Person and such involuntary
proceedings shall not be discharged within sixty (60) days of their
commencement or an order for relief shall be entered within such
sixty-day period;
(7) The Borrowers (or any of them) shall suffer
final judgments for payment of money aggregating in excess of
$50,000.00 and shall not discharge the same within a period of thirty
(30) days unless, pending further proceedings, execution has not been
commenced or if commenced has been effectively stayed;
(8) A judgment creditor of any of the Borrowers
shall obtain possession of any item or items of the Collateral having
a fair market value or book value in excess of $50,000.00, by any
means, including, but without limitation, levy, garnishment, distraint,
detinue, replevin or self-help;
(9) The Borrowers (or any of them), any Guarantor
or any obligee of Subordinated Indebtedness shall fail to comply with
the subordination provisions of the Subordination Agreements or of the
instruments evidencing such Subordinated Indebtedness;
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(10) A Reportable Event, as defined in ERISA, with
respect to any Benefit Plan shall occur;
(11) Any Guarantor shall fail to comply fully with
the requirements of his or its Guaranty Agreement, or if any such
Guarantor is an individual, such Guarantor shall die, unless the
estate of such Guarantor remains obligated thereunder and the Guaranty
obligations remain legally enforceable against such estate; or
(12) A criminal investigation is commenced, in
connection with which any of the Borrowers or any Guarantor is named
as a "target" or a "subject".
7.2. ACCELERATION.
(A) Automatic Acceleration. Immediately and without
notice upon the occurrence of an Event of Default specified in Sections
7.1(A)(6), (A)(7) or (B)(6), all Obligations, whether arising hereunder, under
the Plan Notes or otherwise, shall immediately become due and payable without
further action of any kind on the part of the Lender, and the Lender may
exercise any rights or remedies available under this Agreement, the Security
Documents, at law or in equity.
(B) Acceleration at the Option of the Lender. Upon the
occurrence of any Event of Default specified in Section 7.1 hereof, other than
Section 7.1(A)(6), (A)(7) or (B)(6), then at any time thereafter if any such
Event of Default shall then be continuing, the Lender may (1) declare all
Obligations (whether arising hereunder, under the Plan Notes or otherwise) to
be, whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers, and (2) exercise any other rights or remedies
available under this Agreement, the Security Documents, at law or in equity.
(C) Borrowers' Right to Obtain a Waiver of Events of
Default Other Than Major Defaults. Upon the occurrence of any Event of Default
other than a Major Default, then, whether or not maturity of the Obligations
has been accelerated pursuant to Section 7.2(A) or (B), and whether or not the
Lender has commenced exercise of any of its rights or remedies hereunder, at
law or in equity, the Borrowers shall be entitled to obtain a waiver of such
Event of Default, but only in the manner, and within the time period, expressly
provided in this Section 7.2(C). In order to obtain such a waiver, within
thirty (30) days after notice of the occurrence of such Event of Default from
the Lender, the Borrowers shall pay to the Lender an amount, in cash or other
immediately available funds, equal to the sum of:
(a) All of the then outstanding Amortization
Principal Amount under Plan Note I, together with all accrued
interest thereon at the Pay Rate (or the Default Rate, if
applicable),
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(b) All amounts then outstanding (if any) under Plan
Note II, together with accrued interest thereon at the Default
Rate, if applicable, and
(c) All of the Lender's costs incurred as a result of
each such Event of Default, including, but without limitation,
all costs of acceleration of the Obligations, all fees and
expenses of counsel incurred in connection with the
enforcement of the Obligations, and all other costs and
expenses incurred in connection with the Lender's exercise of
any rights and remedies as a result of such Event of Default.
If, and only if, the amounts described in clauses (a), (b) and (c) above are
irrevocably paid to the Lender within the time period specified above, each
Event of Default (other than a Major Default) which exists at the time of such
payment shall be deemed to have been waived by the Lender, effective on the
date of such irrevocable payment; provided, that such waiver shall not extend
to any other Event of Default, or to the occurrence of any Event of Default
which may occur after any such payment. Nothing contained in this Section
7.2(C) shall, or shall be deemed to, prevent or delay the exercise by the
Lender of any of its rights and remedies under this Agreement or the Security
Documents, at law or in equity, upon the occurrence of any Event of Default.
