SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1998 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________________ to _________________
0-16594
Commission file number __________________________________________________
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
Incorporation or Organization) Identification No.)
12920 Automobile Boulevard, Clearwater, Florida 33762
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
727-576-6311
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 0r 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such 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 ______
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ______
10Q-1
<PAGE>
i
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
Index
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30,1998 and March 31, 1998........................ 1
Consolidated Statements of Operations -
Three months and six months ended September 30, 1998 and 1997.. 2
Consolidated Statements of Changes in Stockholders' Equity (Deficit) -
Six months ended September 30, 1998......................... 3
Consolidated Statements of Cash Flow -
Six months ended September 30, 1998 and 1997................ 4
Notes to Consolidated Financial Statements.................... 5 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 10 - 14
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.............................. 15
Signature.................................................... 15
<PAGE>
1
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
Item 1. Financial Statements
PART I - FINANCIAL INFORMATION
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
September, March 31,
1998 1998
----------------- ----------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 155 $ 324
Accounts Receivable, Net 6,734 5,277
Inventories 2,533 2,481
Prepaids and Other 405 206
-------------------- -------------------
Total Current Assets 9,827 8,288
Property and Equipment, Net 2,821 3,173
Other Assets, Net 4,124 4,301
-------------------- -------------------
Total Assets $ 16,772 $ 15,762
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt $ 1,262 $ 625
Accounts Payable-Trade and Accrued Liabilities 6,034 4,811
-------------------- -------------------
Total Current Liabilities 7,296 5,436
Liabilities Subject to Compromise 0 826
Long-Term Debt, Less Current Maturities 16,064 15,613
-------------------- -------------------
Total Liabilities 23,360 21,875
-------------------- -------------------
Stockholders' Equity (Deficit):
Voting Preferred Stock 1 1
Common Stock 62 62
Capital in Excess of Par Value 8,588 8,588
Retained Earnings (Deficit) (14,908) (14,433)
Less: Treasury Stock (331) (331)
-------------------- -------------------
Total Stockholders' Equity (Deficit) (6,588) (6,113)
-------------------- -------------------
Total Liabilities and Stockholders' Equity $ 16,772 $ 15,762
==================== ===================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
2
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands; Except Earnings Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Month Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Net Sales and Services $ 8,381 $ 5,611 $ 15,426 $ 10,758
Costs and Expenses:
Cost of Sales and Services 4,615 2,917 8,710 5,802
Selling, General and Administrative 3,798 2,414 6,512 4,414
Depreciation and Amortization 363 389 725 747
Interest, Net 306 283 616 556
-------------- -------------- -------------- ---------------
Total Costs and Expenses 9,082 6,003 16,563 11,519
-------------- -------------- -------------- ---------------
Loss Before Extraordinary Gain (701) (392) (1,137) (761)
Extraordinary Gain on Forgiveness of Debt 0 0 662 0
-------------- -------------- -------------- ---------------
Net Loss $ (701) $ (392) $ (475) $ (761)
============== ============== ============== ===============
Earnings (Loss) Per Basic and Diluted Common Share:
Loss Before Extraordinary Gain $ (0.11) $ (0.07) $ (0.18) $ (0.13)
Extraordinary Gain On Debt Forgiveness 0.00 0.00 0.10 0.00
-------------- -------------- -------------- ---------------
Net Loss Per Basic and Diluted Common Share $ (0.11) $ (0.07) $ (0.08) $ (0.13)
============== ============== ============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
3
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
SIX MONTHS ENDED SEPTEMBER 30, 1998
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------------------------------------
Number $0.01 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, 1998 6,129,673 $ 62 $ 8,588 $ (14,433) $ (331) $ (6,114)
Net Loss for Six Months
Ended September 30, 1998 (475) (475)
-----------------------------------------------------------------------------------------------
Balance, September 30, 1998 6,129,673 $ 62 $ 8,588 $ (14,908) $ (331) $ (6,589)
=========== ============== ============== ============= ============== ==============
VOTING PREFERRED STOCK
-----------------------------------------------------------------------------------------------
Number $0001
of Par
Shares Value
----------- ------------
Balance, March 31, 1998 6,500,000 $ 1 $ 1
----------- -------------- --------------
Balance, September 30, 1998 6,500,000 $ 1 $ 1
----------- -------------- --------------
Total Stockholders' (Deficit),
September 30, 1998 $ (6,588)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
4
MEDICAL TECHNOLOGY SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1997
------------ ------------
<S> <C> <C>
Operating Activities:
Net Loss $ (475) $ (761)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 725 747
Extraordinary Gain on Debt Forgiveness (662) 0
Legal Settlement 215 0
(Increase) Decrease in:
Accounts Receivable (1,457) (205)
Inventories (52) (120)
Prepaids and Other (199) 351
Loss On Early Retirement of Fixed Assets 22 0
Increase (Decrease) in:
Accounts Payable and Other Accrued Liabilities 1,572 501
------------ ------------
Total Adjustments 164 1,274
------------ ------------
Net Cash Provided (Used) by Operating Activities (311) 513
------------ ------------
Investing Activities
Expended for Property and Equipment (201) (197)
Acquisition, Net of Cash Acquired 0 (195)
Expended for Product Development (144) (198)
Expended for Other Assets (44) (79)
------------ ------------
Net Cash Used by Investing Activities (389) (669)
------------ ------------
Financing Activities
Payments on Notes Payable, Long-Term Debt (119) (216)
Proceeds from Borrowing on Notes Payable and Long-Term Debt 650 51
Issuance of Common Stock 0 150
------------ ------------
Net cash Provided (Used) by Financing Activities 531 (15)
------------ ------------
Net Decrease in Cash (169) (171)
Cash at Beginning of Period 324 616
------------ ------------
Cash at End of Period $ 155 $ 445
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Interest $ 578 $ 393
============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
5
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, 1998 are not necessarily indicative of the results that may
be expected for the year ended March 31, 1999. 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, 1998.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
----------------- -----------------
(In Thousands)
<S> <C> <C>
Raw Materials $ 575 $ 531
Finished Goods and Work in Progress 2,227 2,219
Less: Inventory Valuation Allowance (269) (269)
================ ================
$ 2,533 $ 2,481
================ ================
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out) or
market.
NOTE C - EARNINGS PER SHARE
Net income (loss) per common share is computed by dividing net income
(loss) by the basic and diluted weighted average number of shares of common
stock outstanding. For diluted weighted average shares outstanding, the Company
used the Treasury stock method to calculate the common stock equivalents that
stock options would represent. The effect of all options and warrants werre not
included in the calculation of net income (loss) per diluted common share as the
effect would have been anti-dilutive.
NOTE D - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
-------------- ---------------
(In Thousands)
<S> <C> <C>
Plan Note I; interest only at 7.5% payable monthly until September 1,
1998; installments of interest and principal monthly for ten years
ending September 1, 2006, with a lump sum payment of approximately
$11.4 million on that date secured by all tangible
and intangible assets of the Company. $ 15,000 $ 15,000
</TABLE>
<PAGE>
6
NOTE D - LONG-TERM DEBT (continued)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
-------------- ---------------
(In Thousands)
<S> <C> <C>
Note Payable; interest at 12% payable $20,026 per month including
interest maturing September 1, 2002. Secured by equipment at a
customer site and the payments from a lease contract receivable. 608 688
Demand note due October 31, 1998 plus interest at 10%. 500 0
Seller Financing Under Tampa Pathology Acquisition Agreement, face value
of $487,628 discounted at 10%, with variable monthly
payments until satisfied. 253 234
Unsecured Notes Payable; interest 12%, payable within 6 months of
borrowing date. 150 0
Unsecured Note Payable; interest at 3%, payable in monthly
installments of $2,394 through September 2006. 215 0
Unsecured Note Payable under settlement agreement with State of Florida
Department of Revenue, payable in monthly installments of $2,500-
$3,500 over a period of four to eight years. 290 0
Other Notes and Agreements; interest and principal payable monthly
and annual at various amounts through March 2000. 310 316
------------ -------------
Total Long -Term Debt 17,326 16,238
Less Current Portion (1,262) (625)
============ =============
LONG-TERM DEBT DUE AFTER 1 YEAR $ 16,064 $ 15,613
============ =============
</TABLE>
At September 30, 1998, the Company was in violation of certain covenants of
the loan agreement with its principal lenders. The Company requested a waiver of
any defaults which may have occurred under the loan agreement as a result of
these violations. The lenders have acknowledged the receipt of the Company's
request; however, to date no waivers have been provided.
At October 31, 1998, LifeServ Technologies, Inc.(TM) ("LifeServ"), a
subsidiary of the Company, was in default for non-payment of its obligations
pursuant to a $500,000 loan which matured on that date. As a result of the
default, the lender may exercise certain rights including, but not limited to,
enforcement of its security interest in the assets of LifeServ. The Company is
currently negotiating revised terms with the lenders; however, to date, no
agreement has been reached with the lender.
In August 1998, the Company borrowed $150,000 from three individuals,
including $100,000 from the Chairman and C.E.O. to support the operations of
Medical Technology Laboratories, Inc. ("MTL"). The terms and conditions of these
obligations provide for repayment within six months from the borrowing date
including interest payable at 12% per annum. In addition, the notes provide the
lenders with warrants to purchase 75,000 shares of common stock of the Company
at $.75 per share for a period of ten (10) years. In addition, in the event that
the repayment of these amounts are not made on the maturity dates, the lender
may receive additional warrants to purchase up to 13,500 shares of common stock
at $.75 per share for a period of ten (10) years.
In October 1998, the Company borrowed $200,000 from an individual to
support the operations of MTL. The terms and conditions of this obligation
include repayment within nine months from the borrowing date including interest
at 12% per annum. In addition, the notes provide the lenders with warrants to
purchase 100,000 shares of common stock of the company at $.75 per share for a
period of ten (10) years. In addition, in the event that repayment of the amount
due on the maturity date is not made, the lenders may receive additional
warrants to purchase up to 18,000 shares of common stock at $.75 per share for
ten (10) years. In the event that the Company defaults on its obligations under
the promissory note, the lender is entitled to receive warrants to purchase up
to 800,000 shares of common stock at $.05 per share for a period of ten (10)
years.
<PAGE>
7
NOTE E - SEGMENT INFORMATION
The Company is a holding company operating through a number of separate
subsidiaries. The operations of these subsidiaries are comprised of three
business segments; (1) the Medication Packaging and Dispensing Systems segment
which manufactures and distributes equipment, systems and supplies to pharmacies
who service nursing homes and hospitals; (2) the Health Care Information Systems
segment which provides software systems for medication management and
point-of-care electronic documentation for hospitals and other health care
facilities; and (3) the Clinical Laboratory Services segment which provides
diagnostic laboratory services to physicians.
The following is operating information for these business segments for the
six months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Reportable Segments
Medication Packaging and Dispensing Systems $ 3,464 $ 3,124 $ 6,965 $ 6,041
Health Care Information Systems 1,528 938 3,253 1,339
Clinical Laboratory Services 3,389 1,549 5,208 3,378
----------- ----------- ----------- -----------
Total Consolidated Revenue $ 8,381 $ 5,611 $ 15,426 $ 10,758
=========== =========== =========== ===========
Depreciation and Amortization:
Reportable Segments
Medication Packaging and Dispensing Systems $ 157 $ 136 $ 317 $ 272
Health Care Information Systems 64 74 136 117
Clinical Laboratory Services 51 61 103 122
Corporate 91 118 169 236
=========== =========== =========== ===========
Total Consolidated Depreciation and Amortization $ 363 $ 389 $ 725 $ 747
=========== =========== =========== ===========
Interest Expense:
Reportable Segments
Medication Packaging and Dispensing Systems $ 0 $ 0 $ 0 $ 0
Health Care Information Systems 21 7 44 11
Clinical Laboratory Services 1 4 2 6
----------- ----------- ----------- -----------
22 11 46 17
Unallocated Debts 284 272 570 539
=========== =========== =========== ===========
Total Consolidated Interest Expense $ 306 $ 283 $ 616 $ 556
=========== =========== =========== ===========
Operating Profit (Loss):
Reportable Segments
Medication Packaging and Dispensing Systems $ 750 $ 836 $ 1,613 $ 1,458
Health Care Information Systems (443) (321) (914) (792)
Clinical Laboratory Services (139) (36) (184) 245
Corporate and Interest (869) (871) (1,652) (1,672)
============ ============ ============ ============
Total Consolidated Operating Loss $ (701) $ (392) $ (1,137) $ (761)
============ ============ ============ ============
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
September 30,
1998 1997
------------ ------------
<S> <C> <C>
Identifiable Assets:
Reportable Segments
Medication Packaging and Dispensing Systems $ 5,733 $ 5,697
Health Care Information Systems 4,773 2,910
Clinical Laboratory Services 4,065 2,627
Corporate 2,201 2,270
=========== ===========
Total Consolidated Identifiable Assets $ 16,772 $ 13,504
=========== ===========
Identifiable Liabilities:
Reportable Segments
Medication Packaging and Dispensing Systems $ 873 $ 360
Health Care Information Systems 3,644 1,830
Clinical Laboratory Services 1,932 960
Corporate 16,911 16,383
----------- -----------
Total Consolidated Identifiable Liabilities $ 23,360 $ 19,533
=========== ===========
Capital Expenditures:
Reportable Segments
Medication Packaging and Dispensing Systems $ 85 $ 45
Health Care Information Systems 78 76
Clinical Laboratory Services 19 56
Corporate 19 20
----------- -----------
Total Consolidated Capital Expenditures $ 201 $ 197
=========== ===========
</TABLE>
NOTE F - BUSINESS ACQUISITIONS
In April 1998, the Company through its subsidiary LifeServ entered into an
agreement to purchase certain assets of Peritronics Medical, Inc.
("Peritronics"), a California company which distributed obstetrical information
systems. The agreement provided for the Company to pay Peritronics shareholders
$350,000 in cash, 250,000 shares of the Company's common stock and assume
certain liabilities in the amount of approximately $330,000. On August 12, 1998,
the terms of the agreement were modified to provide for the Company to pay
Peritronics' shareholders $410,000 in cash and assume certain liabilities in the
amount of $330,000. In addition, the modification allows LifeServ to manage the
business of Peritronics until the closing. The purchase currently is anticipated
to close in December 1998; however, there are no assurances that such closing
will occur.
On August 4, 1998, the Company through its subsidiary, MTL, entered into an
agreement to purchase certain assets of Community Clinical Laboratories, Inc.
("CCL"), a Clearwater, Florida company that provides clinical laboratory testing
services to patients referred by physicians. The agreement provides for MTL to
pay CCL a percentage of the payments received from clients serviced by MTL for a
period of five years or until a maximum of $2,500,000 is paid. The purchase was
closed on September 11, 1998; however, it is subject to approval by the
Company's primary lenders and as a result the purchase will not be recorded in
the Company's consolidated financial statements until the approval is received.
The Company has requested the consent of its lenders and has entered into
discussions with the lenders to obtain their approval; however, there are no
assurances that such approval will be obtained.
<PAGE>
9
NOTE G - BANKRUPTCY MATTERS
On June 12, 1998, a Plan of Reorganization for Medication Management
Technologies, Inc. was confirmed by the bankruptcy court. As a result of the
confirmation of the Plan, the holders of trade and miscellaneous claims will
receive payment of 15% of their claims over a three-year period. The amount of
liabilities that were compromised as part of the Plan was approximately
$662,000. This amount has been classified as an extraordinary gain in the
Company's consolidated Statement of Operations and Statements of Cash Flow for
the six months ended September 30, 1998.
On August 14, 1998, the Company completed a settlement agreement in
litigation which it had commenced in the Vangard Labs, Inc. Chapter 11 case in
the U.S. Bankruptcy Court. As part of the settlement, the Company recovered
$175,000 from the defendant. In addition, pursuant to the Vangard Labs, Inc.
Plan of Reorganization, the Company was responsible for the payment of a
promissory note which it had guaranteed on behalf of Vangard Labs, Inc. in the
amount of approximately $215,000. The Company and the City of Glasgow have
agreed to the repayment terms of this obligation (see Note D).
NOTE H -TAXES
The Florida State Department of Revenue has examined the Company's
Intangible tax returns for the period 1987-1996 and proposed a suggested
assessment of approximately $380,000 for intangible taxes, penalties and
interest. The Company disputed the assessment and in October 1998 agreed with
the Department of Revenue on a settlement amount of $24,000 payable over a four
year period and the rate of $500 per month
<PAGE>
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements within the meaning of
that term in Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Additional written or oral forward-looking
statements may be made by the Company from time to time, in filings with the
Securities and Exchange Commission or otherwise. Statements contained herein
that are not historical facts are forward-looking statements made pursuant to
the safe harbor provisions described above. Forward-looking statements may
include, but are not limited to, projections of revenues, income or losses,
capital expenditures, plans for future operations, the elimination of losses
under certain programs, financing needs or plans, compliance with financial
covenants in loan agreements, plans for sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events and the effects of pending and possible litigation,
as well as assumptions relating to the foregoing. In addition, when used in this
discussion, the words "anticipates", "estimates", "expects", "intends", "plans"
and variations thereof and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which can be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained herein. Statements in Quarterly Report,
particularly in "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes to Condensed Consolidated
Financial Statements, describe factors, among others, that could contribute to
or cause such differences. Other factors that could contribute to or cause such
differences include, but are not limited to, unanticipated increases in
operating costs, labor disputes, capital requirements, increases in borrowing
costs, product demand, pricing, market acceptance, intellectual property rights
and litigation, risks in product and technology development and other risk
factors detailed in the Company's Securities and Exchange Commission filings.
Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions of these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unexpected events.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 and 1997
- ----------------------------------------------
Net sales and services for the three months ended September 30, 1998
increased 50.0% to $8.4 million from $5.6 million during the same period the
prior year.
Net sales and services for each business segment increased as follows:
<TABLE>
<CAPTION>
Three Month Ended
------------------------------------------------------
September 30, September 30, % Increase
1998 1997
--------------- ---------------- ---------------
<S> <C> <C> <C>
Medication Packaging and Dispensing Systems $3.5 Million $3.1 Million 12.9%
Health Care Information Systems $1.5 Million $0.9 Million 66.7%
Clinical Laboratory Services $3.4 Million $1.6 Million 112.5%
</TABLE>
<PAGE>
11
Net sales in the Medication Packaging and Dispensing Systems segment
increased primarily as a result of a greater number of punch cards and packaging
machines sold to pharmacies. MTS Packaging Systems, Inc.'s ("MTS Packaging")
customer base continues to consolidate as a result of acquisitions which has
increased the number of pharmacies serviced by MTS Packaging. This consolidation
has had a favorable impact on the volume of product MTS Packaging sells to its
existing customers.
Net sales and services in the Health Care Information Systems segment
increased primarily due to an increase in the number of systems which were sold
and installed at hospitals.
Net services in the Clinical Laboratory Services segment increased
primarily as a result of the increase in the number of physician's serviced in
conjunction with the Asset Acquisition Agreement that MTL entered into with
Community Clinical Laboratories in August 1998.
Cost of sales and services for the three months ended September 30, 1998
increased 58.2% to $4.6 million from $2.9 million during the same period the
prior year. Cost of sales and services as a percentage of sales increased to
54.8% from 51.8% during the same period the prior year. The increase in cost of
sales and services resulted primarily from the increase in sales for each
business segment. Cost of sales and services as a percentage of sales for each
business segment is outlined below:
<TABLE>
<CAPTION>
Three Month Ended
--------------------------------------
September 30, September 30, 1997
1998
---------------- -----------------
<S> <C> <C>
Medication Packaging and Dispensing Systems 57.1% 54.8%
Health Care Information Systems 40.0% 33.3%
Clinical Laboratory Services 58.8% 56.3%
</TABLE>
Cost of sales in the Medication Packaging and Dispensing Systems segment
increased as a percentage of sales primarily as a result of price reductions on
punch cards sold by MTS Packaging. The price reductions have resulted, in part,
from the consolidation of pharmacies which has allowed individual customers to
take advantage of volume pricing discounts
Cost of sales as a percentage of sales in the Health Care Information
segment increased primarily as a result of a higher portion of revenue
associated with hardware components of systems sold. The profit margin realized
in hardware components is lower than the software components.
Cost of services as a percentage of sales in the Clinical Laboratory
segment increased primarily as a result of lower expected reimbursements by
third party payers for test performed.
Selling, general and administration expenses for the three months ended
September 30, 1998 increased 58.3% to $3.8 million from $2.4 million during the
same period the prior year. The increase resulted primarily from an increase in
personnel costs in the Health Care Information and Clinical Laboratory segments
which resulted from the addition of personnel to accommodate increased sales and
services.
Selling, general and administrative expenses for each business segment
increased as follows:
<TABLE>
<CAPTION>
Three Month Ended
-------------------------------------------------------
September 30, September 30, % Increase
1998 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Medication Packaging and Dispensing Systems $.5 Million $.5 Million 0%
Health Care Information Systems $1.2 Million $.8 Million 50%
Clinical Laboratory Services $1.6 Million $.6 Million 167%
Corporate $.5 Million $.5 Million 0%
</TABLE>
<PAGE>
12
Depreciation and amortization expenses for the three months ended September
30, 1998 decreased 6.7% to $363,000 from $389,000 during the same period the
prior year. This decrease is a result of certain corporate assets becoming fully
depreciated.
Interest expense for the three months ended September 30, 1998 increased
8.1% to $306,000 from $283,000 during the same period the prior year. The
increase results from additional debt which the Company incurred during the
fourth quarter of the previous fiscal year and during the first half of the
current fiscal year.
Six months Ended September 30, 1998 and 1997
- --------------------------------------------
Net sales and services for the six months ended September 30, 1998
increased 42.6% to $15.4 million from $10.8 million during the same period the
prior year.
Net sales and services for each business segment increased as follows:
<TABLE>
<CAPTION>
Six Month Ended
----------------------------------------------------------
September 30, September 30, % Increase
1998 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Medication Packaging and Dispensing Systems $7.0 Million $6.1 Million 14.8%
Health Care Information Systems $3.2 Million $1.3 Million 146.2%
Clinical Laboratory Services $5.2 Million $3.4 Million 52.9%
</TABLE>
Net sales in the Medication Packaging and Dispensing Systems segment
increased primarily as a result of a greater number of punch cards and packaging
machines sold to pharmacies. MTS Packaging Systems, Inc.'s customer base
continues to consolidate as a result of acquisitions which has increased the
number of pharmacies serviced by MTS Packaging. This consolidation has had a
favorable impact on the volume of product MTS Packaging sells to its existing
customers.
Net sales and services in the Health Care Information Systems segment
increased primarily due to an increase in the number of systems which were
installed and an increase in the number of customers which LifeServ services
with long-term maintenance contracts.
Net services in the Clinical Laboratory Segment increased as a result of
the increase in the number of physician's serviced in conjunction with the Asset
Acquisition Agreement that MTL entered into with Community Clinical Laboratories
in August 1998.
Cost of sales and services for the six months ended September 30, 1998
increased 50.0% to $8.7 million from $5.8 million during the same period the
prior year. Cost of sales and services as a percentage of sales increased to
56.5% from 53.7% during the same period the prior year. The increase in cost of
sales and services resulted primarily from the increase in sales for each
business segment.
Cost of sales and services as a percentage of sales for each business
segment is outlined below:
<TABLE>
<CAPTION>
Six Month Ended
--------------------------------------
September 30, September 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Medication Packaging and Dispensing Systems 57.1% 55.7%
Health Care Information Systems 46.9% 46.2%
Clinical Laboratory Services 61.5% 52.9%
</TABLE>
<PAGE>
13
Cost of sales in the Medication Packaging and Dispensing Systems segment
increased as a percentage of sales primarily as a result of price reductions on
punch cards sold by MTS Packaging. The price reductions have resulted, in part,
from the consolidation of pharmacies which has allowed individual customers to
take advantage of volume pricing discounts
Cost of sales as a percentage of sales in the Health Care Information
segment increased primarily as a result of a higher portion of revenue
associated with hardware components of systems sold. the profit margin realized
on hardware components is lower than the software components.
Cost of services as a percentage of sales in the Clinical Laboratory
segment increased primarily as a result of lower reimbursements by third party
payers for test performed.
Selling, general and administration expenses for the six months ended
September 30, 1998 increased 47.7% to $6.5 million from $4.4 million during the
same period the prior year. The increase resulted primarily from an increase in
personnel costs in each business segment which resulted from the addition of
personnel to accommodate increased sales and services.
Selling, general and administrative expenses for each business segment
increased as follows:
<TABLE>
<CAPTION>
Six Month Ended
----------------------------------------------------------
September 30, September 30, % Increase
1998 1997
---------------- --------------- ---------------
<S> <C> <C> <C>
Medication Packaging and Dispensing Systems $1.0 Million $.9 Million 11.1%
Health Care Information Systems $2.5 Million $1.4 Million 78.6%
Clinical Laboratory Services $2.1 Million $1.2 Million 75.0%
Corporate $.9 Million $.9 Million 0%
</TABLE>
Depreciation and amortization expenses for the six months ended September
30, 1998 decreased 2.9% to $725,000 from $747,000 during the same period the
prior year. The decrease is a result of certain corporate assets becoming fully
depreciated.
Interest expense for the six months ended September 30, 1998 increased
10.8% to $616,000 from $556,000 during the same period the prior year. The
increase results from additional debt which the Company incurred during the
fourth quarter of the previous fiscal year and during the first half of the
current fiscal year.
Year 2000 Compliance
- --------------------
The Company has reviewed its computer information systems to identify any
systems that could be affected by the "Year 2000" issue. Year 2000 problems
typically arise from computer programs using two characters rather than four to
define the applicable year. This could result in system failure or
miscalculations. The Company is presently upgrading its software systems, which
include its application products and other internally-developed software, and
its information systems hardware used in connection with managing the Company's
operations in order to ensure they are Year 2000 compliant. The Company is
currently assessing the cost of the year 2000 upgrades.
The Health Care Information Systems products that the Company offers for
sale through LifeServ have been tested for year 2000 compliance, except for the
Performance software system which is currently undergoing an upgrade that is
expected to be completed in fiscal 1999. The Company believes that all of its
products except Performance are year 2000 compliant.
The Company has not assessed fully the impact of the Year 2000 compliance
issue on the entities with whom the Company interacts, such as distributors,
suppliers, manufacturers and customers. The Company also has not verified
whether its non-information systems equipment is Year 2000 compliant.
<PAGE>
14
LIQUIDITY AND CAPITAL RESOURCES
During the first half of the current fiscal year, the Company incurred a
net loss of $475,000 compared to a net loss of $761,000 the prior year. Cash
used by operating activities was $311,000 during the six months ended September
30, 1998 compared to $513,000 provided in the prior year. The Company had
working capital of $2,531,000 at September 30, 1998.
Cash was used by operating activities during the six months ended September
30, 1998 primarily due to net operating losses.
Investing activities used $389,000 during six months ended September
30,1998 as a result of expenditures for capital equipment and product
development.
Financing activities provided $531,000 during the six months ended
September 30, 1998. The Company borrowed $500,000 from an individual to support
the operations of LifeServ. This promissory note matured on October 31, 1998.
The Company does not currently have sufficient funds to repay the note, however,
discussions with the lender regarding repayment of the note are currently in
progress. In addition, the Company borrowed $150,000 from several individuals,
including $100,000 from the Chairman and Chief Executive Officer to support the
operations of MTL. These amounts are repayable within six months.
The Company believes that cash generated from the Medication Packaging and
Dispensing Systems business segment will be sufficient to meet the working
capital and capital expenditure needs of this segment as well as service the
consolidated debt of the Company for the foreseeable future.
LifeServ relies solely on cash flow generated from its operation,
additional debt and equity which they are permitted to obtain in accordance with
the loan agreement with the primary lenders of the Company. There are no
assurances that LifeServ will generate sufficient cash flow from operations to
fund its operations or be successful in obtaining debt or raising equity
capital. Management believes that the results of operation of LifeServ will not
adversely effect the overall liquidity of the Company.
In August 1998, the Company, through its subsidiary MTL, entered into an
agreement with another clinical laboratory to acquire certain assets. The
acquisition has increased the amount of testing services performed by MTL and as
a result has required additional funds to support these activities. To date the
Company has been successful in obtaining capital in the form of unsecured debt
to supplement cash generated from operations to meet the working capital needs
of MTL. The Company anticipates that additional capital may be required to
support the operations of MTL, however, there are no assurances that additional
capital will be available.
<PAGE>
15
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
The Annual Meeting of the Shareholders of the Company was held on September
29, 1998. Messrs. Todd E. Siegel, David Kazarian, Michael Conroy, and John
Stanton were elected directors of the Company for one year terms with at least
5,034,288 shares of Common Stock and 6,500,000 shares of Voting Preferred Stock
voting in favor, no more than 81,627 shares of Common Stock and zero shares of
Voting Preferred Stock voting against, and 144,942 shares of Common Stock and
zero shares of Voting Preferred Stock abstaining.
Grant Thornton LLP was ratified as the Company's independent certified
public accountants for fiscal year 1999 with 5,129,432 shares of Common Stock
and 6,500,000 shares of Voting Preferred Stock voting in favor, 70,245 shares of
Common Stock and zero shares of Voting Preferred Stock voting against, and
11,180 shares of Common Stock and zero shares of Voting Preferred Stock
abstaining.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27 - Financial data schedule as of September 30, 1998 filed
herewith (for SEC use only).
B. Reports on Form 8-K
None
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.
MEDICAL TECHNOLOGY SYSTEMS, INC.
Date: November 12, 1998 By: /s/ Michael P. Conroy
----------------- ---------------------
Michael P. Conroy
Vice President & Chief Financial Officer
<PAGE>
1
ASSET ACQUISITION AGREEMENT
This is an Asset Acquisition Agreement (the "Agreement"), dated August 4,
1998, among Community Clinical Laboratories, Inc. (the "Seller"), James L.
McKeown, Sr., James L. McKeown, Jr. (collectively, the "Shareholders") and
Medical Technology Laboratories, Inc. (the "Buyer").
Background
The Seller is a provider of clinical laboratory services. The Buyer wishes
to purchase from the Seller and the Seller wishes to sell to the Buyer certain
assets of the Seller related to that business, subject to the terms and
conditions set forth below. Accordingly, in consideration of the mutual
covenants and agreements set forth below, the parties agree as follows:
Terms
1. Sale of Business and Assets. On the Closing Date (as defined below), the
Seller shall sell and the Buyer shall purchase, for the consideration set forth
in Section 2 below:
(a) The exclusive right to the customer lists and associated goodwill
of the Seller listed on Schedule 1(a);
(b) The leasehold interest in the Seller's laboratory testing
equipment, sometimes described as reagent rental agreements, listed on
Schedule 1(b);
(c) The leasehold interest in the Seller's assets listed on Schedule
1(c); and
(d) Those assets of the Seller listed on Schedule 1(d).
The assets described in this Section are collectively called the "Assets."
2. Assets Not Acquired. The Buyer shall not acquire or assume any of the
following Assets:
(a) Medicare provider number or agreement;
(b) Medicaid provider number or agreement;
(c) Clinical laboratory licenses;
<PAGE>
2
(d) Any third-party payor provider numbers or agreements;
(e) Any provider network agreements;
(f) Any contracts or agreements with any physicians; or
(g) Any equipment leased, purchased or owned by any physician.
The assets described in this Section collectively called the "Not Acquired
Assets."
3. Purchase Price of the Assets.
(a) The purchase price for the Assets (the "Purchase Price") shall be
an amount equal to 9% of all Collected Receivables for the Established List
(as defined below) for a period of 5 years after the Closing Date;
provided, however, that the maximum Purchase Price shall not exceed
$2,500,000. The first payment of the Purchase Price shall be paid 90 days
after the Closing. After the first payment, each successive payment shall
be paid 90 days after the date of the first payment during the term of the
Agreement.
(b) The Seller agrees that, if the Buyer is directed in writing by any
governmental agency or a court of competent jurisdiction, including but not
limited to the United States Postal Inspection Service, Office of Inspector
General, Health and Human Services, Defense Criminal Investigative Service,
Internal Revenue Service, Department of Justice, Office of the United
States Attorney or Health Care Finance Administration, to place all or any
part of the Purchase Price or any other payment owed to the Seller in
escrow, or to pay any creditor, receiver, government agency or any other
third person, the Buyer may comply with such a directive.
(c) In addition, the Seller agrees that if all or part of the Purchase
Price is paid into escrow, the amount of such payment into escrow shall be
credited toward the next quarterly payment of the Purchase Price and shall
reduce the Purchase Price maximum to be paid by the Buyer. In the event
that the Buyer makes any payment directly to any of the Seller's creditors,
except for payments made directly to the Seller's creditors relating to the
Assets listed on Schedule 1(c), the amount of such payment shall be
credited toward the next quarterly payment of the Purchase Price and shall
reduce the Purchase Price maximum to be paid by the Buyer. In the event
that the Buyer makes any payment directly to the owner of any of the Assets
under a lease agreement with the Seller, except for payments made directly
to the owner of the Assets listed on Schedule 1(c) and any rental payments
made to James L. McKeown, Sr. for the real property that is the subject of
the Lease between the Buyer and James L. McKeown, Sr., Trustee of the James
L. McKeown, Sr. Living Trust Under Agreement Dated 11/9/82, as amended (the
"Building"), the amount of such payment shall be credited toward the next
quarterly payment of the Purchase Price and shall reduce the Purchase Price
maximum to be paid by the Buyer.
<PAGE>
3
(d) The first payment of the Purchase Price will not be affected by
any credit for payments made by the Buyer as outlined in this Agreement. In
addition, the amount of any credit thereafter may not exceed 50% of the
quarterly Purchase Price payment that is due. If the amount of any credit
exceeds 50% of the Purchase Price payment in any quarter, the excess amount
of the credit will be credited toward the next quarterly payment up to the
50% maximum. Provided, however any payment made by the Buyer pursuant to
Section 3(b) above shall offset, dollar for dollar, any payment due under
this Agreement and this Section 3(d) shall have no force or effect over
such payments.
(e) Within 30 days after the Closing, the Seller will decide, in its
sole discretion, whether the Buyer will act as custodian for its accounts
receivables and liabilities. If the Buyer is chosen as custodian of the
Seller's accounts receivables and liabilities after 30 days, the Buyer, in
its sole discretion, may decide at that time whether it will act as
custodian of the Seller's accounts. If the Buyer is chosen as custodian,
the Buyer will use its reasonable efforts to collect the Sellers accounts
receivables and will use the proceeds of these collection efforts to pay
the Seller's liabilities. The Seller will appoint a third party, acceptable
to the Buyer, to receive funds and make disbursements on behalf of the
Seller as directed by the Buyer. Payments will be made first to secured
creditors, then to unsecured creditors and then to the Seller unless
formally directed otherwise by any government agency or court of competent
jurisdiction.
(f) In the event that the Buyer, in its sole discretion, determines
that certain liabilities should be paid, the Seller hereby authorizes the
Buyer to satisfy those liabilities first from the proceeds of the accounts
receivables and then from the Buyer's own funds. If the Buyer uses its
funds to satisfy the liabilities of the Seller, the amount of such payment
shall be credited toward the next quarterly payment of the Purchase Price
and shall reduce the Purchase Price maximum to be paid by the Buyer. The
amount of any credit may not exceed 50% of the quarterly Purchase Price
payment that is due. If the amount of any credit exceeds 50% of the
Purchase Price payment in any quarter, the excess amount of any credit will
be credited toward the next quarterly payment up to the 50% maximum. In the
event seller disputes purchase price offsets, the parties shall resolve it
in accordance with the provision for disputes in the Agreement A/R.
4. Definitions.
(a) Collected Receivables shall mean all cash collections actually
received and retained by the Buyer from the Established List. Any
regulatory or insurance company fees, fines, chargebacks, adjustments,
penalties or other payments (and related legal fees and costs related)
required to be paid by the Buyer, for the acts or omissions of the Seller
occurring prior to the Closing Date, will be deducted from the Purchase
Price maximum.
(b) Established List shall mean all of the Seller's accounts listed on
Schedule 1(a).
5. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer the following, as of the execution date of this Agreement
and as of the Closing Date:
<PAGE>
4
(a) Organization and Authority. The Seller is a corporation duly
organized and in active status under the laws of Florida, and has full
corporate power and authority to execute and deliver this Agreement, to
carry out its obligations under this Agreement, and to effect the
transactions contemplated by this Agreement;
(b) Authorization, Consents, and Validity. The execution, delivery,
and performance of this Agreement by the Seller (i) has been duly
authorized by all requisite corporate action of the Seller, (ii) does not
require any consent, license, approval, waiver, or authorization from any
governmental authority or any other person, and (iii) will not conflict
with the articles of incorporation or bylaws of the Seller. This Agreement
has been duly and validly executed by the Seller and is a valid and legally
binding obligation of the Seller, enforceable against it in accordance with
its terms, except to the extent limited by bankruptcy, reorganization,
insolvency, moratorium, and similar laws of general application affecting
the rights and remedies of creditors and by general equity principles;
(c) Brokers. All negotiations relating to this Agreement and the
transaction contemplated hereunder have been carried on by the Seller
without the use of any broker, finder, underwriter, or other intermediary
whereby such party would have a valid claim against the Seller or the Buyer
for a brokerage commission, finder's fee, or other similar payment;
(d) Title to Assets. The Seller has, and at Closing the Buyer will
have, good and marketable title to, or a valid leasehold interest in, the
Assets, free and clear of any lien, encumbrance, security interest, claim
or equity interest, except for as set forth on Schedule 1(c);
(e) Absence of Certain Developments. Since July 27, 1998:
(i) The Seller is not in violation of any state or federal law;
(ii) There has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to a material portion of the
Assets;
(iii) The Seller has not entered into any transaction or contract
(other than purchase and service orders entered into between the
Seller and its customers and suppliers in the ordinary course of
business) having, in the aggregate, a value or requiring payments in
excess of $10,000.00;
(iv) The Seller has not failed to pay and discharge current
liabilities within 90; days, except as set forth on Schedule 5(e)(iv);
(v) The Seller has not mortgaged, pledged or subjected to any
lien any of the Assets, or acquired or sold, assigned, transferred,
conveyed, leased or otherwise disposed of any property, right or asset
or any interest therein that otherwise would have been included as
part of the; Assets, except as set forth on Schedule 5(e)(v);
<PAGE>
5
(vi) The Seller has not amended, cancelled, terminated,
relinquished, waived or released any contract or right that otherwise
would have been included as part of the Assets, other than in the
ordinary course of business consistent with past practice;
(vii) The Seller has not made or committed to make any capital
expenditures or capital additions or betterments to any of the
business in excess of $10,000.00 in the aggregate that would affect
any of the Assets;
(viii) The Seller has not agreed to do any of the foregoing;
(f) Material Contracts.
