MEDICAL TECHNOLOGY SYSTEMS INC /DE/
MATERIAL CONTRACTS
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<TYPE>EX-10
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<FILENAME>elsloansec.txt
<DESCRIPTION>MATERIAL CONTRACTS
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                           LOAN AND SECURITY AGREEMENT

                            DATED AS OF JUNE 26, 2002

                                  BY AND AMONG

                         LASALLE BUSINESS CREDIT, INC.,

                                    AS AGENT

                   STANDARD FEDERAL BANK NATIONAL ASSOCIATION,

                                    AS LENDER

                        MEDICAL TECHNOLOGY SYSTEMS, INC.

                                       AND

                          MTS PACKAGING SYSTEMS, INC.,

                                  AS BORROWERS

                                       AND

                          THE GUARANTORS LISTED HEREIN



<PAGE>

                                      - i -

                                Table of Contents


                                                                           Page


1.       DEFINITIONS...........................................................1

2.       LOANS................................................................12

         (a)      Revolving Loans.............................................12

         (b)      Term Loan A.................................................13

         (c)      Term Loan B.................................................13

         (d)      Capital Expenditure Loans...................................13

         (e)      Repayments..................................................14

3.       LETTERS OF CREDIT....................................................16

         (a)      General Terms...............................................16

         (b)      Requests for Letters of Credit..............................16

         (c)      Obligations Absolute........................................16

         (d)      Expiration Dates of Letters of Credit.......................17

4.       INTEREST, FEES AND CHARGES...........................................17

         (a)      Interest Rate...............................................17

         (b)      Fees And Charges............................................17

         (c)      Maximum Interest............................................18

5.       COLLATERAL...........................................................18

         (a)      Grant of Security Interest to Agent.........................18

         (b)      Other Security..............................................19

         (c)      Possessory Collateral.......................................19

         (d)      Electronic Chattel Paper....................................19

         (e)      Siegel Family Trust.........................................20

         (f)      Guarantors..................................................20


<PAGE>
                                       ii

6.       PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
                INTERESTS THEREIN.............................................20

7.       POSSESSION OF COLLATERAL AND RELATED MATTERS.........................20

8.       COLLECTIONS..........................................................21

9.       COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.........22

         (a)      Daily/Weekly Reports........................................22

         (b)      Monthly Reports.............................................22

         (c)      Financial Statements........................................23

         (d)      Annual Projections..........................................23

         (e)      Explanation of Budgets and Projections......................23

         (f)      Public Reporting............................................24

         (g)      Valuation of Assets of Guarantors...........................24

         (h)      Other Information...........................................24

10.      TERMINATION..........................................................24

11.      REPRESENTATIONS AND WARRANTIES.......................................25

         (a)      Financial Statements and Other Information..................25

         (b)      Locations...................................................25

         (c)      Loans by Borrowers..........................................25

         (d)      Accounts and Inventory......................................26

         (e)      Liens.......................................................26

         (f)      Organization, Authority and No Conflict.....................26

         (g)      Litigation..................................................26

         (h)      Compliance with Laws and Maintenance of Permits.............26

         (i)      Affiliate Transactions......................................27

         (j)      Names and Tradenames........................................27

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                                      iii


         (k)      Equipment...................................................27

         (l)      Enforceability..............................................27

         (m)      Solvency....................................................27

         (n)      Indebtedness................................................27

         (o)      Margin Security and Use of Proceeds.........................27

         (p)      Parent, Subsidiaries and Affiliates.........................27

         (q)      No Defaults.................................................28

         (r)      Employee Matters............................................28

         (s)      Intellectual Property.......................................28

         (t)      Environmental Matters.......................................28

         (u)      ERISA Matters...............................................28

         (v)      Subordinated Debt and Preferred Stock Financing.............28

         (w)      Siegel License Agreement....................................29

         (x)      Absence of Undisclosed Liabilities..........................29

         (y)      Interrelatedeness of Borrowers and Guarantors...............29

         (z)      Individual Material Adverse Effect on Closing Date..........29

12.      AFFIRMATIVE COVENANTS................................................29

         (a)      Maintenance of Records......................................29

         (b)      Notices.....................................................29

         (c)      Compliance with Laws and Maintenance of Permits.............31

         (d)      Inspection and Audits.......................................31

         (e)      Insurance...................................................31

         (f)      Collateral..................................................33

         (g)      Use of Proceeds.............................................33

         (h)      Taxes.......................................................33


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                                       iv

         (i)      Intellectual Property.......................................33

         (j)      Senior Management...........................................33

         (k)      Key Person Life Insurance...................................34

         (l)      Siegel License Agreement....................................34

         (m)      Preferred Stock Documents...................................34

         (n)      Subordinated Debt Documents.................................34

         (o)      Borrower Subsidiaries.......................................34

13.      NEGATIVE COVENANTS...................................................34

         (a)      Guaranties..................................................34

         (b)      Indebtedness................................................34

         (c)      Liens.......................................................35

         (d)      Mergers, Sales, Acquisitions, Subsidiaries and Other
                     Transactions Outside the Ordinary Course of Business.....35

         (e)      Dividends and Distributions.................................36

         (f)      Investments; Loans..........................................36

         (g)      Fundamental Changes, Line of Business.......................36

         (h)      Equipment...................................................36

         (i)      Use of Proceeds.............................................36

         (j)      Affiliate Transactions......................................37

         (k)      Subordinated Debt Payments..................................37

         (l)      Certain Warrant and Preferred Stock Provisions..............37

14.      FINANCIAL COVENANTS..................................................37

         (a)      Tangible Net Worth..........................................37

         (b)      Debt Service Coverage Ratio.................................38

         (c)      Interest Coverage Ratio.....................................38

         (d)      Capital Expenditure Limitations.............................39

<PAGE>
                                       v

15.      DEFAULT..............................................................39

         (a)      Payment.....................................................39

         (b)      Breach of this Agreement and the Other Agreements...........39

         (c)      Breaches or Amendments of Other Obligations.................39

         (d)      Breach of Representations and Warranties....................39

         (e)      Loss of Collateral..........................................40

         (f)      Levy, Seizure or Attachment.................................40

         (g)      Bankruptcy or Similar Proceedings...........................40

         (h)      Appointment of Receiver.....................................40

         (i)      Judgment....................................................41

         (j)      Dissolution of Obligor......................................41

         (k)      Default or Revocation of Guaranty...........................41

         (l)      Criminal Proceedings........................................41

         (m)      Change of Control...........................................41

         (n)      Change of Management........................................41

         (o)      Termination of Life Insurance Policies......................41

         (p)      Material Adverse Effect.....................................41

         (q)      Siegel License Agreement....................................41

16.      REMEDIES UPON AN EVENT OF DEFAULT....................................41

17.      CONDITIONS PRECEDENT.................................................42

18.      INDEMNIFICATION......................................................44

19.      NOTICE...............................................................45

20.      CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION...............45

21.      MODIFICATION AND BENEFIT OF AGREEMENT................................46

22.      HEADINGS OF SUBDIVISIONS.............................................46

<PAGE>
                                       VI

23.      POWER OF ATTORNEY....................................................46

24.      CONFIDENTIALITY......................................................46

25.      COUNTERPARTS.........................................................47

26.      ELECTRONIC SUBMISSIONS...............................................47

27.      WAIVER OF JURY TRIAL; OTHER WAIVERS..................................47

28.      AGENT AND LENDER.....................................................48

29.      JOINT AND SEVERAL OBLIGATIONS........................................48


<PAGE>
                                      VII

EXHIBITS

Exhibit A       Business and Collateral Locations

Exhibit B       Compliance Certificate

Exhibit C       Commercial Tort Claims

Exhibit D       Form of Capital Expenditure Note

Exhibit E       Form of Accountant's Letter


SCHEDULES

Schedule A        Addresses of Borrowers and Guarantors

Schedule 2        Description of Preferred Stock

Schedule 5(e)     Intellectual Property licensed to Borrowers
                   by Siegel Family Trust

Schedule 11(g)    Litigation

Schedule 11(i)    Affiliate Transactions

Schedule 11(j)    Names and Trade Names

Schedule 11(n)    Indebtedness

Schedule 11(p)    Parents, Subsidiaries and Affiliates

Schedule 11(s)    Intellectual Property

Schedule 11(x)    Liabilities

Schedule 13(c)    Permitted Liens

Schedule 17(a)    Closing Document List


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                                       1

                           LOAN AND SECURITY AGREEMENT

     THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from
time to time,  this  "Agreement")  made this 26th day of June, 2002 by and among
LASALLE  BUSINESS  CREDIT,  INC.,  as Agent  ("Agent"),  STANDARD  FEDERAL  BANK
NATIONAL  ASSOCIATION,  a national banking  association,  as Lender  ("Lender"),
MEDICAL  TECHNOLOGY  SYSTEMS,  INC.  ("MTS"),  a Delaware  corporation,  and MTS
PACKAGING SYSTEMS, INC., a Florida corporation,  each having its principal place
of  business  at having its  principal  place of  business  at 12920  Automobile
Boulevard,  Clearwater,  Florida  33762  ("Packaging",  and  with  MTS,  each  a
"Borrower" and collectively, the "Borrowers").

                                   WITNESSETH:

     WHEREAS,  the Borrowers may, from time to time, request Loans from Agent on
behalf of Lender,  and the parties wish to provide for the terms and  conditions
upon  which such Loans or other  financial  accommodations,  if made by Agent on
behalf of Lender, shall be made;

     WHEREAS,   the   Guarantors   are  all  direct  or  indirect   wholly-owned
Subsidiaries  of MTS, and as such, will derive benefit form the extension of the
financial accommodations hereunder;

     NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal
or extension) hereafter made to a Borrower by Agent on behalf of Lender, and for
other good and valuable consideration,  the receipt and sufficiency of which are
hereby  acknowledged  by each  Borrower,  the  parties,  intending to be legally
bound, agree as follows:

     1. DEFINITIONS.

     "Account",  "Account  Debtor",  "Chattel Paper",  "Commercial Tort Claims",
"Deposit  Accounts",  "Documents",   "Electronic  Chattel  Paper",  "Equipment",
"Fixtures",   "General  Intangibles",   "Goods",   "Instruments",   "Inventory",
"Investment  Property",  "Letter-of-Credit  Rights",  "Proceeds"  and  "Tangible
Chattel Paper" shall have the respective  meanings assigned to such terms, as of
the date of this Agreement,  in the Pennsylvania  Uniform Commercial Code as the
same may be in effect from time to time.

     "Affiliate" shall mean any Person (i) which directly or indirectly  through
one or more  intermediaries  controls,  is  controlled  by,  or is under  common
control  with, a Borrower,  (ii) which  beneficially  owns or holds five percent
(5%) or more of the voting control or equity  interests of a Borrower,  or (iii)
five percent (5%) or more of the voting control or equity  interests of which is
beneficially owned or held by Borrower. No Borrower or Guarantor shall be deemed
to be an  Affiliate  of any other  Borrower or  Guarantor.  No Obligor  shall be
deemed to be an  Affiliate  of the  Subordinated  Lender,  and the  Subordinated
Lender shall not be deemed to be an Affiliate of any Obligor.

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                                       2

     "Approved   Electronic  form  Notice",   "Approved  Electronic  form",  and
"Electronic form" shall have the meanings specified in Section 26 hereof.

     "Authorized  Officer"  shall  mean any of the  President,  Chief  Financial
Officer or Treasurer of a Borrower (and other Person  designated as such by such
officers).

     "Business"  shall mean the  manufacture  and sale of medication  dispensing
systems and disposable medication  dispensing products,  packaging equipment and
allied ancillary products.

     "Business  Day" shall mean any day other than a  Saturday,  a Sunday or any
day that banks in Philadelphia, Pennsylvania are required or permitted to close.

     "Capital  Expenditure  Loans" shall mean the Loans made pursuant to Section
2(d) hereof.

     "Capital  Expenditures"  shall  mean for any  Person,  with  respect to any
period of determination, the aggregate of all expenditures (whether paid in cash
or accrued as  liabilities  and including  expenditures  for  capitalized  lease
obligations)  by such  Person  during  such  period  that are  required by GAAP,
consistently applied, to be included in or reflected by the property,  plant and
equipment or similar fixed asset  accounts (or  intangible  accounts  subject to
amortization) on the balance sheet of such Person,  including, to the extent not
already accounted for, capitalized development costs for such period.