Notwithstanding any provision to the contrary contained in this Section 7.2(C),
the Borrowers' right to obtain a waiver of Events of Default (other than Major
Defaults) pursuant to this Section 7.2(C) shall automatically and immediately
expire upon the occurrence of any Major Default.
7.3. REMEDIES.
7.3.1. Exercise of Remedies Generally. After the occurrence
of any Event of Default under Section 7.1 or any acceleration under Section ,
the Lender shall have, in addition to the rights and remedies given it by this
Agreement and the Security Documents, all those allowed by all applicable Laws,
including, but without limitation, the Uniform Commercial Code as enacted in
any jurisdiction in which any Collateral may be located. Without limiting the
generality of the foregoing, the Lender may immediately, without demand of
performance and without other notice (except as specifically required by this
Agreement or the Security Documents, or as required by Law and which cannot be
waived) or demand whatsoever to the Borrowers, all of which are hereby
expressly waived, and without advertisement, sell at public or private sale or
otherwise realize upon, in Birmingham, Alabama, or elsewhere, the whole or,
from time to time, any part of the Collateral, or any interest which the
Borrowers may have therein. After deducting from the proceeds of sale or other
disposition of the Collateral all expenses (including all reasonable expenses
for legal services), the Lender shall apply such proceeds toward the
satisfaction of the Obligations which are then due, whether by acceleration
pursuant to Section or otherwise, in such order as the Lender may elect. Any
remainder of the proceeds after satisfaction in full of the Obligations shall
be distributed as required by applicable Laws. Notice of any sale or other
disposition shall be given to the Borrowers at least five (5) days before the
time of any intended public sale or of the time after which any intended
private sale or other disposition of the Collateral is to be made, which the
Borrowers hereby agree shall be reasonable
53
<PAGE> 58
notice of such sale or other disposition. The Borrowers shall be liable for
any deficiency, jointly and severally. The Borrowers agree to assemble, or to
cause to be assembled, at its own expense, the Collateral at such place or
places as the Lender shall designate. At any such sale or other disposition,
the Lender may, to the extent permissible under applicable Laws, purchase the
whole or any part of the Collateral, free from any right of redemption on the
part of any of the Borrowers, which right is hereby waived and released.
Without limiting the generality of any of the rights and remedies conferred
upon the Lender under this paragraph, the Lender may, to the full extent
permitted by applicable Laws:
7.3.1.1. Enter upon the premises of any of
the Borrowers, exclude therefrom the
Borrowers or any Affiliate thereof,
and take immediate possession of the
Collateral, either personally or by
means of a receiver appointed by a
court of competent jurisdiction,
using all necessary force to do so;
7.3.1.2. At the Lender's option, use, operate,
manage and control the Collateral in
any lawful manner;
7.3.1.3. Collect and receive all rents,
income, revenue, earnings, issues
and profits therefrom; and
7.3.1.4. Maintain, repair, renovate, alter or
remove the Collateral as the Lender
may determine in its discretion.
7.3.2. Agreement to Delay Exercising Certain Remedies in
Certain Events. Notwithstanding the provisions of Section 7.3(A) hereof, the
Lender hereby agrees that, if an Event of Default, which does not constitute a
Major Default, occurs hereunder, then during the time period specified in
Section 7.2(C), the Lender will not (i) actually take possession or control of
any Collateral, (ii) dispose of any Collateral, (iii) direct the Borrowers'
Account debtors to make payments directly to the Lender, or (iv) exercise any
right of setoff with respect to any funds of Borrowers on deposit with the
Lender. Nothing contained in this Section 7.3(B) shall, or shall be deemed to,
prevent or delay the Lender from commencing any action leading to the taking of
any actions described in items (i) through (iv), above, or from exercising any
of its other available rights or remedies, as a result of the occurrence of an
Event of Default, including, without limitation, the commencement of litigation
on the Plan Notes, the commencement of foreclosure proceedings, seeking the
appointment of a receiver, exercising its rights under the Guaranty, or
commencing involuntary bankruptcy proceedings against one or more of the
Borrowers. Nothing contained in this Section 7.3(B) shall, or shall be deemed
to, prevent or delay the Lender from exercising any available rights and
remedies hereunder, under the Security Documents, at law or in equity
(including, without limitation, the rights and remedies described in items (i)
through (iv), above), upon the occurrence of any Major Default.