(i) Except as set forth on Schedule 5(f)(i), all of the
Seller's material contracts are valid, binding and enforceable
against the Seller and, to the best knowledge of the Seller, any
other party thereto, in accordance with their respective terms,
and there does not exist under any material contract any default
on the part of the Seller or of any other party thereto or any
event which with notice or lapse of time or both would constitute
such a default.
(ii) Except as set forth on Schedule 5(f)(ii), the Seller
has not received any notice or communication from any party to a
material contract relating to such party's intent to modify,
terminate or fail to renew the arrangements and relationships set
forth therein that relate to the Assets.
(iii) The Seller is not a party to or subject to: (A) any
agreement, contract or commitment that substantially limits the
freedom of the Seller to compete in any line of business or with
any person or in any area, or to own, operate, sell, transfer,
pledge or otherwise dispose of or encumber any Asset or which
would so limit the freedom of the Buyer after the Closing Date;
or (B) any agreement, contract or commitment between the Seller
and any affiliate of the Seller.
(g) Taxes.
(i) Except as set forth on Schedule 5(g)(i), the Seller has
(A) timely paid (and until the Closing Date will timely pay) all
taxes that are due and payable with respect to the Seller, its
operations and assets, except for taxes, the nonpayment of which,
would not (1) result in a lien on any of the Assets after the
Closing Date, or (2) result in the Buyer becoming liable
therefor, and (B) established (and through and including the
Closing Date will establish) reserves that are adequate for the
payment of all taxes not yet due and payable with respect to the
result of operations through the Closing Date, the nonpayment of
which would (1) result in a lien on any of the Assets after the
Closing Date, or (2) result in the Buyer becoming liable
therefor.
<PAGE>
6
(ii) Except as set forth on Schedule 5(g)(ii), the Seller
has complied and will have complied through and including the
Closing Date with all applicable laws, rules and regulations
relating to the payment and withholding of taxes relating to
employee wages, salaries and other compensation and has timely
withheld and paid over (and through and including the Closing
Date will timely withhold and pay over) to the proper
governmental authorities all amounts required to be so withheld
and paid over for all periods under all applicable laws.
(h) Employees and Employee Benefits.
(i) (A) The Seller is not a party to any collective
bargaining agreement applicable to the employees, (B) none of the
employees are represented by any labor organization, and (C)
there is no labor strike, work stoppage or slowdown pending
against the Seller and no pending lockout by the Seller, in each
case, with respect to the business.
(ii) All of the Seller's employee benefit plans as defined
by Section 3(3) of ERISA are in compliance with the applicable
requirements of ERISA and the Code.
(i) Litigation. Except as set forth on Schedule 5(i), there
is no legal proceeding or investigation pending or, to the
knowledge of the Seller, threatened (A) against the Seller in
connection with the operation of the business or in respect of
any of the Assets; (B) that seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated by
this Agreement; or (iii) that questions the validity of this
Agreement, or any action taken or to be taken by the Seller in
connection with the consummation of the transactions contemplated
hereby or thereby.
(j) Compliance with Law.
(i) Except as set forth on Schedule 5(i), the business is
currently operating in compliance with all applicable laws and
orders of governmental bodies. The Seller has neither received,
nor knows of the issuance of, any notice of any violation or
alleged violation of any applicable laws and orders of
governmental bodies.
(ii) Except as set forth on Schedule 5(i), the Seller is not
aware of any investigation with respect to any violation of any
law, order or judgment entered by any court, arbitrator or
governmental body, applicable to the Assets or the conduct of the
business.
(k) Assets Necessary to Conduct Business. The Assets comprise all of
the assets necessary to operate the business as presently being conducted.
<PAGE>
7
6. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller the following, as of the execution date of this Agreement
and as of the Closing Date:
(a) Organization and Authority. The Seller is a corporation duly
organized and in active status under the laws of the State of Florida, and
has full corporate power and authority to execute and deliver this
Agreement, to carry out its obligations under this Agreement, and to effect
the transactions contemplated by this Agreement;
(b) Authorization, Consents, and Validity. The execution, delivery,
and performance of this Agreement by the Buyer (i) has been duly authorized
by all requisite corporate action of the Buyer, (ii) does not require any
consent, license, approval, waiver, or authorization from any governmental
authority, and (iii) will not conflict with the articles of incorporation
or bylaws of the Buyer. This Agreement has been duly and validly executed
by the Buyer and is a valid and legally binding obligation of the Buyer,
enforceable against it in accordance with its terms, except to the extent
limited by bankruptcy, reorganization, insolvency, moratorium, and similar
laws of general application affecting the rights and remedies of creditors
and by general equity principles;
(c) Brokers. All negotiations relating to this Agreement and the
transaction contemplated hereunder have been carried on by the Buyer
without the use of any broker, finder, underwriter, or other intermediary
whereby such party would have a valid claim against the Buyer or the Seller
for a brokerage commission, finder's fee, or other similar payment.
7. Noncompetition and Nonsolicitation. Each of the Seller and the
Shareholders agree that, effective upon consummation of the Closing and
continuing for a period of 3 years thereafter, without the prior written consent
of the Buyer, he or it will not, directly or indirectly, as an agent, consultant
or independent contractor or in any other capacity: (a) invest (other than
investments in publicly owned companies which constitute not more than 1% of the
voting securities of any such company) or engage in any business or activity
that is competitive with the operation of the Assets; (b) accept employment with
or render services to a competitor of the Buyer; (c) contact, solicit or attempt
to solicit or accept business that is competitive with the operation of the
Assets from any of the Buyer's customers; (d) own or operate a medical
laboratory; or (e) own or operate a draw station. In addition, prior to the
Closing (as defined below), the Buyer will obtain agreements from the
Shareholders in substantially the form attached to this Agreement as Exhibit A
and from Vincent Gepp and Richard Holt in substantially the form attached to
this Agreement as Exhibit B.
8. Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Holland & Knight LLP, in
Tampa, Florida, commencing at 10:00 a.m. local time, on or before August 31,
1998, or such other date as may be agreed upon in writing by the parties (the
"Closing Date"). The Closing shall be contingent upon the Buyer obtaining
approval of this transaction by the Buyer's primary lenders.
<PAGE>
8
9. Deliveries at Closing. At the Closing, the Seller shall deliver to the
Buyer a bill of sale, a form of which is attached to this Agreement as Exhibit
C, and such other instruments of transfer and conveyance as in the reasonable
opinion of the Buyer's counsel shall be effective to vest in the Buyer title to
the Assets. At the Closing, the Buyer must have executed a lease, mutually
acceptable to the lessor and the Buyer, for the Building and must deliver an
appraisal of the Assets listed on Schedule 1(d). At the Closing, the Buyer and
the Seller must have executed separate leases for the Assets listed on Schedule
1(c).
10. Assumption of Liabilities. The parties acknowledge that the Buyer is
not assuming any of the Seller's liabilities, including, but not limited to,
accounts payable, notes payable to any financial institution, notes payable to
any individuals, or any liability relating to the current investigation of the
Seller or as set forth on Schedule 5(i) or any liability relating to or arising
from the Medicare or Medicaid provider number or agreements, or any liability
relating to or arising from any other third-party payor agreement.
11. Indemnification. The Seller will indemnify and hold the Buyer harmless
against any and all losses, costs, expenses, and liabilities (including
attorneys' fees and expenses at all levels of proceedings) arising out of or
resulting from any claim against the Seller, for any act or omissions by the
Seller that occurred prior to the Closing Date, including without limitation,
any losses, costs, expenses, or liabilities relating to the current
investigation or as set forth on Schedule 5(i). If the Seller is required to
indemnify the Buyer pursuant to this provision, the amount of any loss, cost,
expense or liability for which the Seller must indemnify the Buyer will be
set-off against the Buyer's future quarterly Purchase Price payments.
12. Pre-Closing Covenants. The parties agree as follows with respect to the
period between the execution of this Agreement and the Closing:
(a) General. Each of the parties will use its reasonable commercial
efforts to take all action and to do all things necessary, appropriate, or
convenient to consummate and make effective the transactions contemplated
by this Agreement;
(b) Notices and Consents. The Seller will give any notices to third
parties and will obtain any third-party consents the Buyer may reasonably
request in connection with the transactions contemplated by this Agreement
or that may otherwise be necessary to convey the Seller's full rights in
the Assets to the Buyer;
(c) Full Access. The Seller will permit representatives of the Buyer
to have full access to all premises, properties, books, records, contracts,
tax records, and documents of or pertaining to its financial statements,
during normal business hours or any other reasonable time for purposes of
due diligence investigation.
<PAGE>
9
13. Post-Closing Covenants. The parties agree as follows with respect to
the period following the Closing:
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each
of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other party may
reasonably request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification under
this Agreement);
(b) Transition. The Seller will not take any action (other than
actions required to be taken by the Seller under this Agreement) that is
designed or intended to have the effect of discouraging any client from
maintaining the same business relationships with the Buyer after the
Closing Date as it maintained with the Seller before the Closing Date. The
Seller will refer all client inquiries to the Buyer from and after the
Closing.
14. General Provisions.
(a) Benefit and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns. The rights of the Seller may not be assigned. The rights of the
Buyer may be assigned to a subsidiary or affiliate of the Buyer, provided
that any such assignment shall in no way relieve the Buyer of its
obligations and responsibilities under this Agreement.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Florida.
(c) Notices. All notices, requests, demands and other communications
hereunder shall be in writing, and shall be deemed to have been duly given
if delivered by overnight delivery service or hand delivered, addressed as
follows:
If to the Buyer:
Medical Technology Laboratories, Inc.
12920 Automobile Boulevard
Clearwater, Florida 34622
Attn: Mr. Todd E. Siegel, President
<PAGE>
10
With a copy to:
Holland & Knight LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Attn: Robert J. Grammig, Esq.
If to the Seller:
Community Clinical Laboratories, Inc.
1375 South Fort Harrison Avenue
Clearwater, Florida 33756
Attn: James L. McKeown, Jr.
With a copy to:
Conklin, Stanley & Probst, P.A.
1465 South Fort Harrison Avenue, #202
Clearwater, Florida 34616
Attn: Paul Probst, Esq.
If to the Shareholders:
James L. McKeown, Sr.
430 West Druid Road
Clearwater, Florida 34616
and
James L. McKeown, Jr.
11410 74th Avenue North
Seminole, Florida 33772
15. Expenses. Except as otherwise provided in this Agreement, any expenses
in connection with this Agreement or the transactions contemplated in this
Agreement shall be paid for by the party incurring such expenses.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Headings. All paragraph headings are inserted for convenience only and
shall not modify or affect the construction or interpretation of any provision
of this Agreement.
<PAGE>
11
18. Amendment, Modification and Waiver. This Agreement may be modified,
amended, and supplemented by mutual written agreement of the parties, at any
time prior to the Closing. Each party may waive any condition intended to be for
its benefit. Each amendment, modification, supplement, or waiver shall be in
writing executed by both parties.
19. Entire Agreement. This Agreement represents the entire agreement
between the parties and supersedes all prior negotiations and discussions by and
among the parties in connection with this Agreement or its subject matter.
20. Disputes Regarding Purchase Price. In the event the Seller disputes any
calculation of the Purchase Price made under this Agreement and the parties are
unable to resolve this dispute within thirty days, then each party shall appoint
(within thirty days) an independent certified public accountant to rule upon the
dispute. If the two accountants are unable to resolve the dispute, they shall
appoint a third accountant, who shall have the final, nonappealable authority
over the dispute. The accountants shall award the costs of the dispute
resolution as they deem appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date set forth above.
BUYER:
MEDICAL TECHNOLOGY
LABORATORIES, INC.
By: _____________________
Name: Todd E. Siegel
Its: President
SELLER:
COMMUNITY CLINICAL LABORATORIES, INC.
By:_____________________
Name:___________________
Its:____________________
SHAREHOLDERS:
________________________
James L. McKeown, Sr.
________________________
James L. McKeown, Jr.
<PAGE>
12
AMENDMENT TO ASSET ACQUISITION AGREEMENT
In accordance with Section 18 of the Asset Acquisition Agreement dated
August 4, 1998, the parties agree to amend Section 3A of the Agreement to
provide that the first payment of the purchase price shall be paid on November
15, 1998.
MEDICAL TECHNOLOGY LABORATORIES, INC.
By:__________________
Name: Todd E. Siegel
Its: President
SELLER:
COMMUNITY CLINICAL LABORATORIES, INC.
By:__________________
Name:________________
Its:_________________
SHAREHOLDERS:
______________________
James L. McKeown, Sr.
______________________
James L. McKeown, Jr.
<PAGE>
1
LEASE AGREEMENT
This is a LEASE AGREEMENT (the "Agreement"), dated August 4, 1998, by and
between Community Clinical Laboratories, Inc. (the "Lessor"), James L. McKeown,
Sr. (the "Landlord") and Medical Technology Laboratories, Inc. (the "Lessee").
Background
The Lessor is the owner of certain assets that are used in the Lessor's
clinical laboratory business. The Landlord is the owner of certain real property
that is used by the Lessor in its clinical laboratory business. The Lessor
wishes to lease certain assets to the Lessee. The Landlord wishes to lease his
real property to the Lessee. The Lessee is a provider of clinical laboratory
services and wishes to lease certain assets from the Lessor and certain real
property from the Landlord. Accordingly, in consideration of the mutual
covenants and agreements set forth below, the parties agree as follows:
Terms
1. Lease of Assets and Real Property. The Lessor and the Landlord lease or
sublease to the Lessee, and the Lessee leases or subleases from the Lessor and
the Landlord, upon and subject to the terms and conditions set forth in this
Agreement:
(a) The Lessor's customer lists listed on Schedule 1(a);
(b) The Lessor's laboratory testing equipment listed on Schedule 1(b);
(c) The Lessor's assets listed on Schedule 1(c);
(d) The Lessors assets listed on Schedule 1(d); and
(e) The Landlord's real property described on Schedule 1(e).
The assets described in this Section are collectively called the "Assets." The
real property described on Schedule 1(e) is called the "Building."
2. Assets Not Leased. The Lessee shall not lease any of the following
Assets from the Lessor:
(a) Medicare provider number or agreement;
(b) Medicaid provider number or agreement;
<PAGE>
2
(c) Clinical laboratory licenses;
(d) Any third-party payor provider numbers or agreements;
(e) Any provider network agreements;
(f) Any contracts or agreements with any physicians; or
(g) Any equipment leased, purchased or owned by any physician.
The assets described in this Section are collectively called the "Not Acquired
Assets."
3. Term. The term of this Agreement shall commence on the date this
Agreement is executed and will terminate on the closing date of the Asset
Acquisition Agreement (the "Acquisition Agreement") entered into by the parties
simultaneously with the execution of this Agreement.
4. Rent. For the specified term, the Lessee shall pay to the Lessor and the
Landlord rent as set forth in Schedule 4 to this Agreement. The Lessee has the
option, in its sole discretion, to make rent payments directly to the owner of
the Assets or to the Lessor's creditors or lessors. In the event that the Lessee
makes any payment directly to the owner of the assets or to the Lessee's
creditors or lessors, the amount of such payment shall be credited toward any
future quarterly payments required to be paid pursuant to this Agreement or the
Acquisition Agreement. In addition, the Lessee agrees that, if all or part of
the rent is required to be paid into escrow by any governmental authority, the
amount of such payment into escrow shall be credited toward any future quarterly
payments required to be paid pursuant to this Agreement or the Acquisition
Agreement.
5. Title and Ownership. The Assets are, and shall remain, the personal
property of the Lessor. The Building is, and shall remain, the real property of
the Landlord. The Lessor grants no interest in the Assets except as expressly
set forth in this Agreement. The Landlord grants no interest in the Building
except as expressly set forth in this Agreement. The Lessee shall not lease,
sublease, mortgage, grant a security interest in or otherwise encumber the
Assets or the Building or any part thereof.
6. Compliance with Building Code Regulations. The Landlord shall take
whatever measures are necessary to bring the Building into compliance with all
building code regulations of any governmental entity. Should the Landlord fail
to bring the Building into compliance with all building code regulations, the
Lessee may take the necessary action to bring the Building into compliance. All
cash payments made by the Lessee to bring the Building into compliance with
building code regulations shall be credited toward any future quarterly payments
required to be paid pursuant to this Agreement or the Acquisition Agreement.
<PAGE>
3
7. Alterations. Without the prior written consent of the Lessor or the
Landlord, the Lessee shall not make any material alterations, additions or
improvements of any kind to the Assets or the Building.
8. Insurance. The Lessee shall keep the Assets insured against all risks of
loss or damage from every cause whatsoever for not less than the full
replacement value thereof and shall carry public liability and property damage
insurance covering the Assets and their use. Should the Lessee fail to provide
such insurance coverage, the Lessor may obtain coverage for part or all of the
term of this Agreement, or such period beyond the term as is required by the
insurance company issuing such coverage. The proceeds of any insurance, at the
option of the Lessee, provided it is not in default under this Agreement, shall
be applied to: (i) the replacement, restoration, or repair of the Assets; or
(ii) payment of the obligations of the Lessee. The Landlord shall keep the
Building insured against all risks of loss or damage from every cause whatsoever
for not less than the full replacement value thereof. Should the Landlord fail
to provide such insurance coverage, the Lessee may obtain coverage for part or
all of the term of this Agreement, or such period beyond the term as is required
by the insurance company issuing such coverage.
9. Indemnification. The Landlord will indemnify and hold the Lessee
harmless from and against any and all losses, expenses and liabilities
(including attorneys' fees and expenses at all levels of proceedings) arising
out of or resulting from the Building. This indemnity shall survive the
termination or expiration of the Agreement.
10. Surrender. Upon the expiration or early termination or cancellation of
this Agreement, the Lessee, at its sole expense, shall return the Assets to the
Lessor in good working order and repair.
11. Risk of Loss. The Lessor shall bear all risks of loss of and damage to
the Assets from any cause. The Landlord shall bear all risks of loss and damage
to the Building from any cause.
12. Early Termination. The Lessee may cancel and terminate this Agreement
at any time upon 30 days' prior written notice.
13. Waiver. No covenants or condition of this Agreement can be waived
except by the written consent of the parties.
14. Entire Agreement. This Agreement contains the entire understanding and
agreement between the parties concerning the lease of the Assets. There are no
promises, agreements, conditions, undertakings, inducements, waivers,
representations, or warranties, oral or written, express or implied, between the
parties other than as are specifically set forth in this Agreement.
15. Inspection. From time to time during the term of this Agreement, the
Lessor and the Landlord shall have the right to inspect the Assets and the
Building, respectively, upon reasonable notice to the Lessee.
<PAGE>
4
16. Severability. If any provision contained in this Agreement is declared
or held to be invalid or unenforceable, then such declaration or holding shall
be limited to its most narrow application and shall not affect the remaining
provisions of this Agreement, all of which shall remain in full force and
effect.
17. Amendments. This Agreement and any exhibit or schedule to this
Agreement shall not be amended, altered or changed except by a written agreement
signed by the parties.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered by overnight delivery service or hand delivered, addressed as follows:
If to Lessee:
Medical Technology Laboratories, Inc.
12920 Automobile Boulevard
Clearwater, Florida 34622
Attn: Mr. Todd E. Siegel, President
With a copy to:
Holland & Knight LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Attn: Robert J. Grammig, Esq.
If to Lessor:
Community Clinical Laboratories, Inc.
1375 South Fort Harrison Avenue
Clearwater, Florida 33756
Attn: James L. McKeown, Jr.
With a copy to:
Conklin, Stanley & Probst, P.A.
1465 South Fort Harrison Avenue
Clearwater, Florida 34616
Attn: Paul Probst, Esq.
<PAGE>
5
If to the Landlord:
James L. McKeown, Sr.
430 West Druid Road
Clearwater, Florida 34616
19. Benefit. This Agreement shall be binding upon and inure to the benefit
of the parties and their respective heirs, personal representatives, successors,
and assigns. Nothing in the foregoing sentence shall in any way waive or be
deemed to waive any limitations provided in this Agreement as to the
assignability or transferability of this Agreement.
20. Headings. The headings to the paragraphs of this Agreement are solely
for the convenience of the parties, and are not an aid in the interpretation of
the instrument.
21. Governing Law. The validity, interpretation, and enforcement of this
Agreement, of the rights and obligations of the parties to this Agreement, and
of the other documents delivered in connection with this Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of
Florida.
22. Counterparts; Facsimile Signatures. This Agreement may be executed in
one or more counterparts, which taken together shall constitute one agreement.
Facsimile signatures shall have the same effect as original signatures.
23. No Joint Venture. The parties to this Agreement do not intend to create
any joint venture, partnership, agency or other relationship, implied or
otherwise, as a result of this Agreement.
<PAGE>
6
IN WITNESS WHEREOF, the Lessor, the Landlord and the Lessee have executed
this Agreement on the date written above.
LESSOR:
Community Clinical Laboratories, Inc.
By:__________________
Name:________________
Its:_________________
LANDLORD:
_____________________
James L. McKeown, Sr.
LESSEE:
Medical Technology Laboratories, Inc.
By:___________________
Name: Todd E. Siegel
Its: President
<PAGE>
1
PROMISSORY NOTE
Clearwater, Florida
August 31, 1998
FOR VALUE RECEIVED, Medical Technology Laboratories, Inc., a Florida
corporation, whose address is 12920 Automobile Boulevard, Clearwater, Florida
34622 (the "Obligor"), hereby promises to pay to James L. McKeown, Sr. (the
"Holder") 51% of the purchase price payments as described in Section 3(a) of the
Asset Acquisition Agreement, dated August 4, 1998 (the "Agreement"), a copy of
which is attached to this Note as Exhibit A, subject to any setoffs, payments or
amounts placed in escrow in accordance with the Agreement.
An event of default will occur under this Note if the Obligor fails to make
a payment before 5:00 p.m., eastern time, on the day such payment is due as set
forth in Section 3(a) of the Agreement. An event of default under this Note will
become a default if not cured within three days of notice of such event of
default is conveyed by the Holder to the Obligor. If this Note is in default,
the outstanding purchase price payment shall bear interest at a rate of 10% per
annum. The Obligor shall pay all costs of collection, including reasonable
attorneys fees, as well as all accrued interest. This Note is secured by, and
subject to, the Agreement between the Obligor and the Holder.
The Obligor and any other party liable for the payment under this Note
hereby waive presentment, protest and demand, notice of protest, and dishonor.
The Obligor and any other party liable for the payment of this Note hereby
expressly consent to any extensions and renewals, in whole or in part, and all
delays in time of performance which the Holder may grant at any time and from
time to time, without limitation and without any notice or further consent of
such persons.
No failure by the Holder to exercise any right or remedy shall be deemed to
be a waiver or release of such right or remedy, and any waiver or release may be
effected only through a written document executed by the Holder and then only to
the extent specifically recited in such document.
This Note shall be governed by and construed under the laws of Florida,
without regard to principles of conflict of laws.
MEDICAL TECHNOLOGY LABORATORIES, INC.
By:_____________________
Name: Todd E. Siegel
Its: President
<PAGE>
1
PROMISSORY NOTE
FOR VALUE RECEIVED, Medical Technology Laboratories, Inc., a Florida
corporation, whose address is 12920 Automobile Boulevard, Clearwater, Florida
34622 (the "Obligor"), hereby promises to pay to James L. McKeown, Jr. (the
"Holder") 49% of the purchase price payments as described in Section 3(a) of the
Asset Acquisition Agreement, dated August 4, 1998 (the "Agreement"), a copy of
which is attached to this Note as Exhibit A, subject to any setoffs, payments or
amounts placed in escrow in accordance with the Agreement.
An event of default will occur under this Note if the Obligor fails to make
a payment before 5:00 p.m., eastern time, on the day such payment is due as set
forth in Section 3(a) of the Agreement. An event of default under this Note will
become a default if not cured within three days of notice of such event of
default is conveyed by the Holder to the Obligor. If this Note is in default,
the outstanding purchase price payment shall bear interest at a rate of 10% per
annum. The Obligor shall pay all costs of collection, including reasonable
attorneys fees, as well as all accrued interest. This Note is secured by, and
subject to, the Agreement between the Obligor and the Holder.
The Obligor and any other party liable for the payment under this Note
hereby waive presentment, protest and demand, notice of protest, and dishonor.
The Obligor and any other party liable for the payment of this Note hereby
expressly consent to any extensions and renewals, in whole or in part, and all
delays in time of performance which the Holder may grant at any time and from
time to time, without limitation and without any notice or further consent of
such persons.
No failure by the Holder to exercise any right or remedy shall be deemed to
be a waiver or release of such right or remedy, and any waiver or release may be
effected only through a written document executed by the Holder and then only to
the extent specifically recited in such document.
This Note shall be governed by and construed under the laws of Florida,
without regard to principles of conflict of laws.
MEDICAL TECHNOLOGY LABORATORIES, INC.
By:_____________________
Name: Todd E. Siegel
Its: President
<PAGE>
1
EXHIBIT C
BILL OF SALE
This Bill of Sale ("Bill of Sale") is entered into as of September 11th,
1998, between Community Clinical Laboratories, Inc., a Florida corporation, (the
"Seller"), whose address is 1375 South Ft. Harrison Avenue, Clearwater, Florida,
33756, and Medical Technology Laboratories, Inc., a Florida corporation (the
"Buyer"), whose address is 12920 Automobile Boulevard, Clearwater, Florida
34622, pursuant to the Asset Acquisition Agreement dated as of August 4,1998,
between the Seller and the Buyer ("Acquisition Agreement"). Capitalized terms
not otherwise defined in this Bill of Sale shall have the meanings ascribed to
them in the Acquisition Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller and the Buyer agree as
follows:
1. 1. The Seller hereby sells, transfers, assigns, conveys, and delivers to
the Buyer and its successors and assigns all of its right, title, and interest
in and to all of the Assets.
2. The Seller and its successors and assigns warrant and will defend title
to the Assets unto the Buyer and its successors and assigns against every person
or entity claiming or to claim the same or any part thereof, except for those
listed on Schedule 1(c), and the claim of AmSouth Banks, if any.
3. The Seller hereby irrevocably constitutes and appoints the Buyer its
true and lawful attorney-in-fact, with full power of substitution and
resubstitution, in its name or the Buyer's name, but on behalf and for the
benefit of the Buyer, to demand, collect, and receive for the account of the
Buyer all of the Assets; to institute or prosecute, in its name or otherwise,
all proceedings which the Buyer may deem necessary or convenient in order to
realize upon, affirm, or obtain title to or possession of or to collect, assert,
or enforce any claim, right, or title of any kind in or to the Assets; and to
defend and compromise any and all actions, suits, or proceedings in respect of
any of the Assets. The Seller agrees that the foregoing powers are coupled with
an interest and are and shall be irrevocable.
4. This Bill of Sale shall not be deemed to supersede any of the provisions
of the Acquisition Agreement, and the representations and warranties contained
in the Acquisition Agreement are incorporated by reference in this Bill of Sale
as if fully set forth herein.
5. All of the terms and provisions of this Bill of Sale shall be binding
upon the Seller, its successors and assigns, and shall inure to the benefit of
the Buyer, its successors and assigns.
<PAGE>
2
IN WITNESS WHEREOF, the Seller has executed this Bill of Sale as of the
date first written above.
COMMUNITY CLINICAL LABORATORIES, INC.
By:____________________
Name:__________________
Its:___________________
MEDICAL TECHNOLOGY LABORATORIES, INC.
By:____________________
Name: Todd E. Siegel
Its: President
STATE OF FLORIDA
COUNTY OF PINELLAS
Execution of the foregoing instrument was acknowledged before me on the
____ day of August, 1998, by _________________________________, as
_______________________________ of Community Clinical Laboratories, Inc., a
Florida corporation, on behalf of the corporation. He/She is either personally
known to me or has produced _______________________________________________ as
identification.
Notary Public, State of
(AFFIX NOTARIAL SEAL) (Name)
Commission No. _________________ My Commission Expires:
STATE OF FLORIDA
COUNTY OF PINELLAS
Execution of the foregoing instrument was acknowledged before me on the
____ day of August, 1998, by _______________________, as _____________________
of Medical Technology Laboratories, Inc., a Florida corporation, on behalf of
the corporation. He is either personally known to me or produced
_______________________________________ as identification.
Notary Public, State of
(AFFIX NOTARIAL SEAL) (Name)
Commission No. _________________ My Commission Expires:
<PAGE>
1
AGREEMENT
This is an agreement (the "Agreement"), dated September 4, 1998, between
Medical Technology Laboratories, Inc. ("MTL"), Community Clinical Laboratories,
Inc. ("CCL"), James McKeown, Sr. and James McKeown, Jr. (the "McKeowns") and
Vincent Gepp ("Gepp").
Background
On August 4, 1998, the parties entered into the Asset Acquisition Agreement
(the "Acquisition Agreement"), a copy of which is attached as Exhibit A, in
which MTL agreed to acquire certain assets of CCL. In Section 3(e) of the
Acquisition Agreement, CCL was required to decide whether MTL would act as
custodian for its accounts receivables and liabilities. Pursuant to this
provision of the Acquisition Agreement, CCL decided that it desired MTL to act
as the custodian of its accounts receivables and MTL agreed to act as custodian.
Accordingly, in consideration of the mutual covenants and agreements set forth
below, the parties agree as follows:
Terms
Appointment. CCL desires to appoint MTL as the custodian of its accounts
receivables and MTL agrees to act as the custodian of CCL's accounts
receivables.
Duties. MTL will use its reasonable efforts to collect CCL's accounts
receivables and will use the proceeds of these collection efforts to pay CCL's
liabilities. MTL will provide an employee experienced in the collection of
accounts receivable for a minimum of 40 hours per week for a period of 90 days
beginning August 31, 1998. After the 90 day-period, the parties agree to
negotiate a new agreement to provide for additional services that may be
required of MTL relating to the uncollected accounts receivables.
Payment of Costs. CCL and the McKeowns agree that they will reimburse up to
$50,000 of the cost of documented postage and supplies. This reimbursement
amount will be deducted from the purchase price payment as set forth in Section
3(a) of the Acquisition Agreement; provided, however, that the maximum amount
that may be used to reduce a single purchase price payment to reimburse
documented costs will be $25,000, beginning with the second payment in 1999.
Term. MTL agrees that it will continue as the custodian under this
Agreement until the earlier of: (a) the expiration of the Acquisition Agreement;
(b) the payment of the maximum purchase price of $2,500,000; or (c) the mutual
agreement of the parties to terminate this Agreement.
Duties of Gepp. MTL appoints Gepp to negotiate with vendors, receive funds
and make disbursements on behalf of CCL as directed by MTL. CCL and MTL agree
that Gepp, a consultant for MTL, is empowered to negotiate the amounts to be
paid to vendors on the list, attached to this Agreement as Exhibit B, and
prescribe a period within which vendors must make their payments. Gepp must use
reasonable efforts to negotiate with the vendors.
Gepp agrees that, if he is indicted, is convicted, pleads guilty to, or is
formally charged with a "healthcare crime," whether a misdemeanor or felony, MTL
may terminate any relationship with Gepp and may discontinue any and all
payments to Gepp that may be due under this Agreement. For purposes of this
section, a "healthcare crime" means any action that results in exclusion,
whether voluntary or involuntary, of Gepp from any federal or state healthcare
program, or otherwise would prohibit Gepp from being employed by or receive
payments from a company that participates in the Medicare or Medicaid program or
any other state or federal healthcare program.
<PAGE>
2
Method of Payment to Creditors. Payments to creditors pursuant to this
Agreement will be made first to secured creditors, then to unsecured creditors,
unless formally directed otherwise by any government agency or court of
competent jurisdiction.
Liability. Neither Gepp, MTL nor any of its affiliates, stockholders,
officers, employees or agents will be liable to CCL or the McKeowns for any
loss, liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss,
liability, damage or expense is a result of the willful misconduct of such
person. CCL agrees to indemnify and hold harmless MTL, its stockholders,
affiliates, officers, agents and employees against and from any and all loss,
liability, suits, claims, costs, damages and expenses, including reasonable
attorneys' fees, arising from MTL's performance under this Agreement, except as
a result of the willful misconduct of the person in question.
Independent Contractor Status. MTL and CCL agree that MTL will perform
services under this Agreement as an independent contractor, retaining control
over and responsibility for its own operations and personnel. Neither MTL nor
its officers, employees or agents will be considered employees or agents of CCL
as a result of this Agreement nor will any of them have authority to contract in
the name of or bind the Company by reason of this Agreement, except as the
parties may expressly agree in writing. Likewise, neither this Agreement nor any
conduct under this Agreement shall be deemed to create a relationship of
employer-employee, partnership, joint venture, or other common enterprise.
General Provisions.
Benefit and Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns. The
rights of the Seller may not be assigned. The rights of the Buyer may be
assigned to a subsidiary or affiliate of the Buyer, provided that any such
assignment shall in no way relieve the Buyer of its obligations and
responsibilities under this Agreement.
Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Florida.
Notices. All notices, requests, demands and other communications hereunder
shall be in writing, and shall be deemed to have been duly given if delivered by
overnight delivery service or hand delivered, addressed as follows:
If to the Buyer:
Medical Technology Laboratories, Inc.
12920 Automobile Boulevard
Clearwater, Florida 34622
Attn: Mr. Todd E. Siegel, President
<PAGE>
3
With a copy to:
Holland & Knight LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Attn: Robert J. Grammig, Esq.
If to the Seller:
Community Clinical Laboratories, Inc.
1375 South Fort Harrison Avenue
Clearwater, Florida 33756
Attn: James L. McKeown, Jr.
With a copy to:
Conklin, Stanley & Probst, P.A.
1465 South Fort Harrison Avenue, #202
Clearwater, Florida 34616
Attn: Paul Probst, Esq.
If to the Shareholders:
James L. McKeown, Sr.
430 West Druid Road
Clearwater, Florida 34616
and
James L. McKeown, Jr.
11410 74th Avenue North
Seminole, Florida 33772
Expenses. Except as otherwise provided in this Agreement, any expenses in
connection with this Agreement or the transactions contemplated in this
Agreement shall be paid for by the party incurring such expenses.
Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Headings. All paragraph headings are inserted for convenience only and
shall not modify or affect the construction or interpretation of any provision
of this Agreement.
<PAGE>
4
Amendment, Modification and Waiver. This Agreement may be modified,
amended, and supplemented by mutual written agreement of the parties, at any
time prior to the Closing. Each party may waive any condition intended to be for
its benefit. Each amendment, modification, supplement, or waiver shall be in
writing executed by both parties.
Entire Agreement. This Agreement represents the entire agreement between
the parties and supersedes all prior negotiations and discussions by and among
the parties in connection with this Agreement or its subject matter.
Disputes Regarding Purchase Price. In the event the Seller disputes any
calculation of the Purchase Price made under this Agreement and the parties are
unable to resolve this dispute within thirty days, then each party shall appoint
(within thirty days) an independent certified public accountant to rule upon the
dispute. If the two accountants are unable to resolve the dispute, they shall
appoint a third accountant, who shall have the final, nonappealable authority
over the dispute. The accountants shall award the costs of the dispute
resolution as they deem appropriate. IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the date set forth above.
BUYER:
MEDICAL TECHNOLOGY LABORATORIES, INC.
By:_______________________
Name: Todd E. Siegel
Its: President
SELLER:
COMMUNITY CLINICAL LABORATORIES, INC.
By:_______________________
Name:_____________________
Its:______________________
SHAREHOLDERS:
__________________________
James L. McKeown, Sr.
__________________________
James L. McKeown, Jr.
CONSULTANT:
__________________________
Vincent Gepp
<PAGE>
1
NONCOMPETITION AND NONSOLICITATION AGREEMENT
THIS NONCOMPETITION AND NONSOLICITATION AGREEMENT ("Agreement") entered
into this 11th day of September, 1998, by and between MEDICAL TECHNOLOGY
LABORATORIES, INC., a Florida corporation (the "Company") and James L. McKeown,
Jr. (the "Executive").