     "Change of Control" shall mean the  occurrence of any of the following:  as
the  result  of  the  issuance  of  securities  by MTS  or  the  disposition  of
outstanding securities of MTS by the holders thereof, by merger, or by any other
transaction,  members of the Siegel Family  collectively  own less than 22.5% of
the  combined  voting  power of all  classes  of Voting  Securities,  or (2) any
"person"  or group of  persons  (within  the  meaning  of  section  13(d) of the
Securities  Exchange  Act of 1934 or Rule 13d-5  thereunder),  other than one or
more  members of the Siegel  Family or holders of the Series A Preferred  Stock,
Warrants  or shares  of common  stock  issued as a result of  conversion  of the
exercise of the Warrants or the conversion of the Preferred  Stock,  becomes the
"beneficial  owner"  (within  the  meaning  of Rule 13d-3  under the  Securities
Exchange Act of 1934,  except that a person shall be deemed to be the beneficial
owner of all  securities  that such  person has the right to  acquire  before or
after the  expiration  of any period of time  specified  in such rule) of Voting
Securities  with  combined  voting  power equal to or greater  than the combined
voting power of all Voting  Securities  held at the time in the aggregate by the
members of the Siegel Family.  In determining  the percentage of voting power of
all Voting  Securities held by any Person (or "person"),  all Voting  Securities
issuable  upon the  exercise,  conversion  or exchange of  outstanding  options,
warrants,  convertible  securities  or other rights to purchase or subscribe for
Voting Securities shall be deemed to be outstanding.

     "Closing Date" shall mean the date of the funding of the initial Loans.

     "Closing  Document List" shall have the meaning  specified in Section 17(a)
hereof.

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                                       3

     "Collateral"  shall mean all of the  property  of a Borrower  or  Guarantor
described in Section 5 hereof, together with all other real or personal property
of any Obligor or any other Person now or hereafter pledged or assigned to Agent
or Lender to secure,  either  directly or  indirectly,  repayment  of any of the
Liabilities.

     "Concentration Percentage" shall have the meaning specified in clause (xiv)
of the definition "Eligible Account".

     "Debt Service  Coverage Ratio" shall mean, for any Person,  with respect to
any period of  determination,  the ratio of (i) such  Person's  net income after
taxes for such period  (excluding  any after-tax  gains or losses on the sale of
assets (other than the sale of Inventory in the ordinary course of business) and
excluding other after-tax  extraordinary gains or losses), plus depreciation and
amortization  deducted  in  determining  net  income for such  period,  plus tax
benefits which offset any income tax expense provisions  deducted in determining
net income for such  period,  minus  Unfinanced  Capital  Expenditures  for such
period  plus the  after-tax  increase in LIFO  reserves,  or minus the after tax
decrease in LIFO reserves, to (ii) such Person's current principal maturities of
long-term debt and  capitalized  leases paid or scheduled to be paid during such
period, plus any prepayments on indebtedness owed to any other Person (exclusive
of payments  of Excess  Cash Flow made in  accordance  with  Section  2(e)(v)(B)
hereof, trade payables and Revolving Loans) and paid during such period plus, if
the period of  determination  ends on and is for such Person's  Fiscal Year, any
Permitted Dividends paid during such Fiscal Year.

     "Default"  shall  mean an event  which,  with the  giving  of notice or the
passage of time or both, would result in an Event of Default.

     "Eligible  Account"  shall  mean an Account  owing to a  Borrower  which is
acceptable to Agent in its reasonable  discretion for lending purposes.  Without
limiting Agent's discretion,  Agent shall, in general, consider an Account to be
an  Eligible  Account  if it meets,  and so long as it  continues  to meet,  the
following requirements:

          (i) it is genuine and in all respects is what it purports to be;

          (ii) it is owned by a Borrower, such Borrower has the right to subject
     it to a security  interest in favor of Agent, or assign it to Agent, and it
     is subject to a first  priority  perfected  security  interest  in favor of
     Agent  and to no  other  claim,  lien,  security  interest  or  encumbrance
     whatsoever  other than Permitted Liens (excluding those Permitted Liens set
     forth in clause (v) of the definition thereof);

          (iii) it arises from (A) the  performance of services by a Borrower in
     the ordinary  course of such  Borrower's  business,  and such services have
     been fully  performed and  acknowledged  and accepted by the Account Debtor
     thereunder; or (B) the sale or lease of Goods by a Borrower in the ordinary
     course of such Borrower's business,  and (x) such Goods have been completed
     in  accordance  with  the  Account  Debtor's  specifications  (if  any) and
     delivered to the Account Debtor, (y) such Account Debtor has not refused to
     accept,  returned  or  offered to  return,  any of the Goods  which are the
     subject of such Account,  and (z) such Borrower has  possession of, or such
     Borrower has delivered to Agent (at Agent's request)  shipping and delivery
     receipts evidencing delivery of such Goods;

<PAGE>
                                       4

          (iv) it is  evidenced  by an invoice  rendered to the  Account  Debtor
     thereunder,  is due and payable by its terms within  ninety (90) days after
     the date of the  invoice  and does not remain  unpaid more than ninety (90)
     days past the invoice date thereof;  provided,  however,  that if more than
     twenty-five  percent (25%) of the aggregate dollar amount of invoices owing
     by a particular  Account  Debtor  remain  unpaid more than ninety (90) days
     after the respective invoice dates thereof, then all Accounts owing by that
     Account Debtor shall be deemed ineligible;

          (v) it is a valid, legally enforceable and unconditional obligation of
     the Account Debtor thereunder, and is not subject to setoff,  counterclaim,
     credit,  allowance or adjustment by such Account Debtor, or to any claim by
     such Account Debtor denying liability thereunder in whole or in part;

          (vi) it does not arise out of a contract  or order  which fails in any
     material respect to comply with the requirements of applicable law;

          (vii)  the  Account  Debtor  thereunder  is not a  director,  officer,
     employee or agent of a Borrower, or a Subsidiary, Parent or Affiliate;

          (viii) if the Account  Debtor  thereof is the United States of America
     or  any  state  or  local   government,   or  any  department,   agency  or
     instrumentality  thereof,  the  Borrower to which such  Account  shall have
     assigned its right to payment of such Account to Agent  pursuant to, and in
     full compliance with, the Assignment of Claims Act of 1940, as amended,  or
     any comparable state or local law, as applicable;

          (ix) it is not an Account with respect to which the Account  Debtor is
     located in a state which  requires  the  Borrower to which such  Account is
     owed,  as a  precondition  to commencing  or  maintaining  an action in the
     courts of that state,  either to (A) receive a certificate  of authority to
     do business and be in good standing in such state;  or (B) file a notice of
     business  activities  report or similar  report  with such  state's  taxing
     authority,  unless (x) such Borrower has taken one of the actions described
     in clauses (A) or (B); (y) the failure to take one of the actions described
     in either clause (A) or (B) may be cured  retroactively by such Borrower at
     its  election;  or (z) such Borrower has proven,  to Agent's  satisfaction,
     that it is exempt from any such requirements under any such state's laws;

          (x) the Account  Debtor is located within the United States of America
     or is located within a foreign country and, in each case, the Account owing
     by such  Account  Debtor is payable  in U.S.  Dollars  and with  respect to
     Account  Debtors who are  residents or citizens of or are located  within a
     foreign  country,  the Account is supported by a letter of credit or credit
     insurance which is in form and substance satisfactory to Agent, issued by a
     financial institution acceptable to Agent and assigned to Agent in a manner
     acceptable to Agent;

          (xi) it is not an Account with  respect to which the Account  Debtor's
     obligation to pay is subject to any repurchase  obligation or return right,
     as with sales made on a  bill-and-hold,  guaranteed sale, sale on approval,
     sale or return or consignment basis;

<PAGE>
                                       5

          (xii) it is not an Account  which  consists  of  customer  deposits or
     progress  billings  (such  that the  obligation  of the  Account  Debtor is
     conditioned  upon a  Borrower's  satisfactory  completion  of  any  further
     performance under the agreement giving rise thereto);

          (xiii)  it  is  not  an  Account   (A)  with   respect  to  which  any
     representation  or warranty  contained in this Agreement is untrue;  or (B)
     which  violates  any of the  covenants of the  Borrowers  contained in this
     Agreement;

          (xiv) it is not an Account owing to a Borrower which,  when added to a
     particular  Account Debtor's other  indebtedness to such Borrower,  exceeds
     10% of all  Accounts of Borrower  (the  "Concentration  Percentage"),  or a
     credit limit  determined  by Agent in its  reasonable  discretion  for that
     Account Debtor (except that Accounts excluded from Eligible Accounts solely
     by reason of this clause (xiv) shall be Eligible  Accounts to the extent of
     such credit limit); provided, however, that with respect to Omnicare, Inc.,
     PharMerica/Amerisource   Bergen  Corporation,   McKesson   Corporation  and
     Cardinal Health, Inc., the Concentration Percentage shall be 20%.

          (xv) it is not a contra Account; and

          (xvi) it is not an Account (i) with  respect to which the  prospect of
     payment or performance by the Account Debtor is or will be impaired or (ii)
     of poor credit quality as determined by Agent in its reasonable discretion.

     "Eligible  Inventory"  shall mean Inventory of a Borrower which consists of
finished  goods or raw materials  and is  acceptable to Agent in its  reasonable
discretion for lending  purposes.  Without  limiting Agent's  discretion,  Agent
shall, in general, consider such Inventory to be Eligible Inventory if it meets,
and so long as it continues to meet, the following requirements:

          (i) it is owned by a Borrower,  such Borrower has the right to subject
     it to a  security  interest  in favor of Agent and it is subject to a first
     priority  perfected  security  interest  in favor of Agent  and to no other
     claim,  lien,  security  interest  or  encumbrance  whatsoever  other  than
     Permitted Liens (excluding those Permitted Liens set forth in clause (v) of
     the definition thereof);

          (ii) it is  located  on one of the  premises  listed on  Exhibit A (or
     other  locations  of which  Agent has been  advised in writing  pursuant to
     Section 12(b)(i) hereof) and is not in transit;

          (iii)  if held for sale or lease  or  furnishing  under  contracts  of
     service,  it is (except as Agent may otherwise  consent in writing) new and
     unused  and  free  from  defects   which  would,   in  Agent's   reasonable
     determination, affect its market value;

          (iv)  it  is  not  stored  with  a  bailee,  consignee,  warehouseman,
     processor  or  similar  party  unless  Agent has  given  its prior  written
     approval and the Borrower owning such Inventory has caused any such bailee,
     consignee, warehouseman, processor or similar party to issue and deliver to
     Agent, in form and substance  reasonably  acceptable to Agent, such Uniform
     Commercial Code financing statements, warehouse receipts, waivers and other
     documents as Agent shall require;

<PAGE>
                                       6

          (v)  Agent  has  determined,  in  accordance  with  Agent's  customary
     business practices,  that it is not unacceptable due to age, type, category
     or quantity;

          (vi) it is not slow moving or obsolete,  as determined by Agent in its
     reasonable discretion;

          (vii) it does not consist of samples, assemblies,  packaging materials
     or shipping materials, spare parts, supplies or tooling; and

          (viii)  it is not  Inventory  (A) with  respect  to  which  any of the
     representations  and warranties  contained in this Agreement are untrue; or
     (B) which violates any of the covenants of the Borrowers  contained in this
     Agreement.

     "Environmental  Laws" shall mean all federal,  state,  district,  local and
foreign laws, rules,  regulations,  ordinances,  and consent decrees relating to
health,  safety,  hazardous substances,  pollution and environmental matters, as
now or at any time  hereafter in effect,  applicable to business of any Borrower
or any  Guarantor  or  facilities  owned  or  operated  by any  Borrower  or any
Guarantor,  including  laws  relating  to  emissions,  discharges,  releases  or
threatened releases of pollutants, contamination, chemicals, or hazardous, toxic
or dangerous  substances,  materials or wastes into the environment  (including,
without  limitation,  ambient air, surface water,  ground water, land surface or
subsurface  strata)  or  otherwise  relating  to  the  generation,  manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Materials.

     "ERISA" shall mean the Employee  Retirement Income Security Act of 1974, as
amended, modified or restated from time to time.

     "Eureka" shall mean Eureka I, L.P., a Delaware limited partnership, and its
successors in interest.

     "Event of Default" shall have the meaning specified in Section 15 hereof.

     "Excess Cash Flow" shall have the meaning  specified in Section  2(e)(v)(B)
hereof.

     "Financial  Statements"  shall have the meaning  specified  in Section 9(a)
hereof.

     "Fiscal  Year" shall mean each twelve (12) month  accounting  period of MTS
and its Subsidiaries, which ends on March 31 of each year.