7.4. RIGHT OF SET-OFF. Upon the occurrence of any Event of
Default, except as expressly provided in Section 7.3(B) hereof, the Lender may,
and is hereby authorized by the Borrowers, at any time and from time to time
thereafter, to the fullest extent permitted by
54
<PAGE> 59
applicable Laws, and without advance notice to any of the Borrowers (any such
notice being expressly waived by the Borrowers), set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and any other Indebtedness at any time owing by the Lender to, or for the
credit or the account of, any of the Borrowers against any or all of the
Obligations of the Borrowers now or hereafter existing whether or not such
Obligations have matured and irrespective of whether the Lender has exercised
any other rights that it has or may have with respect to such Obligations,
including without limitation any acceleration rights. The aforesaid right of
set-off may be exercised by the Lender against the Borrowers (or any of them)
or against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of the creditors, receiver, or execution, judgment or attachment
creditor of any of the Borrowers, or such trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver, or execution,
judgment or attachment creditor, notwithstanding the fact that such right of
set-off shall not have been exercised by the Lender prior to the making, filing
or issuance, or service upon the Lender of, or of notice of, any such petition,
assignment for the benefit of creditors, appointment or application for the
appointment of a receiver or issuance of execution, subpoena, order or warrant.
The Lender agrees to promptly notify the Borrowers after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Lender under this
Section 7.4 are in addition to the other rights and remedies (including,
without limitation, other rights of set-off) which the Lender may have.
7.5. WAIVER OF RIGHT TO STAY FORECLOSURE UPON OCCURRENCE OF MAJOR
DEFAULT. In order to induce SouthTrust to enter into the transactions
contemplated in this Agreement and in the Plans, each of the Borrowers and the
Guarantor hereby waives any right or ability any of them may have to seek to
stop or stay a future foreclosure action brought by, or any other exercise of
legal or equitable rights or remedies by, the Lender upon the occurrence of any
one or more of the Major Defaults described in Section 7.1 (A), and each such
Borrower and the Guarantor hereby agree with, and for the benefit of, the
Lender, that they shall not be entitled to take any action to seek to stop or
stay any such exercise of Lender's remedies in any such event.
7.6. RELIEF FROM AUTOMATIC STAY. In order to induce SouthTrust to
enter into the transactions contemplated in this Agreement and in the Plans,
each of the Borrowers and the Guarantor hereby agrees that, in the event that
(A) any Bankruptcy Proceeding is filed by or against any of the Borrowers or
Guarantor, or which otherwise has jurisdiction over the Indebtedness evidenced
by the Plan Notes, this Agreement or the other Plan Documents (as defined in
the Plans), and (B) any such Bankruptcy Proceeding, or any action or omission
by any of the Borrowers or any Guarantor in connection therewith (including,
without limitation, any failure to timely comply with their payment or other
Obligations hereunder or under the Plan Notes), impairs or affects adversely
the Collateral or the rights and remedies of the Lender hereunder, then the
Lender automatically shall be entitled to relief from the automatic stay
provisions of Section 362 of the Bankruptcy Code or any successor or similar
law, and each of the Borrowers and the Guarantor hereby consents and agrees not
to oppose, and the debtor in any such bankruptcy case shall, and shall be
deemed to, consent and agree not to oppose, the filing by the Lender of a
motion for such relief.
55
<PAGE> 60
7.7. ACKNOWLEDGMENT OF THE BORROWERS AND GUARANTOR. The Borrowers
and the Guarantors hereby acknowledge that the provisions contained in Sections
7.5 and 7.6 were bargained for by the Lender, are required by the terms of the
Plans to be included in this Agreement, and are being relied upon by the Lender
in connection with its agreement to enter into the transactions contemplated by
this Agreement and the Plans.
ARTICLE 8. MISCELLANEOUS
8.1. CONSTRUCTION. The provisions of this Agreement shall be in
addition to those of any guaranty, pledge or security agreement, note or other
evidence of liability held by the Lender, all of which are incorporated herein
and shall be construed as complementary to each other. Nothing herein
contained shall prevent the Lender from enforcing any or all other notes,
guaranty, pledge or security agreements in accordance with their respective
terms.