BACKGROUND
Simultaneously with the execution of this Agreement, the Company is
acquiring certain assets of Community Clinical Laboratories, Inc. (the "Seller")
pursuant to the Asset Acquisition Agreement between the Company and the Seller,
dated August 4, 1998 (the "Acquisition Agreement"). The Executive is the owner,
directly or indirectly, of the common stock of the Seller, has an interest in
the business of the Seller and is an employee of the Seller. In connection with
the purchase of the Seller's assets and in accordance with the Acquisition
Agreement, the Company wishes to obtain assurances that the Executive's ability
to compete with it is restricted. The Executive acknowledges that the
restrictive covenants contained in this Agreement are reasonably necessary to
protect the Company's business, trade secrets and its relationships with its
customers. The Executive is willing to accept such restrictions on the terms and
conditions set forth herein. Accordingly, in consideration of the mutual
covenants and agreements set forth below, the parties agree as follows:
TERMS
1. Competitive Business.
The Executive agrees that, as of the date of this Agreement and continuing
for a period of 36 months thereafter, in the following Florida counties:
Pinellas, Hillsborough, Pasco, Manatee, Sarasota, Charlotte, Polk, Lee,
Hernando, Citrus, Lake, Orange, DeSoto, Hardee, Osceola, Seminole, Brevard,
Marion, Collier, Alachua and Volusia, the Executive shall not, directly or
indirectly or on behalf of himself or any other person or entity: (a) hire, or
attempt to hire, any employee of the Company or person on assignment from the
Company or otherwise encourage any employee of the Company or person on
assignment to leave employment or terminate an assignment with the Company; (b)
accept, perform, or supervise the full or partial duties of any position in any
company or entity that is in competition with the Company; or (c) in any manner
or at any time, encourage any person, firm, corporation, or any business entity
that is a customer of the Company to cease doing business with the Company.
<PAGE>
2
2. Confidentiality; Disclosure; Proprietary Information.
The Executive recognizes and acknowledges that all records with respect to
customers currently served by the Seller and that will be served by the Company
following the execution of the Acquisition Agreement, or with respect to other
employees of the Seller or the Company and lists of customers of the Seller or
the Company and all personal, financial, and business information of the
customers are valuable, special and unique and proprietary assets of the Company
following the execution of the Acquisition Agreement. The Executive agrees that
he will not at any time, (i) disclose any list of customers or any personal,
financial, or business information about the customers, or any other records
pertaining to the customers, to any person, firm, corporation, association, or
other entity or (ii) utilize such information for any purpose competitive to the
Company.
3. Consideration.
In exchange for the covenants set forth in Sections 1 and 2, the Company
agrees to pay to the Executive an amount of cash equal to $1,000.00 payable
monthly for eight (8) months beginning September 15, 1998.
The Executive agrees that, if he is indicted, is convicted, pleads guilty
to, or is formally charged with a "healthcare crime," whether a misdemeanor or
felony, the Company may discontinue any and all payments to the Executive that
may be due under this Agreement. For purposes of this section, a "healthcare
crime" means any action that results in exclusion, whether voluntary or
involuntary, of the Executive from any federal or state healthcare program, or
otherwise would prohibit the Executive from being employed by or receive
payments from a company that participates in the Medicare or Medicaid program or
any other state or federal healthcare program.
4. Covenants Independent and Separable.
Each of the covenants set forth in Sections 1 and 2 of this Agreement are
independent of any other provision in this Agreement. The existence of any claim
or cause of action by the Executive against the Seller or the Company, whether
based on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. If any part of Section 1 or 2 is
held to be invalid or unenforceable in any respect, the parties agree that such
part shall be modified to permit its enforcement to the maximum extent permitted
by applicable law, and the remaining parts shall be unaffected by any such
modification.
<PAGE>
3
5. Irreparable Injury.
The Executive agrees that a breach of any of the covenants set forth in
Sections 1 or 2 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law. The Executive further
agrees that, in the event of such a breach, the Company shall be entitled to
immediate injunctive relief to prevent such violation or continued violation,
without having to prove damages, and the Company shall be entitled to recover
all costs and expenses, including reasonable attorneys' fees, incurred by the
Company in enforcing said covenants, in addition to any other remedies to which
the Company may be entitled at law or in equity.
6. Accounting.
The Executive covenants and agrees that, if he violates any of the
covenants or agreements set forth in Sections 1 or 2 of this Agreement, the
Company shall be entitled to an accounting and repayment of all profits,
compensation, commission, remuneration, or other benefits that the Executive has
realized, directly or indirectly, or may realize as a result of, growing out of,
or in connection with, any such violation. These remedies shall be in addition
to, and not in limitation of, any injunctive relief or other rights or remedies
to which the Company may be entitled at law, in equity, or under this Agreement.
7. Arbitration; Consent to Jurisdiction and Venue.
All controversies, claims, disputes, and matters in question arising out
of, or related to, this Agreement or the breach of this Agreement, or the
relations between the parties to this Agreement, shall be decided by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The parties agree that the arbitration shall take place exclusively
in Clearwater, Florida, and shall be governed by the substantive law of Florida.
Any award rendered by the arbitrator shall be final, and final judgment may be
entered upon the parties in accordance with applicable law in any court having
jurisdiction, including a federal district court, pursuant to the Federal
Arbitration Act. The arbitrator may grant the Company injunctive relief,
including mandatory injunctive relief, to protect the rights of the Company, but
the arbitrator shall not be limited to such relief. This arbitration provision
shall not preclude the Company from seeking temporary or preliminary injunctive
relief in a court of law to protect its rights, nor shall the filing of such an
action constitute any waiver by the Company of its right to arbitrate. In
connection with the arbitration of any dispute between the parties to this
Agreement, each party may utilize all methods of discovery authorized by the
Federal and Florida Rules of Civil Procedure. The Executive consents to personal
jurisdiction and venue, for any action brought by the Company arising out of a
breach or threatened breach of this Agreement, in the United States District
Court for the Middle District of Florida, Tampa Division, or in the Circuit
Court in and for Pinellas County, Florida. The Executive agrees that any action
arising under this Agreement or out of the relationship established by this
Agreement shall be brought only and exclusively in the United States District
Court for the Middle District of Florida, Tampa Division, or in the Circuit
Court in and for Pinellas County, Florida.
<PAGE>
4
8. Acknowledgement.
The Executive acknowledges that the Executive will be able to earn a living
subject to the foregoing restrictions and that the Executive's recognition and
representation of this fact is a material condition to the execution of this
Agreement and to the Executive's continued employment with the Company.
9. Miscellaneous.
(a) Entire Agreement. This Agreement represents the entire agreement
between the Company and the Executive and supersedes all prior negotiations and
discussions by and among the parties in connection with this Agreement or its
subject matter.
(b) Amendments. No change, modification, or termination of any of the
terms, provisions, or conditions of this Agreement shall be effective unless
made in writing and signed by the parties to this Agreement.
(c) Waiver of Breach. The waiver by the Company of a breach or threatened
breach of any provision of this Agreement by the Executive shall not be
construed as a waiver of any of the Company's rights under this Agreement.
(d) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Florida.
(e) Separability. If any provision of this Agreement is held invalid, the
remainder of this Agreement shall not be affected thereby. If any of the
provisions of this Agreement relating to the time period or areas of activity
restricted shall be declared by a court of competent jurisdiction to exceed the
maximum restrictiveness such court deems reasonable and enforceable, the time
period or areas of activity restricted and related aspects deemed reasonable and
enforceable by the court shall become the maximum restrictions, and the
restriction shall remain enforceable in such jurisdiction to the fullest extent
deemed reasonable by such court. Such court's determination shall not affect the
validity and enforceability of this Agreement in any other jurisdiction.
<PAGE>
5
(f) Headings. The titles or captions of sections contained in this
Agreement are provided for convenience of reference only, and they shall not be
considered a part of this Agreement.
(g) Continuance of Agreement. The rights, responsibilities and duties of
the Company and the Executive, and the covenants and agreements contained in
this Agreement, shall survive the execution of this Agreement, shall continue to
bind the parties to this Agreement shall continue in full force and effect until
each and every obligation of the parties pursuant to this Agreement shall have
been performed, and shall be binding upon and inure to the benefit of the
successors and assigns of the parties.
10. Notices.
All notices, requests, demands and other communications hereunder shall be
in writing, and shall be deemed to have been duly given if delivered by
overnight delivery service or hand delivered, addressed as follows:
If to the Company:
Medical Technology Laboratories, Inc.
12920 Automobile Boulevard
Clearwater, Florida 34622
Attn: Mr. Todd E. Siegel, President
With a copy to:
Holland & Knight LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Attn: Robert J. Grammig, Esq.
If to the Executive:
James L. McKeown, Jr.
11410 74th Avenue North
Seminole, Florida 33772
<PAGE>
6
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first written above.
MEDICAL TECHNOLOGY LABORATORIES, INC.
By: ________________________________________
Name: Todd E. Siegel
Title: President
EXECUTIVE:
By: ________________________________________
Name: James L. McKeown, Jr.
<PAGE>
1
NONCOMPETITION AND NONSOLICITATION AGREEMENT
THIS NONCOMPETITION AND NONSOLICITATION AGREEMENT ("Agreement") entered
into this 11th day of September, 1998, by and between MEDICAL TECHNOLOGY
LABORATORIES, INC., a Florida corporation (the "Company") and James L. McKeown,
Sr. (the "Executive").
BACKGROUND
Simultaneously with the execution of this Agreement, the Company is
acquiring certain assets of Community Clinical Laboratories, Inc. (the "Seller")
pursuant to the Asset Acquisition Agreement between the Company and the Seller,
dated August 4, 1998 (the "Acquisition Agreement"). The Executive is the owner,
directly or indirectly, of the common stock of the Seller, has an interest in
the business of the Seller and is an employee of the Seller. In connection with
the purchase of the Seller's assets and in accordance with the Acquisition
Agreement, the Company wishes to obtain assurances that the Executive's ability
to compete with it is restricted. The Executive acknowledges that the
restrictive covenants contained in this Agreement are reasonably necessary to
protect the Company's business, trade secrets and its relationships with its
customers. The Executive is willing to accept such restrictions on the terms and
conditions set forth herein. Accordingly, in consideration of the mutual
covenants and agreements set forth below, the parties agree as follows:
TERMS
1. Competitive Business.
The Executive agrees that, as of the date of this Agreement and continuing
for a period of 36 months thereafter, in the following Florida counties:
Pinellas, Hillsborough, Pasco, Manatee, Sarasota, Polk, Lee, Hernando, Citrus,
Lake, Orange, DeSoto, Hardee, Osceola, Seminole, Brevard, Marion, Alachua and
Volusia, the Executive shall not, directly or indirectly or on behalf of himself
or any other person or entity: (a) hire, or attempt to hire, any employee of the
Company or person on assignment from the Company or otherwise encourage any
employee of the Company or person on assignment to leave employment or terminate
an assignment with the Company; (b) accept, perform, or supervise the full or
partial duties of any position in any company or entity that is in competition
with the Company, except that Executive may take a position solely as a
laboratory director with another laboratory; or (c) in any manner or at any time
encourage any person, firm, corporation, or any business entity that is a
customer of the Company to cease doing business with the Company.
MTL agrees Executive may own a phlebotomy service.
<PAGE>
2
2. Confidentiality; Disclosure; Proprietary Information.
The Executive recognizes and acknowledges that all records with respect to
customers currently served by the Seller and that will be served by the Company
following the execution of the Acquisition Agreement, or with respect to other
employees of the Seller or the Company and lists of customers of the Seller or
the Company and all personal, financial, and business information of the
customers are valuable, special and unique and proprietary assets of the Company
following the execution of the Acquisition Agreement. The Executive agrees that
he will not at any time, (i) disclose any list of customers or any personal,
financial, or business information about the customers, or any other records
pertaining to the customers, to any person, firm, corporation, association, or
other entity or (ii) utilize such information for any purpose competitive to the
Company.
3. Consideration.
In exchange for the consideration received by the executive as part of the
sale of assets pursuant to the Acquisition Agreement, the executive agrees to
the covenants set forth in Sections 1 and 2 of this Agreement.
4. Covenants Independent and Separable.
Each of the covenants set forth in Sections 1 and 2 of this Agreement are
independent of any other provision in this Agreement. The existence of any claim
or cause of action by the Executive against the Seller or the Company, whether
based on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants. If any part of Section 1 or 2 is
held to be invalid or unenforceable in any respect, the parties agree that such
part shall be modified to permit its enforcement to the maximum extent permitted
by applicable law, and the remaining parts shall be unaffected by any such
modification.
5. Irreparable Injury.
The Executive agrees that a breach of any of the covenants set forth in
Sections 1 or 2 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law. The Executive further
agrees that, in the event of such a breach, the Company shall be entitled to
immediate injunctive relief to prevent such violation or continued violation,
without having to prove damages, and the Company shall be entitled to recover
all costs and expenses, including reasonable attorneys' fees, incurred by the
Company in enforcing said covenants, in addition to any other remedies to which
the Company may be entitled at law or in equity.
<PAGE>
3
6. Accounting.
The Executive covenants and agrees that, if he violates any of the
covenants or agreements set forth in Sections 1 or 2 of this Agreement, the
Company shall be entitled to an accounting and repayment of all profits,
compensation, commission, remuneration, or other benefits that the Executive has
realized, directly or indirectly, or may realize as a result of, growing out of,
or in connection with, any such violation. These remedies shall be in addition
to, and not in limitation of, any injunctive relief or other rights or remedies
to which the Company may be entitled at law, in equity, or under this Agreement.
7. Arbitration; Consent to Jurisdiction and Venue.
All controversies, claims, disputes, and matters in question arising out
of, or related to, this Agreement or the breach of this Agreement, or the
relations between the parties to this Agreement, shall be decided by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The parties agree that the arbitration shall take place exclusively
in Clearwater, Florida, and shall be governed by the substantive law of Florida.
Any award rendered by the arbitrator shall be final, and final judgment may be
entered upon the parties in accordance with applicable law in any court having
jurisdiction, including a federal district court, pursuant to the Federal
Arbitration Act. The arbitrator may grant the Company injunctive relief,
including mandatory injunctive relief, to protect the rights of the Company, but
the arbitrator shall not be limited to such relief. This arbitration provision
shall not preclude the Company from seeking temporary or preliminary injunctive
relief in a court of law to protect its rights, nor shall the filing of such an
action constitute any waiver by the Company of its right to arbitrate. In
connection with the arbitration of any dispute between the parties to this
Agreement, each party may utilize all methods of discovery authorized by the
Federal and Florida Rules of Civil Procedure. The Executive consents to personal
jurisdiction and venue, for any action brought by the Company arising out of a
breach or threatened breach of this Agreement, in the United States District
Court for the Middle District of Florida, Tampa Division, or in the Circuit
Court in and for Pinellas County, Florida. The Executive agrees that any action
arising under this Agreement or out of the relationship established by this
Agreement shall be brought only and exclusively in the United States District
Court for the Middle District of Florida, Tampa Division, or in the Circuit
Court in and for Pinellas County, Florida.
8. Acknowledgement.
The Executive acknowledges that the Executive will be able to earn a living
subject to the foregoing restrictions and that the Executive's recognition and
representation of this fact is a material condition to the execution of this
Agreement and to the Executive's continued employment with the Company.
<PAGE>
4
9. Miscellaneous.
(a) Entire Agreement. This Agreement represents the entire agreement
between the Company and the Executive and supersedes all prior negotiations
and discussions by and among the parties in connection with this Agreement
or its subject matter.
(b) Amendments. No change, modification, or termination of any of the
terms, provisions, or conditions of this Agreement shall be effective
unless made in writing and signed by the parties to this Agreement.
(c) Waiver of Breach. The waiver by the Company of a breach or
threatened breach of any provision of this Agreement by the Executive shall
not be construed as a waiver of any of the Company's rights under this
Agreement.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Florida.
(e) Separability. If any provision of this Agreement is held invalid,
the remainder of this Agreement shall not be affected thereby. If any of
the provisions of this Agreement relating to the time period or areas of
activity restricted shall be declared by a court of competent jurisdiction
to exceed the maximum restrictiveness such court deems reasonable and
enforceable, the time period or areas of activity restricted and related
aspects deemed reasonable and enforceable by the court shall become the
maximum restrictions, and the restriction shall remain enforceable in such
jurisdiction to the fullest extent deemed reasonable by such court. Such
court's determination shall not affect the validity and enforceability of
this Agreement in any other jurisdiction.
(f) Headings. The titles or captions of sections contained in this
Agreement are provided for convenience of reference only, and they shall
not be considered a part of this Agreement.
(g) Continuance of Agreement. The rights, responsibilities and duties
of the Company and the Executive, and the covenants and agreements
contained in this Agreement, shall survive the execution of this Agreement,
shall continue to bind the parties to this Agreement shall continue in full
force and effect until each and every obligation of the parties pursuant to
this Agreement shall have been performed, and shall be binding upon and
inure to the benefit of the successors and assigns of the parties.
<PAGE>
5
10. Notices.
All notices, requests, demands and other communications hereunder shall be
in writing, and shall be deemed to have been duly given if delivered by
overnight delivery service or hand delivered, addressed as follows:
If to the Company:
Medical Technology Laboratories, Inc.
12920 Automobile Boulevard
Clearwater, Florida 34622
Attn: Mr. Todd E. Siegel, President
With a copy to:
Holland & Knight LLP
400 North Ashley Drive
Suite 2300
Tampa, Florida 33602
Attn: Robert J. Grammig, Esq.
If to the Executive:
James L. McKeown, Sr.
430 West Druid Road
Clearwater, Florida 34616
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first written above.
MEDICAL TECHNOLOGY LABORATORIES, INC.
By: _________________________________________
Name: Todd E. Siegel
Title: President
EXECUTIVE:
By: ________________________________________
Name: James L. McKeown, Sr.
1
<PAGE>
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of August 20, 1998, by and
among Stanley D. Estrin Irrevocable Trust dtd 3/16/93, Judith C. Estrin, Trustee
("Lender") the Borrower described below.
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Lender and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined
herein, the following terms shall have the meaning set forth with respect
thereto:
A. Borrower(s): Medical Technology Systems, Inc.
B. Borrowers' Address:
12920 Automobile Boulevard
Clearwater, Florida 33762
C. Hazardous Materials. Hazardous Materials include all materials
defined as hazardous materials or substances under any local, state or
federal environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
D. Loan. Any loan described in Section 2 hereof and any subsequent
loan which states that it is subject to this Loan Agreement.
E. Loan Documents. Loan Documents means this Loan Agreement and any
and all promissory notes executed by the Borrower in favor of Lender and
all other documents, instruments (including, without limitation, warrants),
guarantees, certificates and agreements executed and/or delivered by the
Borrower in connection with the Loan.
F. Accounting Terms. All accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such terms
under generally accepted accounting principles ("GAAP"), as in effect from
time to time, consistently applied, with respect to the financial
statements referenced in Section 3.H. hereof.
2. LOANS.
A. Loan. Lender hereby agrees to make a term loan to Borrowers in the
principal amount of $25,000.00. The obligation to repay the loan is
evidenced by a promissory note of even date herewith (the promissory note
together with any and all renewals, extensions or rearrangements thereof
being hereafter collectively referred to as the "Note") having a maturity
date, repayment terms and interest rate as set forth in the Note.
B. Use of Proceeds. The Borrower agree that the proceeds of the Loan
shall be used solely for working capital purposes and shall not be used to
satisfy any obligations of the Borrower other than obligations incurred in
the normal course of business of the Borrower.
C. Extension of Loan. The maturity of the Note shall be automatically
extended from February 20, 1999 until May 20, 1999 provided that: (a) no
defaults exist under this Agreement; and (b) that the Loan is not subject
to any setoff, defense or counterclaim by the Borrower.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF BORROWERS. The Borrower hereby
represent and warrant to Lender as follows:
A. Good Standing. The Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the state of its
respective incorporation and has the power and authority to own its
property and to carry on its business in each jurisdiction in which
Borrower does business.
B. Authority and Compliance. The Borrower has full power and authority
to execute and deliver the Loan Documents and to incur and perform the
obligations provided for therein, all of which have been duly authorized by
all proper and necessary action of the appropriate governing body of such
Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and
the Borrower is in compliance with all laws and regulatory requirements to
which it is subject.
C. Binding Agreement. This Agreement and the other Loan Documents
executed by the Borrower constitute valid and legally binding obligations
of the Borrower, enforceable in accordance with their terms.
D. Litigation. There is no proceeding involving the Borrower pending
or, to the knowledge of the Borrower, threatened before any court or
governmental authority, agency or arbitration authority, except as
disclosed to Lender in writing and acknowledged by Lender prior to the date
of this Agreement.
E. No Conflicting Agreements. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the
organization, power or authority of the Borrower and no provision of any
existing agreement, mortgage, indenture or contract binding on the Borrower
or affecting its respective properties, which would conflict with or in any
way prevent the execution, delivery or carrying out of the terms of this
Agreement and the other Loan Documents.
F. Ownership of Assets. The Borrower has good title to its assets, and
its assets are free and clear of liens, except those granted to Lender and
as disclosed to Lender prior to the date of this Agreement.
G. Taxes. All taxes and assessments due and payable by the Borrower
have been paid or are being contested in good faith by appropriate
proceedings and the Borrower has filed all tax returns which it is required
to file.
H. Financial Statements. The financial statements of Borrower
heretofore delivered to Lender have been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved and fairly
present Borrowers' financial condition as of the date or dates thereof. All
factual information furnished by the Borrower to Lender in connection with
this Agreement and the other Loan Documents is and will be accurate and
complete on the date as of which such information is delivered to Lender
and is not and will not be incomplete by the omission of any material fact
necessary to make such information not misleading.
I. Place of Business. The Borrower's chief executive office is located
at 12920 Automobile Boulevard, Clearwater, Florida 33762.
3
<PAGE>
J. Environmental. The conduct of the Borrower's business operations
and the condition of the Borrower's property does not and will not violate
any federal laws, rules or ordinances for environmental protection,
regulations of the Environmental Protection Agency, any applicable local or
state law, rule, regulation or rule of common law or any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials.
K. Continuation of Representations and Warranties. All representations
and warranties made under this Agreement shall be deemed to be made at and
as of the date hereof and at and as of the date of any advance under any
Loan.
4. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender hereby represents and
warrants to Borrowers that Lender: (a) is an "accredited investor," as that term
is defined in Exhibit "A" to this Agreement, (b) has such knowledge and
experience in financial and business matters rendering the Lender capable of
evaluating the merits and risks of an investment in securities of the Company (a
"sophisticated investor"), or (c) is not an accredited or sophisticated
investor, but has appointed a "purchaser representative," as that term is
defined in Exhibit "A" in connection with evaluating the merits and risks of an
investment in securities of the Company.
5. AFFIRMATIVE COVENANTS. Until full payment and performance of all
obligations of the Borrower under the Note, the Borrower will, unless Lender
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):
A. Financial Statements and Other Information. Maintain a system of
accounting satisfactory to Lender and in accordance with GAAP applied on a
consistent basis throughout the period involved, permit Lender's officers
or authorized representatives to visit and inspect such Borrower's books of
account and other records at such reasonable times and as often as Lender
may desire, and pay the reasonable fees and disbursements of any
accountants or other agents of Lender selected by Lender for the foregoing
purposes. Unless written notice of another location is given to Lender, the
Borrower's books and records will be located at such Borrower's chief
executive office set forth above. All financial statements called for below
shall be prepared in form and content acceptable to Lender.
In addition, the Borrower will:
i. Furnish to Lender audited financial statements of such
Borrower for each fiscal year of such Borrower, within ninety (90)
days after the close of each such fiscal year.
ii. Furnish to Lender Borrower-prepared financial statements of
such Borrower for each quarter of each fiscal year of such Borrower,
within forty-five (45) days after the close of each such period.
iii. Furnish to Lender promptly such additional financial
information and reports with respect to the business operations and
financial condition of the Borrower as Lender may reasonably request.
B. Insurance. Maintain insurance with responsible insurance companies
on such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance
covering all assets, business interruption insurance, workers compensation
insurance and liability insurance, all to be with such companies and in
such amounts as are satisfactory to Lender and providing for at least 30
days prior notice to Lender of any cancellation thereof. Satisfactory
evidence of such insurance will be supplied to Lender prior to funding
under the Loan(s) and 30 days prior to each policy renewal.
4
<PAGE>
C. Existence and Compliance. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
D. Adverse Conditions or Events. Promptly advise Lender in writing of
(i) any condition, event or act which comes to its attention that would or
might materially adversely affect such Borrower's financial condition or
operations or Lender's rights under the Loan Documents, (ii) any litigation
filed by or against such Borrower, (iii) any event that has occurred that
would constitute an event of default under any Loan Documents and (iv) any
uninsured or partially uninsured loss through fire, theft, liability or
property damage in excess of an aggregate of $50,000.00.
E. Taxes and Other Obligations. Pay all of its taxes, assessments and
other obligations, including, but not limited to taxes, costs or other
expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
F. Maintenance. Maintain all of its tangible property in good
condition and repair and make all necessary replacements thereof, and
preserve and maintain all licenses, trademarks, privileges, permits,
franchises, certificates and the like necessary for the operation of its
business.
G. Environmental. Immediately advise Lender in writing of (i) any and
all enforcement, cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed or threatened pursuant to any
applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting such Borrower's business
operations; and (ii) all claims made or threatened by any third party
against such Borrower relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials. The
Borrower shall immediately notify Lender of any remedial action taken by
Borrower with respect to such Borrower's business operations. Borrower will
not use or permit any other party to use any Hazardous Materials at any of
such Borrower's places of business or at any other property owned by such
Borrower except such materials as are incidental to such Borrower's normal
course of business, maintenance and repairs and which are handled in
compliance with all applicable environmental laws. The Borrower agrees to
permit Lender, its agents, contractors and employees to enter and inspect
any of such Borrower's places of business or any other property of such
Borrower at any reasonable times upon three (3) days prior notice for the
purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that such Borrower is complying with
this covenant and Borrower shall reimburse Lender on demand for the costs
of any such environmental investigation and audit. The Borrower shall
provide Lender, its agents, contractors, employees and representatives with
access to and copies of any and all data and documents relating to or
dealing with any Hazardous Materials used, generated, manufactured, stored
or disposed of by such Borrower's business operations within five (5) days
of the request therefore.
6. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of the Borrower under the Note, the Borrower will not, without the
prior written consent of Lender (and without limiting any requirement of any
other Loan Documents):
5
<PAGE>
A. Transfer of Assets or Control. Sell, lease, assign or otherwise
dispose of or transfer any assets, except in the normal course of its
business, or enter into any merger or consolidation, or transfer control or
ownership of the Borrower.
B. Character of Business. Change the general character of business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
C. Dividends and Distributions. Make any distribution or pay any
dividends (other than dividends payable in common stock of the Borrower) on
any shares of any class of its capital stock, or apply any of its property
or assets to the purchase, redemption or the retirement of any shares of
any class of its capital stock.
E. Management Change. Make any change in the president of the Borrower
or the chief executive officer of the Borrower, if applicable.
7. DEFAULT. Borrowers shall be in default under this Agreement and under
each of the other Loan Documents if they shall default in the payment of any
amounts due and owing under the Loan or should any of them fail to timely and
properly observe, keep or perform any term, covenant, agreement or condition in
any Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust, deed to secure debt, mortgage, assignment or other
contract securing or evidencing payment of any indebtedness of the Borrower to
Lender. Borrower shall also be in default under this Agreement if (a) any
Borrower defaults under the Second Amended and Restated Loan and Security
Agreement dated as of September 5, 1996, as amended, by and among SouthTrust,
certain of the Borrowers, Medical Technology Systems, Inc. ("MTS"), and certain
other parties, (b) if the Borrower or MTS defaults under or refuses to issue any
shares of stock pursuant to any stock warrant that is issued to Lender in
connection with the loan transaction contemplated by this Loan Agreement, or (c)
the Lender's attorney does not receive the original stock certificate or
certificates that are subject to the Pledge Agreement within ten (10) days from
the date of this Agreement.
8. REMEDIES UPON DEFAULT. If an event of default shall occur, Lender shall
have all rights, powers and remedies available under each of the Loan Documents
as well as all rights and remedies available at law or in equity.
9. NOTICES. All notices, requests or demands which any party is required or
may desire to give to any other party under any provision of this Agreement must
be in writing delivered to the other party at the following address:
Medical Technology Systems, Inc.
12920 Automobile Boulevard
Clearwater, Florida 33762
Fax. No. (727) 573-1100
Lender:
Stanley D. Estrin Irrevocable Trust dtd 3/16/93,
Judith C. Estrin, Trustee
6720 N. W. 105th Lane
Parkland, Florida 33076
6
<PAGE>
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid;
B. If sent by any other means, upon delivery.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. The Borrower shall pay to Lender
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees incurred by Lender in connection with (a) negotiation
and preparation of this Agreement and each of the Loan Documents, and (b) all
other costs and attorneys' fees incurred by Lender for which Borrowers are
obligated to reimburse Lender in accordance with the terms of the Loan
Documents.
11. MISCELLANEOUS. Borrowers and Lender further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. Cumulative Rights and No Waiver. Each and every right granted to
Lender under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all
other rights of Lender, and no delay in exercising any right shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of
any right preclude any other or future exercise thereof or the exercise of
any other right. The Borrower expressly waives any presentment, demand,
protest or other notice of any kind, including but not limited to notice of
intent to accelerate and notice of acceleration. No notice to or demand on
the Borrower in any case shall, of itself, entitle the Borrower to any
other or future notice or demand in similar or other circumstances.
B. Applicable Law. This Loan Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted in accordance
with the laws of Florida and applicable United States federal law.
C. Amendment. No modification, consent, amendment or waiver of any
provision of this Loan Agreement, nor consent to any departure by the
Borrower therefrom, shall be effective unless the same shall be in writing
and signed by an officer of Lender, and then shall be effective only in the
specified instance and for the purpose for which given. This Loan Agreement
is binding upon the Borrower, their respective successors and assigns, and
inures to the benefit of Lender, its successors and assigns; however, no
assignment or other transfer of the Borrower's rights or obligations
hereunder shall be made or be effective without Lender's prior written
consent, nor shall it relieve the Borrower of any obligations hereunder.
There is no third party beneficiary of this Loan Agreement.
D. Documents. All documents, certificates and other items required
under this Loan Agreement to be executed and/or delivered to Lender shall
be in form and content satisfactory to Lender and its counsel.
E. Partial Invalidity. The unenforceability or invalidity of any
provision of this Loan Agreement shall not affect the enforceability or
validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
7
<PAGE>
F. Indemnification. Notwithstanding anything to the contrary contained
in Section 12(G), the Borrower shall indemnify, defend and hold Lender and
its successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or
other expenses (including reasonable attorneys' fees and court costs)
arising from or in any way related to any of the transactions contemplated
hereby, including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous
Materials, arising from the Borrower's business operations, any other
property owned by the Borrower or in the surface or ground water arising
from any of the Borrower's business operations, or gaseous emissions
arising from any such Borrower's business operations or any other condition
existing or arising from the Borrower's business operations resulting from
the use or existence of Hazardous Materials, whether such claim proves to
be true or false. The Borrower further agrees that its indemnity
obligations shall include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of the Borrower,
regardless of whether the Borrower has paid the employee under the workmen'
s compensation laws of any state or other similar federal or state
legislation for the protection of employees. The term "property damage" as
used in this paragraph includes, but is not limited to, damage to any real
or personal property of the Borrower, the Lender, and of any third parties.
The Borrower's obligations under this paragraph shall survive the repayment
of the Loan.
G. Survivability. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the
making of the Loan and shall continue in full force and effect so long as
the Loan is outstanding or the obligation of the Lender to make any
advances under the Line shall not have expired.
H. Counterparts. This Agreement may be executed in two or more
counterparts any by facsimile transmission of signed counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12. WAIVER OF JURY TRIAL. AFTER CONSULTING WITH COUNSEL AND CAREFUL
CONSIDERATION, THE BORROWER AND THE LENDER KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER
LOAN DOCUMENTS, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(ORAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR LENDER. THIS WAIVER IS A
MATERIAL INDUCEMENT TO LENDER'S AGREEMENT TO MAKE THE LOAN TO THE BORROWER.
13. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
14. JOINT VENTURE. Neither this Loan Agreement nor any other Loan Document
creates or evidences a partnership or joint venture between the Borrower and the
Lender. The relationship between Borrower and Lender is solely that of a debtor
and creditor.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
LENDER:
_______________________________________________
Stanley D. Estrin Irrevocable Trust dtd 3/16/93,
Judith C. Estrin, Trustee
BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:______________________________________
______________________________, as its
______________________________________
9
<PAGE>
EXHIBIT "A"
With respect to individuals, an "accredited investor" is defined by Rule
501(a) of Regulation D, promulgated under the Securities Act of 1933, as amended
("Reg D"), as (i) "any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds
$1,000,000," (ii) "any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year," or (iii)
"any director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer or general
partner of a general partner of that issuer."
"Purchaser representative" is defined by Reg D as a person that is "not an
affiliate, director, officer or other employee of the issuer, or beneficial
owner of 10 percent or more of any class of the equity securities or 10 percent
or more of the equity interest in the issuer," unless the purchaser is (a) a
relative of the purchaser representative by blood, marriage, or adoption, and is
not more remote than a first cousin; (b) a trust or estate in which the
purchaser representative and any persons related to him as described in sections
(a) or (c) of this paragraph collectively have more than 50% of the beneficial
interest (excluding contingent interest) or of which the purchaser
representative serves as trustee, executor, or in any similar capacity; (c) a
corporation or other organization of which the purchaser representative and any
persons related to him as described in sections (a) or (b) of this paragraph
collectively are the beneficial owners of more than 50% of the equity securities
(excluding directors' qualifying shares) or equity interests. A "purchaser
representative" must have such knowledge and experience in financial and
business matters that he is capable of evaluating (together with the purchaser
or other purchaser representatives of the purchaser) the merits and risks of the
prospective investment. A "purchaser representative" must also meet certain
acknowledgement and disclosure requirements described in Reg D.
<PAGE>
1
Promissory Note
Date August 20, 1998
Amount $25,000.00 Maturity Date February 20, 1999
===============================================================================
Lender: Borrowers:
Stanley D. Estrin Irrevocable Trust Medical Technology Systems, Inc.
dtd 3/16/93, Judith C. Estrin, Trustee 12920 Automobile Boulevard
6720 N. W. 105th Lane Clearwater, Florida 33762
Parkland, Florida 33076
===============================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly
and severally, if more than one) promises to pay to the order of Lender, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Lender,
the principal amount of Twenty Five Thousand and No/100 Dollars ($25,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
1. Rate.
Fixed Rate. The Rate shall be fixed at twelve percent (12.0%) per annum.
Notwithstanding any provision of this Note, Lender does not intend to
charge and Borrower shall not be required to pay any amount of interest or other
charges in excess of the maximum permitted by the applicable law of the State of
Florida; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to Borrower
or credited against principal, at the option of Lender.
2. Accrual Method. Unless otherwise indicated, interest at the Rate set
forth above will be calculated by the 365/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder).
3. Payment Schedule. All payments received hereunder shall be applied first
to the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Lender
shall determine at its option.
Single Payment. Principal and interest shall be paid in full in a single
payment on February 20, 1999.The maturity date of this Note shall be
automatically extended from February 20, 1999, to May 20, 1999, if the Borrower
satisfies all of the terms and conditions of a Loan Agreement of even date
herewith between Borrower and Lender.
4. Waivers, Consents and Covenants. Borrower, any endorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any endorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to
Lender (the "Loan Documents"); (b) consent to all delays, extensions, renewals
or other modifications of this Note or the Loan Documents, or waivers of any
term hereof or of the Loan Documents, or release or discharge by Lender of any
of Obligors, or release, substitution or exchange of any security for the
payment hereof, or the failure to act on the part of Lender, or any indulgence
shown by Lender (without notice to or further assent from any of Obligors), and
agree that no such action, failure to act or failure to exercise any right or
remedy by Lender shall in any way affect or impair the obligations of any
Obligors or be construed as a waiver by Lender of, or otherwise affect, any of
Lender's rights under this Note, under any endorsement or guaranty of this Note
or under any of the Loan Documents; and (c) agree to pay, on demand, all costs
and expenses of collection or defense of this Note or of any endorsement or
guaranty hereof and/or the enforcement or defense of Lender's rights with
respect to, or the administration, supervision, preservation, or protection of,
or realization upon, any property securing payment hereof, including, without
limitation, reasonable attorney's and paralegal=s fees, including fees related
to any suit, mediation or arbitration proceeding, out of court payment
agreement, trial, appeal, bankruptcy proceedings or other proceeding, in such
amount as may be determined reasonable by any arbitrator or court, whichever is
applicable.
<PAGE>
5. Indemnification. Obligors agree to promptly pay, indemnify and hold Lender
harmless from all State and Federal taxes of any kind and other liabilities with
respect to or resulting from the execution and/or delivery of this Note or any
advances made pursuant to this Note. If this Note has a revolving feature and is
secured by a mortgage, Obligors expressly consent to the deduction of any
applicable taxes from each taxable advance extended by Lender.
6. Prepayments. Prepayments may be made in whole or in part at any time without
premium or penalty. All prepayments of principal shall be applied in the inverse
order of maturity, or in such other order as Lender shall determine in its sole
discretion.
7. Delinquency Charge. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of any payment that is
more than fifteen days late.
8. Events of Default. The following are events of default hereunder: (a) the
failure to pay any obligation, liability or indebtedness of any Obligor to
Lender, whether under this Note or any Loan Documents, as and when due (whether
at maturity or by acceleration); (b) the failure to perform any other
obligation, liability or indebtedness of any Obligor to Lender, which failure is
not cured within fifteen (15) days from the date on which Lender provides
Borrower written notice of such failure to the extent that any such default can
be cured by Borrower; (c) the commencement of a proceeding against any Obligor
for dissolution or liquidation, the voluntary or involuntary termination or
dissolution of any Obligor or the merger or consolidation of any Obligor with or
into another entity; (d) the insolvency of, the business failure of, the
appointment of a custodian, trustee, liquidator or receiver for or for any of
the property of, the assignment for the benefit of creditors by, or the filing
of a petition under bankruptcy, insolvency or debtor's relief law or the filing
of a petition for any adjustment of indebtedness, composition or extension by or
against any Obligor; (e) the determination by Lender that any representation or
warranty made to Lender by any Obligor in any Loan Documents or otherwise or in
any financial statement or financial information submitted to Lender by any
Borrower is or was, when it was made, untrue or materially misleading; (f) the
entry of a judgment against any Obligor in excess of $50,000.00, which judgment
is not satisfied or bonded off within thirty (30) days from the date of entry of
the judgment; (g) the seizure or forfeiture of, or the issuance of any writ of
possession, garnishment or attachment which writ relates to any damage in excess
of $50,000.00 and which writ is not dismissed within thirty (30) days from the
date of issuance of any such writ; or (h) the failure of any Borrower's business
to comply in any material respect with any law or regulation controlling its
operation.