     "GAAP" shall mean generally  accepted  accounting  principles in the United
States of America in effect from time to time.

     "Guarantor"  or  "Guarantors"  shall mean each of the  Subsidiaries  of MTS
which have entered or shall enter into a guaranty of the Liabilities.

<PAGE>
                                       7

     "Hazardous  Materials"  shall  mean  any  hazardous,   toxic  or  dangerous
substance,  materials and wastes,  including,  without limitation,  hydrocarbons
(including   naturally   occurring  or  man-made  petroleum  and  hydrocarbons),
flammable  explosives,  asbestos,  urea  formaldehyde  insulation,   radioactive
materials,   biological  substances,   polychlorinated  biphenyls,   pesticides,
herbicides  and any  other  kind  and/or  type  of  pollutants  or  contaminants
(including, without limitation, materials which include hazardous constituents),
sewage,  sludge,  industrial slag, solvents and/or any other similar substances,
materials,  or wastes and  including any other  substances,  materials or wastes
that are or become  regulated under any  Environmental  Law (including,  without
limitation  any that are or become  classified  as  hazardous or toxic under any
Environmental Law).

     "Indemnified Party" shall have the meaning specified in Section 18 hereof.

     "Individual  Material  Adverse Effect" shall mean a material adverse effect
on the business, profitability, property, assets, business prospects, operations
or condition, financial or otherwise, of any one Obligor.

     "Interest  Coverage Ratio" shall mean, for any Person,  with respect to any
period of  determination,  the ratio of (i) such Person's net income after taxes
for such period  (excluding any after-tax  gains or losses on the sale of assets
(other  than the sale of  Inventory  in the  ordinary  course of  business)  and
excluding other after-tax  extraordinary gains or losses), plus depreciation and
amortization  deducted in determining net income for such period,  plus interest
expense  deducted in determining  net income for such period,  plus tax benefits
which offset income tax expense  provisions  deducted in determining  net income
for such period minus Unfinanced Capital  Expenditures for such period, and plus
the after-tax increase in LIFO reserves, or minus the after tax decrease in LIFO
reserves,  to (ii) interest  expense deducted in determining net income for such
period.

     "Interest Period" shall have the meaning specified in Section 4 hereof.

     "Investment" shall have the meaning specified in Section 13(f) hereof.

     "LaSalle  Bank" shall mean  LaSalle  Bank  National  Association,  Chicago,
Illinois.

     "Letter of Credit"  shall mean any Letter of Credit  issued for the account
of a Borrower under this Agreement.

     "Letter of Credit Obligations" shall mean, as of any date of determination,
the sum of (i) the  undrawn  face  amount of the  Letters of Credit and (ii) the
aggregate unreimbursed amount of all draws under a Letter of Credit.

     "Liabilities"   shall  mean  any  and  all  obligations,   liabilities  and
indebtedness  of any Obligor to Agent or Lender or to any parent,  affiliate  or
subsidiary  of Agent or  Lender  of any and  every  kind and  nature,  howsoever
created, arising or evidenced and howsoever owned, held or acquired, whether now
or  hereafter  existing,  whether  now due or to become  due,  whether  primary,
secondary,  direct,  indirect,  absolute,  contingent  or otherwise  (including,
without limitation, obligations of performance), whether several, joint or joint
and several,  and whether arising or existing under written or oral agreement or
by operation of law.

<PAGE>
                                       8

     "Life Insurance Policy" of "Life Insurance Policies" shall have the meaning
specified in Section 12(k) hereof.

     "Loans" shall mean all loans and advances made by Agent on behalf of Lender
to or on behalf of a Borrower hereunder.

     "Lock Box" and "Lock Box  Account"  shall have the  meanings  specified  in
Section 8(a) hereof.

     "Master Letter of Credit Agreement" shall mean the form of Master Letter of
Credit  Agreement used by Agent in  conjunction  with the issuance of Letters of
Credit.

     "Material  Adverse  Effect"  shall  mean a material  adverse  effect on the
business,  profitability,  property,  assets, business prospects,  operations or
condition,  financial or otherwise,  of a MTS and its  Subsidiaries,  taken as a
whole.

     "Material Agreement" shall mean, with respect to any Person, each contract,
whether  written or oral,  to which such Person is a party  involving  aggregate
consideration  payable to or by such  Person of  $100,000 or more in one year or
involving  extensions  of credit by or to such Person of  $100,000 or more,  but
excluding  the  agreements  documenting  credit  facilities  being repaid on the
Closing Date.

     "Maximum  Loan  Limit"  shall mean Eight  Million  Seven  Hundred  Thousand
Dollars ($8,700,000).

     "Maximum   Revolving   Loan  Limit"   shall  mean  Five   Million   Dollars
($5,000,000).

     "Minimum Net  Availability"  shall mean, at any time of  determination,  an
amount  equal to (a) the lesser of: (i) the Maximum  Revolving  Loan Limit;  and
(ii) the Revolving Loan Limit available to the Borrowers at such time, minus (b)
the sum of: (i) all sums due and owing by the Borrowers to the Borrowers'  trade
creditors  which are  outstanding  beyond  trade terms  usually and  customarily
afforded to the Borrowers by their trade  creditors (as determined by Agent from
time to time in the  reasonable  exercise  of its  discretion);  plus  (ii)  the
outstanding  principal  balance  of all  initial  Revolving  Loans and Letter of
Credit  Obligations;  plus  (iii) all taxes due to any  federal,  state or local
taxing  authority due and not yet paid;  plus (iv) all unpaid fees due hereunder
and all costs and expenses  incurred by the Borrowers in connection with closing
the transactions contemplated by this Agreement.

     "Obligor"  shall mean each  Borrower,  each Guarantor and each other Person
who  is or  shall  become  primarily  or  secondarily  liable  for  any  of  the
Liabilities or who has pledged or assigned  Collateral to secure the payment and
performance of the Liabilities.

<PAGE>
                                       9

     "Other  Agreements"  shall mean all agreements,  instruments and documents,
other than this Agreement, including, without limitation, guaranties, mortgages,
trust deeds,  pledges,  powers of attorney,  consents,  assignments,  contracts,
notices,  security agreements,  contribution and repayment  agreements,  leases,
financing statements and all other writings heretofore, now or from time to time
hereafter executed by or on behalf of a Borrower, a Guarantor, any other Obligor
or any other Person and delivered to Agent or Lender or to any parent, affiliate
or subsidiary of Agent or Lender or in connection  with the  Liabilities  or the
transactions  contemplated hereby, as each of the same may be amended,  modified
or supplemented from time to time.

     "Parent" shall mean any Person now or at any time or times hereafter owning
or  controlling  (alone or with any other  Person)  at least a  majority  of the
issued and outstanding equity of MTS or of any of its Subsidiaries.

     "PBGC" shall have the meaning specified in Section 12(b)(v) hereof.

     "Permitted  Dividend"  shall mean any dividend paid by MTS on the Preferred
Stock to a holder of the Preferred Stock which is permitted to be made under the
provisions of the Subordination Agreement.

     "Permitted  Liens"  shall mean (i) liens for taxes,  assessments,  fees and
other  governmental  charges,  and for  claims  the  payment of which is not yet
overdue or is being  contested  in good faith (and for which  adequate  reserves
have  been  established  by MTS on its  books in  conformity  with  GAAP),  (ii)
statutory liens of landlords,  carriers,  warehousemen,  processors,  mechanics,
materialmen  or  suppliers  incurred  in the  ordinary  course of  business  and
securing  amounts not yet due or declared to be due by the claimant  thereunder;
(iii) liens or security  interests in favor of Agent;  (iv) zoning  restrictions
and easements,  licenses,  covenants and other restrictions affecting the use of
real  property  that do not  individually  or in the  aggregate  have a material
adverse  effect on any  Borrower's  ability  to use such real  property  for its
intended  purpose in  connection  with such  Borrower's  business;  (v) liens in
connection with purchase money  indebtedness  and capitalized  leases  otherwise
permitted  pursuant to the Agreement;  provided,  that such liens attach only to
the  assets  the  purchase  of  which  was  financed  by  such  purchase   money
indebtedness or which is the subject of such capitalized  leases;  (vi) liens in
favor of customs and revenue  authorities which secure payment of customs duties
in  connection  with the  importation  of goods;  provided that all such customs
duties are  promptly  paid;  (vii)  liens in favor of the  Subordinated  Lender;
(viii) liens  described on Schedule  13(c) hereto and (ix) liens (other than any
lien  created by ERISA)  incurred or  deposits  made in the  ordinary  course of
business in connection with worker's  compensation,  unemployment  insurance and
other types of social security.

     "Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization,  association,  corporation, limited
liability  company,  institution,  entity,  party or  foreign  or United  States
government  (whether  federal,  state,  county,  city,  municipal or otherwise),
including,  without limitation,  any instrumentality,  division, agency, body or
department thereof.

     "Plan" shall have the meaning specified in Section 12(b)(v) hereof.

<PAGE>
                                       10

     "Preferred  Stock" shall mean 2,000 shares (as such number may be increased
pursuant to adjustments made and paid-in kind dividends paid, in accordance with
the Preferred Stock Documents) of Series A Convertible  Participating  Preferred
Stock to be issued by MTS to the  Subordinated  Lender on the date  hereof for a
purchase  price of  $2,000,000,  as more fully  described on Schedule 2 attached
hereto and made a part hereof.

     "Preferred Stock Documents" shall mean the Securities Purchase Agreement of
even date herewith  between Eureka and MTS, the certificate of designations  for
the  Preferred  Stock  and any  and all  documents,  agreement  and  instruments
executed in connection therewith.

     "Prime Rate" shall mean LaSalle Bank's publicly announced prime rate (which
is not intended to be LaSalle  Bank's lowest or most favorable rate in effect at
any time) in effect from time to time.

     "Proceeding" shall have the meaning specified in Section 15(g) hereof.

     "Revolving  Loan Limit"  shall have the meaning  specified  in Section 2(a)
hereof.

     "Revolving Loans" shall have the meaning specified in Section 2(a) hereof.

     "Siegel  Family"  shall  mean  (1)  Todd  E.  Siegel,  his  siblings,   the
descendants  of Todd E. Siegel and his  siblings,  and the spouses of any of the
foregoing persons;  and (2) any general or limited  partnership  (including Jade
Partners),  trust  (including  the Siegel Family Trust) or other entity,  all of
whose partners,  beneficiaries  or other owners are Persons  described in clause
(1).

     "Siegel License Agreement" shall mean that certain license agreement by and
between the Siegel Family Trust, as licensor, and MTS, as licensee,  dated as of
September  2,  1990,  under the terms of which  licensor  has  licensed  certain
intellectual property to licensee.

     "South  Trust  Bank"  shall have the  meaning  specified  in Section  17(d)
hereof.

     "Subordinated  Debt" shall mean the  indebtedness  of the Borrowers and the
Guarantors to the  Subordinated  Lender,  in the aggregate  principal  amount of
$4,000,000,  which shall at all times be fully junior and subordinated to all of
the  Liabilities in accordance  with the terms of the  Subordination  Agreement,
together with any refinancing thereof;  provided, that such refinancing does not
have an earlier  maturity date or a greater  interest rate than the Subordinated
Debt  currently  has, does not contain other terms or conditions  which are more
onerous to or less favorable to the Borrowers than those currently  contained in
the  Subordinated  Debt  Documents,  and  any  new  lender  of  such  refinanced
Subordinated Debt which is not a signatory  thereto,  becomes a signatory to the
Subordination Agreement.

     "Subordinated Debt Documents" shall mean the securities purchase agreement,
the subordinated  note and any and all other related  documents,  agreements and
instruments entered into in connection with the Subordinated Debt.

<PAGE>
                                       11

     "Subordinated  Lender"  shall  mean  Eureka I, L.P.  and/or  certain of its
Affiliates,  as lender of the Subordinated Debt, and their respective successors
and assigns.

     "Subordination  Agreement" shall mean the  Subordination  Agreement of even
date herewith by and among the Agent, the Subordinated  Lender and the Borrowers
and  Guarantors,  as  applicable,  which  sets  forth  the terms of the lien and
payment  subordination of the Subordinated Debt and the payment subordination of
certain terms of the Warrants and the Preferred Stock to the Liabilities.