8.2. FURTHER ASSURANCE. From time to time, the Borrowers will
execute and deliver to the Lender such additional documents and will provide
such additional information as the Lender may reasonably require to carry out
the terms of this Agreement and be informed of the status and affairs of the
Borrowers.
8.3. INDEMNITY. The Borrowers hereby agree to indemnify the
Lender, all Participants, and its or their respective officers, directors,
agents and attorneys against, and to hold the Lender, all Participants, and all
such other persons harmless from, any claims, demands, liabilities, costs,
damages, and judgments (including, without limitation, liability under any
Environmental Laws and costs of defense and attorneys' fees) resulting from any
representation or warranty made by Borrowers or on Borrowers' behalf pursuant
to Article V of this Agreement having been false when made, or resulting from
Borrowers' breach of any of the covenants set forth in Article VI of this
Agreement. This agreement of indemnity shall be a continuing agreement and
shall survive payment of the Indebtedness evidenced by the Plan Notes and
termination of this Agreement.
8.4. ENFORCEMENT AND WAIVER BY THE LENDER. The Lender shall have
the right at all times to enforce the provisions of this Agreement, the Plan
Notes, and the Security Documents in strict accordance with the terms hereof
and thereof, notwithstanding any conduct or custom on the part of the Lender in
refraining from so doing at any time or times. The failure of the Lender at
any time or times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a custom in
any way or manner contrary to specific provisions of this Agreement or as
having in any way or manner modified or waived the same. All rights and
remedies of the Lender are cumulative and concurrent and the exercise of one
right or remedy shall not be deemed a waiver or release of any other right or
remedy.
8.5. EXPENSES OF THE LENDER. The Borrowers will, on demand,
reimburse the Lender for all expenses, including the fees and expenses of legal
counsel for the Lender, incurred (A) in connection with the preparation, and
negotiation of this Agreement and participation in the Closing, provided that
such fees and expenses of counsel shall not exceed $25,000.00, and (B) in
56
<PAGE> 61
connection with the administration, and any amendment, modification, renewal,
extension, or enforcement of this Agreement, the Plan Notes, the Security
Documents and any other documents related to this Agreement and the collection
or attempted collection of the Indebtedness evidenced by the Plan Notes.
8.6. NOTICES. Any notices or consents required or permitted by
this Agreement shall be in writing and shall be deemed delivered if delivered
in person or if sent by certified mail, postage prepaid, return receipt
requested, or telegraph, or facsimile, as follows, unless such address is
changed by written notice hereunder:
8.6.1. If to the Borrowers (or any of them):
Medical Technology Systems, Inc.
12920 Automobile Blvd.
Clearwater, Florida 34622
Facsimile #(813) 573-1100
Attention: President
with a copy to:
Massari & Bell, P.A.
One Urban Center, Suite 875
4830 West Kennedy Boulevard
Tampa, Florida 33609
Facsimile #(813) 289-4083
Attention: Domenic L. Massari, Esq.
8.6.2. If to the Lender:
SouthTrust Bank of Alabama, National Association
Post Office Box 2554
Birmingham, Alabama 35290
Facsimile #(205) 254-4852
Attention: J. Scott Hilley
with a copy to:
Bradley, Arant, Rose & White
2001 Park Place, Suite 1400 [zip code 35203]
P.O. Box 830709 [zip code 35283-0709]
Birmingham, Alabama
Facsimile #(205) 251-9915
Attention: John P. Whittington, Esq.
57
<PAGE> 62
8.7. WAIVER BY THE BORROWERS. To the maximum extent permitted by
applicable Laws, each of the Borrowers:
8.7.1. Waives: (1) protest of all commercial paper at any
time held by the Lender on which the Borrower is any way liable; and (2)
notice, after acceleration in the manner provided in Section , before exercise
by the Lender of the remedies of self-help, set-off, or of other summary
procedures permitted by any applicable Laws or by any agreement with any of the
Borrowers and except where required hereby or by any applicable Laws, notice of
any other action taken by the Lender; and
8.7.2. Waives, in favor of the Lender and its successors and
assigns, any claims or defenses which any of the Borrowers or the Guarantor
have or may have with respect to this Agreement, the Plan Notes, the Original
SouthTrust Loan Documents or the Original SouthTrust Indebtedness, and each of
them hereby agrees further not to raise any such claims or defenses (if any)
against the Lender or its successors or assigns in any civil proceeding of any
kind or otherwise.