<PAGE>
2
9. Remedies upon Default. Whenever there is a default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Lender (however acquired or evidenced) shall, at the option of
Lender, become immediately due and payable and any obligation of Lender to
permit further borrowing under this Note shall immediately cease and terminate,
and/or (b) to the extent permitted by law, the Rate of interest on the unpaid
principal shall be increased at Lender's discretion up to the maximum rate
allowed by law, or if none, 18% per annum (the "Default Rate"). The provisions
herein for a Default Rate shall not be deemed to extend the time for any payment
hereunder or to constitute a "grace period" giving Obligors a right to cure any
default. At Lender's option, any accrued and unpaid interest, fees or charges
may, for purposes of computing and accruing interest on a daily basis after the
due date of the Note or any installment thereof, be deemed to be a part of the
principal balance, and interest shall accrue on a daily compounded basis after
such date at the Default Rate provided in this Note until the entire outstanding
balance of principal and interest is paid in full. Upon a default under this
Note, Lender is hereby authorized at any time, at its option and without notice
or demand, to set off and charge against any deposit accounts of any Obligor (as
well as any money, instruments, securities, documents, chattel paper, credits,
claims, demands, income and any other property, rights and interests of any
Obligor), which at any time shall come into the possession or custody or under
the control of Lender or any of its agents, affiliates or correspondents, any
and all obligations due hereunder. Additionally, Lender shall have all rights
and remedies available under each of the Loan Documents, as well as all rights
and remedies available at law or in equity. Any judgment rendered on this Note
shall bear interest at the highest rate of interest permitted pursuant to
Chapter 687, Florida Statutes.
10. Non-waiver. The failure at any time of Lender to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options or rights at a later
date. All rights and remedies of Lender shall be cumulative and may be pursued
singly, successively or together, at the option of Lender. The acceptance by
Lender of any partial payment shall not constitute a waiver of any default or of
any of Lender's rights under this Note. No waiver of any of its rights
hereunder, and no modification or amendment of this Note, shall be deemed to be
made by Lender unless the same shall be in writing, duly signed on behalf of
Lender; each such waiver shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Lender or the obligations of
Obligors to Lender in any other respect at any other time.
11. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Lender shall be governed by and interpreted in
accordance with the law of the State of Florida. In any litigation in connection
with or to enforce this Note or any endorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Florida or the United States
located within the State of Florida and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent
Lender from bringing any action or exercising any rights within any other state
or jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law. The interest rate charged on this Note is
authorized by Chapter 655, Florida Statutes and Section 687.12, Florida
Statutes.
12. Partial Invalidity. The unenforceability or invalidity of any provision
of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of this
Note or of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
13. Binding Effect. This Note shall be binding upon and inure to the
benefit of Borrower, Obligors and Lender and their respective successors,
assigns, heirs and personal representatives, provided, however, that no
obligations of Borrower or Obligors hereunder can be assigned without prior
written consent of Lender.
14. Controlling Document. To the extent that this Note conflicts with or is
in any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
15. WAIVER OF JURY TRIAL. AFTER CONSULTING WITH COUNSEL AND CAREFUL
CONSIDERATION, BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL
BY JURY WITH RESPECT TO ANY LITIGATION ARISING OUT OF THIS NOTE OR THE LOAN
DOCUMENTS, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL
OR WRITTEN), OR ACTIONS OF BORROWER OR LENDER. THIS WAIVER IS A MATERIAL
INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS NOTE. Borrower represents to Lender
that the proceeds of this loan are to be used primarily for business. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If this Note is secured by a mortgage on real property, documentary stamp taxes
have been paid and affixed to the mortgage.
EXECUTION DATE: August 20, 1998
BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:______________________________
______________________, as its
______________________________
<PAGE>
1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE ACT OR AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
DATED: August 20, 1998 NO. I
FORM OF WARRANT
MEDICAL TECHNOLOGY SYSTEMS, INC.
Warrant to Purchase 12,500 Shares, Subject to Adjustment,
of Common Stock, par value $.01 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON August 20, 2008 OR SUCH LATER DATE AS
DESCRIBED IN THE FIRST PARAGRAPH BELOW
This certifies that, for value received, Stanley D. Estrin Irrevocable
Trust dtd 3/16/93, Judith C. Estrin, Trustee, 6720 N. W. 105th Lane, Parkland,
Florida , 33076 or registered assigns (collectively with Stanley D. Estrin
Irrevocable Trust dtd 3/16/93, Judith C. Estrin, Trustee, 6720 N. W. 105th Lane,
Parkland, Florida , 33076, the "Holder"), is entitled to purchase from Medical
Technology Systems, Inc., a Florida corporation (the "Company"), 12,500 shares
(which become exercisable on the date hereof), (the "Shares") of the Company's
Common Stock, par value $.01 per share (the "Common Stock"), at a price of $0.75
per Share (the "Exercise Price") for ten years after the warrant becomes
exercisable with respect to such shares (the "Exercise Period"), subject to the
terms, conditions, and adjustments set forth in this warrant (the "Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole or in part
by the Holder during the applicable Exercise Period upon presentation and
surrender hereof, with the Purchase Form attached hereto as Exhibit A duly
executed, at the office of the Company located at 12920 Automobile Boulevard,
Clearwater, Florida 33762, accompanied by full payment of the Exercise Price
multiplied by the number of Shares of the Company being purchased (the "Purchase
Price"), whereupon the Company shall cause the appropriate number of Shares to
be issued and shall deliver to the Holder, within 10 days of surrender of the
Warrant, a certificate representing the Shares being purchased. Upon each
partial exercise hereof, a new Warrant evidencing the remainder of the Shares
will be issued to the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise Period(s), and
otherwise on the same terms and conditions as the Warrant partially exercised.
The Purchase Price shall be payable by delivery of a certified or bank cashier's
check payable to the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of the
Purchase Price, or, if the Company's Common Stock is listed on a securities
exchange or market, in the manner set forth in the following paragraph if
requested by the Holder in the Purchase Form. The Holder shall be deemed for all
purposes to have become the holder of record of Shares so purchased upon
exercise of this Warrant as of the close of business on the date as of which
this Warrant, together with a duly executed Purchase Form, was delivered to the
Company and payment of the Purchase Price was made, regardless of the date of
delivery of any certificate representing the Shares so purchased, except that if
the Company were subject to any legal requirements prohibiting it from issuing
shares of Common Stock on such date, the Holder shall be deemed to have become
the record holder of such Shares on the next succeeding date as of which the
Company ceased to be so prohibited.
<PAGE>
2
If the Company's Common Stock is listed on a securities exchange or market,
in addition to the method of payment set forth above and in lieu of any cash
payment required, the Holder shall have the right to exercise this Warrant in
full or in part by surrendering this Warrant in the manner specified above in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which this Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) less the Purchase
Price, and the denominator of which is the Market Price. For purpose of this
Warrant, "Market Price" shall mean the average closing sale price quoted on a
share of Common Stock on the NASDAQ National Market or the principal stock
exchange on which the Common Stock is then traded for the three trading days
immediately prior to the date of the delivery to the Company of a purchase form
(or if the Company's Common Stock is not traded or listed on the NASDAQ National
Market or any other principal securities market, the average of the closing bid
prices on the NASDAQ SmallCap Market, the OTC Electronic Bulletin Board, or
otherwise in the over-the-counter market on such days as reported by NASDAQ, the
National Quotation Bureau Incorporated or any comparable system, or if not so
reported, as reported by any New York Stock Exchange member firm selected in
good faith by the Company for such purpose).
2. Exchange; Restrictions on Transfer or Assignment. This Warrant is
exchangeable, without expense, at the option of the Holder, upon surrender
hereof to the Company for other Warrants of different denominations entitling
the Holder to purchase in the aggregate the same number of Shares purchasable
hereunder. Subject to compliance with the Act, applicable state securities laws,
and the requirements pertaining to transfer described in Section 5, this Warrant
and the Holder's rights hereunder are transferable. To effect a transfer of this
Warrant, the Holder shall surrender the Warrant to the Company at its principal
office with the Assignment Form attached hereto as Exhibit B duly completed and
executed (with signature guaranteed), whereupon the Company, if the proposed
assignment is permitted pursuant to the provisions hereof, shall register the
assignment of this Warrant in accordance with the information contained in the
assignment instrument and shall, without charge, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees named in such
assignment instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not theretofore
exercised, transferred, or assigned) and this Warrant shall promptly be
cancelled. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.
3. Rights and Obligations of Warrant Holders. This Warrant does not confer
upon the Holder any rights as a shareholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed herein and the
Holder, by acceptance hereof, consents to and agrees to be bound by and to
comply with all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if any, may, prior
to any presentation of this Warrant for registration of transfer, deem and treat
the person in whose name this Warrant is registered as the absolute, true, and
lawful owner of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the contrary.
<PAGE>
3
4. Covenants and Warranties of the Company. The Company covenants and
agrees that (i) any and all Shares that are issued and delivered upon exercise
of this Warrant and payment of the Purchase Price will, upon delivery, be duly
authorized, validly issued, fully-paid, and nonassessable shares of Common Stock
and (ii) the Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common Stock
sufficient to permit the exercise in full of this Warrant. The Company will take
all such actions as may be necessary to assure that all shares of Common Stock
may be so issued without violation by the Company of any applicable law or
government regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance,
which the Company will transmit promptly upon issuance of such shares).
The Company represents and warrants that (i) the Company is a corporation
duly organized, validly existing, and of active status under the laws of the
State of Florida, (ii) the Company has all requisite corporate power and
authority to issue this Warrant and to consummate the transactions contemplated
hereby, and such issuance and consummation will not conflict with, result in a
material breach of, constitute a material default under, or material violation
of any provision of the Company's Articles of Incorporation or Bylaws, or any
law or regulation of any governmental authority or any provision of any
agreement, judgment, or decree affecting the Company and (iii) all corporate
action required to be taken by the Company in connection with the execution and
delivery of this Warrant and the performance of the Company's obligations
hereunder has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges that this
Warrant and the Shares issuable upon exercise thereof have not been registered
under the Act or applicable state law. The Holder agrees, by acceptance of this
Warrant, (i) that no sale, transfer, or distribution of this Warrant or the
Shares shall be made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable prospectus delivery
requirements and the restrictions on transfer set forth herein, and (ii) that if
any distribution or any other transfer of this Warrant or any Shares is proposed
to be made by it otherwise than pursuant to an effective registration statement
under the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed distribution will not
be in violation of the Act or of applicable state law.
6. Adjustment. The number of Shares purchasable upon the exercise of this
Warrant and the Exercise Price per Share are subject to adjustment from time to
time as provided in this Section 6.
<PAGE>
4
(a) Subdivision or Combination of Shares. If the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares (including a stock split effected as a stock dividend) or combine
its outstanding shares of Common Stock into a lesser number of shares, the
number of Shares issuable upon exercise of this Warrant shall be adjusted
to such number as is obtained by multiplying the number of shares issuable
upon exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate number
of shares of Common Stock outstanding immediately after giving effect to
such subdivision or combination and the denominator of which is the
aggregate number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied by the
number of Shares issuable upon full exercise of this Warrant (as increased
or decreased to reflect such subdivision or combination of outstanding
shares of Common Stock, as the case may be), equal the product of the
Exercise Price per Share in effect immediately prior to such subdivision or
combination multiplied by the number of Shares issuable upon exercise of
this Warrant immediately prior to such subdivision or combination.
(b) Effect of Sale, Merger, or Consolidation. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of
all or substantially all of the Company's assets to another corporation
shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and the terms and
conditions specified in this Warrant and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of this Warrant,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any
such case appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and
delivered to the Holder at its last address appearing on the books of the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence, the
Holder may be entitled to purchase.
(c) Issuance of Common Stock Below Exercise Price. If the Company
shall issue or sell shares of Common Stock or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock ("Common Stock Equivalents")
pursuant to the exercise of any Common Stock Equivalents outstanding on the
date of the Note under any of the Company's employee benefit plans), at a
price per share of Common Stock (determined, in the case of Common Stock
Equivalents, by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Common Stock Equivalent,
plus the total consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (B) the total number of shares of
Common Stock covered by such Common Stock Equivalent), that is lower
(calculated the date of such sale or issuance) than the Exercise Price, or
for no consideration, then:
<PAGE>
5
(i) in each case the number of shares of Common Stock thereafter
issuable upon the exercise of this Warrant (whether or not presently
exercisable) shall be increased in a manner determined by multiplying
the number of shares of Common Stock issuable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon exercise,
conversion, or exchange of such Common Stock Equivalent, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock that the "aggregate consideration to be
received by the Company" (as defined below) in connection with such
sale or issuance would purchase at the Exercise Price. For the purpose
of such adjustments the "aggregate consideration to be received by the
Company" shall be the consideration received by the Company for such
Common Stock or Common Stock Equivalents, plus any consideration or
premiums stated in the Common Stock Equivalents to be paid for the
shares of Common Stock covered thereby; and
(ii) in each case the Exercise Price will be reduced to the price
calculated by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately before such
issuance or sale multiplied by the then existing Exercise Price plus
(2) the aggregate consideration, if any, received by the Company upon
such issuance or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale plus the
number of shares of Common Stock issuable upon the exercise,
conversion, or exchange of any Common Stock Equivalents issued or sold
in the transaction for which the Company is making this adjustment.
If the Company shall issue or sell shares of Common Stock or Common
Stock Equivalents for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the "price
per share of Common Stock" and the "consideration" receivable by or payable
to the Company for purposes of this Section 6(c), the Board of Directors of
the Company shall determine, in good faith, the fair value of such
property. If the Company shall issue and sell Common Stock Equivalents,
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of
this Section 6(c), the Board of Directors of the Company shall determine,
in good faith, the fair value of the Common Stock Equivalents then being
sold as part of such unit.
(d) If any event occurs as to which the preceding Sections 6(a)
through (c) are not strictly applicable, but as to which the failure to
make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of this Warrant, as determined by the Company or as requested by
the Holder in accordance with the notice provisions of Section 12, then, in
each such case, the Company shall select an independent investment bank or
firm of independent public accountants, such investment bank or firm of
independent public accountants to be selected from a group of three
nationally recognized investment banks or firms of public accountants
chosen by the Holder, which will give its opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established in this Warrant. Upon receipt of such opinion, the Company will
promptly deliver a copy of such opinion to the Holder and will make the
adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the
Company. If the adjustment is requested by the Holder, however, and the
investment bank or firm of independent public accountants selected by the
Company pursuant to this paragraph determines that no adjustment is
necessary, then the fees and expenses described in the preceding sentence
shall be borne by the Holder.
(e) Notice to Holder of Adjustment. Whenever the number of Shares
purchasable upon exercise of this Warrant or the Exercise Price per Share
is adjusted as herein provided, the Company shall cause to be mailed to the
Holder within 5 days of such adjustment, in accordance with the provisions
of Section 12, notice setting forth the adjusted number of Shares
purchasable upon the exercise of the Warrant and the adjusted Exercise
Price and showing in reasonable detail the computation of the adjustment
and the facts upon which such adjustment is based.
<PAGE>
6
(f) Notices to Holder of Certain Events. If at any time after the date
hereof:
(i) the Company shall declare any dividend or other distribution
upon or with respect to the Common Stock, including any dividend
payable in cash, shares of Common Stock or other securities of the
Company; or
(ii) the Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into Common Stock or any rights to
subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as result of the subdivision or combination of
shares), or any conversion of the Shares into securities of another
corporation, or a sale of all or substantially all of the assets of
the Company, or a consolidation or merger of the Company with another
corporation (other than a merger with a subsidiary in which the
Company is the continuing corporation and which does not result in any
reclassification or change of the Shares issuable upon exercise of the
Warrants); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, not less than 15 days before any record date or other date set for
the definitive action, written notice of the date upon which the books of the
Company shall close or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such reorganization,
reclassification, conversion, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
Shares and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holder of record of the shares of Common Stock
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation, or winding
up, as the case may be (on which date in the event of voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the right to exercise
the Warrants shall terminate).
7. Piggy-Back Registration.
(a) If the Company shall, at any time prior to the expiration of this
Warrant, authorize a registration of its Common Stock with the Securities
and Exchange Commission (the "SEC"), the Company shall furnish the Holder
with at least 30 days prior written notice thereof and the Holder shall
have the option to include the Shares to be issued to the Holder upon the
exercise of this Warrant in such registration statement. The Holder shall
exercise the "piggy-back registration rights" granted pursuant to this
Section 7 by giving written notice to the Company within 20 days of the
receipt of the written notice from the Company described above.
(b) Notwithstanding any other provision of this Warrant, the Company's
obligations under this Section 7 shall be subject to the following terms
and conditions:
<PAGE>
7
(i) The obligations of the Company set forth under this Section 7
shall not arise upon the filing of a registration statement that
covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt
securities not convertible into, or exchangeable for, shares of Common
Stock; (C) securities to be issued pursuant to a transaction
registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); or (D) a stock option, stock bonus,
stock purchase, or other employee benefit or compensation plan or
securities issued or issuable pursuant to any such plan.
(ii) If the Company files a registration statement in connection
with an underwritten public offering of Common Stock, the Company
shall use its best efforts to cause the managing underwriter of the
proposed offering to grant any request by the Holder that Shares
purchased by the Holder upon the exercise of this Warrant be included
in the proposed public offering on terms and conditions that are
customary under industry practice. Notwithstanding any other provision
of this Agreement, if the managing underwriter of the public offering
of the Common Stock gives written notice to the Company that, in the
reasonable opinion of such managing underwriter, marketing factors
require a limitation of the total number of shares of Common Stock to
be underwritten, then the number of Shares purchased by the Holder
upon the exercise of this Warrant that the Company shall be obligated
to include in the registration statement shall be reduced in
accordance with the limitations imposed by the managing underwriter.
(iii) The Holder must provide to the Company all information, and
take all action, the Parent reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law or
regulation or to prepare the registration statement that will cover
the Shares that will be included in the registration.
(c) The Company will pay all Registration Expenses (as defined below)
in connection with the registration of the Shares pursuant to this
Section 7. For purposes of this Warrant, the term "Registration Expenses"
shall mean all expenses incurred by the Company in complying with this
Section 7, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and disbursements of counsel
for the Company, state Blue Sky fees and expenses, transfer agent fees,
cost of engraving of stock certificates, costs for mailing and tombstone
advertising, cost of preparing the registration statement, related
exhibits, amendments and supplements thereto, underwriting documents,
selected dealer agreements, preliminary and final prospectuses, and the
expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Shares and the fees and expenses of the Holder's own
counsel and accountants, which shall be borne by the Holder.
<PAGE>
8
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holder from and
against any and all losses, claims, damages, expenses, and liabilities
caused by any untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact necessary to make any
statement therein not misleading. The foregoing indemnification and
agreement to hold harmless shall not apply, however, insofar as such
losses, claims, damages, expenses, and liabilities are caused by an untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use in any registration statement or
prospectus.
(b) The Holder will indemnify the Company, and each person who
controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses, and liabilities
caused by an untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by an omission to state a material fact necessary to make any
statement therein not misleading insofar as such losses, claims, damages,
expenses, and liabilities are caused by an untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use in any registration statement or prospectus.
(c) Each indemnified party promptly shall notify each indemnifying
party of any claim asserted or action commenced against it that is subject
to the indemnification provisions of this Section, but failure to so notify
an indemnifying party will not relieve the indemnifying party from any
liability pursuant to these indemnity provisions or otherwise, unless and
only to the extent that the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be
materially prejudicial to an indemnifying party, the failure of an
indemnified party to notify an indemnifying party of a lawsuit within ten
days after the date when the indemnified party is served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim
will be considered materially prejudicial to the rights and obligations of
any indemnifying party who was not also served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim.
The indemnifying party may participate at its own expense in the
defense, or, if the indemnifying party so elects within a reasonable time,
the indemnifying party may assume the defense, of any action commenced
against the indemnified party that is the subject of indemnification under
this Section. If the indemnifying party elects to assume the defense of an
indemnified action, however, the indemnifying party shall engage to defend
the action legal counsel reasonably satisfactory to the indemnified party.
If the indemnifying party elects to assume the defense of any indemnified
action, the indemnified party, and each controlling person who is a
defendant in the action, will be entitled to employ separate counsel
participate in the defense of the action at its own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the
indemnifying party will not be liable for any settlement made without its
consent. The indemnifying party shall notify the indemnified party whether
or not it will consent to a proposed settlement within ten days after it
receives from the indemnified party notice of the proposed settlement,
summarizing all the terms and conditions of settlement. The indemnifying
party's failure to notify the indemnified party within that ten-day period
whether or not it consents to the proposed settlement will constitute its
consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including
any amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act
and the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the
person.
<PAGE>
9
9. No Impairment. The Company will not by any action including, without
limitation, amending or permitting the amendment of the charter documents,
bylaws, or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share exchange,
dissolution, issue or sale of securities, or any other similar voluntary action,
avoid or seek to avoid the observance or performance of any of the express terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary to
protect the rights of the Holder against impairment or dilution. Without
limiting the generality of the foregoing, the Company will (i) take all such
action as may be reasonably necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon exercise
of the Warrant, free and clear of all liens, encumbrances, equities, and claims
and (ii) use all reasonable efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction over
the Company as may be necessary to enable the Company to perform its obligations
under this Warrant.
10. Dilution Fee. If, during the Exercise Period, the Company pays any cash
dividends or makes any cash distribution to any holder of any class of its
Common Stock with respect to such Common Stock and the Exercise Price exceeds
the Market Price, then the Holder of this Warrant will be entitled to receive in
respect of this Warrant a dilution fee in cash (the "Dilution Fee") on the date
of payment of such dividend or distribution, which Dilution Fee will be equal to
the amount per share paid to the holders of Common Stock times the number of
Shares currently exercisable under this Warrant.
11. Survival. The various rights and obligations of the Holder and of the
Company as set forth in Sections 4 and 5 hereof shall survive the exercise of
this Warrant and the surrender of this instrument upon such exercise.
12. Notice. All notices required by this Warrant to be given or made by the
Company shall be given or made by first class mail, postage prepaid, addressed
to the registered Holder hereof at the address of such Holder as shown on the
books of the Company.
13. Loss or Destruction. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its counsel, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed, waived,
discharged, or terminated except by a written instrument executed by the
Company and the Holder.
(b) This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida, without regard
to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in such a
manner as to be effective, valid, and enforceable under applicable law, but
if any provision of this Warrant is held to be invalid, illegal, or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating
the remainder of this Warrant in such jurisdiction or any provision hereof
in any other jurisdiction.
<PAGE>
10
(d) No course of dealing or delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right
or otherwise prejudice the Holder's rights, power, or remedies.
(e) The Company shall pay all expenses incurred by it in connection
with, and all documentary stamp and other taxes (other than stock transfer
taxes) and other governmental charges that may be imposed in respect of,
the issue, sale and delivery of this Warrant and the Shares issuable upon
the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors and assigns of the Company
and the successors and permitted assigns of the Holder.
15. Further Assurances. The Company agrees that it will execute and record
such documents as the Holder shall reasonably request to secure for the Holder
any of the rights represented by this Warrant.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed by
its duly authorized officer as
of the August 20, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:__________________________
Name:________________________
Title:_______________________
<PAGE>
11
EXHIBIT "A"
PURCHASE FORM
To be executed upon exercise of the Warrant. Capitalized terms have the
same meanings ascribed to them in the Warrant.
TO: MEDICAL TECHNOLOGY SYSTEMS, INC.
The undersigned hereby exercises the right to purchase _____________ Shares
of Common Stock evidenced by the Warrant, according to the terms and conditions
thereof, and hereby makes payment of the Purchase Price. If the Company's Common
Stock is listed on a securities exchange or market, the undersigned [does] [does
not] choose to pay the Purchase Price pursuant to a cashless exercise of the
Warrant. The undersigned requests that certificates for the Shares shall be
issued in the name set forth below:
Dated: Name:_________________________
________________________
(Address)
__________________________
Social Security No.________
or other identifying number
<PAGE>
12
EXHIBIT "B"
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer of
the Warrant. Capitalized terms have the same meanings ascribed to them in the
Warrant.
FOR VALUE RECEIVED ________________("Assignor")
hereby sells, assigns and transfers unto
____________________("Assignee")
(Name)
____________________
(Address)
the right to purchase __________ shares of Common Stock of Medical Technology
Systems, Inc. evidenced by the Warrant, together with all right, title, and
interest therein, and does irrevocably constitute and appoint
_____________________________ attorney to transfer the said right on the books
of said corporation with full power of substitution in the premises.
Date: ____________________ Assignor:
By:____________________________
Its:___________________________
Signature:______________________
<PAGE>
1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE ACT OR AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
DATED: August 20, 1998 NO. I
FORM OF WARRANT
MEDICAL TECHNOLOGY SYSTEMS, INC.
Warrant to Purchase up to 2,250 Shares
of Common Stock, par value $.01 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON OR BEFORE AUGUST 20, 2008
This certifies that, for value received, Stanley D. Estrin Irrevocable
Trust dtd 3/16/93, Judith C. Estrin, Trustee, 6720 N. W. 105th Lane, Parkland,
Florida, 33076 or registered assigns (collectively with Stanley D. Estrin
Irrevocable Trust dtd 3/16/93, Judith C. Estrin, Trustee, 6720 N. W. 105th Lane,
Parkland, Florida, 33076, the "Holder"), is entitled to purchase from Medical
Technology Systems, Inc., a Florida corporation (the "Company"), if a promissory
note of Stanley D. Estrin Irrevocable Trust dtd 3/16/93, Judith C. Estrin,
Trustee, 6720 N. W. 105th Lane, Parkland, Florida, 33076, a copy of which is
attached hereto as Exhibit A (the "Note"), is not paid in full as described
below, up to 2,250 fully paid and nonassessable shares (the "Shares") of the
Common Stock, par value $.01 per share, of the Company ("Common Stock"), which
will become exercisable as follows: 750 Shares if the Note (including any
accrued interest) is not paid in full on or before February 16, 1999, an
additional 750 Shares if the Note (including any accrued interest) is not paid
in full on or before March 16, 1999, and an additional 750 Shares if the Note
(including any accrued interest) is not paid in full on or before April 16,
1999, in each case at a price of $0.75 per Share (the "Exercise Price") for ten
years after the warrant becomes exercisable with respect to such Shares (the
"Exercise Period"), subject to the terms, conditions, and adjustments set forth
in this Warrant (the "Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole or in part
by the Holder during the applicable Exercise Period upon presentation and
surrender hereof, with the Purchase Form attached hereto as Exhibit B duly
executed, at the office of the Company located at 12920 Automobile Boulevard,
Clearwater, Florida 33762, accompanied by full payment of the Exercise Price
multiplied by the number of Shares of the Company being purchased (the "Purchase
Price"), whereupon the Company shall cause the appropriate number of Shares to
be issued and shall deliver to the Holder, within 10 days of surrender of the
Warrant, a certificate representing the Shares being purchased. Upon each
partial exercise hereof, a new Warrant evidencing the remainder of the Shares
will be issued to the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise Periods, and
otherwise on the same terms and conditions as the Warrant partially exercised.
The Purchase Price shall be payable by delivery of a certified or bank cashier's
check payable to the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of the
Purchase Price, or, if the Company's Common Stock is listed on a securities
exchange or market, in the manner set forth in the following paragraph if
requested by the Holder in the Purchase Form. The Holder shall be deemed for all
purposes to have become the holder of record of Shares so purchased upon
exercise of this Warrant as of the close of business on the date as of which
this Warrant, together with a duly executed Purchase Form, was delivered to the
Company and payment of the Purchase Price was made, regardless of the date of
delivery of any certificate representing the Shares so purchased, except that if
the Company were subject to any legal requirements prohibiting it from issuing
shares of Common Stock on such date, the Holder shall be deemed to have become
the record holder of such Shares on the next succeeding date as of which the
Company ceased to be so prohibited.
<PAGE>
2
If the Company's Common Stock is listed on a securities exchange or market,
in addition to the method of payment set forth above and in lieu of any cash
payment required, the Holder shall have the right to exercise this Warrant in
full or in part by surrendering this Warrant in the manner specified above in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which this Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) less the Purchase
Price, and the denominator of which is the Market Price. For purpose of this
Warrant, "Market Price" shall mean the average closing sale price quoted on a
share of Common Stock on the NASDAQ National Market or the principal stock
exchange on which the Common Stock is then traded for the three trading days
immediately prior to the date of the delivery to the Company of a purchase form
(or if the Company's Common Stock is not traded or listed on the NASDAQ National
Market or any other principal securities market, the average of the closing bid
prices on the NASDAQ SmallCap Market, the OTC Electronic Bulletin Board, or
otherwise in the over-the-counter market on such days as reported by NASDAQ, the
National Quotation Bureau Incorporated or any comparable system, or if not so
reported, as reported by any New York Stock Exchange member firm selected in
good faith by the Company for such purpose).
2. Exchange; Restrictions on Transfer or Assignment. This Warrant is
exchangeable, without expense, at the option of the Holder, upon surrender
hereof to the Company for other Warrants of different denominations entitling
the Holder to purchase in the aggregate the same number of Shares purchasable
hereunder. Subject to compliance with the Act, applicable state securities laws,
and the requirements pertaining to transfer described in Section 5, this Warrant
and the Holder's rights hereunder are transferable. To effect a transfer of this
Warrant, the Holder shall surrender the Warrant to the Company at its principal
office with the Assignment Form attached hereto as Exhibit C duly completed and
executed (with signature guaranteed), whereupon the Company, if the proposed
assignment is permitted pursuant to the provisions hereof, shall register the
assignment of this Warrant in accordance with the information contained in the
assignment instrument and shall, without charge, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees named in such
assignment instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not theretofore
exercised, transferred, or assigned) and this Warrant shall promptly be
cancelled. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.
<PAGE>
3
3. Rights and Obligations of Warrant Holders. This Warrant does not confer
upon the Holder any rights as a shareholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed herein and the
Holder, by acceptance hereof, consents to and agrees to be bound by and to
comply with all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if any, may, prior
to any presentation of this Warrant for registration of transfer, deem and treat
the person in whose name this Warrant is registered as the absolute, true, and
lawful owner of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the contrary.
4. Covenants and Warranties of the Company. The Company covenants and
agrees that (i) any and all Shares that are issued and delivered upon exercise
of this Warrant and payment of the Purchase Price will, upon delivery, be duly
authorized, validly issued, fully-paid, and nonassessable shares of Common Stock
and (ii) the Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common Stock
sufficient to permit the exercise in full of this Warrant. The Company will take
all such actions as may be necessary to assure that all shares of Common Stock
may be so issued without violation by the Company of any applicable law or
government regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance,
which the Company will transmit promptly upon issuance of such shares).
The Company represents and warrants that (i) the Company is a corporation
duly organized, validly existing, and of active status under the laws of the
State of Florida, (ii) the Company has all requisite corporate power and
authority to issue this Warrant and to consummate the transactions contemplated
hereby, and such issuance and consummation will not conflict with, result in a
material breach of, constitute a material default under, or material violation
of any provision of the Company's Articles of Incorporation or Bylaws, or any
law or regulation of any governmental authority or any provision of any
agreement, judgment, or decree affecting the Company and (iii) all corporate
action required to be taken by the Company in connection with the execution and
delivery of this Warrant and the performance of the Company's obligations
hereunder has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges that this
Warrant and the Shares issuable upon exercise thereof have not been registered
under the Act or applicable state law. The Holder agrees, by acceptance of this
Warrant, (i) that no sale, transfer, or distribution of this Warrant or the
Shares shall be made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable prospectus delivery
requirements and the restrictions on transfer set forth herein, and (ii) that if
any distribution or any other transfer of this Warrant or any Shares is proposed
to be made by it otherwise than pursuant to an effective registration statement
under the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed distribution will not
be in violation of the Act or of applicable state law.
6. Adjustment. The number of Shares purchasable upon the exercise of
this Warrant and the Exercise Price per Share are subject to adjustment from
time to time as provided in this Section 6.
<PAGE>
4
(a) Subdivision or Combination of Shares. If the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares (including a stock split effected as a stock dividend) or combine
its outstanding shares of Common Stock into a lesser number of shares, the
number of Shares issuable upon exercise of this Warrant shall be adjusted
to such number as is obtained by multiplying the number of shares issuable
upon exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate number
of shares of Common Stock outstanding immediately after giving effect to
such subdivision or combination and the denominator of which is the
aggregate number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied by the
number of Shares issuable upon full exercise of this Warrant (as increased
or decreased to reflect such subdivision or combination of outstanding
shares of Common Stock, as the case may be), equal the product of the
Exercise Price per Share in effect immediately prior to such subdivision or
combination multiplied by the number of Shares issuable upon exercise of
this Warrant immediately prior to such subdivision or combination.
(b) Effect of Sale, Merger, or Consolidation. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of
all or substantially all of the Company's assets to another corporation
shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and the terms and
conditions specified in this Warrant and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of this Warrant,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any
such case appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and
delivered to the Holder at its last address appearing on the books of the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence, the
Holder may be entitled to purchase.
(c) Issuance of Common Stock Below Exercise Price. If the Company
shall issue or sell shares of Common Stock or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock ("Common Stock Equivalents")
pursuant to the exercise of any Common Stock Equivalents outstanding on the
date of the Note under any of the Company's employee benefit plans), at a
price per share of Common Stock (determined, in the case of Common Stock
Equivalents, by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Common Stock Equivalent,
plus the total consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (B) the total number of shares of
Common Stock covered by such Common Stock Equivalent), that is lower
(calculated the date of such sale or issuance) than the Exercise Price, or
for no consideration, then:
<PAGE>
5
(i) in each case the number of shares of Common Stock thereafter
issuable upon the exercise of this Warrant (whether or not presently
exercisable) shall be increased in a manner determined by multiplying
the number of shares of Common Stock issuable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon conversion,
exercise, or exchange of such Common Stock Equivalent, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock that the "aggregate consideration to be
received by the Company" (as defined below) in connection with such
sale or issuance would purchase at the Exercise Price. For the purpose
of such adjustments the "aggregate consideration to be received by the
Company" shall be the consideration received by the Company for such
Common Stock or Common Stock Equivalents, plus any consideration or
premiums stated in the Common Stock Equivalents to be paid for the
shares of Common Stock covered thereby; and
(ii) in each case the Exercise Price will be reduced to the price
calculated by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately before such
issuance or sale multiplied by the then existing Exercise Price Plus
(2) the aggregate consideration, if any, received by the Company upon
such issuance or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale plus the
number of shares of Common Stock issuable upon the exercise,
conversion, or exchange of any Common Stock Equivalents issued or sold
in the transaction for which the Company is making this adjustment.
If the Company shall issue or sell shares of Common Stock or
Common Stock Equivalents for a consideration consisting, in whole or
in part, of property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes
of this Section 6(c), the Board of Directors of the Company shall
determine, in good faith, the fair value of such property. If the
Company shall issue and sell Common Stock Equivalents, together with
one or more other securities as part of a unit at a price per unit,
then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes
of this Section 6(c), the Board of Directors of the Company shall
determine, in good faith, the fair value of the Common Stock
Equivalents then being sold as part of such unit.
(d) If any event occurs as to which the preceding Sections 6(a) through (c)
are not strictly applicable, but as to which the failure to make any adjustment
would not fairly protect the purchase rights represented by this Warrant in
accordance with the essential intent and principles of this Warrant, as
determined by the Company or as requested by the Holder in accordance with the
notice provisions of Section 12, then, in each such case, the Company shall
select an independent investment bank or firm of independent public accountants,
such investment bank or firm of independent public accountants to be selected
from a group of three nationally recognized investment banks or firms of public
accountants chosen by the Holder, which will give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established in this Warrant. Upon receipt of such opinion, the
Company will promptly deliver a copy of such opinion to the Holder and will make
the adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the Company.
If the adjustment is requested by the Holder, however, and the investment bank
or firm of independent public accountants selected by the Company pursuant to
this paragraph determines that no adjustment is necessary, then the fees and
expenses described in the preceding sentence shall be borne by the Holder.
(e) Notice to Holder of Adjustment. Whenever the number of Shares
purchasable upon exercise of this Warrant or the Exercise Price per Share is
adjusted as herein provided, the Company shall cause to be mailed to the Holder
within 5 days of such adjustment, in accordance with the provisions of Section
12, notice setting forth the adjusted number of Shares purchasable upon the
exercise of the Warrant and the adjusted Exercise Price and showing in
reasonable detail the computation of the adjustment and the facts upon which
such adjustment is based.