     "Subsidiary"  shall mean any  corporation  of which more than fifty percent
(50%) of the  outstanding  capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation  (irrespective of whether
at the time  stock of any other  class of such  corporation  shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by MTS or a Subsidiary of MTS, or any partnership,
joint  venture or  limited  liability  company of which more than fifty  percent
(50%)  of  the  outstanding  equity  interests  are  at the  time,  directly  or
indirectly,  owned by MTS or a Subsidiary of MTS or any partnership of which MTS
or a Subsidiary of MTS is a general partner.

     "Tangible  Net Worth" shall mean,  with respect to a Person,  such Person's
shareholders'  equity,  defined in accordance with GAAP, less the book value (to
the extent  included in such  shareholders'  equity) of all assets  reflected as
goodwill  (which  shall  in  no  event  include  trademarks,  patents  or  other
intellectual property or capitalized  development costs), plus the amount of any
LIFO reserve, all as determined under GAAP, consistently applied;

     "Term" shall have the meaning specified in Section 10 hereof.

     "Term Loan A" shall have the meaning specified in Section 2(b) hereof.

     "Term Loan B" shall have the meaning specified in Section 2(c) hereof.

     "Term Loans" shall mean, collectively, Term Loan A, Term Loan B.

     "2004 Tangible Net Worth  Requirement"  shall have the meaning specified in
Section 14(a) hereof.

     "2005 Tangible Net Worth  Requirement"  shall have the meaning specified in
Section 14(a) hereof.

     "Unfinanced  Capital  Expenditures"  shall mean those Capital  Expenditures
which  have not been  financed,  funded or paid for with the  proceeds  of Loans
(other than Revolving Loans), purchase money indebtedness, capital leases or any
other form of indebtedness.

     "Voting   Securities"   shall  mean   securities   entitled   in   ordinary
circumstances to vote generally in the election of directors of MTS.

<PAGE>
                                       12

     "Warrants"  shall mean the  Warrants to be issued in  conjunction  with the
Subordinated Debt to the Subordinated Lender.

     "Warrant  Shares" shall mean the shares of common stock of MTS to be issued
upon the exercise of the Warrants.

     2. LOANS.

          (a)  Revolving  Loans.  Subject  to the terms and  conditions  of this
     Agreement  and the Other  Agreements,  during the Term,  Agent on behalf of
     Lender shall make revolving loans and advances (the  "Revolving  Loans") to
     one or more  Borrowers in an aggregate  amount up to the lesser of: (x) the
     Maximum Revolving Loan Limit minus the Letter of Credit  Obligations or (y)
     the sum of the following  sublimits (the  "Revolving Loan Limit") minus the
     Letter of Credit Obligations:

               (i) Up to  eighty-five  percent  (85%) of the face  amount  (less
          maximum  discounts,  credits and  allowances  which may be taken by or
          granted to Account  Debtors in  connection  therewith  in the ordinary
          course  of each  Borrower's  business)  of  Eligible  Accounts  of the
          Borrowers; plus

               (ii) Up to the lesser of:  (A) the sum of  (without  duplication)
          sixty  percent  (60%) of the lower of cost or  market  value on a FIFO
          basis of the Eligible Inventory of each Borrower;  and (B) Two Million
          Dollars ($2,000,000); minus

               (iii)  such  reserves  as  Lender   elects,   in  its  reasonable
          discretion, to establish from time to time.

          The aggregate unpaid principal  balance of the Revolving Loans made to
     all Borrowers  plus the  outstanding  Letter of Credit  Obligations  of the
     Borrowers shall not at any time exceed the lesser of (i) the Revolving Loan
     Limit and (ii) the Maximum  Revolving  Loan Limit (as each of such  amounts
     may be increased or decreased by Agent, in its sole discretion).  If at any
     time the outstanding  Revolving  Loans made to all Borrowers  exceed either
     the  Revolving  Loan Limit or the  Maximum  Revolving  Loan  Limit,  or any
     portion  of the  Revolving  Loans  plus the  outstanding  Letter  of Credit
     Obligations exceed any applicable sublimit within the Revolving Loan Limit,
     the  Borrowers  shall  immediately,  and without the necessity of demand by
     Agent,  pay to Agent such  amount as may be  necessary  to  eliminate  such
     excess,  and Agent shall apply such  payment to the  outstanding  Revolving
     Loans in such  order  as  Agent  shall  determine  in its sole  discretion;
     provided,  however,  that if such excess results from any  establishment of
     reserves  by  Agent  or from  the  imposition  of any  modification  to the
     eligibility  criteria set forth in the definitions of Eligible Accounts and
     Eligible  Inventory  or in this  Section  2(a) in such a manner  that items
     heretofore  eligible  thereunder are rendered  ineligible,  Borrowers shall
     have five (5) days to eliminate such excess.

          Each Borrower  hereby  authorizes  Agent, in its sole  discretion,  to
     charge any accounts of the Borrowers  maintained at LaSalle Bank or advance
     Revolving Loans to make any payments of principal, interest, fees, costs or
     expenses  required to be made under this Agreement or the Other Agreements.
     All Revolving Loans shall, in Agent's sole discretion,  be evidenced by one
     or more  promissory  notes in form and  substance  satisfactory  to  Agent.
     However, if such Revolving Loans are not so evidenced, such Revolving Loans
     may be evidenced solely by entries upon the books and records maintained by
     Agent.

<PAGE>
                                       13

          A request for a Revolving  Loan shall be made or shall be deemed to be
     made,  each in the  following  manner:  Borrower  shall give Agent same day
     notice, no later than 12:00 P.M.  (Philadelphia  time) for such day, of its
     request for a Revolving  Loan, in which notice such Borrower  shall specify
     the amount of the  proposed  borrowing  and the  proposed  borrowing  date;
     provided,  however,  that no such  request may be made at a time when there
     exists an Event of Default.  Each check or request for payment  against the
     control  disbursement account maintained by Borrowers at LaSalle Bank shall
     constitute  a request  for a Revolving  Loan.  As an  accommodation  to the
     Borrowers,  Agent may permit  telephone  requests for  Revolving  Loans and
     electronic  transmittal  of  instructions,  authorizations,  agreements  or
     reports to Agent by Borrowers.  Unless such Borrower  specifically  directs
     Agent in  writing  not to  accept  or act  upon  telephonic  or  electronic
     communications  from it, Agent shall have no liability to such Borrower for
     any  loss or  damage  suffered  by such  Borrower  as a result  of  Agent's
     honoring of any requests, execution of any instructions,  authorizations or
     agreements or reliance on any reports  communicated to it telephonically or
     electronically  and purporting to have been sent to Agent by such Borrower,
     and Agent shall have no duty to verify the origin of any such communication
     or the authority of the Person sending it (but such request must purport to
     be sent by an Authorized Officer).

          Each  Borrower  hereby  irrevocably  authorizes  Agent to disburse the
     proceeds of each Revolving Loan requested by such Borrower, or deemed to be
     requested by such Borrower, as follows: the proceeds of each Revolving Loan
     requested under Section 2(a) shall be disbursed by Agent in lawful money of
     the United States of America in immediately available funds, in the case of
     the  initial  borrowing,  in  accordance  with  the  terms  of the  written
     disbursement  letter  from  Borrower,  and in the  case of each  subsequent
     borrowing,  by wire transfer or Automated  Clearing House (ACH) transfer to
     such bank  account as may be agreed  upon by such  Borrower  and Agent from
     time to time,  or  elsewhere if pursuant to a written  direction  from such
     Borrower.

          (b) Term Loan A. Subject to the terms and conditions of this Agreement
     and the Other  Agreements,  on the date that the  conditions to the initial
     Loans are  satisfied,  Lender shall make a term loan to the Borrowers in an
     amount equal to Seven Hundred Thousand Dollars ($700,000) ("Term Loan A").

          (c) Term Loan B. Subject to the terms and conditions of this Agreement
     and the Other  Agreements,  on the date that the  conditions to the initial
     Loans are  satisfied,  Lender shall make a term loan to the Borrowers in an
     amount equal to Two Million Dollars ($2,000,000) ("Term Loan B").

          (d) Capital Expenditure Loans.  Subject to the terms and conditions of
     this  Agreement  and the  Other  Agreements,  from  time to time  after the
     initial Loans are advanced hereunder,  but in no event after the date which
     is six months prior to the last day of the Term,  Agent shall make advances
     to  the  Borrowers  up to  eighty  percent  (80%)  of  the  purchase  price
     (exclusive of sales taxes,  delivery charges and other "soft" costs related
     to such  purchase) of  Equipment to be purchased  with the proceeds of such
     advances,  which  Equipment  is  acceptable  to  Agent  in  its  reasonable

<PAGE>
                                       14

     discretion,  and upon  which  Agent on behalf of Lender  shall have a first
     priority  perfected  security  interest;  provided,  that (i) the aggregate
     amount  advanced  during the Term for such  purchases  shall not exceed One
     Million Dollars ($1,000,000), (ii) at least five (5) Business Days prior to
     any such advance hereunder,  the Borrowers shall have furnished to Agent an
     invoice and acceptance  letter for the Equipment  being purchased and shall
     have  executed  such  documents and taken such other actions as Agent shall
     required  to assure  that  Agent has a first  priority  perfected  security
     interest in such  Equipment,  (iii) each advance  hereunder  shall be in an
     amount not less than Two Hundred Fifty  Thousand  Dollars  ($250,000),  and
     (iv) the Borrowers  shall have executed and delivered to Agent a CapEx Note
     in the form of  Exhibit  D annexed  hereto.  The  CapEx  Line  shall not be
     available for further  advances at any time during which a Default or Event
     of Default has occurred unless the Agent in its sole discretion waives such
     Default or Event of Default in writing.

          (e)  Repayments.   The  obligation  of  the  Borrowers  to  repay  the
     Liabilities  shall be joint  and  several.  The  Loans  shall be  repaid as
     follows:

               (i) Repayment of Revolving  Loans.  The  Revolving  Loans and all
          other Liabilities  (other than the Term Loan B) shall be repaid on the
          last day of the Term.

               (ii) Repayment of Term Loan A. The principal of Term Loan A shall
          be repaid  in (i)  thirty-five  (35)  equal  and  consecutive  monthly
          installments of principal of Eleven Thousand Six Hundred Sixty-Six and
          67/100  Dollars  ($11,666.67),  payable on the first day of each month
          during the period  beginning on and including  July 1, 2002 and ending
          on and  including  June 1,  2005  and (ii) one  final  payment  of the
          remaining  principal  balance thereof,  together with all interest and
          fees accrued and unpaid  thereon,  on the last day of the Term. If any
          such payment due date is not a Business  Day,  then such payment shall
          be made on the next  succeeding  Business  Day, and such  extension of
          time shall be  included in the  computation  of the amount of interest
          and fees due hereunder.

               (iii)  Repayment  of Term  Loan B. The  principal  of Term Loan B
          shall be repaid in (i) twenty-four (24) equal and consecutive  monthly
          installments  of  principal of  Eighty-Three  Thousand  Three  Hundred
          Thirty-Three and 33/100 (83,333.33),  payable on the first day of each
          month during the period  beginning on and  including  July 1, 2002 and
          ending on and including June 1, 2004;  provided that, on June 1, 2004,
          the Borrowers shall also repay any other remaining  principal  balance
          of the Term Loan B and  interest  accrued and unpaid  thereon.  If any
          such payment due date is not a Business  Day,  then such payment shall
          be made on the next  succeeding  Business  Day, and such  extension of
          time shall be  included in the  computation  of the amount of interest
          and fees due hereunder.

               (iv)  Repayment of Capital  Expenditure  Loans.  The principal of
          each  Capital  Expenditure  Loan  shall be  repaid  in (i)  equal  and
          consecutive  monthly   installments,   each  in  an  amount  equal  to
          one-sixtieth   (1/60th)  of  the  principal  amount  of  such  Capital
          Expenditure  Loan,  payable on the first day of each month  during the
          period  beginning  on and  including  the first day of the month  next
          succeeding  the month in which such Capital  Expenditure  Loan is made
          and ending on and including June 1, 2005 and (ii) one final payment of
          the remaining  principal  balance thereof,  together with all interest
          and fees accrued and unpaid  thereon,  on the last day of the Term. If
          any such  payment due date is not a Business  Day,  then such  payment
          shall be made on the next succeeding  Business Day, and such extension
          of time shall be included in the computation of the amount of interest
          and fees due hereunder.

<PAGE>
                                       15

               (v) Mandatory Prepayments of the Term Loans.