8.8. PARTICIPATION. Notwithstanding any other provision of this
Agreement, each of the Borrowers understands that the Lender has heretofore
entered into, and may hereafter enter into, participation agreements with The
Daiwa Bank, Limited and other Participants, whereby the Lender has allocated or
will allocate certain percentages of the Obligations to them. The Borrowers
acknowledge that, for the convenience of all parties, this Agreement is being
entered into with the Lender only and that its obligations under this Agreement
are undertaken for the benefit of, and as an inducement to each of any such
Participants as well as the Lender, and each of the Borrowers hereby grants to
each such Participant, to the extent of its participation in the Obligations,
the right to set off deposit accounts maintained by the Borrowers with such
bank.
8.9. GOVERNING LAW. This Agreement is entered into and performable
in Jefferson County, Alabama, and the substantive Laws of the United States and
the State of Alabama, without giving effect to its principles of conflict of
laws, shall govern the construction of this Agreement and the documents
executed and delivered pursuant hereto, and the rights and remedies of the
parties hereto and thereto, except to the extent that the location of any
Collateral in a state or jurisdiction other than Alabama requires that the
perfection of the Lender's security interest hereunder, and the enforcement of
certain of the Lender's remedies with respect to the Collateral, be governed by
the laws of such other state or jurisdiction.
8.10. SUBMISSION TO JURISDICTION; WAIVERS.
EACH OF THE BORROWERS HEREBY IRREVOCABLY AND UNCONDITIONALLY:
8.10.1. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGMENT IN RESPECT
58
<PAGE> 63
THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF
ALABAMA, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE NORTHERN DISTRICT OF ALABAMA,
AND APPELLATE COURTS FROM ANY THEREOF;
8.10.2. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING
MAY BE BROUGHT IN SUCH COURTS, AND WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
8.10.3. AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO THE
BORROWERS AT THE ADDRESS SET FORTH IN SECTION
8.6(A) OR AT SUCH OTHER ADDRESS OF WHICH THE
LENDER SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO; AND
8.10.4. AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
EACH OF THE BORROWERS AND THE LENDER HEREBY:
IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER
ARISING DIRECTLY OR INDIRECTLY OUT OF OR WITH RESPECT TO THIS AGREEMENT, THE
PLAN NOTES, THE SECURITY DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
HEREWITH OR THEREWITH; AND
AGREE THAT EITHER OF THEM MAY FILE A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED FOR
AGREEMENT BETWEEN THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY
DISPUTE OR CONTROVERSY OF ANY KIND WHATSOEVER BETWEEN THEM SHALL INSTEAD OF
59
<PAGE> 64
TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
8.11. RELEASE. Each of the Borrowers and the Guarantor, for
themselves and their respective legal representatives, successors,
predecessors, heirs and assigns, and their respective officers, directors,
stockholders, agents, servants and employees, hereby release, acquit and
forever discharge the Lender and its Participants, officers, directors,
stockholders, agents, servants, employees, legal representatives, successors
and assigns, of and from any and all claims, demands, debts, actions and causes
of action of any kind which they or any of them now have or might hereafter
have against the Lender or any of its Participants, officers, directors,
stockholders, agents, servants, employees, legal representatives, successors or
assigns, by reason of any act, matter, contract, agreement or thing whatsoever
up to the date of this Agreement, including, without limitation, any claim,
counterclaim, demand, debt, action or cause of action of any kind arising,
directly or indirectly, under the Original SouthTrust Loan Documents or in
connection with the Original SouthTrust Indebtedness.
8.12. BINDING EFFECT, ASSIGNMENT. This Agreement shall inure to the
benefit of, and shall be binding upon, the respective successors and permitted
assigns of the parties hereto. The Borrowers and the Guarantor have no right
to assign any of their rights or obligations hereunder without the prior
written consent of the Lender.