<PAGE>
6
(f) Notices to Holder of Certain Events. If at any time after
the date hereof:
(i) the Company shall declare any dividend or other distribution upon
or with respect to the Common Stock, including any dividend payable in
cash, shares of Common Stock or other securities of the Company; or
(ii) the Company shall offer for subscription to the holders of its
Common Stock any additional shares of stock of any class or any other
securities convertible into Common Stock or any rights to subscribe
thereto; or
(iii) there shall be any capital reorganization or reclassification of
the capital stock of the Company (other than a change in par value, or from
par value to no par value, or from no par value to par value or as result
of the subdivision or combination of shares), or any conversion of the
Shares into securities of another corporation, or a sale of all or
substantially all of the assets of the Company, or a consolidation or
merger of the Company with another corporation (other than a merger with a
subsidiary in which the Company is the continuing corporation and which
does not result in any reclassification or change of the Shares issuable
upon exercise of the Warrants); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, not less than 15 days before any record date or other date set for
the definitive action, written notice of the date upon which the books of the
Company shall close or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such reorganization,
reclassification, conversion, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
Shares and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holder of record of the shares of Common Stock
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation, or winding
up, as the case may be (on which date in the event of voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the right to exercise
the Warrants shall terminate).
7. Piggy-Back Registration.
(a) If the Company shall, at any time prior to the expiration of this
Warrant, authorize a registration of its Common Stock with the Securities
and Exchange Commission (the "SEC"), the Company shall furnish the Holder
with at least 30 days prior written notice thereof and the Holder shall
have the option to include the Shares to be issued to the Holder upon the
exercise of this Warrant in such registration statement. The Holder shall
exercise the "piggy-back registration rights" granted pursuant to this
Section 7 by giving written notice to the Company within 20 days of the
receipt of the written notice from the Company described above.
<PAGE>
7
(b) Notwithstanding any other provision of this Warrant, the Company's
obligations under this Section 7 shall be subject to the following terms
and conditions:
(i) The obligations of the Company set forth under this Section 7
shall not arise upon the filing of a registration statement that
covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt
securities not convertible into, or exchangeable for, shares of Common
Stock; (C) securities to be issued pursuant to a transaction
registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); or (D) a stock option, stock bonus,
stock purchase, or other employee benefit or compensation plan or
securities issued or issuable pursuant to any such plan.
(ii) If the Company files a registration statement in connection
with an underwritten public offering of Common Stock, the Company
shall use its best efforts to cause the managing underwriter of the
proposed offering to grant any request by the Holder that Shares
purchased by the Holder upon the exercise of this Warrant be included
in the proposed public offering on terms and conditions that are
customary under industry practice. Notwithstanding any other provision
of this Agreement, if the managing underwriter of the public offering
of the Common Stock gives written notice to the Company that, in the
reasonable opinion of such managing underwriter, marketing factors
require a limitation of the total number of shares of Common Stock to
be underwritten, then the number of Shares purchased by the Holder
upon the exercise of this Warrant that the Company shall be obligated
to include in the registration statement shall be reduced in
accordance with the limitations imposed by the managing underwriter.
(iii) The Holder must provide to the Company all information, and
take all action, the Parent reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law or
regulation or to prepare the registration statement that will cover
the Shares that will be included in the registration.
(c) The Company will pay all Registration Expenses (as defined below)
in connection with the registration of the Shares pursuant to this Section
7. For purposes of this Warrant, the term "Registration Expenses" shall
mean all expenses incurred by the Company in complying with this Section 7,
including, without limitation, all registration and filing fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company, state Blue Sky fees and expenses, transfer agent fees, cost of
engraving of stock certificates, costs for mailing and tombstone
advertising, cost of preparing the registration statement, related
exhibits, amendments and supplements thereto, underwriting documents,
selected dealer agreements, preliminary and final prospectuses, and the
expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Shares and the fees and expenses of the Holder's own
counsel and accountants, which shall be borne by the Holder.
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holder from and
against any and all losses, claims, damages, expenses, and liabilities
caused by any untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact necessary to make any
statement therein not misleading. The foregoing indemnification and
agreement to hold harmless shall not apply, however, insofar as such
losses, claims, damages, expenses, and liabilities are caused by an untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use in any registration statement or
prospectus.
<PAGE>
8
(b) The Holder will indemnify the Company, and each person who
controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses, and liabilities
caused by an untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by an omission to state a material fact necessary to make any
statement therein not misleading insofar as such losses, claims, damages,
expenses, and liabilities are caused by an untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use in any registration statement or prospectus.
(c) Each indemnified party promptly shall notify each indemnifying
party of any claim asserted or action commenced against it that is subject
to the indemnification provisions of this Section, but failure to so notify
an indemnifying party will not relieve the indemnifying party from any
liability pursuant to these indemnity provisions or otherwise, unless and
only to the extent that the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be
materially prejudicial to an indemnifying party, the failure of an
indemnified party to notify an indemnifying party of a lawsuit within ten
days after the date when the indemnified party is served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim
will be considered materially prejudicial to the rights and obligations of
any indemnifying party who was not also served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim.
The indemnifying party may participate at its own expense in the
defense, or, if the indemnifying party so elects within a reasonable time,
the indemnifying party may assume the defense, of any action commenced
against the indemnified party that is the subject of indemnification under
this Section. If the indemnifying party elects to assume the defense of an
indemnified action, however, the indemnifying party shall engage to defend
the action legal counsel reasonably satisfactory to the indemnified party.
If the indemnifying party elects to assume the defense of any indemnified
action, the indemnified party, and each controlling person who is a
defendant in the action, will be entitled to employ separate counsel
participate in the defense of the action at its own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the
indemnifying party will not be liable for any settlement made without its
consent. The indemnifying party shall notify the indemnified party whether
or not it will consent to a proposed settlement within ten days after it
receives from the indemnified party notice of the proposed settlement,
summarizing all the terms and conditions of settlement. The indemnifying
party's failure to notify the indemnified party within that ten-day period
whether or not it consents to the proposed settlement will constitute its
consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including
any amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act
and the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the
person.
<PAGE>
9
9. No Impairment. The Company will not by any action including, without
limitation, amending or permitting the amendment of the charter documents,
bylaws, or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share exchange,
dissolution, issue or sale of securities, or any other similar voluntary action,
avoid or seek to avoid the observance or performance of any of the express terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be reasonably
necessary to protect the rights of the Holder against impairment or dilution.
Without limiting the generality of the foregoing, the Company will (i) take all
such action as may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon exercise
of the Warrant, free and clear of all liens, encumbrances, equities, and claims
and (ii) use all reasonable efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction over
the Company as may be necessary to enable the Company to perform its obligations
under this Warrant.
10. Dilution Fee. If, during the Exercise Period, the Company pays any cash
dividends or makes any cash distribution to any holder of any class of its
Common Stock with respect to such Common Stock and the Exercise Price exceeds
the Market Price, then the Holder of this Warrant will be entitled to receive in
respect of this Warrant a dilution fee in cash (the "Dilution Fee") on the date
of payment of such dividend or distribution, which Dilution Fee will be equal to
the amount per share paid to the holders of Common Stock times the number of
Shares currently exercisable under this Warrant.
11. Survival. The various rights and obligations of the Holder and of the
Company as set forth in Sections 4 and 5 hereof shall survive the exercise of
this Warrant and the surrender of this instrument upon such exercise.
12. Notice. All notices required by this Warrant to be given or made by the
Company shall be given or made by first class mail, postage prepaid, addressed
to the registered Holder hereof at the address of such Holder as shown on the
books of the Company.
13. Loss or Destruction. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its counsel, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed, waived,
discharged, or terminated except by a written instrument executed by the
Company and the Holder.
(b) This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida, without regard
to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in such a
manner as to be effective, valid, and enforceable under applicable law, but
if any provision of this Warrant is held to be invalid, illegal, or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating
the remainder of this Warrant in such jurisdiction or any provision hereof
in any other jurisdiction.
<PAGE>
10
(d) No course of dealing or delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right
or otherwise prejudice the Holder's rights, power, or remedies.
(e) The Company shall pay all expenses incurred by it in connection
with, and all documentary stamp and other taxes (other than stock transfer
taxes) and other governmental charges that may be imposed in respect of,
the issue, sale and delivery of this Warrant and the Shares issuable upon
the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors and assigns of the Company
and the successors and permitted assigns of the Holder.
15. Further Assurances. The Company agrees that it will execute and record
such documents as the Holder shall reasonably request to secure for the Holder
any of the rights represented by this Warrant.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed by
its duly authorized officer as of the 20th day of August, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
11
EXHIBIT "A"
PROMISSORY NOTE
<PAGE>
12
EXHIBIT "B"
PURCHASE FORM
To be executed upon exercise of the Warrant. Capitalized terms have the
same meanings ascribed to them in the Warrant.
TO: Medical Technology Systems, Inc.
The undersigned hereby exercises the right to purchase _____________ Shares
of Common Stock evidenced by the Warrant, according to the terms and conditions
thereof, and hereby makes payment of the Purchase Price. If the Company's Common
Stock is listed on a securities exchange or market, the undersigned [does] [does
not] choose to pay the Purchase Price pursuant to a cashless exercise of the
Warrant. The undersigned requests that certificates for the Shares shall be
issued in the name set forth below:
Dated:_____________________ Name:_____________________
__________________________
(Address)
Social Security No.___________________
or other identifying number
<PAGE>
13
EXHIBIT "C"
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer of
the Warrant. Capitalized terms have the same meanings ascribed to them in the
Warrant.
FOR VALUE RECEIVED _________________("Assignor")
hereby sells, assigns and transfers unto
___________________________("Assignee")
(Name)
___________________________
(Address)
___________________________
the right to purchase __________ shares of Common Stock of Medical Technology
Systems, Inc. evidenced by the Warrant, together with all right, title, and
interest therein, and does irrevocably constitute and appoint
_____________________________ attorney to transfer the said right on the books
of said corporation with full power of substitution in the premises.
Date:____________ Assignor:
By:__________________________
Its:_________________________
Signature:___________________
<PAGE>
1
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of August 7, 1998, by and
among Sally Siegel ("Lender") the Borrower described below.
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Lender and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined
herein, the following terms shall have the meaning set forth with respect
thereto:
A. Borrower(s): Medical Technology Systems, Inc.
B. Borrowers' Address: 12920 Automobile Boulevard Clearwater, Florida
33762
C. Hazardous Materials. Hazardous Materials include all materials
defined as hazardous materials or substances under any local, state or
federal environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
D. Loan. Any loan described in Section 2 hereof and any subsequent
loan which states that it is subject to this Loan Agreement.
E. Loan Documents. Loan Documents means this Loan Agreement and any
and all promissory notes executed by the Borrower in favor of Lender and
all other documents, instruments (including, without limitation, warrants),
guarantees, certificates and agreements executed and/or delivered by the
Borrower in connection with the Loan.
F. Accounting Terms. All accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such terms
under generally accepted accounting principles ("GAAP"), as in effect from
time to time, consistently applied, with respect to the financial
statements referenced in Section 3.H. hereof.
2. LOANS.
A. Loan. Lender hereby agrees to make a term loan to Borrowers in the
principal amount of $25,000.00. The obligation to repay the loan is
evidenced by a promissory note of even date herewith (the promissory note
together with any and all renewals, extensions or rearrangements thereof
being hereafter collectively referred to as the "Note") having a maturity
date, repayment terms and interest rate as set forth in the Note.
B. Use of Proceeds. The Borrower agree that the proceeds of the Loan
shall be used solely for working capital purposes and shall not be used to
satisfy any obligations of the Borrower other than obligations incurred in
the normal course of business of the Borrower.
C. Extension of Loan. The maturity of the Note shall be automatically
extended from February 15, 1999 until May 16, 1999 provided that: (a) no
defaults exist under this Agreement; and (b) that the Loan is not subject
to any setoff, defense or counterclaim by the Borrower.
<PAGE>
2
3. REPRESENTATIONS AND WARRANTIES OF BORROWERS. The Borrower hereby
represent and warrant to Lender as follows:
A. Good Standing. The Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the state of its
respective incorporation and has the power and authority to own its
property and to carry on its business in each jurisdiction in which
Borrower does business.
B. Authority and Compliance. The Borrower has full power and authority
to execute and deliver the Loan Documents and to incur and perform the
obligations provided for therein, all of which have been duly authorized by
all proper and necessary action of the appropriate governing body of such
Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and
the Borrower is in compliance with all laws and regulatory requirements to
which it is subject.
C. Binding Agreement. This Agreement and the other Loan Documents
executed by the Borrower constitute valid and legally binding obligations
of the Borrower, enforceable in accordance with their terms.
D. Litigation. There is no proceeding involving the Borrower pending
or, to the knowledge of the Borrower, threatened before any court or
governmental authority, agency or arbitration authority, except as
disclosed to Lender in writing and acknowledged by Lender prior to the date
of this Agreement.
E. No Conflicting Agreements. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the
organization, power or authority of the Borrower and no provision of any
existing agreement, mortgage, indenture or contract binding on the Borrower
or affecting its respective properties, which would conflict with or in any
way prevent the execution, delivery or carrying out of the terms of this
Agreement and the other Loan Documents.
F. Ownership of Assets. The Borrower has good title to its assets, and
its assets are free and clear of liens, except those granted to Lender and
as disclosed to Lender prior to the date of this Agreement.
G. Taxes. All taxes and assessments due and payable by the Borrower
have been paid or are being contested in good faith by appropriate
proceedings and the Borrower has filed all tax returns which it is required
to file.
H. Financial Statements. The financial statements of Borrower
heretofore delivered to Lender have been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved and fairly
present Borrowers' financial condition as of the date or dates thereof. All
factual information furnished by the Borrower to Lender in connection with
this Agreement and the other Loan Documents is and will be accurate and
complete on the date as of which such information is delivered to Lender
and is not and will not be incomplete by the omission of any material fact
necessary to make such information not misleading.
I. Place of Business. The Borrower's chief executive office is located
at 12920 Automobile Boulevard, Clearwater, Florida 33762.
<PAGE>
3
J. Environmental. The conduct of the Borrower's business operations
and the condition of the Borrower's property does not and will not violate
any federal laws, rules or ordinances for environmental protection,
regulations of the Environmental Protection Agency, any applicable local or
state law, rule, regulation or rule of common law or any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials.
K. Continuation of Representations and Warranties. All representations
and warranties made under this Agreement shall be deemed to be made at and
as of the date hereof and at and as of the date of any advance under any
Loan.
4. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender hereby represents and
warrants to Borrowers that Lender: (a) is an "accredited investor," as that term
is defined in Exhibit "A" to this Agreement, (b) has such knowledge and
experience in financial and business matters rendering the Lender capable of
evaluating the merits and risks of an investment in securities of the Company (a
"sophisticated investor"), or (c) is not an accredited or sophisticated
investor, but has appointed a "purchaser representative," as that term is
defined in Exhibit "A" in connection with evaluating the merits and risks of an
investment in securities of the Company.
5. AFFIRMATIVE COVENANTS. Until full payment and performance of all
obligations of the Borrower under the Note, the Borrower will, unless Lender
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):
A. Financial Statements and Other Information. Maintain a system of
accounting satisfactory to Lender and in accordance with GAAP applied on a
consistent basis throughout the period involved, permit Lender's officers
or authorized representatives to visit and inspect such Borrower's books of
account and other records at such reasonable times and as often as Lender
may desire, and pay the reasonable fees and disbursements of any
accountants or other agents of Lender selected by Lender for the foregoing
purposes. Unless written notice of another location is given to Lender, the
Borrower's books and records will be located at such Borrower's chief
executive office set forth above. All financial statements called for below
shall be prepared in form and content acceptable to Lender.
In addition, the Borrower will:
i. Furnish to Lender audited financial statements of such
Borrower for each fiscal year of such Borrower, within ninety (90)
days after the close of each such fiscal year.
ii. Furnish to Lender Borrower-prepared financial statements of
such Borrower for each quarter of each fiscal year of such Borrower,
within forty-five (45) days after the close of each such period.
iii. Furnish to Lender promptly such additional financial
information and reports with respect to the business operations and
financial condition of the Borrower as Lender may reasonably request.
B. Insurance. Maintain insurance with responsible insurance companies
on such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance
covering all assets, business interruption insurance, workers compensation
insurance and liability insurance, all to be with such companies and in
such amounts as are satisfactory to Lender and providing for at least 30
days prior notice to Lender of any cancellation thereof. Satisfactory
evidence of such insurance will be supplied to Lender prior to funding
under the Loan(s) and 30 days prior to each policy renewal.
<PAGE>
4
C. Existence and Compliance. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
D. Adverse Conditions or Events. Promptly advise Lender in writing of
(i) any condition, event or act which comes to its attention that would or
might materially adversely affect such Borrower's financial condition or
operations or Lender's rights under the Loan Documents, (ii) any litigation
filed by or against such Borrower, (iii) any event that has occurred that
would constitute an event of default under any Loan Documents and (iv) any
uninsured or partially uninsured loss through fire, theft, liability or
property damage in excess of an aggregate of $50,000.00.
E. Taxes and Other Obligations. Pay all of its taxes, assessments and
other obligations, including, but not limited to taxes, costs or other
expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
F. Maintenance. Maintain all of its tangible property in good
condition and repair and make all necessary replacements thereof, and
preserve and maintain all licenses, trademarks, privileges, permits,
franchises, certificates and the like necessary for the operation of its
business.
G. Environmental. Immediately advise Lender in writing of (i) any and
all enforcement, cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed or threatened pursuant to any
applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting such Borrower's business
operations; and (ii) all claims made or threatened by any third party
against such Borrower relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials. The
Borrower shall immediately notify Lender of any remedial action taken by
Borrower with respect to such Borrower's business operations. Borrower will
not use or permit any other party to use any Hazardous Materials at any of
such Borrower's places of business or at any other property owned by such
Borrower except such materials as are incidental to such Borrower's normal
course of business, maintenance and repairs and which are handled in
compliance with all applicable environmental laws. The Borrower agrees to
permit Lender, its agents, contractors and employees to enter and inspect
any of such Borrower's places of business or any other property of such
Borrower at any reasonable times upon three (3) days prior notice for the
purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that such Borrower is complying with
this covenant and Borrower shall reimburse Lender on demand for the costs
of any such environmental investigation and audit. The Borrower shall
provide Lender, its agents, contractors, employees and representatives with
access to and copies of any and all data and documents relating to or
dealing with any Hazardous Materials used, generated, manufactured, stored
or disposed of by such Borrower's business operations within five (5) days
of the request therefore.
6. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of the Borrower under the Note, the Borrower will not, without the
prior written consent of Lender (and without limiting any requirement of any
other Loan Documents):
<PAGE>
5
A. Transfer of Assets or Control. Sell, lease, assign or otherwise
dispose of or transfer any assets, except in the normal course of its
business, or enter into any merger or consolidation, or transfer control or
ownership of the Borrower.
B. Character of Business. Change the general character of business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
C. Dividends and Distributions. Make any distribution or pay any
dividends (other than dividends payable in common stock of the Borrower) on
any shares of any class of its capital stock, or apply any of its property
or assets to the purchase, redemption or the retirement of any shares of
any class of its capital stock.
E. Management Change. Make any change in the president of the Borrower
or the chief executive officer of the Borrower, if applicable.
7. DEFAULT. Borrowers shall be in default under this Agreement and
under each of the other Loan Documents if they shall default in the payment of
any amounts due and owing under the Loan or should any of them fail to timely
and properly observe, keep or perform any term, covenant, agreement or condition
in any Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust, deed to secure debt, mortgage, assignment or other
contract securing or evidencing payment of any indebtedness of the Borrower to
Lender. Borrower shall also be in default under this Agreement if (a) any
Borrower defaults under the Second Amended and Restated Loan and Security
Agreement dated as of September 5, 1996, as amended, by and among SouthTrust,
certain of the Borrowers, Medical Technology Systems, Inc. ("MTS"), and certain
other parties, (b) if the Borrower or MTS defaults under or refuses to issue any
shares of stock pursuant to any stock warrant that is issued to Lender in
connection with the loan transaction contemplated by this Loan Agreement, or (c)
the Lender's attorney does not receive the original stock certificate or
certificates that are subject to the Pledge Agreement within ten (10) days from
the date of this Agreement.
8. REMEDIES UPON DEFAULT. If an event of default shall occur, Lender shall
have all rights, powers and remedies available under each of the Loan Documents
as well as all rights and remedies available at law or in equity.
9. NOTICES. All notices, requests or demands which any party is required or
may desire to give to any other party under any provision of this Agreement must
be in writing delivered to the other party at the following address:
Medical Technology Systems, Inc.
12920 Automobile Boulevard
Clearwater, Florida 33762
Fax. No. (727) 573-1100
Lender:
Sally Siegel
1550 Belleair Lane
Clearwater, FL 34624
<PAGE>
6
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid;
B. If sent by any other means, upon delivery.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. The Borrower shall pay to Lender
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees incurred by Lender in connection with (a) negotiation
and preparation of this Agreement and each of the Loan Documents, and (b) all
other costs and attorneys' fees incurred by Lender for which Borrowers are
obligated to reimburse Lender in accordance with the terms of the Loan
Documents.
11. MISCELLANEOUS. Borrowers and Lender further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. Cumulative Rights and No Waiver. Each and every right granted to
Lender under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all
other rights of Lender, and no delay in exercising any right shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of
any right preclude any other or future exercise thereof or the exercise of
any other right. The Borrower expressly waives any presentment, demand,
protest or other notice of any kind, including but not limited to notice of
intent to accelerate and notice of acceleration. No notice to or demand on
the Borrower in any case shall, of itself, entitle the Borrower to any
other or future notice or demand in similar or other circumstances.
B. Applicable Law. This Loan Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted in accordance
with the laws of Florida and applicable United States federal law.
C. Amendment. No modification, consent, amendment or waiver of any
provision of this Loan Agreement, nor consent to any departure by the
Borrower therefrom, shall be effective unless the same shall be in writing
and signed by an officer of Lender, and then shall be effective only in the
specified instance and for the purpose for which given. This Loan Agreement
is binding upon the Borrower, their respective successors and assigns, and
inures to the benefit of Lender, its successors and assigns; however, no
assignment or other transfer of the Borrower's rights or obligations
hereunder shall be made or be effective without Lender's prior written
consent, nor shall it relieve the Borrower of any obligations hereunder.
There is no third party beneficiary of this Loan Agreement.
D. Documents. All documents, certificates and other items required
under this Loan Agreement to be executed and/or delivered to Lender shall
be in form and content satisfactory to Lender and its counsel.
E. Partial Invalidity. The unenforceability or invalidity of any
provision of this Loan Agreement shall not affect the enforceability or
validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
<PAGE>
7
F. Indemnification. Notwithstanding anything to the contrary contained
in Section 12(G), the Borrower shall indemnify, defend and hold Lender and
its successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or
other expenses (including reasonable attorneys' fees and court costs)
arising from or in any way related to any of the transactions contemplated
hereby, including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous
Materials, arising from the Borrower's business operations, any other
property owned by the Borrower or in the surface or ground water arising
from any of the Borrower's business operations, or gaseous emissions
arising from any such Borrower's business operations or any other condition
existing or arising from the Borrower's business operations resulting from
the use or existence of Hazardous Materials, whether such claim proves to
be true or false. The Borrower further agrees that its indemnity
obligations shall include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of the Borrower,
regardless of whether the Borrower has paid the employee under the workmen'
s compensation laws of any state or other similar federal or state
legislation for the protection of employees. The term "property damage" as
used in this paragraph includes, but is not limited to, damage to any real
or personal property of the Borrower, the Lender, and of any third parties.
The Borrower's obligations under this paragraph shall survive the repayment
of the Loan.
G. Survivability. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the
making of the Loan and shall continue in full force and effect so long as
the Loan is outstanding or the obligation of the Lender to make any
advances under the Line shall not have expired.
H. Counterparts. This Agreement may be executed in two or more
counterparts any by facsimile transmission of signed counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12. WAIVER OF JURY TRIAL. AFTER CONSULTING WITH COUNSEL AND CAREFUL
CONSIDERATION, THE BORROWER AND THE LENDER KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER
LOAN DOCUMENTS, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(ORAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR LENDER. THIS WAIVER IS A
MATERIAL INDUCEMENT TO LENDER'S AGREEMENT TO MAKE THE LOAN TO THE BORROWER.
13. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
14. JOINT VENTURE. Neither this Loan Agreement nor any other Loan Document
creates or evidences a partnership or joint venture between the Borrower and the
Lender. The relationship between Borrower and Lender is solely that of a debtor
and creditor.
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
LENDER:
______________________________
Sally Siegel
BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:___________________________
___________________, as its
___________________________
<PAGE>
9
EXHIBIT "A"
With respect to individuals, an "accredited investor" is defined by Rule
501(a) of Regulation D, promulgated under the Securities Act of 1933, as amended
("Reg D"), as (i) "any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds
$1,000,000," (ii) "any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year," or (iii)
"any director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer or general
partner of a general partner of that issuer."
"Purchaser representative" is defined by Reg D as a person that is "not an
affiliate, director, officer or other employee of the issuer, or beneficial
owner of 10 percent or more of any class of the equity securities or 10 percent
or more of the equity interest in the issuer," unless the purchaser is (a) a
relative of the purchaser representative by blood, marriage, or adoption, and is
not more remote than a first cousin; (b) a trust or estate in which the
purchaser representative and any persons related to him as described in sections
(a) or (c) of this paragraph collectively have more than 50% of the beneficial
interest (excluding contingent interest) or of which the purchaser
representative serves as trustee, executor, or in any similar capacity; (c) a
corporation or other organization of which the purchaser representative and any
persons related to him as described in sections (a) or (b) of this paragraph
collectively are the beneficial owners of more than 50% of the equity securities
(excluding directors' qualifying shares) or equity interests. A "purchaser
representative" must have such knowledge and experience in financial and
business matters that he is capable of evaluating (together with the purchaser
or other purchaser representatives of the purchaser) the merits and risks of the
prospective investment. A "purchaser representative" must also meet certain
acknowledgement and disclosure requirements described in Reg D.
<PAGE>
1
Promissory Note
Date August 7, 1998
Amount $25,000.00 Maturity Date February 15, 1999
===============================================================================
Lender: Borrowers:
Sally Siegel Medical Technology Systems, Inc.
1550 Belleair Lane 12920 Automobile Boulevard
Clearwater, Florida 34624 Clearwater, Florida 33762
===============================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Lender, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Lender,
the principal amount of Twenty Five Thousand and No/100 Dollars ($25,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
1. Rate.
Fixed Rate. The Rate shall be fixed at twelve percent (12.0%) per annum.
Notwithstanding any provision of this Note, Lender does not intend to
charge and Borrower shall not be required to pay any amount of interest or other
charges in excess of the maximum permitted by the applicable law of the State of
Florida; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to Borrower
or credited against principal, at the option of Lender.
2. Accrual Method. Unless otherwise indicated, interest at the Rate set
forth above will be calculated by the 365/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder).
3. Payment Schedule. All payments received hereunder shall be applied first
to the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Lender
shall determine at its option.
Single Payment. Principal and interest shall be paid in full in a single
payment on February 15, 1999.The maturity date of this Note shall be
automatically extended from February 15, 1999, to May 16, 1999, if the Borrower
satisfies all of the terms and conditions of a Loan Agreement of even date
herewith between Borrower and Lender.
4. Waivers, Consents and Covenants. Borrower, any endorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any endorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to
Lender (the "Loan Documents"); (b) consent to all delays, extensions, renewals
or other modifications of this Note or the Loan Documents, or waivers of any
term hereof or of the Loan Documents, or release or discharge by Lender of any
of Obligors, or release, substitution or exchange of any security for the
payment hereof, or the failure to act on the part of Lender, or any indulgence
shown by Lender (without notice to or further assent from any of Obligors), and
agree that no such action, failure to act or failure to exercise any right or
remedy by Lender shall in any way affect or impair the obligations of any
Obligors or be construed as a waiver by Lender of, or otherwise affect, any of
Lender's rights under this Note, under any endorsement or guaranty of this Note
or under any of the Loan Documents; and (c) agree to pay, on demand, all costs
and expenses of collection or defense of this Note or of any endorsement or
guaranty hereof and/or the enforcement or defense of Lender's rights with
respect to, or the administration, supervision, preservation, or protection of,
or realization upon, any property securing payment hereof, including, without
limitation, reasonable attorney's and paralegal=s fees, including fees related
to any suit, mediation or arbitration proceeding, out of court payment
agreement, trial, appeal, bankruptcy proceedings or other proceeding, in such
amount as may be determined reasonable by any arbitrator or court, whichever is
applicable.
5. Indemnification. Obligors agree to promptly pay, indemnify and hold
Lender harmless from all State and Federal taxes of any kind and other
liabilities with respect to or resulting from the execution and/or delivery of
this Note or any advances made pursuant to this Note. If this Note has a
revolving feature and is secured by a mortgage, Obligors expressly consent to
the deduction of any applicable taxes from each taxable advance extended by
Lender.
6. Prepayments. Prepayments may be made in whole or in part at any time
without premium or penalty. All prepayments of principal shall be applied in the
inverse order of maturity, or in such other order as Lender shall determine in
its sole discretion.
7. Delinquency Charge. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of any payment that
is more than fifteen days late.
8. Events of Default. The following are events of default hereunder: (a)the
failure to pay any obligation, liability or indebtedness of any Obligor to
Lender, whether under this Note or any Loan Documents, as and when due (whether
at maturity or by acceleration); (b) the failure to perform any other
obligation, liability or indebtedness of any Obligor to Lender, which failure is
not cured within fifteen (15) days from the date on which Lender provides
Borrower written notice of such failure to the extent that any such default can
be cured by Borrower; (c) the commencement of a proceeding against any Obligor
for dissolution or liquidation, the voluntary or involuntary termination or
dissolution of any Obligor or the merger or consolidation of any Obligor with or
into another entity; (d) the insolvency of, the business failure of, the
appointment of a custodian, trustee, liquidator or receiver for or for any of
the property of, the assignment for the benefit of creditors by, or the filing
of a petition under bankruptcy, insolvency or debtor's relief law or the filing
of a petition for any adjustment of indebtedness, composition or extension by or
against any Obligor; (e) the determination by Lender that any representation or
warranty made to Lender by any Obligor in any Loan Documents or otherwise or in
any financial statement or financial information submitted to Lender by any
Borrower is or was, when it was made, untrue or materially misleading; (f) the
entry of a judgment against any Obligor in excess of $50,000.00, which judgment
is not satisfied or bonded off within thirty (30) days from the date of entry of
the judgment; (g) the seizure or forfeiture of, or the issuance of any writ of
possession, garnishment or attachment which writ relates to any damage in excess
of $50,000.00 and which writ is not dismissed within thirty (30) days from the
date of issuance of any such writ; or (h) the failure of any Borrower's business
to comply in any material respect with any law or regulation controlling its
operation.
<PAGE>
2
9. Remedies upon Default. Whenever there is a default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Lender (however acquired or evidenced) shall, at the option of
Lender, become immediately due and payable and any obligation of Lender to
permit further borrowing under this Note shall immediately cease and terminate,
and/or (b) to the extent permitted by law, the Rate of interest on the unpaid
principal shall be increased at Lender's discretion up to the maximum rate
allowed by law, or if none, 18% per annum (the "Default Rate"). The provisions
herein for a Default Rate shall not be deemed to extend the time for any payment
hereunder or to constitute a "grace period" giving Obligors a right to cure any
default. At Lender's option, any accrued and unpaid interest, fees or charges
may, for purposes of computing and accruing interest on a daily basis after the
due date of the Note or any installment thereof, be deemed to be a part of the
principal balance, and interest shall accrue on a daily compounded basis after
such date at the Default Rate provided in this Note until the entire outstanding
balance of principal and interest is paid in full. Upon a default under this
Note, Lender is hereby authorized at any time, at its option and without notice
or demand, to set off and charge against any deposit accounts of any Obligor (as
well as any money, instruments, securities, documents, chattel paper, credits,
claims, demands, income and any other property, rights and interests of any
Obligor), which at any time shall come into the possession or custody or under
the control of Lender or any of its agents, affiliates or correspondents, any
and all obligations due hereunder. Additionally, Lender shall have all rights
and remedies available under each of the Loan Documents, as well as all rights
and remedies available at law or in equity. Any judgment rendered on this Note
shall bear interest at the highest rate of interest permitted pursuant to
Chapter 687, Florida Statutes.
10. Non-waiver. The failure at any time of Lender to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options or rights at a later
date. All rights and remedies of Lender shall be cumulative and may be pursued
singly, successively or together, at the option of Lender. The acceptance by
Lender of any partial payment shall not constitute a waiver of any default or of
any of Lender's rights under this Note. No waiver of any of its rights
hereunder, and no modification or amendment of this Note, shall be deemed to be
made by Lender unless the same shall be in writing, duly signed on behalf of
Lender; each such waiver shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Lender or the obligations of
Obligors to Lender in any other respect at any other time.
11. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Lender shall be governed by and interpreted in
accordance with the law of the State of Florida. In any litigation in connection
with or to enforce this Note or any endorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Florida or the United States
located within the State of Florida and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent
Lender from bringing any action or exercising any rights within any other state
or jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law. The interest rate charged on this Note is
authorized by Chapter 655, Florida Statutes and Section 687.12, Florida
Statutes.
12. Partial Invalidity. The unenforceability or invalidity of any provision
of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of this
Note or of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
13. Binding Effect. This Note shall be binding upon and inure to the
benefit of Borrower, Obligors and Lender and their respective successors,
assigns, heirs and personal representatives, provided, however, that no
obligations of Borrower or Obligors hereunder can be assigned without prior
written consent of Lender.
14. Controlling Document. To the extent that this Note conflicts with or is
in any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
15. WAIVER OF JURY TRIAL.AFTER CONSULTING WITH COUNSEL AND CAREFUL
CONSIDERATION, BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL
BY JURY WITH RESPECT TO ANY LITIGATION ARISING OUT OF THIS NOTE OR THE LOAN
DOCUMENTS, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL
OR WRITTEN), OR ACTIONS OF BORROWER OR LENDER.THIS WAIVER IS A MATERIAL
INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS NOTE. Borrower represents to Lender
that the proceeds of this loan are to be used primarily for business. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT.THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If this Note is secured by a mortgage on real property, documentary stamp taxes
have been paid and affixed to the mortgage.
EXECUTION DATE: August 7, 1998
BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:____________________________
____________________, as its
____________________________
<PAGE>
1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE ACT OR AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
DATED: August 7, 1998 NO. I
FORM OF WARRANT
MEDICAL TECHNOLOGY SYSTEMS, INC.
Warrant to Purchase 12,500 Shares, Subject to Adjustment,
of Common Stock, par value $.01 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON August 7, 2008 OR SUCH LATER DATE AS
DESCRIBED IN THE FIRST PARAGRAPH BELOW
This certifies that, for value received, Sally Siegel or registered assigns
(collectively with Sally Siegel, the "Holder"), is entitled to purchase from
Medical Technology Systems, Inc., a Florida corporation (the "Company"), 12,500
shares (which become exercisable on the date hereof), (the "Shares") of the
Company's Common Stock, par value $.01 per share (the "Common Stock"), at a
price of $0.75 per Share (the "Exercise Price") for ten years after the warrant
becomes exercisable with respect to such shares (the "Exercise Period"), subject
to the terms, conditions, and adjustments set forth in this warrant (the
"Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole or in part
by the Holder during the applicable Exercise Period upon presentation and
surrender hereof, with the Purchase Form attached hereto as Exhibit A duly
executed, at the office of the Company located at 12920 Automobile Boulevard,
Clearwater, Florida 33762, accompanied by full payment of the Exercise Price
multiplied by the number of Shares of the Company being purchased (the "Purchase
Price"), whereupon the Company shall cause the appropriate number of Shares to
be issued and shall deliver to the Holder, within 10 days of surrender of the
Warrant, a certificate representing the Shares being purchased. Upon each
partial exercise hereof, a new Warrant evidencing the remainder of the Shares
will be issued to the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise Period(s), and
otherwise on the same terms and conditions as the Warrant partially exercised.
The Purchase Price shall be payable by delivery of a certified or bank cashier's
check payable to the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of the
Purchase Price, or, if the Company's Common Stock is listed on a securities
exchange or market, in the manner set forth in the following paragraph if
requested by the Holder in the Purchase Form. The Holder shall be deemed for all
purposes to have become the holder of record of Shares so purchased upon
exercise of this Warrant as of the close of business on the date as of which
this Warrant, together with a duly executed Purchase Form, was delivered to the
Company and payment of the Purchase Price was made, regardless of the date of
delivery of any certificate representing the Shares so purchased, except that if
the Company were subject to any legal requirements prohibiting it from issuing
shares of Common Stock on such date, the Holder shall be deemed to have become
the record holder of such Shares on the next succeeding date as of which the
Company ceased to be so prohibited.
<PAGE>
2
If the Company's Common Stock is listed on a securities exchange or market,
in addition to the method of payment set forth above and in lieu of any cash
payment required, the Holder shall have the right to exercise this Warrant in
full or in part by surrendering this Warrant in the manner specified above in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which this Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) less the Purchase
Price, and the denominator of which is the Market Price. For purpose of this
Warrant, "Market Price" shall mean the average closing sale price quoted on a
share of Common Stock on the NASDAQ National Market or the principal stock
exchange on which the Common Stock is then traded for the three trading days
immediately prior to the date of the delivery to the Company of a purchase form
(or if the Company's Common Stock is not traded or listed on the NASDAQ National
Market or any other principal securities market, the average of the closing bid
prices on the NASDAQ SmallCap Market, the OTC Electronic Bulletin Board, or
otherwise in the over-the-counter market on such days as reported by NASDAQ, the
National Quotation Bureau Incorporated or any comparable system, or if not so
reported, as reported by any New York Stock Exchange member firm selected in
good faith by the Company for such purpose).