                    (A) Sales of Assets.  Upon  receipt of the  proceeds  of the
               sale or other  disposition of any Equipment of a Borrower,  or if
               any  of  such  Equipment  is  damaged,   destroyed  or  taken  by
               condemnation  in whole or in part, the proceeds  thereof shall be
               paid by the  Borrowers to Agent as a mandatory  prepayment of the
               Term Loan or the  Capital  Expenditure  Loan  which was  advanced
               against  the value of such  asset,  such  payment  to be  applied
               against the  remaining  installments  of principal in the inverse
               order  of  their  maturities  until  such  Term  Loan or  Capital
               Expenditure  Loan  is  repaid  in  full,  and  then  against  the
               remaining Term Loan or Capital Expenditure Loan, as determined by
               Agent  in its  sole  discretion,  in the  inverse  order of their
               maturities  until  repaid  in full,  and then  against  the other
               Liabilities,  as  determined  by Agent  in its  sole  discretion.
               Notwithstanding the foregoing,  in the event of any casualty loss
               or condemnation regarding the property of any Borrower in respect
               of which  the  insurance  proceeds  are equal to or less than Two
               Hundred Fifty  Thousand  Dollars  ($250,000) and provided that no
               Event of Default shall be continuing, the applicable Borrower may
               use  such  insurance  proceeds  so  long as (i)  Borrowers  shall
               confirm to Agent in writing that they have business  interruption
               insurance  in effect  providing  for the  payment of  proceeds in
               amounts  reasonably  acceptable to Agent,  (ii)  Borrowers  shall
               submit to Agent  their plan for  operations  after such  casualty
               loss,  which  plan  must  be  in  form  and  content   reasonably
               satisfactory to Agent, and (iii) Borrowers shall confirm to Agent
               that the amount of such  proceeds is  sufficient  to complete the
               plan presented to Agent, or Borrowers shall have  demonstrated to
               Agent that they will have cash sufficient to cover any deficiency
               thereof.

                    (B)  Excess  Cash  Flow.  Coincident  with  receipt of MTS's
               Fiscal Year end  consolidated  audited  Financial  Statements for
               each Fiscal Year commencing with the Fiscal Year ending March 31,
               2003, but in no event later than July 31 of such Fiscal Year, the
               Borrowers shall make a mandatory prepayment of the Term Loan B in
               an amount equal to fifty  percent (50%) of the "Excess Cash Flow"
               of MTS and its  Subsidiaries  (as described below) for the Fiscal
               Year just  ended,  such  prepayment  to be  applied  against  the
               remaining installments of principal of Term Loan B in the inverse
               order of their maturities, such mandatory prepayments to continue
               until  the date on which the Term Loan B shall be repaid in full.
               For  purposes  hereof,  "Excess  Cash Flow" shall mean,  for each
               Fiscal  Year,  the sum of (i) the Net  Income,  depreciation  and
               amortization and tax benefits of MTS and its  Subsidiaries,  on a
               consolidated  basis,  minus  the  sum of  -----  (ii)  Unfinanced
               Capital  Expenditures,  actual principal payments with respect to
               long-term debt and payments of Permitted Dividends of MTS and its
               Subsidiaries,  on a  consolidated  basis,  all as  determined  in
               accordance with GAAP, consistently applied.

          (f)Promissory  Notes. The Loans shall, in Agent's sole discretion,  be
     evidenced  by  one  or  more   promissory   notes  in  form  and  substance
     satisfactory  to Agent,  however if such Loans are not so  evidenced,  such
     Loans may be  evidenced  solely  by  entries  upon the  books  and  records
     maintained  by the Agent and the entries on such books and records shall be
     deemed accurate absent manifest error.

<PAGE>
                                       16

     3. LETTERS OF CREDIT.

          (a)  General  Terms.  Subject  to the  terms  and  conditions  of this
     Agreement and the Other Agreements, during the Term, Agent may from time to
     time  cause to be issued  and  co-sign  for or  otherwise  guarantee,  upon
     Borrower's request,  commercial and/or standby Letters of Credit; provided,
     that the (i)  aggregate  undrawn  face amount of all such Letters of Credit
     shall at no time exceed Five Hundred  Thousand  Dollars  ($500,000.00)  and
     (ii) sum of the  outstanding  Revolving  Loans  plus the  Letter  of Credit
     Obligations  shall at no time exceed the lesser of (A) the  Revolving  Loan
     Limit or (B) the Maximum Loan Limit. Payments made on account of any Letter
     of Credit shall constitute  Loans hereunder,  and Borrowers agree that each
     payment  made by the issuer of a Letter of Credit in respect of a Letter of
     Credit shall  constitute a request by the Borrowers for a Loan to reimburse
     such issuer.  The Borrowers  shall remit to Agent a Letter of Credit fee on
     the aggregate  undrawn face amount of all Letters of Credit  outstanding at
     rates to be established by Agent at the time of any such request, which fee
     shall be payable monthly in arrears on the last Business Day of each month.
     The   Borrowers   shall  also  pay  on  demand  the  normal  and  customary
     administrative  charges of the issuer of the Letter of Credit for issuance,
     amendment, negotiation, renewal or extension of any Letter of Credit.

          (b) Requests for Letters of Credit. The Borrowers shall execute on the
     Closing Date the Master Letter of Credit  Agreement.  Borrowers  shall make
     requests  for Letters of Credit in writing at least two (2)  Business  Days
     prior to the date any such  Letter  of Credit  is to be  issued.  Each such
     request shall  specify the date such Letter of Credit is to be issued,  the
     amount  thereof,  the name and  address of the  beneficiary  thereof  and a
     description  of the  transaction to be supported  thereby.  Any such notice
     shall be  accompanied  by the form of Letter of  Credit  requested  and any
     application or reimbursement  agreement  required  thereby.  If any term of
     such  application  or  reimbursement  agreement is  inconsistent  with this
     Agreement,  then the  provisions  of this  Agreement  shall  control to the
     extent of such inconsistency.

          (c) Obligations Absolute. The Borrowers shall be obligated jointly and
     severally  to  reimburse  the issuer of any Letter of Credit,  or Lender if
     Lender has reimbursed  such issuer on Borrowers'  behalf,  for any payments
     made in  respect  of any  Letter  of  Credit,  which  obligation  shall  be
     unconditional and irrevocable and shall be paid regardless of: (i) any lack
     of validity or enforceability  of any Letter of Credit,  (ii) any amendment
     or waiver of or  consent or  departure  from all or any  provisions  of any
     Letter  of  Credit,  this  Agreement  or any  Other  Agreement,  (iii)  the
     existence of any claim, set off, defense or other right which the Borrowers
     or any other  Person  may have  against  any  beneficiary  of any Letter of
     Credit,  Lender or the issuer of the  Letter of  Credit,  (iv) any draft or
     other document  presented  under any Letter of Credit proving to be forged,
     fraudulent,  invalid,  or  insufficient  in any  respect  or any  statement
     therein being untrue or  inaccurate  in any respect,  (v) any payment under
     any Letter of Credit against presentation of a draft or other document that
     does not comply with the terms of such Letter of Credit, and (vi) any other
     act or omission to act or delay of any kind of the issuer of such Letter of
     Credit,  the Lender or any other Person or any other event or  circumstance
     that might  otherwise  constitute  a legal or  equitable  discharge  of the
     Borrowers'  obligations  hereunder.  It is  understood  and  agreed  by the
     Borrowers that the issuer of any Letter of Credit may accept documents that
     appear  on  their  face to be in order  without  further  investigation  or
     inquiry, regardless of any notice or information to the contrary.

<PAGE>
                                       17

          (d)  Expiration  Dates of  Letters of  Credit.  Commercial  Letters of
     Credit shall have a term not to exceed ninety (90) days. Standby Letters of
     Credit  shall  have a term not to exceed  one year.  In no event  shall any
     Letter of Credit expire later than thirty (30) days prior to the expiration
     of the Term.

     4. INTEREST, FEES AND CHARGES.

          (a) Interest Rate. Each Revolving Loan shall bear interest at the rate
     of one percent  (1.0%) per annum in excess of the Prime Rate in effect from
     time to  time.  Term  Loan A shall  bear  interest  at the  rate of one and
     one-quarter  of one percent  (1.25%) per annum in excess of the Prime Rate.
     Term Loan B shall bear interest at the rate of two and  one-quarter  of one
     percent  (2.25%)  per  annum in  excess of the  Prime  Rate.  Each  Capital
     Expenditure  Loan shall bear interest at the rate of one and one-quarter of
     one  percent  (1.25%)  per  annum in excess  of the  Prime  Rate.  All such
     interest to be payable on the first  Business Day of each month in arrears.
     Said rates of interest  shall  increase  or decrease by an amount  equal to
     each  increase or decrease in the Prime Rate,  effective  on the  effective
     date of each such change in the Prime Rate. Upon the occurrence of an Event
     of  Default  and  during  the  continuance  thereof,  each Loan  shall bear
     interest  at the rate of two  percent  (2%)  per  annum  in  excess  of the
     interest rate otherwise payable thereon, which interest shall be payable on
     demand. All interest shall be calculated on the basis of a 360-day year.

          (b) Fees And Charges.

               (i) Facility Fee. The Borrowers have agreed to pay to the Agent a
          facility  fee  in  the  aggregate   amount  of  $107,000.   The  Agent
          acknowledges its receipt of the first  installment of the facility fee
          in the  amount  of  $53,500  on June  10,  2002.  On the  date of this
          Agreement,  the  Borrowers  shall  pay to  Agent  the  balance  of the
          facility fee in an amount equal to $53,500.

               (ii) Unused Line Fee. The Borrowers  shall pay to Agent an unused
          line fee of one-half of one percent (0.50%) of the difference  between
          the Maximum  Revolving Loan Limit and the average daily balance of the
          outstanding  Revolving Loans plus the Letter of Credit Obligations for
          each  month,  which  fee shall be fully  earned  by Agent and  payable
          monthly in arrears on the first  Business Day of each month.  Said fee
          shall be calculated on the basis of a 360-day year.

               (iii) Letter of Credit Fees and Charges.  The Borrowers shall pay
          to the Agent all fees and charges with respect to Letters of Credit as
          provided for in Section 3(b) hereof.

               (iv) Costs and  Expenses.  The  Borrowers  shall be  obligated to
          reimburse  Agent and  Lender  for all costs and  expenses,  including,
          without  limitation,  legal expenses and reasonable  attorneys'  fees,
          actually  incurred  by Agent  and  Lender in  connection  with the (i)

<PAGE>
                                       18

          documentation  and  consummation  of this  transaction  and any  other
          transactions  between  the  Borrowers  and Agent,  including,  without
          limitation,  Uniform  Commercial Code and other public record searches
          and filings, overnight courier or other express or messenger delivery,
          principal  background  reports,  appraisal  and audit costs,  surveys,
          title  insurance  and  environmental   audit  or  review  costs;  (ii)
          collection,  protection  or  enforcement  of any  rights  in or to the
          Collateral;  (iii) collection of any Liabilities; and (iv) enforcement
          of any of  Agent's  and  Lender's  rights  under this  Agreement.  The
          Borrowers  shall also pay all normal  service  charges with respect to
          all accounts  maintained  by the  Borrowers  with LaSalle Bank and any
          additional  services requested by the Borrowers from Agent, Lender and
          LaSalle Bank. All such costs,  expenses and charges shall,  if owed to
          LaSalle  Bank,  be  reimbursed  by Agent,  and in such event or in the
          event  such  costs  and  expenses   are  owed  to  Agent,   constitute
          Liabilities  hereunder,  shall be payable by the Borrowers to Agent on
          demand,  and, until paid, shall bear interest at the highest rate then
          applicable to Loans hereunder.

               (v)  Capital  Adequacy  Charge.  If Agent or  Lender  shall  have
          determined that the adoption of any law, rule or regulation  regarding
          capital  adequacy,  or any change therein or in the  interpretation or
          application thereof, or compliance by Agent or Lender with any request
          or directive  regarding  capital  adequacy  (whether or not having the
          force of law) from any central bank or governmental  authority enacted
          after the date  hereof,  does or shall have the effect of reducing the
          rate of  return  on  such  party's  capital  as a  consequence  of its
          obligations  hereunder  to a level  below that  which  Agent or Lender
          could  have  achieved  but for such  adoption,  change  or  compliance
          (taking into  consideration  Agent's  policies with respect to capital
          adequacy)  by a  material  amount,  then  from  time  to  time,  after
          submission  by Agent to the  Borrowers  of a written  demand  therefor
          ("Capital  Adequacy Demand")  together with the certificate  described
          below,  the  Borrowers  shall pay to Agent or Lender  such  additional
          amount or amounts ("Capital Adequacy Charge") as will compensate Agent
          or Lender for such reduction,  such Capital Adequacy Demand to be made
          with reasonable promptness following such determination. A certificate
          of Agent or Lender claiming  entitlement to payment as set forth above
          shall be conclusive in the absence of manifest error. Such certificate
          shall set  forth the  nature  of the  occurrence  giving  rise to such
          reduction,  the amount of the  Capital  Adequacy  Charge to be paid to
          Agent or Lender,  and the method by which such amount was  determined.
          In  determining  such amount,  Agent or Lender may use any  reasonable
          averaging  and  attribution  method,  applied on a  non-discriminatory
          basis.