8.13. ENTIRE AGREEMENT, AMENDMENTS. Each Recital to this Agreement
and each of the Exhibits hereto is incorporated herein by this reference. This
Agreement, the Plan Notes, the Security Documents, and the other instruments
and documents executed in connection herewith, (A) constitute the entire
agreement among the parties, (B) supersede all prior discussions, negotiations,
offers, understandings, and agreements with respect to the subject matter
hereof, and (C) may be amended only by a writing signed on behalf of each party
to this Agreement. There are no other understandings or agreements, and the
Lender has not made any representations or promises, unless specifically set
forth in this Agreement. Each party acknowledges that it has expressly
bargained for a prohibition of any implied or oral amendments or modifications
of any kinds, nature or character. Each party acknowledges and agrees that
this Agreement, together with the Plan Notes, the Security Documents and the
other instruments and documents executed in connection herewith, is fully
integrated and not in need of parol evidence in order to reflect the intentions
of the parties, and that the parties intend the literal words of this Agreement
and the other documents and instruments referred to in this Section 8.13 to
govern the transactions described herein, and for all prior negotiations,
drafts and other extraneous communications to have no significance or
evidentiary effect whatsoever.
8.14. SEVERABILITY. If any provision of this Agreement, the Plan
Notes, or the Security Documents shall be held invalid under any applicable
Laws, such invalidity shall not affect any other provision of this Agreement or
such other instrument or agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
60
<PAGE> 65
8.15. HEADINGS. The table of contents and paragraph and
subparagraph headings hereof are inserted for convenience of reference only,
and shall not alter, define, or be used in construing the text of such
paragraphs or subparagraphs.
8.16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
8.17. SEAL. This Agreement is intended to take effect as an
instrument under seal.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
61
<PAGE> 66
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto
have executed this Agreement as of the day and year first above written.
THE BORROWERS:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By: /s/ TODD E. SIEGEL
Its: President
CLEARWATER MEDICAL SERVICES, INC.
By: /s/ TODD E. SIEGEL
Its: President
MEDICAL TECHNOLOGY LABORATORIES, INC.
By: /s/ TODD E. SIEGEL
Its: President
MTS PACKAGING SYSTEMS, INC.
By: /s/ TODD E. SIEGEL
Its: President
62
<PAGE> 67
VANGARD LABS, INC.
By: /s/ TODD E. SIEGEL
Its: President
By: /s/ JULES J. STINE
As Plan Trustee for Vangard Labs,
Inc., under the Vangard Plan
VANGARD PHARMACEUTICAL PACKAGING, INC.
By: /s/ TODD E. SIEGEL
Its: President
PERFORMANCE PHARMACY SYSTEMS, INC.
By: /s/ TODD E. SIEGEL
Its: President
CART-WARE, INC.
By: /s/ TODD E. SIEGEL
Its: President
MEDICATION MANAGEMENT SYSTEMS, INC.
By: /s/ TODD E. SIEGEL
Its: President
63
<PAGE> 68
MEDICATION MANAGEMENT TECHNOLOGIES,
INC.
By: /s/ TODD E. SIEGEL
Its: President
MTS SALES & MARKETING, INC.
By: /s/ TODD E. SIEGEL
Its: President
SYSTEMS PROFESSIONALS, INC.
By: /s/ TODD E. SIEGEL
Its: President
GUARANTOR:
By: /s/ TODD E. SIEGEL
THE LENDER:
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
By: /s/ SCOTT HILLEY [L.S.]
Its:
64
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF MEDICAL TECHNOLOGY SYSTEMS INC. FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1545
<SECURITIES> 0
<RECEIVABLES> 4,195
<ALLOWANCES> 869
<INVENTORY> 2,292
<CURRENT-ASSETS> 7,451
<PP&E> 8,182
<DEPRECIATION> 3,754
<TOTAL-ASSETS> 13,800
<CURRENT-LIABILITIES> 1,949
<BONDS> 0
0
1
<COMMON> 55
<OTHER-SE> 8,430
<TOTAL-LIABILITY-AND-EQUITY> 28,998
<SALES> 9,637
<TOTAL-REVENUES> 9,637
<CGS> 5,338
<TOTAL-COSTS> 8,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 793
<INCOME-TAX> 0
<INCOME-CONTINUING> 793
<DISCONTINUED> 0
<EXTRAORDINARY> 2,441
<CHANGES> 0
<NET-INCOME> 3,234
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