2. Exchange; Restrictions on Transfer or Assignment. This Warrant is
exchangeable, without expense, at the option of the Holder, upon surrender
hereof to the Company for other Warrants of different denominations entitling
the Holder to purchase in the aggregate the same number of Shares purchasable
hereunder. Subject to compliance with the Act, applicable state securities laws,
and the requirements pertaining to transfer described in Section 5, this Warrant
and the Holder's rights hereunder are transferable. To effect a transfer of this
Warrant, the Holder shall surrender the Warrant to the Company at its principal
office with the Assignment Form attached hereto as Exhibit B duly completed and
executed (with signature guaranteed), whereupon the Company, if the proposed
assignment is permitted pursuant to the provisions hereof, shall register the
assignment of this Warrant in accordance with the information contained in the
assignment instrument and shall, without charge, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees named in such
assignment instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not theretofore
exercised, transferred, or assigned) and this Warrant shall promptly be
cancelled. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.
3. Rights and Obligations of Warrant Holders. This Warrant does not confer
upon the Holder any rights as a shareholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed herein and the
Holder, by acceptance hereof, consents to and agrees to be bound by and to
comply with all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if any, may, prior
to any presentation of this Warrant for registration of transfer, deem and treat
the person in whose name this Warrant is registered as the absolute, true, and
lawful owner of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the contrary.
4. Covenants and Warranties of the Company. The Company covenants and
agrees that (i) any and all Shares that are issued and delivered upon exercise
of this Warrant and payment of the Purchase Price will, upon delivery, be duly
authorized, validly issued, fully-paid, and nonassessable shares of Common Stock
and (ii) the Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common Stock
sufficient to permit the exercise in full of this Warrant. The Company will take
all such actions as may be necessary to assure that all shares of Common Stock
may be so issued without violation by the Company of any applicable law or
government regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance,
which the Company will transmit promptly upon issuance of such shares).
<PAGE>
3
The Company represents and warrants that (i) the Company is a corporation
duly organized, validly existing, and of active status under the laws of the
State of Florida, (ii) the Company has all requisite corporate power and
authority to issue this Warrant and to consummate the transactions contemplated
hereby, and such issuance and consummation will not conflict with, result in a
material breach of, constitute a material default under, or material violation
of any provision of the Company's Articles of Incorporation or Bylaws, or any
law or regulation of any governmental authority or any provision of any
agreement, judgment, or decree affecting the Company and (iii) all corporate
action required to be taken by the Company in connection with the execution and
delivery of this Warrant and the performance of the Company's obligations
hereunder has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges that this
Warrant and the Shares issuable upon exercise thereof have not been registered
under the Act or applicable state law. The Holder agrees, by acceptance of this
Warrant, (i) that no sale, transfer, or distribution of this Warrant or the
Shares shall be made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable prospectus delivery
requirements and the restrictions on transfer set forth herein, and (ii) that if
any distribution or any other transfer of this Warrant or any Shares is proposed
to be made by it otherwise than pursuant to an effective registration statement
under the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed distribution will not
be in violation of the Act or of applicable state law.
6. Adjustment. The number of Shares purchasable upon the exercise of this
Warrant and the Exercise Price per Share are subject to adjustment from time to
time as provided in this Section 6.
(a) Subdivision or Combination of Shares. If the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares (including a stock split effected as a stock dividend) or combine
its outstanding shares of Common Stock into a lesser number of shares, the
number of Shares issuable upon exercise of this Warrant shall be adjusted
to such number as is obtained by multiplying the number of shares issuable
upon exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate number
of shares of Common Stock outstanding immediately after giving effect to
such subdivision or combination and the denominator of which is the
aggregate number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied by the
number of Shares issuable upon full exercise of this Warrant (as increased
or decreased to reflect such subdivision or combination of outstanding
shares of Common Stock, as the case may be), equal the product of the
Exercise Price per Share in effect immediately prior to such subdivision or
combination multiplied by the number of Shares issuable upon exercise of
this Warrant immediately prior to such subdivision or combination.
<PAGE>
4
(b) Effect of Sale, Merger, or Consolidation. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of
all or substantially all of the Company's assets to another corporation
shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and the terms and
conditions specified in this Warrant and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of this Warrant,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any
such case appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and
delivered to the Holder at its last address appearing on the books of the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence, the
Holder may be entitled to purchase.
(c) Issuance of Common Stock Below Exercise Price. If the Company
shall issue or sell shares of Common Stock or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock ("Common Stock Equivalents")
pursuant to the exercise of any Common Stock Equivalents outstanding on the
date of the Note under any of the Company's employee benefit plans), at a
price per share of Common Stock (determined, in the case of Common Stock
Equivalents, by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Common Stock Equivalent,
plus the total consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (B) the total number of shares of
Common Stock covered by such Common Stock Equivalent), that is lower
(calculated the date of such sale or issuance) than the Exercise Price, or
for no consideration, then:
(i) in each case the number of shares of Common Stock thereafter
issuable upon the exercise of this Warrant (whether or not presently
exercisable) shall be increased in a manner determined by multiplying
the number of shares of Common Stock issuable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon exercise,
conversion, or exchange of such Common Stock Equivalent, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock that the "aggregate consideration to be
received by the Company" (as defined below) in connection with such
sale or issuance would purchase at the Exercise Price. For the purpose
of such adjustments the "aggregate consideration to be received by the
Company" shall be the consideration received by the Company for such
Common Stock or Common Stock Equivalents, plus any consideration or
premiums stated in the Common Stock Equivalents to be paid for the
shares of Common Stock covered thereby; and
<PAGE>
5
(ii) in each case the Exercise Price will be reduced to the price
calculated by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately before such
issuance or sale multiplied by the then existing Exercise Price plus
(2) the aggregate consideration, if any, received by the Company upon
such issuance or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale plus the
number of shares of Common Stock issuable upon the exercise,
conversion, or exchange of any Common Stock Equivalents issued or sold
in the transaction for which the Company is making this adjustment.
If the Company shall issue or sell shares of Common Stock or Common Stock
Equivalents for a consideration consisting, in whole or in part, of property
other than cash or its equivalent, then in determining the "price per share of
Common Stock" and the "consideration" receivable by or payable to the Company
for purposes of this Section 6(c), the Board of Directors of the Company shall
determine, in good faith, the fair value of such property. If the Company shall
issue and sell Common Stock Equivalents, together with one or more other
securities as part of a unit at a price per unit, then in determining the "price
per share of Common Stock" and the "consideration" receivable by or payable to
the Company for purposes of this Section 6(c), the Board of Directors of the
Company shall determine, in good faith, the fair value of the Common Stock
Equivalents then being sold as part of such unit.
(d) If any event occurs as to which the preceding Sections 6(a)
through (c) are not strictly applicable, but as to which the failure to
make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of this Warrant, as determined by the Company or as requested by
the Holder in accordance with the notice provisions of Section 12, then, in
each such case, the Company shall select an independent investment bank or
firm of independent public accountants, such investment bank or firm of
independent public accountants to be selected from a group of three
nationally recognized investment banks or firms of public accountants
chosen by the Holder, which will give its opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established in this Warrant. Upon receipt of such opinion, the Company will
promptly deliver a copy of such opinion to the Holder and will make the
adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the
Company. If the adjustment is requested by the Holder, however, and the
investment bank or firm of independent public accountants selected by the
Company pursuant to this paragraph determines that no adjustment is
necessary, then the fees and expenses described in the preceding sentence
shall be borne by the Holder.
(e) Notice to Holder of Adjustment. Whenever the number of Shares
purchasable upon exercise of this Warrant or the Exercise Price per Share
is adjusted as herein provided, the Company shall cause to be mailed to the
Holder within 5 days of such adjustment, in accordance with the provisions
of Section 12, notice setting forth the adjusted number of Shares
purchasable upon the exercise of the Warrant and the adjusted Exercise
Price and showing in reasonable detail the computation of the adjustment
and the facts upon which such adjustment is based.
(f) Notices to Holder of Certain Events. If at any time after the date
hereof:
(i) the Company shall declare any dividend or other distribution
upon or with respect to the Common Stock, including any dividend
payable in cash, shares of Common Stock or other securities of the
Company; or
<PAGE>
6
(ii) the Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into Common Stock or any rights to
subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as result of the subdivision or combination of
shares), or any conversion of the Shares into securities of another
corporation, or a sale of all or substantially all of the assets of
the Company, or a consolidation or merger of the Company with another
corporation (other than a merger with a subsidiary in which the
Company is the continuing corporation and which does not result in any
reclassification or change of the Shares issuable upon exercise of the
Warrants); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, not less than 15 days before any record date or other date set for
the definitive action, written notice of the date upon which the books of the
Company shall close or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such reorganization,
reclassification, conversion, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
Shares and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holder of record of the shares of Common Stock
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation, or winding
up, as the case may be (on which date in the event of voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the right to exercise
the Warrants shall terminate).
7. Piggy-Back Registration.
(a) If the Company shall, at any time prior to the expiration of this
Warrant, authorize a registration of its Common Stock with the Securities
and Exchange Commission (the "SEC"), the Company shall furnish the Holder
with at least 30 days prior written notice thereof and the Holder shall
have the option to include the Shares to be issued to the Holder upon the
exercise of this Warrant in such registration statement. The Holder shall
exercise the "piggy-back registration rights" granted pursuant to this
Section 7 by giving written notice to the Company within 20 days of the
receipt of the written notice from the Company described above.
(b) Notwithstanding any other provision of this Warrant, the Company's
obligations under this Section 7 shall be subject to the following terms
and conditions:
(i) The obligations of the Company set forth under this Section 7
shall not arise upon the filing of a registration statement that
covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt
securities not convertible into, or exchangeable for, shares of Common
Stock; (C) securities to be issued pursuant to a transaction
registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); or (D) a stock option, stock bonus,
stock purchase, or other employee benefit or compensation plan or
securities issued or issuable pursuant to any such plan.
<PAGE>
7
(ii) If the Company files a registration statement in connection
with an underwritten public offering of Common Stock, the Company
shall use its best efforts to cause the managing underwriter of the
proposed offering to grant any request by the Holder that Shares
purchased by the Holder upon the exercise of this Warrant be included
in the proposed public offering on terms and conditions that are
customary under industry practice. Notwithstanding any other provision
of this Agreement, if the managing underwriter of the public offering
of the Common Stock gives written notice to the Company that, in the
reasonable opinion of such managing underwriter, marketing factors
require a limitation of the total number of shares of Common Stock to
be underwritten, then the number of Shares purchased by the Holder
upon the exercise of this Warrant that the Company shall be obligated
to include in the registration statement shall be reduced in
accordance with the limitations imposed by the managing underwriter.
(iii) The Holder must provide to the Company all information, and
take all action, the Parent reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law or
regulation or to prepare the registration statement that will cover
the Shares that will be included in the registration.
(c) The Company will pay all Registration Expenses (as defined below)
in connection with the registration of the Shares pursuant to this Section
7. For purposes of this Warrant, the term "Registration Expenses" shall
mean all expenses incurred by the Company in complying with this Section 7,
including, without limitation, all registration and filing fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company, state Blue Sky fees and expenses, transfer agent fees, cost of
engraving of stock certificates, costs for mailing and tombstone
advertising, cost of preparing the registration statement, related
exhibits, amendments and supplements thereto, underwriting documents,
selected dealer agreements, preliminary and final prospectuses, and the
expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Shares and the fees and expenses of the Holder's own
counsel and accountants, which shall be borne by the Holder.
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holder from and
against any and all losses, claims, damages, expenses, and liabilities
caused by any untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact necessary to make any
statement therein not misleading. The foregoing indemnification and
agreement to hold harmless shall not apply, however, insofar as such
losses, claims, damages, expenses, and liabilities are caused by an untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use in any registration statement or
prospectus.
(b) The Holder will indemnify the Company, and each person who
controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses, and liabilities
caused by an untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by an omission to state a material fact necessary to make any
statement therein not misleading insofar as such losses, claims, damages,
expenses, and liabilities are caused by an untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use in any registration statement or prospectus.
(c) Each indemnified party promptly shall notify each indemnifying
party of any claim asserted or action commenced against it that is subject
to the indemnification provisions of this Section, but failure to so notify
an indemnifying party will not relieve the indemnifying party from any
liability pursuant to these indemnity provisions or otherwise, unless and
only to the extent that the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be
materially prejudicial to an indemnifying party, the failure of an
indemnified party to notify an indemnifying party of a lawsuit within ten
days after the date when the indemnified party is served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim
will be considered materially prejudicial to the rights and obligations of
any indemnifying party who was not also served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim.
<PAGE>
8
The indemnifying party may participate at its own expense in the
defense, or, if the indemnifying party so elects within a reasonable time,
the indemnifying party may assume the defense, of any action commenced
against the indemnified party that is the subject of indemnification under
this Section. If the indemnifying party elects to assume the defense of an
indemnified action, however, the indemnifying party shall engage to defend
the action legal counsel reasonably satisfactory to the indemnified party.
If the indemnifying party elects to assume the defense of any indemnified
action, the indemnified party, and each controlling person who is a
defendant in the action, will be entitled to employ separate counsel
participate in the defense of the action at its own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the
indemnifying party will not be liable for any settlement made without its
consent. The indemnifying party shall notify the indemnified party whether
or not it will consent to a proposed settlement within ten days after it
receives from the indemnified party notice of the proposed settlement,
summarizing all the terms and conditions of settlement. The indemnifying
party's failure to notify the indemnified party within that ten-day period
whether or not it consents to the proposed settlement will constitute its
consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including
any amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act
and the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the
person.
9. No Impairment. The Company will not by any action including, without
limitation, amending or permitting the amendment of the charter documents,
bylaws, or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share exchange,
dissolution, issue or sale of securities, or any other similar voluntary action,
avoid or seek to avoid the observance or performance of any of the express terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary to
protect the rights of the Holder against impairment or dilution. Without
limiting the generality of the foregoing, the Company will (i) take all such
action as may be reasonably necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon exercise
of the Warrant, free and clear of all liens, encumbrances, equities, and claims
and (ii) use all reasonable efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction over
the Company as may be necessary to enable the Company to perform its obligations
under this Warrant.
10. Dilution Fee. If, during the Exercise Period, the Company pays any
cash dividends or makes any cash distribution to any holder of any class of its
Common Stock with respect to such Common Stock and the Exercise Price exceeds
the Market Price, then the Holder of this Warrant will be entitled to receive in
respect of this Warrant a dilution fee in cash (the "Dilution Fee") on the date
of payment of such dividend or distribution, which Dilution Fee will be equal to
the amount per share paid to the holders of Common Stock times the number of
Shares currently exercisable under this Warrant.
11. Survival. The various rights and obligations of the Holder and of the
Company as set forth in Sections 4 and 5 hereof shall survive the exercise of
this Warrant and the surrender of this instrument upon such exercise.
<PAGE>
9
12. Notice. All notices required by this Warrant to be given or made by the
Company shall be given or made by first class mail, postage prepaid, addressed
to the registered Holder hereof at the address of such Holder as shown on the
books of the Company.
13. Loss or Destruction. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its counsel, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed, waived,
discharged, or terminated except by a written instrument executed by the
Company and the Holder.
(b) This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida, without regard
to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in such a
manner as to be effective, valid, and enforceable under applicable law, but
if any provision of this Warrant is held to be invalid, illegal, or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating
the remainder of this Warrant in such jurisdiction or any provision hereof
in any other jurisdiction.
(d) No course of dealing or delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right
or otherwise prejudice the Holder's rights, power, or remedies.
(e) The Company shall pay all expenses incurred by it in connection
with, and all documentary stamp and other taxes (other than stock transfer
taxes) and other governmental charges that may be imposed in respect of,
the issue, sale and delivery of this Warrant and the Shares issuable upon
the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors and assigns of the Company
and the successors and permitted assigns of the Holder.
<PAGE>
10
15. Further Assurances. The Company agrees that it will execute and record
such documents as the Holder shall reasonably request to secure for the Holder
any of the rights represented by this Warrant.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed by
its duly authorized officer as of the August 7, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
11
EXHIBIT "A"
PURCHASE FORM
To be executed upon exercise of the Warrant. Capitalized terms have the
same meanings ascribed to them in the Warrant.
TO: MEDICAL TECHNOLOGY SYSTEMS, INC.
The undersigned hereby exercises the right to purchase _____________ Shares
of Common Stock evidenced by the Warrant, according to the terms and conditions
thereof, and hereby makes payment of the Purchase Price. If the Company's Common
Stock is listed on a securities exchange or market, the undersigned [does] [does
not] choose to pay the Purchase Price pursuant to a cashless exercise of the
Warrant. The undersigned requests that certificates for the Shares shall be
issued in the name set forth below:
Dated: Name:_________________________
______________________________
(Address)
______________________________
Social Security No.___________
or other identifying number
<PAGE>
12
EXHIBIT "B"
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer of
the Warrant. Capitalized terms have the same meanings ascribed to them in the
Warrant.
FOR VALUE RECEIVED_____________________("Assignor")
hereby sells, assigns and transfers unto
____________________("Assignee")
(Name)
____________________
(Address)
____________________
the right to purchase __________ shares of Common Stock of Medical Technology
Systems, Inc. evidenced by the Warrant, together with all right, title, and
interest therein, and does irrevocably constitute and appoint
_____________________________ attorney to transfer the said right on the books
of said corporation with full power of substitution in the premises.
Date: Assignor
By:_______________________
Its:______________________
__________________________
Signature:
<PAGE>
1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE ACT OR AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
DATED: August 7, 1998 NO. I
FORM OF WARRANT
MEDICAL TECHNOLOGY SYSTEMS, INC.
Warrant to Purchase up to 2,250 Shares
of Common Stock, par value $.01 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON OR BEFORE AUGUST 7, 2008
This certifies that, for value received, Sally Siegel or registered assigns
(collectively with Sally Siegel, the "Holder"), is entitled to purchase from
Medical Technology Systems, Inc., a Florida corporation (the "Company"), if a
promissory note of Sally Siegel, a copy of which is attached hereto as Exhibit A
(the "Note"), is not paid in full as described below, up to 2,250 fully paid and
nonassessable shares (the "Shares") of the Common Stock, par value $.01 per
share, of the Company ("Common Stock"), which will become exercisable as
follows: 750 Shares if the Note (including any accrued interest) is not paid in
full on or before February 16, 1999, an additional 750 Shares if the Note
(including any accrued interest) is not paid in full on or before March 16,
1999, and an additional 750 Shares if the Note (including any accrued interest)
is not paid in full on or before April 16, 1999, in each case at a price of
$0.75 per Share (the "Exercise Price") for ten years after the warrant becomes
exercisable with respect to such Shares (the "Exercise Period"), subject to the
terms, conditions, and adjustments set forth in this Warrant (the "Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole or in part
by the Holder during the applicable Exercise Period upon presentation and
surrender hereof, with the Purchase Form attached hereto as Exhibit B duly
executed, at the office of the Company located at 12920 Automobile Boulevard,
Clearwater, Florida 33762, accompanied by full payment of the Exercise Price
multiplied by the number of Shares of the Company being purchased (the "Purchase
Price"), whereupon the Company shall cause the appropriate number of Shares to
be issued and shall deliver to the Holder, within 10 days of surrender of the
Warrant, a certificate representing the Shares being purchased. Upon each
partial exercise hereof, a new Warrant evidencing the remainder of the Shares
will be issued to the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise Periods, and
otherwise on the same terms and conditions as the Warrant partially exercised.
The Purchase Price shall be payable by delivery of a certified or bank cashier's
check payable to the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of the
Purchase Price, or, if the Company's Common Stock is listed on a securities
exchange or market, in the manner set forth in the following paragraph if
requested by the Holder in the Purchase Form. The Holder shall be deemed for all
purposes to have become the holder of record of Shares so purchased upon
exercise of this Warrant as of the close of business on the date as of which
this Warrant, together with a duly executed Purchase Form, was delivered to the
Company and payment of the Purchase Price was made, regardless of the date of
delivery of any certificate representing the Shares so purchased, except that if
the Company were subject to any legal requirements prohibiting it from issuing
shares of Common Stock on such date, the Holder shall be deemed to have become
the record holder of such Shares on the next succeeding date as of which the
Company ceased to be so prohibited.
<PAGE>
2
If the Company's Common Stock is listed on a securities exchange or market,
in addition to the method of payment set forth above and in lieu of any cash
payment required, the Holder shall have the right to exercise this Warrant in
full or in part by surrendering this Warrant in the manner specified above in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which this Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) less the Purchase
Price, and the denominator of which is the Market Price. For purpose of this
Warrant, "Market Price" shall mean the average closing sale price quoted on a
share of Common Stock on the NASDAQ National Market or the principal stock
exchange on which the Common Stock is then traded for the three trading days
immediately prior to the date of the delivery to the Company of a purchase form
(or if the Company's Common Stock is not traded or listed on the NASDAQ National
Market or any other principal securities market, the average of the closing bid
prices on the NASDAQ SmallCap Market, the OTC Electronic Bulletin Board, or
otherwise in the over-the-counter market on such days as reported by NASDAQ, the
National Quotation Bureau Incorporated or any comparable system, or if not so
reported, as reported by any New York Stock Exchange member firm selected in
good faith by the Company for such purpose).
2. Exchange; Restrictions on Transfer or Assignment. This Warrant is
exchangeable, without expense, at the option of the Holder, upon surrender
hereof to the Company for other Warrants of different denominations entitling
the Holder to purchase in the aggregate the same number of Shares purchasable
hereunder. Subject to compliance with the Act, applicable state securities laws,
and the requirements pertaining to transfer described in Section 5, this Warrant
and the Holder's rights hereunder are transferable. To effect a transfer of this
Warrant, the Holder shall surrender the Warrant to the Company at its principal
office with the Assignment Form attached hereto as Exhibit C duly completed and
executed (with signature guaranteed), whereupon the Company, if the proposed
assignment is permitted pursuant to the provisions hereof, shall register the
assignment of this Warrant in accordance with the information contained in the
assignment instrument and shall, without charge, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees named in such
assignment instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not theretofore
exercised, transferred, or assigned) and this Warrant shall promptly be
cancelled. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.
3. Rights and Obligations of Warrant Holders. This Warrant does not confer
upon the Holder any rights as a shareholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed herein and the
Holder, by acceptance hereof, consents to and agrees to be bound by and to
comply with all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if any, may, prior
to any presentation of this Warrant for registration of transfer, deem and treat
the person in whose name this Warrant is registered as the absolute, true, and
lawful owner of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the contrary.
<PAGE>
3
4. Covenants and Warranties of the Company. The Company covenants and
agrees that (i) any and all Shares that are issued and delivered upon exercise
of this Warrant and payment of the Purchase Price will, upon delivery, be duly
authorized, validly issued, fully-paid, and nonassessable shares of Common Stock
and (ii) the Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common Stock
sufficient to permit the exercise in full of this Warrant. The Company will take
all such actions as may be necessary to assure that all shares of Common Stock
may be so issued without violation by the Company of any applicable law or
government regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance,
which the Company will transmit promptly upon issuance of such shares).
The Company represents and warrants that (i) the Company is a
corporation duly organized, validly existing, and of active status under the
laws of the State of Florida, (ii) the Company has all requisite corporate power
and authority to issue this Warrant and to consummate the transactions
contemplated hereby, and such issuance and consummation will not conflict with,
result in a material breach of, constitute a material default under, or material
violation of any provision of the Company's Articles of Incorporation or Bylaws,
or any law or regulation of any governmental authority or any provision of any
agreement, judgment, or decree affecting the Company and (iii) all corporate
action required to be taken by the Company in connection with the execution and
delivery of this Warrant and the performance of the Company's obligations
hereunder has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges that this
Warrant and the Shares issuable upon exercise thereof have not been registered
under the Act or applicable state law. The Holder agrees, by acceptance of this
Warrant, (i) that no sale, transfer, or distribution of this Warrant or the
Shares shall be made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable prospectus delivery
requirements and the restrictions on transfer set forth herein, and (ii) that if
any distribution or any other transfer of this Warrant or any Shares is proposed
to be made by it otherwise than pursuant to an effective registration statement
under the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed distribution will not
be in violation of the Act or of applicable state law.
6. Adjustment. The number of Shares purchasable upon the exercise of this
Warrant and the Exercise Price per Share are subject to adjustment from time to
time as provided in this Section 6.
(a) Subdivision or Combination of Shares. If the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares (including a stock split effected as a stock dividend) or combine
its outstanding shares of Common Stock into a lesser number of shares, the
number of Shares issuable upon exercise of this Warrant shall be adjusted
to such number as is obtained by multiplying the number of shares issuable
upon exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate number
of shares of Common Stock outstanding immediately after giving effect to
such subdivision or combination and the denominator of which is the
aggregate number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied by the
number of Shares issuable upon full exercise of this Warrant (as increased
or decreased to reflect such subdivision or combination of outstanding
shares of Common Stock, as the case may be), equal the product of the
Exercise Price per Share in effect immediately prior to such subdivision or
combination multiplied by the number of Shares issuable upon exercise of
this Warrant immediately prior to such subdivision or combination.
<PAGE>
4
(b) Effect of Sale, Merger, or Consolidation. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of
all or substantially all of the Company's assets to another corporation
shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and the terms and
conditions specified in this Warrant and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of this Warrant,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any
such case appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and
delivered to the Holder at its last address appearing on the books of the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence, the
Holder may be entitled to purchase.
(c) Issuance of Common Stock Below Exercise Price. If the Company
shall issue or sell shares of Common Stock or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock ("Common Stock Equivalents")
pursuant to the exercise of any Common Stock Equivalents outstanding on the
date of the Note under any of the Company's employee benefit plans), at a
price per share of Common Stock (determined, in the case of Common Stock
Equivalents, by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Common Stock Equivalent,
plus the total consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (B) the total number of shares of
Common Stock covered by such Common Stock Equivalent), that is lower
(calculated the date of such sale or issuance) than the Exercise Price, or
for no consideration, then:
(i) in each case the number of shares of Common Stock thereafter
issuable upon the exercise of this Warrant (whether or not presently
exercisable) shall be increased in a manner determined by multiplying
the number of shares of Common Stock issuable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon conversion,
exercise, or exchange of such Common Stock Equivalent, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock that the "aggregate consideration to be
received by the Company" (as defined below) in connection with such
sale or issuance would purchase at the Exercise Price. For the purpose
of such adjustments the "aggregate consideration to be received by the
Company" shall be the consideration received by the Company for such
Common Stock or Common Stock Equivalents, plus any consideration or
premiums stated in the Common Stock Equivalents to be paid for the
shares of Common Stock covered thereby; and
<PAGE>
5
(ii) in each case the Exercise Price will be reduced to the price
calculated by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately before such
issuance or sale multiplied by the then existing Exercise Price Plus
(2) the aggregate consideration, if any, received by the Company upon
such issuance or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale plus the
number of shares of Common Stock issuable upon the exercise,
conversion, or exchange of any Common Stock Equivalents issued or sold
in the transaction for which the Company is making this adjustment.
If the Company shall issue or sell shares of Common Stock or Common
Stock Equivalents for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the "price
per share of Common Stock" and the "consideration" receivable by or payable
to the Company for purposes of this Section 6(c), the Board of Directors of
the Company shall determine, in good faith, the fair value of such
property. If the Company shall issue and sell Common Stock Equivalents,
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of
this Section 6(c), the Board of Directors of the Company shall determine,
in good faith, the fair value of the Common Stock Equivalents then being
sold as part of such unit.
(d) If any event occurs as to which the preceding Sections 6(a)
through (c) are not strictly applicable, but as to which the failure to
make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of this Warrant, as determined by the Company or as requested by
the Holder in accordance with the notice provisions of Section 12, then, in
each such case, the Company shall select an independent investment bank or
firm of independent public accountants, such investment bank or firm of
independent public accountants to be selected from a group of three
nationally recognized investment banks or firms of public accountants
chosen by the Holder, which will give its opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established in this Warrant. Upon receipt of such opinion, the Company will
promptly deliver a copy of such opinion to the Holder and will make the
adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the
Company. If the adjustment is requested by the Holder, however, and the
investment bank or firm of independent public accountants selected by the
Company pursuant to this paragraph determines that no adjustment is
necessary, then the fees and expenses described in the preceding sentence
shall be borne by the Holder.
(e) Notice to Holder of Adjustment. Whenever the number of Shares
purchasable upon exercise of this Warrant or the Exercise Price per Share
is adjusted as herein provided, the Company shall cause to be mailed to the
Holder within 5 days of such adjustment, in accordance with the provisions
of Section 12, notice setting forth the adjusted number of Shares
purchasable upon the exercise of the Warrant and the adjusted Exercise
Price and showing in reasonable detail the computation of the adjustment
and the facts upon which such adjustment is based.
<PAGE>
6
(f) Notices to Holder of Certain Events. If at any time after the date
hereof:
(i) the Company shall declare any dividend or other distribution
upon or with respect to the Common Stock, including any dividend
payable in cash, shares of Common Stock or other securities of the
Company; or
(ii) the Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into Common Stock or any rights to
subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as result of the subdivision or combination of
shares), or any conversion of the Shares into securities of another
corporation, or a sale of all or substantially all of the assets of
the Company, or a consolidation or merger of the Company with another
corporation (other than a merger with a subsidiary in which the
Company is the continuing corporation and which does not result in any
reclassification or change of the Shares issuable upon exercise of the
Warrants); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, not less than 15 days before any record date or other date set for
the definitive action, written notice of the date upon which the books of the
Company shall close or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such reorganization,
reclassification, conversion, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
Shares and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holder of record of the shares of Common Stock
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation, or winding
up, as the case may be (on which date in the event of voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the right to exercise
the Warrants shall terminate).
7. Piggy-Back Registration.
(a) If the Company shall, at any time prior to the expiration of this
Warrant, authorize a registration of its Common Stock with the Securities
and Exchange Commission (the "SEC"), the Company shall furnish the Holder
with at least 30 days prior written notice thereof and the Holder shall
have the option to include the Shares to be issued to the Holder upon the
exercise of this Warrant in such registration statement. The Holder shall
exercise the "piggy-back registration rights" granted pursuant to this
Section 7 by giving written notice to the Company within 20 days of the
receipt of the written notice from the Company described above.
<PAGE>
7
(b) Notwithstanding any other provision of this Warrant, the Company's
obligations under this Section 7 shall be subject to the following terms
and conditions:
(i) The obligations of the Company set forth under this Section 7
shall not arise upon the filing of a registration statement that
covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt
securities not convertible into, or exchangeable for, shares of Common
Stock; (C) securities to be issued pursuant to a transaction
registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); or (D) a stock option, stock bonus,
stock purchase, or other employee benefit or compensation plan or
securities issued or issuable pursuant to any such plan.
(ii) If the Company files a registration statement in connection
with an underwritten public offering of Common Stock, the Company
shall use its best efforts to cause the managing underwriter of the
proposed offering to grant any request by the Holder that Shares
purchased by the Holder upon the exercise of this Warrant be included
in the proposed public offering on terms and conditions that are
customary under industry practice. Notwithstanding any other provision
of this Agreement, if the managing underwriter of the public offering
of the Common Stock gives written notice to the Company that, in the
reasonable opinion of such managing underwriter, marketing factors
require a limitation of the total number of shares of Common Stock to
be underwritten, then the number of Shares purchased by the Holder
upon the exercise of this Warrant that the Company shall be obligated
to include in the registration statement shall be reduced in
accordance with the limitations imposed by the managing underwriter.
(iii) The Holder must provide to the Company all information, and
take all action, the Parent reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law or
regulation or to prepare the registration statement that will cover
the Shares that will be included in the registration.
(c) The Company will pay all Registration Expenses (as defined below)
in connection with the registration of the Shares pursuant to this Section
7. For purposes of this Warrant, the term "Registration Expenses" shall
mean all expenses incurred by the Company in complying with this Section 7,
including, without limitation, all registration and filing fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company, state Blue Sky fees and expenses, transfer agent fees, cost of
engraving of stock certificates, costs for mailing and tombstone
advertising, cost of preparing the registration statement, related
exhibits, amendments and supplements thereto, underwriting documents,
selected dealer agreements, preliminary and final prospectuses, and the
expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Shares and the fees and expenses of the Holder's own
counsel and accountants, which shall be borne by the Holder.
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holder from and
against any and all losses, claims, damages, expenses, and liabilities
caused by any untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact necessary to make any
statement therein not misleading. The foregoing indemnification and
agreement to hold harmless shall not apply, however, insofar as such
losses, claims, damages, expenses, and liabilities are caused by an untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use in any registration statement or
prospectus.
<PAGE>
8
(b) The Holder will indemnify the Company, and each person who
controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses, and liabilities
caused by an untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by an omission to state a material fact necessary to make any
statement therein not misleading insofar as such losses, claims, damages,
expenses, and liabilities are caused by an untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use in any registration statement or prospectus.
(c) Each indemnified party promptly shall notify each indemnifying
party of any claim asserted or action commenced against it that is subject
to the indemnification provisions of this Section, but failure to so notify
an indemnifying party will not relieve the indemnifying party from any
liability pursuant to these indemnity provisions or otherwise, unless and
only to the extent that the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be
materially prejudicial to an indemnifying party, the failure of an
indemnified party to notify an indemnifying party of a lawsuit within ten
days after the date when the indemnified party is served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim
will be considered materially prejudicial to the rights and obligations of
any indemnifying party who was not also served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim.
The indemnifying party may participate at its own expense in the
defense, or, if the indemnifying party so elects within a reasonable time,
the indemnifying party may assume the defense, of any action commenced
against the indemnified party that is the subject of indemnification under
this Section. If the indemnifying party elects to assume the defense of an
indemnified action, however, the indemnifying party shall engage to defend
the action legal counsel reasonably satisfactory to the indemnified party.
If the indemnifying party elects to assume the defense of any indemnified
action, the indemnified party, and each controlling person who is a
defendant in the action, will be entitled to employ separate counsel
participate in the defense of the action at its own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the
indemnifying party will not be liable for any settlement made without its
consent. The indemnifying party shall notify the indemnified party whether
or not it will consent to a proposed settlement within ten days after it
receives from the indemnified party notice of the proposed settlement,
summarizing all the terms and conditions of settlement. The indemnifying
party's failure to notify the indemnified party within that ten-day period
whether or not it consents to the proposed settlement will constitute its
consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including
any amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act
and the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the
person.
<PAGE>
9
9. No Impairment. The Company will not by any action including, without
limitation, amending or permitting the amendment of the charter documents,
bylaws, or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share exchange,
dissolution, issue or sale of securities, or any other similar voluntary action,
avoid or seek to avoid the observance or performance of any of the express terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be reasonably
necessary to protect the rights of the Holder against impairment or dilution.
Without limiting the generality of the foregoing, the Company will (i) take all
such action as may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon exercise
of the Warrant, free and clear of all liens, encumbrances, equities, and claims
and (ii) use all reasonable efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction over
the Company as may be necessary to enable the Company to perform its obligations
under this Warrant.
10. Dilution Fee. If, during the Exercise Period, the Company pays any cash
dividends or makes any cash distribution to any holder of any class of its
Common Stock with respect to such Common Stock and the Exercise Price exceeds
the Market Price, then the Holder of this Warrant will be entitled to receive in
respect of this Warrant a dilution fee in cash (the "Dilution Fee") on the date
of payment of such dividend or distribution, which Dilution Fee will be equal to
the amount per share paid to the holders of Common Stock times the number of
Shares currently exercisable under this Warrant.
11. Survival. The various rights and obligations of the Holder and of the
Company as set forth in Sections 4 and 5 hereof shall survive the exercise of
this Warrant and the surrender of this instrument upon such exercise.
12. Notice. All notices required by this Warrant to be given or made by the
Company shall be given or made by first class mail, postage prepaid, addressed
to the registered Holder hereof at the address of such Holder as shown on the
books of the Company.
13. Loss or Destruction. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its counsel, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed, waived,
discharged, or terminated except by a written instrument executed by the
Company and the Holder.
(b) This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida, without regard
to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in such a
manner as to be effective, valid, and enforceable under applicable law, but
if any provision of this Warrant is held to be invalid, illegal, or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating
the remainder of this Warrant in such jurisdiction or any provision hereof
in any other jurisdiction.
<PAGE>
10
(d) No course of dealing or delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right
or otherwise prejudice the Holder's rights, power, or remedies.
(e) The Company shall pay all expenses incurred by it in connection
with, and all documentary stamp and other taxes (other than stock transfer
taxes) and other governmental charges that may be imposed in respect of,
the issue, sale and delivery of this Warrant and the Shares issuable upon
the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors and assigns of the Company
and the successors and permitted assigns of the Holder.
15. Further Assurances. The Company agrees that it will execute and record
such documents as the Holder shall reasonably request to secure for the Holder
any of the rights represented by this Warrant.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed
by its duly authorized officer as of the 7th day of August, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
11
EXHIBIT "A"
PROMISSORY NOTE
<PAGE>
12
EXHIBIT "B"
PURCHASE FORM
To be executed upon exercise of the Warrant. Capitalized terms have the
same meanings ascribed to them in the Warrant.
TO: Medical Technology Systems, Inc.
The undersigned hereby exercises the right to purchase _____________ Shares
of Common Stock evidenced by the Warrant, according to the terms and conditions
thereof, and hereby makes payment of the Purchase Price. If the Company's Common
Stock is listed on a securities exchange or market, the undersigned [does] [does
not] choose to pay the Purchase Price pursuant to a cashless exercise of the
Warrant. The undersigned requests that certificates for the Shares shall be
issued in the name set forth below:
Dated: Name:____________________
_________________________
(Address)
_________________________
Social Security No.______________
or other identifying number
<PAGE>
13
EXHIBIT "C"
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer of
the Warrant. Capitalized terms have the same meanings ascribed to them in the
Warrant.