          (c) Maximum  Interest.  It is the intent of the parties that the rates
     of interest and other charges to the Borrowers  under this Agreement  shall
     be  lawful;  therefore,  if for any reason the  interest  or other  charges
     payable   under  this   Agreement   are  found  by  a  court  of  competent
     jurisdiction, in a final determination,  to exceed the limit which Agent or
     Lender  may  lawfully  charge the  Borrowers,  then the  obligation  to pay
     interest and other  charges  shall  automatically  be reduced to such limit
     and, if any amount in excess of such limit shall have been paid,  then such
     amount shall be refunded to the Borrowers.

          5. COLLATERAL.

          (a) Grant of Security  Interest to Agent.  As security for the payment
     of all Loans now or in the future made by Agent or Lender to the  Borrowers
     hereunder  and  for  the  payment  or  other   satisfaction  of  all  other
     Liabilities,  each  Borrower  hereby  grants  and  assigns to Agent for the

<PAGE>
                                       19

     benefit of Agent and Lender a continuing lien and security  interest in the
     following  property  of each  Borrower,  whether  now or  hereafter  owned,
     existing,  acquired or arising and wherever now or hereafter  located:  (a)
     all Accounts  (whether or not Eligible  Accounts) and all Goods whose sale,
     lease or other  disposition by such Borrower has given rise to Accounts and
     have been  returned  to, or  repossessed  or stopped in  transit  by,  such
     Borrower;  (b)  all  Chattel  Paper,  Instruments,  Documents  and  General
     Intangibles   (including,   without   limitation,   all   patents,   patent
     applications,   trademarks,   trademark  applications,   tradenames,  trade
     secrets,  goodwill,  copyrights,  copyright  applications,   registrations,
     licenses, software,  franchises,  customer lists, tax refund claims, claims
     against carriers and shippers,  guarantee claims, contracts rights, payment
     intangibles,   security   interests,   security   deposits  and  rights  to
     indemnification);  (c) all Inventory  (whether or not Eligible  Inventory);
     (d) all  Goods  (other  than  Inventory),  including,  without  limitation,
     Equipment,  vehicles and Fixtures;  (e) all  Investment  Property;  (f) all
     Deposit  Accounts,  bank  accounts,  deposits  and cash;  (g) all Letter of
     Credit Rights, (h) all Commercial Tort Claims, (i) all ownership  interests
     in the issued and  outstanding  capital stock or other equity  interests in
     each of its  Subsidiaries,  (j) any other  property of such Borrower now or
     hereafter in the  possession,  custody or control of Agent or Lender or any
     agent or any  parent,  affiliate  or  subsidiary  of Agent or Lender or any
     participant with Agent or Lender in the Loans, for any purpose (whether for
     safekeeping,   deposit,   collection,   custody,  pledge,  transmission  or
     otherwise) and (k) all additions and accessions to,  substitutions for, and
     replacements,   products  and  all  Proceeds  of  the  foregoing  property,
     including, without limitation,  proceeds of all insurance policies insuring
     the  foregoing  property,  and all of such  Borrower's  books  and  records
     relating to any of the foregoing and to such Borrower's business.

          (b) Other Security. Agent, in its sole discretion,  without waiving or
     releasing any obligation, liability or duty of either Borrower or any other
     Obligor  under  this  Agreement  or the  Other  Agreements  or any Event of
     Default, may at any time or times hereafter, but shall not be obligated to,
     pay,  acquire  or accept an  assignment  of any  security  interest,  lien,
     encumbrance  or claim  asserted  by any  Person  in,  upon or  against  the
     Collateral.  All sums paid by Agent in respect thereof and all costs,  fees
     and expenses including, without limitation, reasonable attorney's fees, all
     court costs and all other charges relating thereto incurred by Agent, shall
     constitute  Liabilities,  payable by the  Borrowers to Agent on demand and,
     until paid and  satisfied in full,  shall bear interest at the highest rate
     then applicable to Loans hereunder.

          (c) Possessory Collateral. Promptly after receipt by a Borrower of any
     portion  of  the  Collateral  evidenced  by  an  agreement,  Instrument  or
     Document,  including, without limitation, any Tangible Chattel Paper or any
     Investment  Property consisting of certificated  securities,  such Borrower
     shall deliver the original  thereof to Agent  together with an  appropriate
     endorsement or other specific  evidence of assignment  thereof to Agent (in
     form and substance acceptable to Agent). If an endorsement or assignment of
     any  such  items  shall  not be  made  for  any  reason,  Agent  is  hereby
     irrevocably authorized,  as such Borrower's attorney and agent-in-fact,  to
     endorse or assign the same on such Borrower's behalf.

          (d) Electronic Chattel Paper. To the extent that a Borrower obtains or
     maintains any Electronic  Chattel Paper, such Borrower shall create,  store
     and assign the record or records comprising the Electronic Chattel Paper in
     such a manner that (i) a single authoritative copy of the record or records
     exists which is unique,  identifiable and, except as otherwise  provided in
     clauses (iv), (v) and (vi) below, unalterable,  (ii) the authoritative copy

<PAGE>
                                       20

     identifies  Agent as the  assignee  of the  record  or  records,  (iii) the
     authoritative  copy is  communicated  to and  maintained  by  Agent  or its
     designated  custodian,  (iv)  copies  or  revisions  that add or  change an
     identified  assignee  of the  authoritative  copy can only be made with the
     participation  of Agent,  (v) each copy of the  authoritative  copy and any
     copy  of a  copy  is  readily  identifiable  as a  copy  that  is  not  the
     authoritative  copy and  (vi) any  revision  of the  authoritative  copy is
     readily identifiable as an authorized or unauthorized revision.

          (e) Siegel Family Trust. As additional  security for the  Liabilities,
     the Borrowers  shall cause the Siegel Family Trust to grant Agent on behalf
     of Lender a lien and security interest in all right,  title and interest to
     any and all intellectual property owned by it and currently licensed to the
     Borrowers, including but not limited to the intellectual property listed on
     Schedule 5(e) attached hereto .

          (f)  Guarantors.  As  additional  security  for the  Liabilities,  the
     Borrowers  shall cause each of the Guarantors to guaranty and become surety
     to Agent for the  benefit of Agent and  Lender  for all of the  Liabilities
     pursuant to a Guaranty in form and  substance  satisfactory  to Agent.  The
     obligations  of each  Guarantor  shall be  secured  by a lien and  security
     interest in all of the assets and property of each such Guarantor  pursuant
     to a Guarantor  Security  Agreement,  and such assets and property shall be
     deemed to be Collateral for all purposes hereunder.

     6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS THEREIN.
The  Borrower  shall,  at  Agent's  request,  at any time and from time to time,
execute  and deliver to Agent such  financing  statements,  documents  and other
agreements and instruments  (and pay the cost of filing or recording the same in
all public  offices  deemed  necessary  or desirable by Agent) and do such other
acts and things or cause third parties to do such other acts and things as Agent
may  deem  necessary  or  desirable  in its  reasonable  discretion  in order to
establish and maintain a valid,  attached and perfected security interest in the
Collateral  in favor of Agent  (free  and  clear  of all  other  liens,  claims,
encumbrances  and rights of third parties  whatsoever,  whether  voluntarily  or
involuntarily  created,  except  Permitted  Liens)  to  secure  payment  of  the
Liabilities,  and in order  to  facilitate  the  collection  of the  Collateral.
Borrower  irrevocably  hereby  makes,  constitutes  and appoints  Agent (and all
Persons designated by Agent for that purpose) as such Borrower's true and lawful
attorney  and  agent-in-fact  to  execute  and file such  financing  statements,
documents and other agreements and instruments and do such other acts and things
as may be  necessary to preserve and perfect  Agent's  security  interest in the
Collateral. The Borrower further agrees that a carbon, photographic, photostatic
or other  reproduction  of this Agreement or of a financing  statement  shall be
sufficient as a financing statement.  The Borrower further ratifies and confirms
the prior filing by Agent of any and all UCC financing statements which identify
such  Borrower  as the  debtor  and  Agent as the  secured  party and any or all
Collateral as collateral.

     7. POSSESSION OF COLLATERAL AND RELATED MATTERS.  Until an Event of Default
has occurred,  Borrower  shall have the right,  except as otherwise  provided in
this Agreement,  in the ordinary course of the Borrower's business, to (a) sell,
lease or furnish  under  contracts  of service any of the  Borrower's  Inventory
normally held by Borrower for any such purpose;  and (b) use and consume any raw
materials,  work in process or other materials normally held by the Borrower for
such purpose; provided,  however, that a sale in the ordinary course of business
shall not include any transfer or sale in satisfaction,  partial or complete, of
a debt owed by such Borrower.

<PAGE>
                                       21

     8. COLLECTIONS.

          (a) The Borrower  shall direct all of its Account  Debtors to make all
     payments  on the  Accounts  owed to it  directly  to a post office box (the
     "Lock Box")  designated by, and under the exclusive  control of, Agent,  at
     LaSalle  Bank.  The  Borrowers  shall  establish  an account (the "Lock Box
     Account")  in Agent's  name with  LaSalle  Bank,  into  which all  payments
     received in the Lock Box shall be  deposited,  and into which the  Borrower
     will immediately deposit all payments received by Borrower for Inventory or
     on Accounts in the identical  form in which such  payments  were  received,
     whether by cash or check. If any Borrower, any Affiliate or Subsidiary, any
     shareholder,  officer, director,  employee or agent of such Borrower or any
     Affiliate or Subsidiary,  or any other Person acting for or in concert with
     Borrower shall receive any monies,  checks, notes, drafts or other payments
     relating to or as Proceeds of Accounts or other  Collateral,  such Borrower
     and each such Person shall  receive all such items in trust for, and as the
     sole and  exclusive  property  of,  Agent  and,  immediately  upon  receipt
     thereof, shall remit the same (or cause the same to be remitted) in kind to
     the Lock Box Account. LaSalle Bank shall acknowledge and agree, in a manner
     satisfactory to Agent, that the amounts on deposit in such Lock Box Account
     are the sole and exclusive property of Agent, that LaSalle Bank will follow
     Agent's  instructions  with respect to disposition of funds in the Lock Box
     and Lock Box  Account  without  further  consent  from any  Borrower,  that
     LaSalle Bank has no right to setoff against the Lock Box Account or against
     any other account maintained by LaSalle Bank into which the contents of the
     Lock Box Account are  transferred,  and that  LaSalle  Bank shall wire,  or
     otherwise  transfer  in  immediately  available  funds to Agent in a manner
     satisfactory  to Agent,  funds deposited in the Lock Box Account on a daily
     basis as such funds are  collected.  The Borrowers  agree that all payments
     made to such Lock Box Account or  otherwise  received by Agent,  whether in
     respect of the Accounts or as Proceeds of other  Collateral  or  otherwise,
     will be applied on account of the  Liabilities in accordance with the terms
     of this Agreement.  The Borrowers agree to pay all fees, costs and expenses
     in  connection  with  opening  and  maintaining  the  Lock Box and Lock Box
     Account. All of such fees, costs and expenses if not paid by the Borrowers,
     may be paid by Agent,  and in such event,  all amounts  paid by Agent shall
     constitute  Liabilities  hereunder,  shall  be  payable  to  Agent  by  the
     Borrowers upon demand,  and, until paid, shall bear interest at the highest
     rate then applicable to Loans hereunder.  All checks,  drafts,  instruments
     and other items of payment or Proceeds of  Collateral  shall be endorsed by
     the Borrowers to Agent, and, if that endorsement of any such item shall not
     be made for any reason,  Agent is hereby irrevocably  authorized to endorse
     the same on the Borrowers'  behalf.  For the purpose of this Section 8, the
     Borrowers  irrevocably  hereby make,  constitute and appoint Agent (and all
     Persons  designated by Agent for that purpose) as the  Borrowers'  true and
     lawful attorney and  agent-in-fact  (i) to endorse the Borrowers' name upon
     said items of payment  and/or  Proceeds of Collateral  and upon any Chattel
     Paper,  Document,  Instrument,  invoice or similar  document  or  agreement
     relating to any Account of any Borrower or Goods pertaining  thereto;  (ii)
     to take  control in any manner of any item of payment or  Proceeds  thereof
     and (iii) to have  access to any lock box or postal  box into  which any of
     any Borrower's  mail is deposited,  and open and process all mail addressed
     to any Borrower and deposited therein.