FOR VALUE RECEIVED___________________("Assignor")
hereby sells, assigns and transfers unto
________________________ ("Assignee")
(Name)
________________________
(Address)
the right to purchase __________ shares of Common Stock of Medical Technology
Systems, Inc. evidenced by the Warrant, together with all right, title, and
interest therein, and does irrevocably constitute and appoint
_____________________________ attorney to transfer the said right on the books
of said corporation with full power of substitution in the premises.
Date: Assignor:______________________
By:____________________________
Its:___________________________
_______________________________
Signature:
<PAGE>
1
LOAN AGREEMENT
This Loan Agreement (the "Agreement") dated as of August 18, 1998, by and
among Todd and Shelia Siegel ("Lender") the Borrower described below.
In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, Lender and Borrower agree as follows:
1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined
herein, the following terms shall have the meaning set forth with respect
thereto:
A. Borrower(s): Medical Technology Systems, Inc.
B. Borrowers' Address: 12920 Automobile Boulevard Clearwater, Florida
33762
C. Hazardous Materials. Hazardous Materials include all materials
defined as hazardous materials or substances under any local, state or
federal environmental laws, rules or regulations, and petroleum, petroleum
products, oil and asbestos.
D. Loan. Any loan described in Section 2 hereof and any subsequent
loan which states that it is subject to this Loan Agreement.
E. Loan Documents. Loan Documents means this Loan Agreement and any
and all promissory notes executed by the Borrower in favor of Lender and
all other documents, instruments (including, without limitation, warrants),
guarantees, certificates and agreements executed and/or delivered by the
Borrower in connection with the Loan.
F. Accounting Terms. All accounting terms not specifically defined or
specified herein shall have the meanings generally attributed to such terms
under generally accepted accounting principles ("GAAP"), as in effect from
time to time, consistently applied, with respect to the financial
statements referenced in Section 3.H. hereof.
2. LOANS.
A. Loan. Lender hereby agrees to make a term loan to Borrowers in the
principal amount of $100,000.00. The obligation to repay the loan is
evidenced by a promissory note of even date herewith (the promissory note
together with any and all renewals, extensions or rearrangements thereof
being hereafter collectively referred to as the "Note") having a maturity
date, repayment terms and interest rate as set forth in the Note.
B. Use of Proceeds. The Borrower agree that the proceeds of the Loan
shall be used solely for working capital purposes and shall not be used to
satisfy any obligations of the Borrower other than obligations incurred in
the normal course of business of the Borrower.
C. Extension of Loan. The maturity of the Note shall be automatically
extended from February 18, 1999 until May 16, 1999 provided that: (a) no
defaults exist under this Agreement; and (b) that the Loan is not subject
to any setoff, defense or counterclaim by the Borrower.
<PAGE>
2
3. REPRESENTATIONS AND WARRANTIES OF BORROWERS. The Borrower hereby
represent and warrant to Lender as follows:
A. Good Standing. The Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the state of its
respective incorporation and has the power and authority to own its
property and to carry on its business in each jurisdiction in which
Borrower does business.
B. Authority and Compliance. The Borrower has full power and authority
to execute and deliver the Loan Documents and to incur and perform the
obligations provided for therein, all of which have been duly authorized by
all proper and necessary action of the appropriate governing body of such
Borrower. No consent or approval of any public authority or other third
party is required as a condition to the validity of any Loan Document, and
the Borrower is in compliance with all laws and regulatory requirements to
which it is subject.
C. Binding Agreement. This Agreement and the other Loan Documents
executed by the Borrower constitute valid and legally binding obligations
of the Borrower, enforceable in accordance with their terms.
D. Litigation. There is no proceeding involving the Borrower pending
or, to the knowledge of the Borrower, threatened before any court or
governmental authority, agency or arbitration authority, except as
disclosed to Lender in writing and acknowledged by Lender prior to the date
of this Agreement.
E. No Conflicting Agreements. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the
organization, power or authority of the Borrower and no provision of any
existing agreement, mortgage, indenture or contract binding on the Borrower
or affecting its respective properties, which would conflict with or in any
way prevent the execution, delivery or carrying out of the terms of this
Agreement and the other Loan Documents.
F. Ownership of Assets. The Borrower has good title to its assets, and
its assets are free and clear of liens, except those granted to Lender and
as disclosed to Lender prior to the date of this Agreement.
G. Taxes. All taxes and assessments due and payable by the Borrower
have been paid or are being contested in good faith by appropriate
proceedings and the Borrower has filed all tax returns which it is required
to file.
H. Financial Statements. The financial statements of Borrower
heretofore delivered to Lender have been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved and fairly
present Borrowers' financial condition as of the date or dates thereof. All
factual information furnished by the Borrower to Lender in connection with
this Agreement and the other Loan Documents is and will be accurate and
complete on the date as of which such information is delivered to Lender
and is not and will not be incomplete by the omission of any material fact
necessary to make such information not misleading.
I. Place of Business. The Borrower's chief executive office is located
at 12920 Automobile Boulevard, Clearwater, Florida 33762.
<PAGE>
3
J. Environmental. The conduct of the Borrower's business operations
and the condition of the Borrower's property does not and will not violate
any federal laws, rules or ordinances for environmental protection,
regulations of the Environmental Protection Agency, any applicable local or
state law, rule, regulation or rule of common law or any judicial
interpretation thereof relating primarily to the environment or Hazardous
Materials.
K. Continuation of Representations and Warranties. All representations
and warranties made under this Agreement shall be deemed to be made at and
as of the date hereof and at and as of the date of any advance under any
Loan.
4. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender hereby represents and
warrants to Borrowers that Lender: (a) is an "accredited investor," as that term
is defined in Exhibit "A" to this Agreement, (b) has such knowledge and
experience in financial and business matters rendering the Lender capable of
evaluating the merits and risks of an investment in securities of the Company (a
"sophisticated investor"), or (c) is not an accredited or sophisticated
investor, but has appointed a "purchaser representative," as that term is
defined in Exhibit "A" in connection with evaluating the merits and risks of an
investment in securities of the Company.
5. AFFIRMATIVE COVENANTS. Until full payment and performance of all
obligations of the Borrower under the Note, the Borrower will, unless Lender
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):
A. Financial Statements and Other Information. Maintain a system of
accounting satisfactory to Lender and in accordance with GAAP applied on a
consistent basis throughout the period involved, permit Lender's officers
or authorized representatives to visit and inspect such Borrower's books of
account and other records at such reasonable times and as often as Lender
may desire, and pay the reasonable fees and disbursements of any
accountants or other agents of Lender selected by Lender for the foregoing
purposes. Unless written notice of another location is given to Lender, the
Borrower's books and records will be located at such Borrower's chief
executive office set forth above. All financial statements called for below
shall be prepared in form and content acceptable to Lender.
In addition, the Borrower will:
i. Furnish to Lender audited financial statements of such
Borrower for each fiscal year of such Borrower, within ninety (90)
days after the close of each such fiscal year.
ii. Furnish to Lender Borrower-prepared financial statements of
such Borrower for each quarter of each fiscal year of such Borrower,
within forty-five (45) days after the close of each such period.
iii. Furnish to Lender promptly such additional financial
information and reports with respect to the business operations and
financial condition of the Borrower as Lender may reasonably request.
B. Insurance. Maintain insurance with responsible insurance companies
on such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same
vicinity, specifically to include fire and extended coverage insurance
covering all assets, business interruption insurance, workers compensation
insurance and liability insurance, all to be with such companies and in
such amounts as are satisfactory to Lender and providing for at least 30
days prior notice to Lender of any cancellation thereof. Satisfactory
evidence of such insurance will be supplied to Lender prior to funding
under the Loan(s) and 30 days prior to each policy renewal.
<PAGE>
4
C. Existence and Compliance. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
D. Adverse Conditions or Events. Promptly advise Lender in writing of
(i) any condition, event or act which comes to its attention that would or
might materially adversely affect such Borrower's financial condition or
operations or Lender's rights under the Loan Documents, (ii) any litigation
filed by or against such Borrower, (iii) any event that has occurred that
would constitute an event of default under any Loan Documents and (iv) any
uninsured or partially uninsured loss through fire, theft, liability or
property damage in excess of an aggregate of $50,000.00.
E. Taxes and Other Obligations. Pay all of its taxes, assessments and
other obligations, including, but not limited to taxes, costs or other
expenses arising out of this transaction, as the same become due and
payable, except to the extent the same are being contested in good faith by
appropriate proceedings in a diligent manner.
F. Maintenance. Maintain all of its tangible property in good
condition and repair and make all necessary replacements thereof, and
preserve and maintain all licenses, trademarks, privileges, permits,
franchises, certificates and the like necessary for the operation of its
business.
G. Environmental. Immediately advise Lender in writing of (i) any and
all enforcement, cleanup, remedial, removal, or other governmental or
regulatory actions instituted, completed or threatened pursuant to any
applicable federal, state, or local laws, ordinances or regulations
relating to any Hazardous Materials affecting such Borrower's business
operations; and (ii) all claims made or threatened by any third party
against such Borrower relating to damages, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials. The
Borrower shall immediately notify Lender of any remedial action taken by
Borrower with respect to such Borrower's business operations. Borrower will
not use or permit any other party to use any Hazardous Materials at any of
such Borrower's places of business or at any other property owned by such
Borrower except such materials as are incidental to such Borrower's normal
course of business, maintenance and repairs and which are handled in
compliance with all applicable environmental laws. The Borrower agrees to
permit Lender, its agents, contractors and employees to enter and inspect
any of such Borrower's places of business or any other property of such
Borrower at any reasonable times upon three (3) days prior notice for the
purposes of conducting an environmental investigation and audit (including
taking physical samples) to insure that such Borrower is complying with
this covenant and Borrower shall reimburse Lender on demand for the costs
of any such environmental investigation and audit. The Borrower shall
provide Lender, its agents, contractors, employees and representatives with
access to and copies of any and all data and documents relating to or
dealing with any Hazardous Materials used, generated, manufactured, stored
or disposed of by such Borrower's business operations within five (5) days
of the request therefore.
6. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of the Borrower under the Note, the Borrower will not, without the
prior written consent of Lender (and without limiting any requirement of any
other Loan Documents):
<PAGE>
5
A. Transfer of Assets or Control. Sell, lease, assign or otherwise
dispose of or transfer any assets, except in the normal course of its
business, or enter into any merger or consolidation, or transfer control or
ownership of the Borrower.
B. Character of Business. Change the general character of business as
conducted at the date hereof, or engage in any type of business not
reasonably related to its business as presently conducted.
C. Dividends and Distributions. Make any distribution or pay any
dividends (other than dividends payable in common stock of the Borrower) on
any shares of any class of its capital stock, or apply any of its property
or assets to the purchase, redemption or the retirement of any shares of
any class of its capital stock.
E. Management Change. Make any change in the president of the Borrower
or the chief executive officer of the Borrower, if applicable.
7. DEFAULT. Borrowers shall be in default under this Agreement and under
each of the other Loan Documents if they shall default in the payment of any
amounts due and owing under the Loan or should any of them fail to timely and
properly observe, keep or perform any term, covenant, agreement or condition in
any Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust, deed to secure debt, mortgage, assignment or other
contract securing or evidencing payment of any indebtedness of the Borrower to
Lender. Borrower shall also be in default under this Agreement if (a) any
Borrower defaults under the Second Amended and Restated Loan and Security
Agreement dated as of September 5, 1996, as amended, by and among SouthTrust,
certain of the Borrowers, Medical Technology Systems, Inc. ("MTS"), and certain
other parties, (b) if the Borrower or MTS defaults under or refuses to issue any
shares of stock pursuant to any stock warrant that is issued to Lender in
connection with the loan transaction contemplated by this Loan Agreement, or (c)
the Lender's attorney does not receive the original stock certificate or
certificates that are subject to the Pledge Agreement within ten (10) days from
the date of this Agreement.
8. REMEDIES UPON DEFAULT. If an event of default shall occur, Lender shall
have all rights, powers and remedies available under each of the Loan Documents
as well as all rights and remedies available at law or in equity.
9. NOTICES. All notices, requests or demands which any party is required or
may desire to give to any other party under any provision of this Agreement must
be in writing delivered to the other party at the following address:
Medical Technology Systems, Inc.
12920 Automobile Boulevard
Clearwater, Florida 33762
Fax. No. (727) 573-1100
Lender:
Todd and Shelia Siegel
10043 Windtree Blvd.
Seminole, FL 33772
Fax No. (727) 392-2837
<PAGE>
6
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:
A. If sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid;
B. If sent by any other means , upon delivery.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. The Borrower shall pay to Lender
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees incurred by Lender in connection with (a) negotiation
and preparation of this Agreement and each of the Loan Documents, and (b) all
other costs and attorneys' fees incurred by Lender for which Borrowers are
obligated to reimburse Lender in accordance with the terms of the Loan
Documents.
11. MISCELLANEOUS. Borrowers and Lender further covenant and agree as
follows, without limiting any requirement of any other Loan Document:
A. Cumulative Rights and No Waiver. Each and every right granted to
Lender under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all
other rights of Lender, and no delay in exercising any right shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of
any right preclude any other or future exercise thereof or the exercise of
any other right. The Borrower expressly waives any presentment, demand,
protest or other notice of any kind, including but not limited to notice of
intent to accelerate and notice of acceleration. No notice to or demand on
the Borrower in any case shall, of itself, entitle the Borrower to any
other or future notice or demand in similar or other circumstances.
B. Applicable Law. This Loan Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted in accordance
with the laws of Florida and applicable United States federal law.
C. Amendment. No modification, consent, amendment or waiver of any
provision of this Loan Agreement, nor consent to any departure by the
Borrower therefrom, shall be effective unless the same shall be in writing
and signed by an officer of Lender, and then shall be effective only in the
specified instance and for the purpose for which given. This Loan Agreement
is binding upon the Borrower, their respective successors and assigns, and
inures to the benefit of Lender, its successors and assigns; however, no
assignment or other transfer of the Borrower's rights or obligations
hereunder shall be made or be effective without Lender's prior written
consent, nor shall it relieve the Borrower of any obligations hereunder.
There is no third party beneficiary of this Loan Agreement.
D. Documents. All documents, certificates and other items required
under this Loan Agreement to be executed and/or delivered to Lender shall
be in form and content satisfactory to Lender and its counsel.
E. Partial Invalidity. The unenforceability or invalidity of any
provision of this Loan Agreement shall not affect the enforceability or
validity of any other provision herein and the invalidity or
unenforceability of any provision of any Loan Document to any person or
circumstance shall not affect the enforceability or validity of such
provision as it may apply to other persons or circumstances.
<PAGE>
7
F. Indemnification. Notwithstanding anything to the contrary contained
in Section 12(G), the Borrower shall indemnify, defend and hold Lender and
its successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, costs or
other expenses (including reasonable attorneys' fees and court costs)
arising from or in any way related to any of the transactions contemplated
hereby, including but not limited to actual or threatened damage to the
environment, agency costs of investigation, personal injury or death, or
property damage, due to a release or alleged release of Hazardous
Materials, arising from the Borrower's business operations, any other
property owned by the Borrower or in the surface or ground water arising
from any of the Borrower's business operations, or gaseous emissions
arising from any such Borrower's business operations or any other condition
existing or arising from the Borrower's business operations resulting from
the use or existence of Hazardous Materials, whether such claim proves to
be true or false. The Borrower further agrees that its indemnity
obligations shall include, but are not limited to, liability for damages
resulting from the personal injury or death of an employee of the Borrower,
regardless of whether the Borrower has paid the employee under the workmen'
s compensation laws of any state or other similar federal or state
legislation for the protection of employees. The term "property damage" as
used in this paragraph includes, but is not limited to, damage to any real
or personal property of the Borrower, the Lender, and of any third parties.
The Borrower's obligations under this paragraph shall survive the repayment
of the Loan.
G. Survivability. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the
making of the Loan and shall continue in full force and effect so long as
the Loan is outstanding or the obligation of the Lender to make any
advances under the Line shall not have expired.
H. Counterparts. This Agreement may be executed in two or more
counterparts any by facsimile transmission of signed counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12. WAIVER OF JURY TRIAL. AFTER CONSULTING WITH COUNSEL AND CAREFUL
CONSIDERATION, THE BORROWER AND THE LENDER KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER
LOAN DOCUMENTS, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(ORAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR LENDER. THIS WAIVER IS A
MATERIAL INDUCEMENT TO LENDER'S AGREEMENT TO MAKE THE LOAN TO THE BORROWER.
13. NO ORAL AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
14. JOINT VENTURE. Neither this Loan Agreement nor any other Loan Document
creates or evidences a partnership or joint venture between the Borrower and the
Lender. The relationship between Borrower and Lender is solely that of a debtor
and creditor.
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
LENDER:
_______________________________
Todd and Shelia Siegel
BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:___________________________
___________________, as its
___________________________
<PAGE>
9
EXHIBIT "A"
With respect to individuals, an "accredited investor" is defined by Rule
501(a) of Regulation D, promulgated under the Securities Act of 1933, as amended
("Reg D"), as (i) "any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds
$1,000,000," (ii) "any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year," or (iii)
"any director, executive officer, or general partner of the issuer of the
securities being offered or sold, or any director, executive officer or general
partner of a general partner of that issuer."
"Purchaser representative" is defined by Reg D as a person that is "not an
affiliate, director, officer or other employee of the issuer, or beneficial
owner of 10 percent or more of any class of the equity securities or 10 percent
or more of the equity interest in the issuer," unless the purchaser is (a) a
relative of the purchaser representative by blood, marriage, or adoption, and is
not more remote than a first cousin; (b) a trust or estate in which the
purchaser representative and any persons related to him as described in sections
(a) or (c) of this paragraph collectively have more than 50% of the beneficial
interest (excluding contingent interest) or of which the purchaser
representative serves as trustee, executor, or in any similar capacity; (c) a
corporation or other organization of which the purchaser representative and any
persons related to him as described in sections (a) or (b) of this paragraph
collectively are the beneficial owners of more than 50% of the equity securities
(excluding directors' qualifying shares) or equity interests. A "purchaser
representative" must have such knowledge and experience in financial and
business matters that he is capable of evaluating (together with the purchaser
or other purchaser representatives of the purchaser) the merits and risks of the
prospective investment. A "purchaser representative" must also meet certain
acknowledgement and disclosure requirements described in Reg D.
<PAGE>
1
Promissory Note
Date August 18, 1998
Amount $100,000.00 Maturity Date February 18, 1999
================================================================================
Lender: Borrowers:
Todd and Shelia Siegel Medical Technology Systems, Inc.
10043 Windtree Blvd. 12920 Automobile Boulevard
Seminole, Florida 33772 Clearwater, Florida 33762
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly
and severally, if more than one) promises to pay to the order of Lender, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Lender,
the principal amount of One Hundred Thousand and No/100 Dollars ($100,000.00),
or so much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
1. Rate.
Fixed Rate. The Rate shall be fixed at twelve percent (12.0%) per annum.
Notwithstanding any provision of this Note, Lender does not intend to
charge and Borrower shall not be required to pay any amount of interest or other
charges in excess of the maximum permitted by the applicable law of the State of
Florida; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to Borrower
or credited against principal, at the option of Lender.
2. Accrual Method. Unless otherwise indicated, interest at the Rate set
forth above will be calculated by the 365/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder).
3. Payment Schedule. All payments received hereunder shall be applied first
to the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Lender
shall determine at its option.
Single Payment. Principal and interest shall be paid in full in a single
payment on February 18, 1999.The maturity date of this Note shall be
automatically extended from February 18, 1999, to May 16, 1999, if the Borrower
satisfies all of the terms and conditions of a Loan Agreement of even date
herewith between Borrower and Lender.
4. Waivers, Consents and Covenants. Borrower, any endorser or guarantor
9hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any endorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to
Lender (the "Loan Documents"); (b) consent to all delays, extensions, renewals
or other modifications of this Note or the Loan Documents, or waivers of any
term hereof or of the Loan Documents, or release or discharge by Lender of any
of Obligors, or release, substitution or exchange of any security for the
payment hereof, or the failure to act on the part of Lender, or any indulgence
shown by Lender (without notice to or further assent from any of Obligors), and
agree that no such action, failure to act or failure to exercise any right or
remedy by Lender shall in any way affect or impair the obligations of any
Obligors or be construed as a waiver by Lender of, or otherwise affect, any of
Lender's rights under this Note, under any endorsement or guaranty of this Note
or under any of the Loan Documents; and (c) agree to pay, on demand, all costs
and expenses of collection or defense of this Note or of any endorsement or
guaranty hereof and/or the enforcement or defense of Lender's rights with
respect to, or the administration, supervision, preservation, or protection of,
or realization upon, any property securing payment hereof, including, without
limitation, reasonable attorney's and paralegal=s fees, including fees related
to any suit, mediation or arbitration proceeding, out of court payment
agreement, trial, appeal, bankruptcy proceedings or other proceeding, in such
amount as may be determined reasonable by any arbitrator or court, whichever is
applicable.
5. Indemnification. Obligors agree to promptly pay, indemnify and hold
Lender harmless from all State and Federal taxes of any kind and other
liabilities with respect to or resulting from the execution and/or delivery of
this Note or any advances made pursuant to this Note. If this Note has a
revolving feature and is secured by a mortgage, Obligors expressly consent to
the deduction of any applicable taxes from each taxable advance extended by
Lender.
6. Prepayments. Prepayments may be made in whole or in part at any time
without premium or penalty. All prepayments of principal shall be applied in the
inverse order of maturity, or in such other order as Lender shall determine in
its sole discretion.
7. Delinquency Charge. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of any payment that
is more than fifteen days late.
8. Events of Default. The following are events of default hereunder:(a) the
failure to pay any obligation, liability or indebtedness of any Obligor to
Lender, whether under this Note or any Loan Documents, as and when due (whether
at maturity or by acceleration); (b) the failure to perform any other
obligation, liability or indebtedness of any Obligor to Lender, which failure is
not cured within fifteen (15) days from the date on which Lender provides
Borrower written notice of such failure to the extent that any such default can
be cured by Borrower; (c) the commencement of a proceeding against any Obligor
for dissolution or liquidation, the voluntary or involuntary termination or
dissolution of any Obligor or the merger or consolidation of any Obligor with or
into another entity; (d) the insolvency of, the business failure of, the
appointment of a custodian, trustee, liquidator or receiver for or for any of
the property of, the assignment for the benefit of creditors by, or the filing
of a petition under bankruptcy, insolvency or debtor's relief law or the filing
of a petition for any adjustment of indebtedness, composition or extension by or
against any Obligor; (e) the determination by Lender that any representation or
warranty made to Lender by any Obligor in any Loan Documents or otherwise or in
any financial statement or financial information submitted to Lender by any
Borrower is or was, when it was made, untrue or materially misleading; (f) the
entry of a judgment against any Obligor in excess of $50,000.00, which judgment
is not satisfied or bonded off within thirty (30) days from the date of entry of
the judgment; (g) the seizure or forfeiture of, or the issuance of any writ of
possession, garnishment or attachment which writ relates to any damage in excess
of $50,000.00 and which writ is not dismissed within thirty (30) days from the
date of issuance of any such writ; or (h) the failure of any Borrower's business
to comply in any material respect with any law or regulation controlling its
operation.
<PAGE>
2
9. Remedies upon Default. Whenever there is a default under this Note (a)
the entire balance outstanding hereunder and all other obligations of any
Obligor to Lender (however acquired or evidenced) shall, at the option of
Lender, become immediately due and payable and any obligation of Lender to
permit further borrowing under this Note shall immediately cease and terminate,
and/or (b) to the extent permitted by law, the Rate of interest on the unpaid
principal shall be increased at Lender's discretion up to the maximum rate
allowed by law, or if none, 18% per annum (the "Default Rate").The provisions
herein for a Default Rate shall not be deemed to extend the time for any payment
hereunder or to constitute a "grace period" giving Obligors a right to cure any
default. At Lender's option, any accrued and unpaid interest, fees or charges
may, for purposes of computing and accruing interest on a daily basis after the
due date of the Note or any installment thereof, be deemed to be a part of the
principal balance, and interest shall accrue on a daily compounded basis after
such date at the Default Rate provided in this Note until the entire outstanding
balance of principal and interest is paid in full. Upon a default under this
Note, Lender is hereby authorized at any time, at its option and without notice
or demand, to set off and charge against any deposit accounts of any Obligor (as
well as any money, instruments, securities, documents, chattel paper, credits,
claims, demands, income and any other property, rights and interests of any
Obligor), which at any time shall come into the possession or custody or under
the control of Lender or any of its agents, affiliates or correspondents, any
and all obligations due hereunder. Additionally, Lender shall have all rights
and remedies available under each of the Loan Documents, as well as all rights
and remedies available at law or in equity. Any judgment rendered on this Note
shall bear interest at the highest rate of interest permitted pursuant to
Chapter 687, Florida Statutes.
10. Non-waiver. The failure at any time of Lender to exercise any of its
options or any other rights hereunder shall not constitute a waiver thereof, nor
shall it be a bar to the exercise of any of its options or rights at a later
date. All rights and remedies of Lender shall be cumulative and may be pursued
singly, successively or together, at the option of Lender. The acceptance by
Lender of any partial payment shall not constitute a waiver of any default or of
any of Lender's rights under this Note. No waiver of any of its rights
hereunder, and no modification or amendment of this Note, shall be deemed to be
made by Lender unless the same shall be in writing, duly signed on behalf of
Lender; each such waiver shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Lender or the obligations of
Obligors to Lender in any other respect at any other time.
11. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Lender shall be governed by and interpreted in
accordance with the law of the State of Florida. In any litigation in connection
with or to enforce this Note or any endorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Florida or the United States
located within the State of Florida and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent
Lender from bringing any action or exercising any rights within any other state
or jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law. The interest rate charged on this Note is
authorized by Chapter 655, Florida Statutes and Section 687.12, Florida
Statutes.
12. Partial Invalidity. The unenforceability or invalidity of any provision
of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of this
Note or of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
13. Binding Effect. This Note shall be binding upon and inure to the
benefit of Borrower, Obligors and Lender and their respective successors,
assigns, heirs and personal representatives, provided, however, that no
obligations of Borrower or Obligors hereunder can be assigned without prior
written consent of Lender.
14. Controlling Document. To the extent that this Note conflicts with or is
in any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
15. WAIVER OF JURY TRIAL.AFTER CONSULTING WITH COUNSEL AND CAREFUL
CONSIDERATION, BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL
BY JURY WITH RESPECT TO ANY LITIGATION ARISING OUT OF THIS NOTE OR THE LOAN
DOCUMENTS, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (ORAL
OR WRITTEN), OR ACTIONS OF BORROWER OR LENDER.THIS WAIVER IS A MATERIAL
INDUCEMENT TO LENDER'S ACCEPTANCE OF THIS NOTE. Borrower represents to Lender
that the proceeds of this loan are to be used primarily for business. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT.THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
If this Note is secured by a mortgage on real property, documentary stamp
taxes have been paid and affixed to the mortgage.
EXECUTION DATE: August 18, 1998
BORROWER:
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:____________________________
____________________, as its
____________________________
<PAGE>
1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE ACT OR AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
DATED: August 18, 1998 NO. I
FORM OF WARRANT
MEDICAL TECHNOLOGY SYSTEMS, INC.
Warrant to Purchase 50,000 Shares, Subject to Adjustment,
of Common Stock, par value $.01 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON August 18, 2008 OR SUCH LATER DATE AS
DESCRIBED IN THE FIRST PARAGRAPH BELOW
This certifies that, for value received, Todd and Shelia Siegel or
registered assigns (collectively with Todd and Shelia Siegel, the "Holder"), is
entitled to purchase from Medical Technology Systems, Inc., a Florida
corporation (the "Company"), 50,000 shares (which become exercisable on the date
hereof), (the "Shares") of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), at a price of $0.75 per Share (the "Exercise Price") for
ten years after the warrant becomes exercisable with respect to such shares (the
"Exercise Period"), subject to the terms, conditions, and adjustments set forth
in this warrant (the "Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole or in part
by the Holder during the applicable Exercise Period upon presentation and
surrender hereof, with the Purchase Form attached hereto as Exhibit A duly
executed, at the office of the Company located at 12920 Automobile Boulevard,
Clearwater, Florida 33762, accompanied by full payment of the Exercise Price
multiplied by the number of Shares of the Company being purchased (the "Purchase
Price"), whereupon the Company shall cause the appropriate number of Shares to
be issued and shall deliver to the Holder, within 10 days of surrender of the
Warrant, a certificate representing the Shares being purchased. Upon each
partial exercise hereof, a new Warrant evidencing the remainder of the Shares
will be issued to the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise Period(s), and
otherwise on the same terms and conditions as the Warrant partially exercised.
The Purchase Price shall be payable by delivery of a certified or bank cashier's
check payable to the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of the
Purchase Price, or, if the Company's Common Stock is listed on a securities
exchange or market, in the manner set forth in the following paragraph if
requested by the Holder in the Purchase Form. The Holder shall be deemed for all
purposes to have become the holder of record of Shares so purchased upon
exercise of this Warrant as of the close of business on the date as of which
this Warrant, together with a duly executed Purchase Form, was delivered to the
Company and payment of the Purchase Price was made, regardless of the date of
delivery of any certificate representing the Shares so purchased, except that if
the Company were subject to any legal requirements prohibiting it from issuing
shares of Common Stock on such date, the Holder shall be deemed to have become
the record holder of such Shares on the next succeeding date as of which the
Company ceased to be so prohibited.
<PAGE>
2
If the Company's Common Stock is listed on a securities exchange or market,
in addition to the method of payment set forth above and in lieu of any cash
payment required, the Holder shall have the right to exercise this Warrant in
full or in part by surrendering this Warrant in the manner specified above in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which this Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) less the Purchase
Price, and the denominator of which is the Market Price. For purpose of this
Warrant, "Market Price" shall mean the average closing sale price quoted on a
share of Common Stock on the NASDAQ National Market or the principal stock
exchange on which the Common Stock is then traded for the three trading days
immediately prior to the date of the delivery to the Company of a purchase form
(or if the Company's Common Stock is not traded or listed on the NASDAQ National
Market or any other principal securities market, the average of the closing bid
prices on the NASDAQ SmallCap Market, the OTC Electronic Bulletin Board, or
otherwise in the over-the-counter market on such days as reported by NASDAQ, the
National Quotation Bureau Incorporated or any comparable system, or if not so
reported, as reported by any New York Stock Exchange member firm selected in
good faith by the Company for such purpose).
2. Exchange; Restrictions on Transfer or Assignment. This Warrant is
exchangeable, without expense, at the option of the Holder, upon surrender
hereof to the Company for other Warrants of different denominations entitling
the Holder to purchase in the aggregate the same number of Shares purchasable
hereunder. Subject to compliance with the Act, applicable state securities laws,
and the requirements pertaining to transfer described in Section 5, this Warrant
and the Holder's rights hereunder are transferable. To effect a transfer of this
Warrant, the Holder shall surrender the Warrant to the Company at its principal
office with the Assignment Form attached hereto as Exhibit B duly completed and
executed (with signature guaranteed), whereupon the Company, if the proposed
assignment is permitted pursuant to the provisions hereof, shall register the
assignment of this Warrant in accordance with the information contained in the
assignment instrument and shall, without charge, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees named in such
assignment instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not theretofore
exercised, transferred, or assigned) and this Warrant shall promptly be
cancelled. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.
3. Rights and Obligations of Warrant Holders. This Warrant does not confer
upon the Holder any rights as a shareholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed herein and the
Holder, by acceptance hereof, consents to and agrees to be bound by and to
comply with all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if any, may, prior
to any presentation of this Warrant for registration of transfer, deem and treat
the person in whose name this Warrant is registered as the absolute, true, and
lawful owner of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the contrary.
4. Covenants and Warranties of the Company. The Company covenants and
agrees that (i) any and all Shares that are issued and delivered upon exercise
of this Warrant and payment of the Purchase Price will, upon delivery, be duly
authorized, validly issued, fully-paid, and nonassessable shares of Common Stock
and (ii) the Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common Stock
sufficient to permit the exercise in full of this Warrant. The Company will take
all such actions as may be necessary to assure that all shares of Common Stock
may be so issued without violation by the Company of any applicable law or
government regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance,
which the Company will transmit promptly upon issuance of such shares).
<PAGE>
3
The Company represents and warrants that (i) the Company is a corporation
duly organized, validly existing, and of active status under the laws of the
State of Florida, (ii) the Company has all requisite corporate power and
authority to issue this Warrant and to consummate the transactions contemplated
hereby, and such issuance and consummation will not conflict with, result in a
material breach of, constitute a material default under, or material violation
of any provision of the Company's Articles of Incorporation or Bylaws, or any
law or regulation of any governmental authority or any provision of any
agreement, judgment, or decree affecting the Company and (iii) all corporate
action required to be taken by the Company in connection with the execution and
delivery of this Warrant and the performance of the Company's obligations
hereunder has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges that this
Warrant and the Shares issuable upon exercise thereof have not been registered
under the Act or applicable state law. The Holder agrees, by acceptance of this
Warrant, (i) that no sale, transfer, or distribution of this Warrant or the
Shares shall be made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable prospectus delivery
requirements and the restrictions on transfer set forth herein, and (ii) that if
any distribution or any other transfer of this Warrant or any Shares is proposed
to be made by it otherwise than pursuant to an effective registration statement
under the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed distribution will not
be in violation of the Act or of applicable state law.
6. Adjustment. The number of Shares purchasable upon the exercise of this
Warrant and the Exercise Price per Share are subject to adjustment from time to
time as provided in this Section 6.
(a) Subdivision or Combination of Shares. If the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares (including a stock split effected as a stock dividend) or combine
its outstanding shares of Common Stock into a lesser number of shares, the
number of Shares issuable upon exercise of this Warrant shall be adjusted
to such number as is obtained by multiplying the number of shares issuable
upon exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate number
of shares of Common Stock outstanding immediately after giving effect to
such subdivision or combination and the denominator of which is the
aggregate number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied by the
number of Shares issuable upon full exercise of this Warrant (as increased
or decreased to reflect such subdivision or combination of outstanding
shares of Common Stock, as the case may be), equal the product of the
Exercise Price per Share in effect immediately prior to such subdivision or
combination multiplied by the number of Shares issuable upon exercise of
this Warrant immediately prior to such subdivision or combination.
<PAGE>
4
(b) Effect of Sale, Merger, or Consolidation. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of
all or substantially all of the Company's assets to another corporation
shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and the terms and
conditions specified in this Warrant and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of this Warrant,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any
such case appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and
delivered to the Holder at its last address appearing on the books of the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence, the
Holder may be entitled to purchase.
(c) Issuance of Common Stock Below Exercise Price. If the Company
shall issue or sell shares of Common Stock or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock ("Common Stock Equivalents")
pursuant to the exercise of any Common Stock Equivalents outstanding on the
date of the Note under any of the Company's employee benefit plans), at a
price per share of Common Stock (determined, in the case of Common Stock
Equivalents, by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Common Stock Equivalent,
plus the total consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (B) the total number of shares of
Common Stock covered by such Common Stock Equivalent), that is lower
(calculated the date of such sale or issuance) than the Exercise Price, or
for no consideration, then:
(i) in each case the number of shares of Common Stock thereafter
issuable upon the exercise of this Warrant (whether or not presently
exercisable) shall be increased in a manner determined by multiplying
the number of shares of Common Stock issuable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon exercise,
conversion, or exchange of such Common Stock Equivalent, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock that the "aggregate consideration to be
received by the Company" (as defined below) in connection with such
sale or issuance would purchase at the Exercise Price. For the purpose
of such adjustments the "aggregate consideration to be received by the
Company" shall be the consideration received by the Company for such
Common Stock or Common Stock Equivalents, plus any consideration or
premiums stated in the Common Stock Equivalents to be paid for the
shares of Common Stock covered thereby; and
(ii) in each case the Exercise Price will be reduced to the price
calculated by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately before such
issuance or sale multiplied by the then existing Exercise Price plus
(2) the aggregate consideration, if any, received by the Company upon
such issuance or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale plus the
number of shares of Common Stock issuable upon the exercise,
conversion, or exchange of any Common Stock Equivalents issued or sold
in the transaction for which the Company is making this adjustment.
<PAGE>
5
If the Company shall issue or sell shares of Common Stock or Common
Stock Equivalents for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the "price
per share of Common Stock" and the "consideration" receivable by or payable
to the Company for purposes of this Section 6(c), the Board of Directors of
the Company shall determine, in good faith, the fair value of such
property. If the Company shall issue and sell Common Stock Equivalents,
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of
this Section 6(c), the Board of Directors of the Company shall determine,
in good faith, the fair value of the Common Stock Equivalents then being
sold as part of such unit.
(d) If any event occurs as to which the preceding Sections 6(a)
through (c) are not strictly applicable, but as to which the failure to
make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of this Warrant, as determined by the Company or as requested by
the Holder in accordance with the notice provisions of Section 12, then, in
each such case, the Company shall select an independent investment bank or
firm of independent public accountants, such investment bank or firm of
independent public accountants to be selected from a group of three
nationally recognized investment banks or firms of public accountants
chosen by the Holder, which will give its opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established in this Warrant. Upon receipt of such opinion, the Company will
promptly deliver a copy of such opinion to the Holder and will make the
adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the
Company. If the adjustment is requested by the Holder, however, and the
investment bank or firm of independent public accountants selected by the
Company pursuant to this paragraph determines that no adjustment is
necessary, then the fees and expenses described in the preceding sentence
shall be borne by the Holder.
(e) Notice to Holder of Adjustment. Whenever the number of Shares
purchasable upon exercise of this Warrant or the Exercise Price per Share
is adjusted as herein provided, the Company shall cause to be mailed to the
Holder within 5 days of such adjustment, in accordance with the provisions
of Section 12, notice setting forth the adjusted number of Shares
purchasable upon the exercise of the Warrant and the adjusted Exercise
Price and showing in reasonable detail the computation of the adjustment
and the facts upon which such adjustment is based.
(f) Notices to Holder of Certain Events. If at any time after the date
hereof:
(i) the Company shall declare any dividend or other distribution
upon or with respect to the Common Stock, including any dividend
payable in cash, shares of Common Stock or other securities of the
Company; or
(ii) the Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into Common Stock or any rights to
subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as result of the subdivision or combination of
shares), or any conversion of the Shares into securities of another
corporation, or a sale of all or substantially all of the assets of
the Company, or a consolidation or merger of the Company with another
corporation (other than a merger with a subsidiary in which the
Company is the continuing corporation and which does not result in any
reclassification or change of the Shares issuable upon exercise of the
Warrants); or
<PAGE>
6
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, not less than 15 days before any record date or other date set for
the definitive action, written notice of the date upon which the books of the
Company shall close or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such reorganization,
reclassification, conversion, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
Shares and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holder of record of the shares of Common Stock
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation, or winding
up, as the case may be (on which date in the event of voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the right to exercise
the Warrants shall terminate).
7. Piggy-Back Registration.
(a) If the Company shall, at any time prior to the expiration of this
Warrant, authorize a registration of its Common Stock with the Securities
and Exchange Commission (the "SEC"), the Company shall furnish the Holder
with at least 30 days prior written notice thereof and the Holder shall
have the option to include the Shares to be issued to the Holder upon the
exercise of this Warrant in such registration statement. The Holder shall
exercise the "piggy-back registration rights" granted pursuant to this
Section 7 by giving written notice to the Company within 20 days of the
receipt of the written notice from the Company described above.
(b) Notwithstanding any other provision of this Warrant, the Company's
obligations under this Section 7 shall be subject to the following terms
and conditions:
(i) The obligations of the Company set forth under this Section 7
shall not arise upon the filing of a registration statement that
covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt
securities not convertible into, or exchangeable for, shares of Common
Stock; (C) securities to be issued pursuant to a transaction
registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); or (D) a stock option, stock bonus,
stock purchase, or other employee benefit or compensation plan or
securities issued or issuable pursuant to any such plan.
(ii) If the Company files a registration statement in connection
with an underwritten public offering of Common Stock, the Company
shall use its best efforts to cause the managing underwriter of the
proposed offering to grant any request by the Holder that Shares
purchased by the Holder upon the exercise of this Warrant be included
in the proposed public offering on terms and conditions that are
customary under industry practice. Notwithstanding any other provision
of this Agreement, if the managing underwriter of the public offering
of the Common Stock gives written notice to the Company that, in the
reasonable opinion of such managing underwriter, marketing factors
require a limitation of the total number of shares of Common Stock to
be underwritten, then the number of Shares purchased by the Holder
upon the exercise of this Warrant that the Company shall be obligated
to include in the registration statement shall be reduced in
accordance with the limitations imposed by the managing underwriter.
<PAGE>
7
(iii) The Holder must provide to the Company all information, and
take all action, the Parent reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law or
regulation or to prepare the registration statement that will cover
the Shares that will be included in the registration.
(c) The Company will pay all Registration Expenses (as defined below)
in connection with the registration of the Shares pursuant to this Section
7. For purposes of this Warrant, the term "Registration Expenses" shall
mean all expenses incurred by the Company in complying with this Section 7,
including, without limitation, all registration and filing fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company, state Blue Sky fees and expenses, transfer agent fees, cost of
engraving of stock certificates, costs for mailing and tombstone
advertising, cost of preparing the registration statement, related
exhibits, amendments and supplements thereto, underwriting documents,
selected dealer agreements, preliminary and final prospectuses, and the
expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Shares and the fees and expenses of the Holder's own
counsel and accountants, which shall be borne by the Holder.
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holder from and
against any and all losses, claims, damages, expenses, and liabilities
caused by any untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact necessary to make any
statement therein not misleading. The foregoing indemnification and
agreement to hold harmless shall not apply, however, insofar as such
losses, claims, damages, expenses, and liabilities are caused by an untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use in any registration statement or
prospectus.
(b) The Holder will indemnify the Company, and each person who
controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses, and liabilities
caused by an untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by an omission to state a material fact necessary to make any
statement therein not misleading insofar as such losses, claims, damages,
expenses, and liabilities are caused by an untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use in any registration statement or prospectus.
(c) Each indemnified party promptly shall notify each indemnifying
party of any claim asserted or action commenced against it that is subject
to the indemnification provisions of this Section, but failure to so notify
an indemnifying party will not relieve the indemnifying party from any
liability pursuant to these indemnity provisions or otherwise, unless and
only to the extent that the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be
materially prejudicial to an indemnifying party, the failure of an
indemnified party to notify an indemnifying party of a lawsuit within ten
days after the date when the indemnified party is served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim
will be considered materially prejudicial to the rights and obligations of
any indemnifying party who was not also served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim.
<PAGE>
8
The indemnifying party may participate at its own expense in the
defense, or, if the indemnifying party so elects within a reasonable time,
the indemnifying party may assume the defense, of any action commenced
against the indemnified party that is the subject of indemnification under
this Section. If the indemnifying party elects to assume the defense of an
indemnified action, however, the indemnifying party shall engage to defend
the action legal counsel reasonably satisfactory to the indemnified party.
If the indemnifying party elects to assume the defense of any indemnified
action, the indemnified party, and each controlling person who is a
defendant in the action, will be entitled to employ separate counsel
participate in the defense of the action at its own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the
indemnifying party will not be liable for any settlement made without its
consent. The indemnifying party shall notify the indemnified party whether
or not it will consent to a proposed settlement within ten days after it
receives from the indemnified party notice of the proposed settlement,
summarizing all the terms and conditions of settlement. The indemnifying
party's failure to notify the indemnified party within that ten-day period
whether or not it consents to the proposed settlement will constitute its
consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including
any amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act
and the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the
person.
9. No Impairment. The Company will not by any action including, without
limitation, amending or permitting the amendment of the charter documents,
bylaws, or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share exchange,
dissolution, issue or sale of securities, or any other similar voluntary action,
avoid or seek to avoid the observance or performance of any of the express terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary to
protect the rights of the Holder against impairment or dilution. Without
limiting the generality of the foregoing, the Company will (i) take all such
action as may be reasonably necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon exercise
of the Warrant, free and clear of all liens, encumbrances, equities, and claims
and (ii) use all reasonable efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction over
the Company as may be necessary to enable the Company to perform its obligations
under this Warrant.
10. Dilution Fee. If, during the Exercise Period, the Company pays any cash
dividends or makes any cash distribution to any holder of any class of its
Common Stock with respect to such Common Stock and the Exercise Price exceeds
the Market Price, then the Holder of this Warrant will be entitled to receive in
respect of this Warrant a dilution fee in cash (the "Dilution Fee") on the date
of payment of such dividend or distribution, which Dilution Fee will be equal to
the amount per share paid to the holders of Common Stock times the number of
Shares currently exercisable under this Warrant.
11. Survival. The various rights and obligations of the Holder and of the
Company as set forth in Sections 4 and 5 hereof shall survive the exercise of
this Warrant and the surrender of this instrument upon such exercise.
<PAGE>
9
12. Notice. All notices required by this Warrant to be given or made by the
Company shall be given or made by first class mail, postage prepaid, addressed
to the registered Holder hereof at the address of such Holder as shown on the
books of the Company.
13. Loss or Destruction. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its counsel, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed, waived,
discharged, or terminated except by a written instrument executed by the
Company and the Holder.
(b) This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida, without regard
to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in such a
manner as to be effective, valid, and enforceable under applicable law, but
if any provision of this Warrant is held to be invalid, illegal, or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating
the remainder of this Warrant in such jurisdiction or any provision hereof
in any other jurisdiction.
(d) No course of dealing or delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right
or otherwise prejudice the Holder's rights, power, or remedies.
(e) The Company shall pay all expenses incurred by it in connection
with, and all documentary stamp and other taxes (other than stock transfer
taxes) and other governmental charges that may be imposed in respect of,
the issue, sale and delivery of this Warrant and the Shares issuable upon
the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure
to the benefit of and be binding upon the successors and assigns of the Company
and the successors and permitted assigns of the Holder.
<PAGE>
10
15. Further Assurances. The Company agrees that it will execute and record
such documents as the Holder shall reasonably request to secure for the Holder
any of the rights represented by this Warrant.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed by
its duly authorized officer as of the August 18, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:____________________________
Name:__________________________
Title:_________________________
<PAGE>
11
EXHIBIT "A"
PURCHASE FORM
To be executed upon exercise of the Warrant. Capitalized terms have the
same meanings ascribed to them in the Warrant.
TO: MEDICAL TECHNOLOGY SYSTEMS, INC.
The undersigned hereby exercises the right to purchase _____________ Shares
of Common Stock evidenced by the Warrant, according to the terms and conditions
thereof, and hereby makes payment of the Purchase Price. If the Company's Common
Stock is listed on a securities exchange or market, the undersigned [does] [does
not] choose to pay the Purchase Price pursuant to a cashless exercise of the
Warrant. The undersigned requests that certificates for the Shares shall be
issued in the name set forth below:
Dated: Name:___________________
________________________
(Address)
________________________
Social Security No._______
or other identifying number
<PAGE>
12
EXHIBIT "B"
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer of
the Warrant. Capitalized terms have the same meanings ascribed to them in the
Warrant.
FOR VALUE RECEIVED __________________("Assignor")
hereby sells, assigns and transfers unto
_____________________("Assignee")
(Name)
_____________________
(Address)
_____________________
the right to purchase __________ shares of Common Stock of Medical Technology
Systems, Inc. evidenced by the Warrant, together with all right, title, and
interest therein, and does irrevocably constitute and appoint
_____________________________ attorney to transfer the said right on the books
of said corporation with full power of substitution in the premises.
Date: Assignor:
By:_______________________
Its:______________________
__________________________
Signature:
<PAGE>
1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED PURSUANT TO THE ACT OR AN OPINION OF LEGAL COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE.
DATED: August 18, 1998 NO. I
FORM OF WARRANT
MEDICAL TECHNOLOGY SYSTEMS, INC.
Warrant to Purchase up to 9,000 Shares
of Common Stock, par value $.01 per share
VOID AFTER 5:00 P.M., EASTERN STANDARD TIME
ON OR BEFORE AUGUST 18, 2008
This certifies that, for value received, Todd and Shelia Siegel or
registered assigns (collectively with Todd and Shelia Siegel, the "Holder"), is
entitled to purchase from Medical Technology Systems, Inc., a Florida
corporation (the "Company"), if a promissory note of Todd and Shelia Siegel, a
copy of which is attached hereto as Exhibit A (the "Note"), is not paid in full
as described below, up to 9,000 fully paid and nonassessable shares (the
"Shares") of the Common Stock, par value $.01 per share, of the Company ("Common
Stock"), which will become exercisable as follows: 3,000 Shares if the Note
(including any accrued interest) is not paid in full on or before February 18,
1999, an additional 3,000 Shares if the Note (including any accrued interest) is
not paid in full on or before March 18, 1999, and an additional 3,000 Shares if
the Note (including any accrued interest) is not paid in full on or before April
18, 1999, in each case at a price of $0.75 per Share (the "Exercise Price") for
ten years after the warrant becomes exercisable with respect to such Shares (the
"Exercise Period"), subject to the terms, conditions, and adjustments set forth
in this Warrant (the "Warrant").
1. Exercise of Warrants. This Warrant may be exercised in whole or in part
by the Holder during the applicable Exercise Period upon presentation and
surrender hereof, with the Purchase Form attached hereto as Exhibit B duly
executed, at the office of the Company located at 12920 Automobile Boulevard,
Clearwater, Florida 33762, accompanied by full payment of the Exercise Price
multiplied by the number of Shares of the Company being purchased (the "Purchase
Price"), whereupon the Company shall cause the appropriate number of Shares to
be issued and shall deliver to the Holder, within 10 days of surrender of the
Warrant, a certificate representing the Shares being purchased. Upon each
partial exercise hereof, a new Warrant evidencing the remainder of the Shares
will be issued to the Holder, at the Company's expense, as soon as reasonably
practicable, at the same Exercise Price, for the same Exercise Periods, and
otherwise on the same terms and conditions as the Warrant partially exercised.
The Purchase Price shall be payable by delivery of a certified or bank cashier's
check payable to the Company, or by wire transfer of immediately available funds
to an account designated in writing by the Company, in the amount of the
Purchase Price, or, if the Company's Common Stock is listed on a securities
exchange or market, in the manner set forth in the following paragraph if
requested by the Holder in the Purchase Form. The Holder shall be deemed for all
purposes to have become the holder of record of Shares so purchased upon
exercise of this Warrant as of the close of business on the date as of which
this Warrant, together with a duly executed Purchase Form, was delivered to the
Company and payment of the Purchase Price was made, regardless of the date of
delivery of any certificate representing the Shares so purchased, except that if
the Company were subject to any legal requirements prohibiting it from issuing
shares of Common Stock on such date, the Holder shall be deemed to have become
the record holder of such Shares on the next succeeding date as of which the
Company ceased to be so prohibited.
<PAGE>
2
If the Company's Common Stock is listed on a securities exchange or market,
in addition to the method of payment set forth above and in lieu of any cash
payment required, the Holder shall have the right to exercise this Warrant in
full or in part by surrendering this Warrant in the manner specified above in
exchange for the number of Shares equal to the product of (x) the number of
Shares as to which this Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the Market Price (as defined below) less the Purchase
Price, and the denominator of which is the Market Price. For purpose of this
Warrant, "Market Price" shall mean the average closing sale price quoted on a
share of Common Stock on the NASDAQ National Market or the principal stock
exchange on which the Common Stock is then traded for the three trading days
immediately prior to the date of the delivery to the Company of a purchase form
(or if the Company's Common Stock is not traded or listed on the NASDAQ National
Market or any other principal securities market, the average of the closing bid
prices on the NASDAQ SmallCap Market, the OTC Electronic Bulletin Board, or
otherwise in the over-the-counter market on such days as reported by NASDAQ, the
National Quotation Bureau Incorporated or any comparable system, or if not so
reported, as reported by any New York Stock Exchange member firm selected in
good faith by the Company for such purpose).
2. Exchange; Restrictions on Transfer or Assignment. This Warrant is
exchangeable, without expense, at the option of the Holder, upon surrender
hereof to the Company for other Warrants of different denominations entitling
the Holder to purchase in the aggregate the same number of Shares purchasable
hereunder. Subject to compliance with the Act, applicable state securities laws,
and the requirements pertaining to transfer described in Section 5, this Warrant
and the Holder's rights hereunder are transferable. To effect a transfer of this
Warrant, the Holder shall surrender the Warrant to the Company at its principal
office with the Assignment Form attached hereto as Exhibit C duly completed and
executed (with signature guaranteed), whereupon the Company, if the proposed
assignment is permitted pursuant to the provisions hereof, shall register the
assignment of this Warrant in accordance with the information contained in the
assignment instrument and shall, without charge, execute and deliver a new
Warrant or Warrants in the name(s) of the assignee or assignees named in such
assignment instrument (and, if applicable, a new Warrant in the name of the
Holder evidencing any remaining portion of the Warrant not theretofore
exercised, transferred, or assigned) and this Warrant shall promptly be
cancelled. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or exchanged.
<PAGE>
3
3. Rights and Obligations of Warrant Holders. This Warrant does not confer
upon the Holder any rights as a shareholder of the Company, either at law or in
equity. The rights of the Holder are limited to those expressed herein and the
Holder, by acceptance hereof, consents to and agrees to be bound by and to
comply with all the provisions of this Warrant. Each Holder, by acceptance of
this Warrant, agrees that the Company and its transfer agent, if any, may, prior
to any presentation of this Warrant for registration of transfer, deem and treat
the person in whose name this Warrant is registered as the absolute, true, and
lawful owner of this Warrant for all purposes whatsoever and neither the Company
nor any transfer agent shall be affected by any notice to the contrary.
4. Covenants and Warranties of the Company. The Company covenants and
agrees that (i) any and all Shares that are issued and delivered upon exercise
of this Warrant and payment of the Purchase Price will, upon delivery, be duly
authorized, validly issued, fully-paid, and nonassessable shares of Common Stock
and (ii) the Company shall at all times during the Exercise Period reserve and
keep available a number of authorized but unissued shares of Common Stock
sufficient to permit the exercise in full of this Warrant. The Company will take
all such actions as may be necessary to assure that all shares of Common Stock
may be so issued without violation by the Company of any applicable law or
government regulation or any requirement of any securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance,
which the Company will transmit promptly upon issuance of such shares).
The Company represents and warrants that (i) the Company is a corporation
duly organized, validly existing, and of active status under the laws of the
State of Florida, (ii) the Company has all requisite corporate power and
authority to issue this Warrant and to consummate the transactions contemplated
hereby, and such issuance and consummation will not conflict with, result in a
material breach of, constitute a material default under, or material violation
of any provision of the Company's Articles of Incorporation or Bylaws, or any
law or regulation of any governmental authority or any provision of any
agreement, judgment, or decree affecting the Company and (iii) all corporate
action required to be taken by the Company in connection with the execution and
delivery of this Warrant and the performance of the Company's obligations
hereunder has been taken.
5. Disposition of Warrants or Shares. The Holder acknowledges that this
Warrant and the Shares issuable upon exercise thereof have not been registered
under the Act or applicable state law. The Holder agrees, by acceptance of this
Warrant, (i) that no sale, transfer, or distribution of this Warrant or the
Shares shall be made except in compliance with the Act and the rules and
regulations promulgated thereunder, including any applicable prospectus delivery
requirements and the restrictions on transfer set forth herein, and (ii) that if
any distribution or any other transfer of this Warrant or any Shares is proposed
to be made by it otherwise than pursuant to an effective registration statement
under the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company and its counsel, to the effect that the proposed distribution will not
be in violation of the Act or of applicable state law.
6. Adjustment. The number of Shares purchasable upon the exercise of this
Warrant and the Exercise Price per Share are subject to adjustment from time to
time as provided in this Section 6.
(a) Subdivision or Combination of Shares. If the Company shall at any
time subdivide its outstanding shares of Common Stock into a greater number
of shares (including a stock split effected as a stock dividend) or combine
its outstanding shares of Common Stock into a lesser number of shares, the
number of Shares issuable upon exercise of this Warrant shall be adjusted
to such number as is obtained by multiplying the number of shares issuable
upon exercise of this Warrant immediately prior to such subdivision or
combination by a fraction, the numerator of which is the aggregate number
of shares of Common Stock outstanding immediately after giving effect to
such subdivision or combination and the denominator of which is the
aggregate number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, and the Exercise Price per Share shall be
correspondingly adjusted to such amount as shall, when multiplied by the
number of Shares issuable upon full exercise of this Warrant (as increased
or decreased to reflect such subdivision or combination of outstanding
shares of Common Stock, as the case may be), equal the product of the
Exercise Price per Share in effect immediately prior to such subdivision or
combination multiplied by the number of Shares issuable upon exercise of
this Warrant immediately prior to such subdivision or combination.
<PAGE>
4
(b) Effect of Sale, Merger, or Consolidation. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation or merger of the Company with another corporation, or sale of
all or substantially all of the Company's assets to another corporation
shall be effected after the date hereof in such a way that holders of
Common Stock shall be entitled to receive stock, securities, or assets with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful
and adequate provision shall be made whereby the Holder shall thereafter
have the right to purchase and receive, upon the basis and the terms and
conditions specified in this Warrant and in lieu of the Shares immediately
theretofore purchasable and receivable upon the exercise of this Warrant,
such shares of stock, securities, or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the exercise of this Warrant, and in any
such case appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Warrant
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Shares issuable upon the exercise of this
Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect
any such consolidation, merger, or sale unless prior to or simultaneously
with the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and
delivered to the Holder at its last address appearing on the books of the
Company, the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing sentence, the
Holder may be entitled to purchase.
(c) Issuance of Common Stock Below Exercise Price. If the Company
shall issue or sell shares of Common Stock or rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock ("Common Stock Equivalents")
pursuant to the exercise of any Common Stock Equivalents outstanding on the
date of the Note under any of the Company's employee benefit plans), at a
price per share of Common Stock (determined, in the case of Common Stock
Equivalents, by dividing (A) the total amount receivable by the Company in
consideration of the issuance and sale of such Common Stock Equivalent,
plus the total consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (B) the total number of shares of
Common Stock covered by such Common Stock Equivalent), that is lower
(calculated the date of such sale or issuance) than the Exercise Price, or
for no consideration, then:
(i) in each case the number of shares of Common Stock thereafter
issuable upon the exercise of this Warrant (whether or not presently
exercisable) shall be increased in a manner determined by multiplying
the number of shares of Common Stock issuable upon the exercise of the
Warrant by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance plus the number of additional shares of Common Stock offered
for subscription or purchase or to be issued upon conversion,
exercise, or exchange of such Common Stock Equivalent, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the sale or issuance plus the number
of shares of Common Stock that the "aggregate consideration to be
received by the Company" (as defined below) in connection with such
sale or issuance would purchase at the Exercise Price. For the purpose
of such adjustments the "aggregate consideration to be received by the
Company" shall be the consideration received by the Company for such
Common Stock or Common Stock Equivalents, plus any consideration or
premiums stated in the Common Stock Equivalents to be paid for the
shares of Common Stock covered thereby; and
<PAGE>
5
(ii) in each case the Exercise Price will be reduced to the price
calculated by dividing (A) an amount equal to the sum of (1) the
number of shares of Common Stock outstanding immediately before such
issuance or sale multiplied by the then existing Exercise Price Plus
(2) the aggregate consideration, if any, received by the Company upon
such issuance or sale, by (B) the total number of shares of Common
Stock outstanding immediately after such issuance or sale plus the
number of shares of Common Stock issuable upon the exercise,
conversion, or exchange of any Common Stock Equivalents issued or sold
in the transaction for which the Company is making this adjustment.
If the Company shall issue or sell shares of Common Stock or Common
Stock Equivalents for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the "price
per share of Common Stock" and the "consideration" receivable by or payable
to the Company for purposes of this Section 6(c), the Board of Directors of
the Company shall determine, in good faith, the fair value of such
property. If the Company shall issue and sell Common Stock Equivalents,
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Company for purposes of
this Section 6(c), the Board of Directors of the Company shall determine,
in good faith, the fair value of the Common Stock Equivalents then being
sold as part of such unit.
(d) If any event occurs as to which the preceding Sections 6(a)
through (c) are not strictly applicable, but as to which the failure to
make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of this Warrant, as determined by the Company or as requested by
the Holder in accordance with the notice provisions of Section 12, then, in
each such case, the Company shall select an independent investment bank or
firm of independent public accountants, such investment bank or firm of
independent public accountants to be selected from a group of three
nationally recognized investment banks or firms of public accountants
chosen by the Holder, which will give its opinion as to the adjustment, if
any, on a basis consistent with the essential intent and principles
established in this Warrant. Upon receipt of such opinion, the Company will
promptly deliver a copy of such opinion to the Holder and will make the
adjustments described in such opinion. The fees and expenses of such
investment bank or independent public accountants will be borne by the
Company. If the adjustment is requested by the Holder, however, and the
investment bank or firm of independent public accountants selected by the
Company pursuant to this paragraph determines that no adjustment is
necessary, then the fees and expenses described in the preceding sentence
shall be borne by the Holder.
(e) Notice to Holder of Adjustment. Whenever the number of Shares
purchasable upon exercise of this Warrant or the Exercise Price per Share
is adjusted as herein provided, the Company shall cause to be mailed to the
Holder within 5 days of such adjustment, in accordance with the provisions
of Section 12, notice setting forth the adjusted number of Shares
purchasable upon the exercise of the Warrant and the adjusted Exercise
Price and showing in reasonable detail the computation of the adjustment
and the facts upon which such adjustment is based.
<PAGE>
6
(f) Notices to Holder of Certain Events. If at any time after the date
hereof:
(i) the Company shall declare any dividend or other distribution
upon or with respect to the Common Stock, including any dividend
payable in cash, shares of Common Stock or other securities of the
Company; or
(ii) the Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into Common Stock or any rights to
subscribe thereto; or
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as result of the subdivision or combination of
shares), or any conversion of the Shares into securities of another
corporation, or a sale of all or substantially all of the assets of
the Company, or a consolidation or merger of the Company with another
corporation (other than a merger with a subsidiary in which the
Company is the continuing corporation and which does not result in any
reclassification or change of the Shares issuable upon exercise of the
Warrants); or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be mailed to
the Holder, not less than 15 days before any record date or other date set for
the definitive action, written notice of the date upon which the books of the
Company shall close or a record shall be taken for purposes of such dividend,
distribution or subscription rights or upon which such reorganization,
reclassification, conversion, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth facts as shall indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
Shares and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holder of record of the shares of Common Stock
shall participate in such dividend, distribution, or subscription rights or
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
conversion, sale, consolidation, merger, dissolution, liquidation, or winding
up, as the case may be (on which date in the event of voluntary or involuntary
dissolution, liquidation, or winding up of the Company, the right to exercise
the Warrants shall terminate).
7. Piggy-Back Registration.
(a) If the Company shall, at any time prior to the expiration of this
Warrant, authorize a registration of its Common Stock with the Securities
and Exchange Commission (the "SEC"), the Company shall furnish the Holder
with at least 30 days prior written notice thereof and the Holder shall
have the option to include the Shares to be issued to the Holder upon the
exercise of this Warrant in such registration statement. The Holder shall
exercise the "piggy-back registration rights" granted pursuant to this
Section 7 by giving written notice to the Company within 20 days of the
receipt of the written notice from the Company described above.
<PAGE>
7
(b) Notwithstanding any other provision of this Warrant, the Company's
obligations under this Section 7 shall be subject to the following terms
and conditions:
(i) The obligations of the Company set forth under this Section 7
shall not arise upon the filing of a registration statement that
covers any of the following: (A) securities proposed to be issued in
exchange for assets or securities of another corporation; (B) debt
securities not convertible into, or exchangeable for, shares of Common
Stock; (C) securities to be issued pursuant to a transaction
registered on Form S-4 (or any registration form promulgated by the
SEC in substitution of that form); or (D) a stock option, stock bonus,
stock purchase, or other employee benefit or compensation plan or
securities issued or issuable pursuant to any such plan.
(ii) If the Company files a registration statement in connection
with an underwritten public offering of Common Stock, the Company
shall use its best efforts to cause the managing underwriter of the
proposed offering to grant any request by the Holder that Shares
purchased by the Holder upon the exercise of this Warrant be included
in the proposed public offering on terms and conditions that are
customary under industry practice. Notwithstanding any other provision
of this Agreement, if the managing underwriter of the public offering
of the Common Stock gives written notice to the Company that, in the
reasonable opinion of such managing underwriter, marketing factors
require a limitation of the total number of shares of Common Stock to
be underwritten, then the number of Shares purchased by the Holder
upon the exercise of this Warrant that the Company shall be obligated
to include in the registration statement shall be reduced in
accordance with the limitations imposed by the managing underwriter.
(iii) The Holder must provide to the Company all information, and
take all action, the Parent reasonably requests with reasonable
advance notice, to enable it to comply with any applicable law or
regulation or to prepare the registration statement that will cover
the Shares that will be included in the registration.
(c) The Company will pay all Registration Expenses (as defined below)
in connection with the registration of the Shares pursuant to this Section
7. For purposes of this Warrant, the term "Registration Expenses" shall
mean all expenses incurred by the Company in complying with this Section 7,
including, without limitation, all registration and filing fees, exchange
listing fees, printing expenses, fees and disbursements of counsel for the
Company, state Blue Sky fees and expenses, transfer agent fees, cost of
engraving of stock certificates, costs for mailing and tombstone
advertising, cost of preparing the registration statement, related
exhibits, amendments and supplements thereto, underwriting documents,
selected dealer agreements, preliminary and final prospectuses, and the
expense of any special audits incident to or required by any such
registration, but excluding underwriting discounts and selling commissions
attributable to the Shares and the fees and expenses of the Holder's own
counsel and accountants, which shall be borne by the Holder.
8. Indemnification and Notification.
(a) The Company will indemnify and hold harmless the Holder from and
against any and all losses, claims, damages, expenses, and liabilities
caused by any untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by any omission to state a material fact necessary to make any
statement therein not misleading. The foregoing indemnification and
agreement to hold harmless shall not apply, however, insofar as such
losses, claims, damages, expenses, and liabilities are caused by an untrue
statement or omissions based upon information furnished in writing to the
Company by the Holder expressly for use in any registration statement or
prospectus.
<PAGE>
8
(b) The Holder will indemnify the Company, and each person who
controls the Company within the meaning of Section 15 of the Act, from and
against any and all losses, claims, damages, expenses, and liabilities
caused by an untrue statement of a material fact contained in any
registration statement or contained in a prospectus furnished thereunder or
caused by an omission to state a material fact necessary to make any
statement therein not misleading insofar as such losses, claims, damages,
expenses, and liabilities are caused by an untrue statement or omission
based upon information furnished in writing to the Company by the Holder
expressly for use in any registration statement or prospectus.
(c) Each indemnified party promptly shall notify each indemnifying
party of any claim asserted or action commenced against it that is subject
to the indemnification provisions of this Section, but failure to so notify
an indemnifying party will not relieve the indemnifying party from any
liability pursuant to these indemnity provisions or otherwise, unless and
only to the extent that the failure materially prejudices the rights or
obligations of the indemnifying party. Without limiting what might be
materially prejudicial to an indemnifying party, the failure of an
indemnified party to notify an indemnifying party of a lawsuit within ten
days after the date when the indemnified party is served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim
will be considered materially prejudicial to the rights and obligations of
any indemnifying party who was not also served with a copy of the
complaint, petition, or other pleading asserting the indemnifiable claim.
The indemnifying party may participate at its own expense in the
defense, or, if the indemnifying party so elects within a reasonable time,
the indemnifying party may assume the defense, of any action commenced
against the indemnified party that is the subject of indemnification under
this Section. If the indemnifying party elects to assume the defense of an
indemnified action, however, the indemnifying party shall engage to defend
the action legal counsel reasonably satisfactory to the indemnified party.
If the indemnifying party elects to assume the defense of any indemnified
action, the indemnified party, and each controlling person who is a
defendant in the action, will be entitled to employ separate counsel
participate in the defense of the action at its own expense.
An indemnified party shall not settle an indemnified claim or action
without the prior written consent of the indemnifying party and the
indemnifying party will not be liable for any settlement made without its
consent. The indemnifying party shall notify the indemnified party whether
or not it will consent to a proposed settlement within ten days after it
receives from the indemnified party notice of the proposed settlement,
summarizing all the terms and conditions of settlement. The indemnifying
party's failure to notify the indemnified party within that ten-day period
whether or not it consents to the proposed settlement will constitute its
consent to the proposed settlement.
This indemnity does not apply to any untrue statement or omission, or
any alleged untrue statement or omission that was made in a preliminary
prospectus but remedied or eliminated in the final prospectus (including
any amendment or supplement to it), if a copy of the definitive prospectus
(including any amendment or supplement to it) was delivered to the person
asserting the claim at or before the time required by the Securities Act
and the delivery of the definitive prospectus (including any amendment or
supplement to it) constitutes a defense to the claim asserted by the
person.
<PAGE>
9
9. No Impairment. The Company will not by any action including, without
limitation, amending or permitting the amendment of the charter documents,
bylaws, or similar instruments of the Company or through any reorganization,
reclassification, transfer of assets, consolidation, merger, share exchange,
dissolution, issue or sale of securities, or any other similar voluntary action,
avoid or seek to avoid the observance or performance of any of the express terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be reasonably
necessary to protect the rights of the Holder against impairment or dilution.
Without limiting the generality of the foregoing, the Company will (i) take all
such action as may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon exercise
of the Warrant, free and clear of all liens, encumbrances, equities, and claims
and (ii) use all reasonable efforts to obtain all such authorizations,
exemptions, or consents from any public regulatory body having jurisdiction over
the Company as may be necessary to enable the Company to perform its obligations
under this Warrant.
10. Dilution Fee. If, during the Exercise Period, the Company pays any cash
dividends or makes any cash distribution to any holder of any class of its
Common Stock with respect to such Common Stock and the Exercise Price exceeds
the Market Price, then the Holder of this Warrant will be entitled to receive in
respect of this Warrant a dilution fee in cash (the "Dilution Fee") on the date
of payment of such dividend or distribution, which Dilution Fee will be equal to
the amount per share paid to the holders of Common Stock times the number of
Shares currently exercisable under this Warrant.
11. Survival. The various rights and obligations of the Holder and of the
Company as set forth in Sections 4 and 5 hereof shall survive the exercise of
this Warrant and the surrender of this instrument upon such exercise.
12. Notice. All notices required by this Warrant to be given or made by the
Company shall be given or made by first class mail, postage prepaid, addressed
to the registered Holder hereof at the address of such Holder as shown on the
books of the Company.
13. Loss or Destruction. Upon receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any loss, theft or destruction, upon delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its counsel, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
14. Miscellaneous.
(a) Neither this Warrant nor any term hereof may be changed, waived,
discharged, or terminated except by a written instrument executed by the
Company and the Holder.
(b) This Warrant shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Florida, without regard
to principles of conflicts of laws thereof.
(c) Each provision of this Warrant shall be interpreted in such a
manner as to be effective, valid, and enforceable under applicable law, but
if any provision of this Warrant is held to be invalid, illegal, or
unenforceable under any applicable law or rule in any jurisdiction, such
provision will be ineffective only to the extent of such invalidity,
illegality, or unenforceability in such jurisdiction, without invalidating
the remainder of this Warrant in such jurisdiction or any provision hereof
in any other jurisdiction.
<PAGE>
10
(d) No course of dealing or delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right
or otherwise prejudice the Holder's rights, power, or remedies.
(e) The Company shall pay all expenses incurred by it in connection
with, and all documentary stamp and other taxes (other than stock transfer
taxes) and other governmental charges that may be imposed in respect of,
the issue, sale and delivery of this Warrant and the Shares issuable upon
the exercise hereof.
(f) This Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors and assigns of the Company
and the successors and permitted assigns of the Holder.
15. Further Assurances. The Company agrees that it will execute and
record such documents as the Holder shall reasonably request to secure for
the Holder any of the rights represented by this Warrant.
IN WITNESS WHEREOF the Company has caused this Warrant to be executed
by its duly authorized officer as of the 18th day of August, 1998.
MEDICAL TECHNOLOGY SYSTEMS, INC.
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
11
EXHIBIT "A"
PROMISSORY NOTE
<PAGE>
12
EXHIBIT "B"
PURCHASE FORM
To be executed upon exercise of the Warrant. Capitalized terms have the
same meanings ascribed to them in the Warrant.
TO: Medical Technology Systems, Inc.
The undersigned hereby exercises the right to purchase _____________ Shares
of Common Stock evidenced by the Warrant, according to the terms and conditions
thereof, and hereby makes payment of the Purchase Price. If the Company's Common
Stock is listed on a securities exchange or market, the undersigned [does] [does
not] choose to pay the Purchase Price pursuant to a cashless exercise of the
Warrant. The undersigned requests that certificates for the Shares shall be
issued in the name set forth below:
Dated: Name:_______________________
____________________________
(Address)
Social Security No.________
or other identifying number
<PAGE>
13
EXHIBIT "C"
ASSIGNMENT
To be executed by the registered holder to effect a permitted transfer /of
the Warrant. Capitalized terms have the same meanings ascribed to them in the
Warrant.
FOR VALUE RECEIVED _______________________("Assignor")
hereby sells, assigns and transfers unto
_____________________("Assignee")
(Name)
_____________________
(Address)
_____________________
the right to purchase __________ shares of Common Stock of Medical Technology
Systems, Inc. evidenced by the Warrant, together with all right, title, and
interest therein, and does irrevocably constitute and appoint
_____________________________ attorney to transfer the said right on the books
of said corporation with full power of substitution in the premises.
Date: Assignor:
By:_________________________
Its:________________________
____________________________
Signature:
<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, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000823560
<NAME> Medical Technology Systems, Inc.
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Mar-31-1999
<PERIOD-START> Apr-1-1998
<PERIOD-END> Sep-30-1998
<EXCHANGE-RATE> 1.00
<CASH> 155
<SECURITIES> 0
<RECEIVABLES> 9,631
<ALLOWANCES> (2,897)
<INVENTORY> 2,533
<CURRENT-ASSETS> 9,827
<PP&E> 8,788
<DEPRECIATION> (5,967)
<TOTAL-ASSETS> 16,772
<CURRENT-LIABILITIES> 7,296
<BONDS> 0
0
1
<COMMON> 62
<OTHER-SE> 8,588
<TOTAL-LIABILITY-AND-EQUITY> 16,772
<SALES> 15,426
<TOTAL-REVENUES> 15,426
<CGS> 8,710
<TOTAL-COSTS> 16,563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 616
<INCOME-PRETAX> (1,137)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,137)
<DISCONTINUED> 0
<EXTRAORDINARY> 662
<CHANGES> 0
<NET-INCOME> (475)
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