<PAGE>
                                       22

          (b) Agent may,  at any time and from time to time,  whether  before or
     after  notification  to any Account  Debtor and whether before or after the
     maturity of any of the  Liabilities,  (i) enforce  collection of any of any
     Borrower's  Accounts  or other  amounts  owed to such  Borrower  by suit or
     otherwise;  (ii)  exercise all of any  Borrower's  rights and remedies with
     respect to  proceedings  brought to collect any  Accounts or other  amounts
     owed to such Borrower; (iii) surrender, release or exchange all or any part
     of any Accounts or other  amounts owed to any  Borrower,  or  compromise or
     extend or renew for any period  (whether  or not longer  than the  original
     period) any indebtedness thereunder; (iv) sell or assign any Account of any
     Borrower or other amount owed to such  Borrower  upon such terms,  for such
     amount and at such time or times as Agent  deems  advisable;  (v)  prepare,
     file and sign any  Borrower's  name on any proof of claim in  bankruptcy or
     other similar document against any Account Debtor or other Person obligated
     to  such  Borrower;  and  (vi) do all  other  acts  and  things  which  are
     necessary,  in Agent's  reasonable  discretion,  to fulfill any  Borrower's
     obligations under this Agreement and to allow Agent to collect the Accounts
     or other amounts owed to such Borrower.  In addition to any other provision
     hereof,  Agent may at any time, whether before or after the occurrence of a
     Default  or an Event of  Default,  at the  Borrowers'  expense,  notify any
     parties  obligated on any of the Accounts to make payment directly to Agent
     of any amounts due or to become due thereunder.

          (c) For  purposes  of  calculating  interest  and fees due under  this
     Agreement  and  determining  the amount of Loans  available  for  borrowing
     purposes,  checks  and  cash or  other  immediately  available  funds  from
     collections  of items of payment and  Proceeds of any  Collateral  shall be
     applied in whole or in part against the  outstanding  Revolving  Loans,  in
     such order as Agent shall determine in its sole  discretion,  one day after
     receipt thereof in the Lock Box Account, subject to actual collection.

          (d) On a monthly  basis,  Agent  shall  deliver  to the  Borrowers  an
     account statement showing all Loans,  charges and payments,  which shall be
     deemed  final,  binding  and  conclusive  upon  the  Borrowers  unless  the
     Borrowers  notify Agent in writing,  specifying any error  therein,  within
     thirty (30) days of the date such account statement is sent to them and any
     such notice shall only  constitute  an objection to the items  specifically
     identified.

     9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.

          (a)  Daily/Weekly  Reports.  The Borrowers  shall deliver to Agent (if
     required by Agent) an executed daily loan report and certificate on Agent's
     then-current  form on each day on which a  Borrower  requests  a  Revolving
     Loan, and in any event not less  frequently than weekly,  unless  otherwise
     required by Agent,  which shall be  accompanied by copies of the Borrowers'
     sales  journal,  cash  receipts  journal  and credit  memo  journal for the
     relevant  period.  Such report shall  reflect the activity of the Borrowers
     with respect to Accounts for the  immediately  preceding week, and shall be
     in a form and with such  specificity as is  satisfactory to Agent and shall
     contain such additional  information  concerning  Accounts and Inventory as
     may be  requested  by  Agent  including,  without  limitation,  but only if
     specifically  requested  by  Agent,  copies  of all  invoices  prepared  in
     connection with such Accounts.

<PAGE>
                                       23

          (b) Monthly Reports. The Borrowers shall deliver to Agent, in addition
     to any other  reports,  as soon as  practicable,  and in any  event  within
     fifteen (15) days after the end of each month: (A) a detailed trial balance
     of each  Borrower's  Accounts  aged per invoice date, in form and substance
     reasonably satisfactory to Agent including,  without limitation,  the names
     and addresses of all Account  Debtors of each  Borrower,  (B) a summary and
     detail of accounts payable (such Accounts and accounts payable divided into
     such time  intervals  as Agent may require in its  reasonable  discretion),
     including a listing of any held checks and (C) an  Inventory  certification
     in form and content satisfactory to Agent.

          (c) Financial  Statements.  The  Borrowers  shall deliver to Agent the
     following financial  information of MTS and its Subsidiaries,  all of which
     shall be prepared in accordance with GAAP  consistently  applied,  shall be
     accompanied  by a compliance  certificate  in the form of Exhibit B hereto,
     which compliance  certificate  shall include a calculation of all financial
     covenants  contained  in this  Agreement  and,  in the  case of the  annual
     audited Financial Statements to be delivered in accordance with clause (ii)
     below,  a  calculation  of Excess Cash Flow for the Fiscal Year  covered by
     such Financial Statements, and shall be in form and content satisfactory to
     the  Agent:  (i) no later  than  thirty  (30)  days  after  the end of each
     calendar month, copies of internally prepared financial statements for such
     month,  including,  without  limitation,  balance  sheets and statements of
     income,  retained  earnings and cash flow  ("Financial  Statements"),  on a
     consolidated  and  consolidating  basis,  together  with  (A) a  cumulative
     statement of income from the first day of the then  current  Fiscal Year to
     the last day of such month, (B) a report comparing Capital Expenditures for
     such month against the capital budget schedule  attached hereto as Schedule
     9(c) and  identifying  all  expected  changes  in the  timing  or amount of
     Capital  Expenditures,  along with a comparison  between the actual figures
     for such month, the comparable figures for the prior year period (only with
     respect to the  balance  sheet and  income  statement)  and the  comparable
     figures in the current year's  budget,  along with  management  commentary.
     Such Financial Statements and additional  financial  information shall have
     been certified by the Chief Financial  Officer of MTS to be true,  accurate
     and complete in all material  respects;  and (ii) no later than  forty-five
     (45)  days  after  the end of each  of the  first  three  of  MTS's  fiscal
     quarters,  unaudited quarterly  consolidated  internally prepared Financial
     Statements,  which  Financial  Statements  shall have been certified by the
     Chief  Financial  Officer of MTS to be true,  accurate  and complete in all
     material  respects;  (iii) no later than  ninety (90) days after the end of
     each Fiscal Year, audited consolidated annual Financial Statements, with an
     unqualified opinion by independent certified public accountants selected by
     MTS and reasonably  satisfactory to Agent, which Financial Statements shall
     be accompanied by (A) a letter from such  accountants  substantially in the
     form of Exhibit E attached hereto and (B) copies of any management letters,
     reports or other detailed  information  concerning  significant  aspects of
     MTS's  operations  and  financial  affairs  given  to  MTS  or  any  of its
     Subsidiaries by such accountants.

          (d) Annual  Projections.  Not later than the first day of each  Fiscal
     Year, the Borrowers shall deliver to Agent projected  consolidated  balance
     sheets,  statements of income,  cash flow and  availability for MTS and its
     Subsidiaries,  for each of the twelve (12) months  during such Fiscal Year,
     which shall include,  without  limitation,  the  assumptions  used therein,
     together with  appropriate  supporting  details as reasonably  requested by
     Agent.

          (e) Explanation of Budgets and  Projections.  In conjunction  with the
     delivery of the annual  presentation of projections or budgets  referred to
     in Section 9(d) above,  MTS shall  deliver a letter signed by the President
     or a Vice President of MTS and by the Treasurer or Chief Financial  Officer
     of MTS,  describing,  comparing and analyzing,  in detail,  all changes and
     developments  between the anticipated  financial  results  included in such
     projections or budgets and the historical consolidated Financial Statements
     of MTS and its Subsidiaries.

<PAGE>
                                       24

          (f)  Public  Reporting(i).  Within  fifteen  days  after  transmission
     thereof,  MTS shall deliver to Agent copies of all registration  statements
     and annual, quarterly, monthly or other regular reports which MTS or any of
     its Subsidiaries files with the Securities and Exchange Commission, as well
     as promptly  providing to Agent copies of any reports and proxy  statements
     delivered to its shareholders.

          (g) Valuation of Assets of  Guarantors.  The Borrowers  shall provide,
     concurrently  with the monthly  Financial  Statements  to be  delivered  in
     accordance  with Section 9(c) above,  a statement  showing the value of the
     assets of each Guarantor as of the date of such Financial Statements, which
     assets shall be valued at the higher of book value and fair market value as
     of such date, with a level of detail and specificity  satisfactory to Agent
     in its reasonable discretion.

          (h) Other  Information.  Promptly following request therefor by Agent,
     such other business or financial data, reports,  appraisals and projections
     as Agent may reasonably request.

     10. TERMINATION. (i) THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF
UNTIL July 1, 2005 (THE "TERM")  UNLESS (A) THE DUE DATE OF THE  LIABILITIES  IS
ACCELERATED  PURSUANT  TO  SECTION  16  HEREOF;  OR (B) THE  BORROWERS  ELECT TO
TERMINATE  THIS  AGREEMENT  PRIOR TO THE END OF THE TERM BY GIVING AGENT WRITTEN
NOTICE OF SUCH ELECTION AT LEAST THIRTY (30) DAYS PRIOR TO THE TERMINATION  DATE
AND BY PAYING ALL OF THE LIABILITIES IN FULL ON THE TERMINATION  DATE. If one or
more of the events specified in clauses (A) or (B) above occurs,  then (i) Agent
shall not make any additional  Loans on or after the date identified as the date
on which  the  Liabilities  are to be  repaid;  and (ii)  this  Agreement  shall
terminate on the date  thereafter that the Liabilities are paid in full. At such
time as the Borrowers  shall have repaid and satisfied all of the Liabilities in
full and this Agreement shall have been terminated,  the Borrowers shall deliver
to Agent and Lender a release,  in form and substance  satisfactory to Agent and
Lender,  of all  obligations  and  liabilities  of Agent  and  Lender  and their
respective officers,  directors,  employees,  agents, parents,  subsidiaries and
affiliates  to the  Borrowers,  and if the Borrowers are obtaining new financing
from another lender,  the Borrowers shall deliver such lender's  indemnification
of Agent and Lender, in form and substance satisfactory to Agent and Lender, for
checks which Agent and Lender have credited to any account of the Borrowers, but
which subsequently are dishonored for any reason or for automatic  clearinghouse
or wire transfers not yet posted to the Borrowers' account.  If, during the Term
of this  Agreement,  the  Revolving  Loan facility is terminated by Borrowers or
this  Agreement  is  terminated  as a result  of the  occurrence  of an Event of
Default,  then  the  Borrowers  agree to repay  and  satisfy  in full all of the
Liabilities,  and additionally,  as a prepayment fee, the Borrowers shall pay to
Agent an amount equal to (i) two percent (2%) of the Maximum Loan Limit, if such
prepayment occurs at anytime prior to July 1, 2003, (ii) one percent (1%) of the
Maximum Loan Limit if such  prepayment  occurs at any time prior to July 1, 2004
but after June 30, 2003, and (iii) one-half of one percent (0.5%) of the Maximum
Loan Limit if such  prepayment  occurs at any time prior to the date thirty (30)
days prior to the last day of the Term but after June 30, 2004.

<PAGE>
                                       25

          (ii) In the event the Revolving  Loan facility under this Agreement is
     terminated  for any reason,  in addition  to all other  obligations  of the
     Borrowers to Agent, the Borrowers will deposit with Agent cash in an amount
     equal to one hundred ten percent (110%) of the aggregate face amount of all
     Letters of Credit,  plus all fees related thereto or to accrue  thereunder.
     Such  funds  shall  be held by  Agent  as cash  collateral  to  secure  the
     Borrowers' reimbursement obligations in respect of such Letters of Credit.

     11.  REPRESENTATIONS AND WARRANTIES.  Each Borrower and each Guarantor,  as
applicable,  hereby represents and warrants to Agent, which  representations and
warranties  (whether appearing in this Section 11 or elsewhere) shall be true at
the time of each Borrower's and Guarantor's  execution hereof and the closing of
the transactions described herein or related hereto, shall remain true until the
repayment in full and  satisfaction  of all the  Liabilities  and termination of
this  Agreement,  and shall be remade by each  Borrower and each  Guarantor,  as
applicable,  at the  time  each  Loan is made  pursuant  to this  Agreement,  as
follows.

          (a)  Financial   Statements  and  Other  Information.   The  Financial
     Statements  and  other  information  delivered  or to be  delivered  by the
     Borrowers  to Agent at or  prior to the date of this  Agreement  accurately
     reflect the financial  condition of MTS and its Subsidiaries as of the date
     of such Financial  Statements or such other information and, since the date
     of the Financial  Statements  delivered to Agent most recently prior to the
     date of this  Agreement,  no event has occurred  which could  reasonably be
     expected to have a Material Adverse Effect. All written  information now or
     heretofore  furnished by any Borrower or any Guarantor to Agent is true and
     correct  as of  the  date  with  respect  to  which  such  information  was
     furnished.

          (b) Locations.  The office where each Borrower and each Guarantor,  as
     applicable,  keeps its books,  records  and  accounts  (or copies  thereof)
     concerning the Collateral,  such Borrower's and such Guarantor's  principal
     place of business and all of such  Borrower's  and such  Guarantor's  other
     places of  business,  locations  of  Collateral  and post office  boxes and
     locations  of bank  accounts  are as set  forth in  Exhibit  A and at other
     locations  within the  continental  United  States of which  Agent has been
     advised  by  such  Borrower  in  accordance  with  Section  12(b)(i).   The
     Collateral,  including,  without limitation, the Equipment (except any part
     thereof  which any Borrower or any  Guarantor  shall have advised  Agent in
     writing  consists of  Collateral  normally  used in more than one state) is
     kept, or, in the case of vehicles,  based,  only at the addresses set forth
     on Exhibit A, and at other locations  within the continental  United States
     of which  Agent has been  advised by such  Borrower  or such  Guarantor  in
     writing in accordance with Section 12(b)(i) hereof.  Exhibit A hereto lists
     the names of the depository  banks and account  numbers with respect to all
     bank accounts currently maintained by each Borrower and each Guarantor,  as
     applicable.

          (c)  Loans by  Borrowers.  There do not  presently  exist any loans or
     advances to any  Affiliate or other  Person by any  Borrower or  Guarantor,
     except  for  advances  authorized  hereunder  to  employees,  officers  and
     directors of all  Borrowers  for travel and other  expenses  arising in the
     ordinary course of such Borrower's business.

<PAGE>
                                       26

          (d) Accounts and Inventory.  Each Account or item of Inventory which a
     Borrower shall,  expressly or by implication,  request Agent to classify as
     an Eligible Account or as Eligible  Inventory,  respectively,  shall, as of
     the  time  when  such  request  is made,  conform  in all  respects  to the
     requirements  of  such  classification  as  set  forth  in  the  respective
     definitions  of "Eligible  Account" and  "Eligible  Inventory" as set forth
     herein and as otherwise established by Agent from time to time.

          (e) Liens. Each Borrower and each Guarantor is the lawful owner of all
     Collateral now purportedly owned or hereafter  purportedly acquired by such
     Borrower or such Guarantor, free from all liens, claims, security interests
     and  encumbrances  whatsoever  (and has not received notice from any Person
     claiming any of the same), whether voluntarily or involuntarily created and
     whether or not perfected, other than the Permitted Liens.

          (f)  Organization,  Authority and No Conflict.  Each Borrower and each
     Guarantor is duly  organized,  validly  existing and in good standing under
     the  laws of its  state  of  organization,  is duly  qualified  and in good
     standing  in all  states  where  the  nature  and  extent  of the  business
     transacted  by it or the  ownership of its assets makes such  qualification
     necessary  (except to the extent such failure to do so will not result in a
     Material  Adverse  Effect).  Each Borrower and each Guarantor has the right
     and power and is duly  authorized and empowered to enter into,  execute and
     deliver this  Agreement and the Other  Agreements to which it is a part and
     perform its obligations hereunder and thereunder.  Each Borrower's and each
     Guarantor's  execution,  delivery and performance of this Agreement and the
     Other  Agreements  to  which  it is a party  does  not  conflict  with  the
     provisions  of the  organizational  documents  of such party,  any statute,
     regulation,  ordinance or rule of law, or any agreement,  contract or other
     document  which may now or  hereafter  be binding on such  party,  and such
     party's execution, delivery and performance of this Agreement and the Other
     Agreements  shall  not  result  in the  imposition  of any  lien  or  other
     encumbrance upon any of such party's property under any existing indenture,
     mortgage,  deed of trust,  loan or credit  agreement or other  agreement or
     instrument  by  which  such  party or any of its  property  may be bound or
     affected.

          (g)  Litigation.  Except as set forth on Schedule 11(g) hereto,  there
     are no actions or proceedings  which are pending or threatened  against any
     Borrower or  Guarantor  which  might have an  Individual  Material  Adverse
     Effect on such  Obligor,  and such Obligor  shall,  promptly  upon becoming
     aware of any such pending or threatened action or proceeding,  give written
     notice thereof to Agent.  No Borrower or Guarantor has any Commercial  Tort
     Claims pending other than those set forth on Schedule 11(g) hereto.

          (h) Compliance with Laws and Maintenance of Permits. Each Borrower and
     each  Guarantor,  as applicable,  has obtained all  governmental  consents,
     franchises, certificates, licenses, authorizations,  approvals and permits,
     the lack of which would have an Individual  Material Adverse Effect on such
     Borrower  or  such  Guarantor.  Each  Borrower  and  each  Guarantor  is in
     compliance in all material  respects with all  applicable  federal,  state,
     local and  foreign  statutes,  orders,  regulations,  rules and  ordinances
     (including,  without limitation,  Environmental Laws and statutes,  orders,
     regulations,  rules,  securities  laws and SEC  rules and  regulations  and
     ordinances  relating to taxes,  employer  and  employee  contributions  and
     similar items, securities, ERISA or employee health and safety) the failure
     to comply with which would have an Individual  Material  Adverse  Effect on
     it.

<PAGE>
                                       27

          (i)  Affiliate  Transactions.  Except as set forth on  Schedule  11(i)
     hereto or as permitted  pursuant to Section  11(c)  hereof,  no Borrower or
     Guarantor is  conducting,  permitting  or suffering  to be  conducted,  any
     transaction with any Affiliate other than  transactions with Affiliates for
     the purchase or sale of  Inventory  or services in the  ordinary  course of
     business  pursuant to terms that are no less  favorable to such Borrower or
     Guarantor  than the terms upon which such transfers or  transactions  would
     have  been  made had  they  been  made to or with a  Person  that is not an
     Affiliate.

          (j) Names and Tradenames.  Each Borrower's and each  Guarantor's  name
     has always been in the past 5 years as set forth on the signature  pages of
     this  Agreement,  and no Borrower or  Guarantor  uses  tradenames,  assumed
     names, fictitious names or division names in the operation of the Business,
     except as set forth on Schedule 11(j) hereto.

          (k) Equipment.  Each Borrower and each Guarantor,  as applicable,  has
     good and indefeasible and merchantable title to and ownership of all of its
     Equipment  (other  than  Equipment  leased by it).  No  Equipment  is (i) a
     Fixture to real estate  unless such real estate is owned by a Borrower or a
     Guarantor  and is  subject  to a  mortgage  in  favor  of  Agent or (ii) an
     accession  to other  personal  property  unless such  personal  property is
     subject to a perfected first priority lien in favor of Agent.

          (l)  Enforceability.  This Agreement and the Other Agreements to which
     each  Borrower  and each  Guarantor  is a party  are the  legal,  valid and
     binding  obligations  of such  Obligor  and are  enforceable  against  such
     Obligor in accordance with their respective terms.

          (m) Solvency.  Each Borrower is, and MTS and each of its Subsidiaries,
     taken as a whole, is after giving effect to the  transactions  contemplated
     hereby,  solvent,  is able to pay its debts as they become due, has capital
     sufficient to carry on its business,  now owns property having a value both
     at fair  valuation  and at present  fair  saleable  value  greater than the
     amount required to pay its debts, and will not be rendered insolvent by the
     execution and delivery of this Agreement or any of the Other  Agreements or
     by completion of the transactions contemplated hereunder or thereunder.

          (n)  Indebtedness.  Except as set forth on Schedule  11(n) hereto,  no
     Borrower or Guarantor is obligated (directly or indirectly),  for any loans
     or other  indebtedness  for  borrowed  money  other  than the Loans and the
     Subordinated Debt.

          (o) Margin Security and Use of Proceeds. No Borrower or Guarantor owns
     any margin  securities,  and none of the  proceeds  of the Loans  hereunder
     shall  be used  for the  purpose  of  purchasing  or  carrying  any  margin
     securities  or for the purpose of reducing  or  retiring  any  indebtedness
     which was originally  incurred to purchase any margin securities or for any
     other  purpose not  permitted by  Regulation U of the Board of Governors of
     the Federal Reserve System as in effect from time to time.

          (p)  Parent,  Subsidiaries  and  Affiliates.  Except  as set  forth on
     Schedule   11(p)  hereto,   no  Borrower  or  Guarantor  has  any  Parents,
     Subsidiaries  or other  Affiliates  or  divisions,  nor is any  Borrower or
     Guarantor  engaged  in any  joint  venture  or  partnership  with any other
     Person.

<PAGE>
                                       28

          (q) No  Defaults.  No Borrower or  Guarantor  is in default  under any
     material  contract,  lease or commitment to which it is a party or by which
     it is  bound,  nor does  any  Borrower  or  Guarantor  know of any  dispute
     regarding any contract,  lease or commitment which would have an Individual
     Material Adverse Effect on any Obligor.

          (r) Employee Matters. There are no controversies pending or threatened
     between any Borrower or Guarantor, as applicable, and any of its employees,
     agents or independent contractors other than employee grievances arising in
     the ordinary course of business which would not, in the aggregate,  have an
     Individual  Material Adverse Effect on such Obligor,  and each Borrower and
     each Guarantor is in compliance  with all federal and state laws respecting
     employment and employment  terms,  conditions and practices except for such
     non-compliance  which would not have an Individual  Material Adverse Effect
     on such Obligor.

          (s)  Intellectual  Property.  Each  Borrower  and each  Guarantor,  as
     applicable,  possesses adequate  licenses,  patents,  patent  applications,
     copyrights, service marks, trademarks, trademark applications,  tradestyles
     and tradenames to continue to conduct its business as heretofore  conducted
     by it, and all of the foregoing are identified on Schedule 11(s) hereto.

          (t) Environmental  Matters.  No Borrower or Guarantor,  as applicable,
     has generated, used, stored, treated, transported,  manufactured,  handled,
     produced or disposed of any  Hazardous  Materials,  on or off its  premises
     (whether or not owned by it) in any manner which at any time  violates in a
     material respect any Environmental Law or any license, permit, certificate,
     approval or similar  authorization  thereunder  and the  operations of each
     Borrower and each Guarantor, as applicable, comply in all material respects
     with  all  Environmental  Laws  and all  licenses,  permits,  certificates,
     approvals and similar authorizations  thereunder.  To Borrowers' knowledge,
     there has been no investigation,  proceeding,  complaint, order, directive,
     claim,  citation  or  notice  by any  governmental  authority  or any other
     Person,  nor is any pending or to the best of any Borrower's or Guarantor's
     knowledge  threatened with respect to any non-compliance  with or violation
     of the  requirements  of any  Environmental  Law by such  Borrower  or such
     Guarantor or the release, spill or discharge,  threatened or actual, of any
     Hazardous   Materials  or  the   generation,   use,   storage,   treatment,
     transportation,  manufacture,  handling,  production  or  disposal  of  any
     Hazardous  Materials or any other  environmental,  health or safety matter,
     which affects such Borrower or such  Guarantor or its business,  operations
     or assets or any  properties at which such  Borrower or such  Guarantor has
     transported,  stored or disposed of any Hazardous Materials. No Borrower or
     Guarantor has material  liability  (contingent  or otherwise) in connection
     with a release, spill or discharge,  threatened or actual, of any Hazardous
     Materials  or the  generation,  use,  storage,  treatment,  transportation,
     manufacture, handling, production or disposal of any Hazardous Materials.

          (u) ERISA Matters.  Each Borrower and each  Guarantor,  as applicable,
     has paid and discharged all obligations and liabilities arising under ERISA
     of a  character  which,  if  unpaid  or  unperformed,  might  result in the
     imposition of a lien against any of its properties or assets.


<PAGE>
                                       29

          (v)  Subordinated  Debt and Preferred Stock  Financing.  The Borrowers
     have delivered to Agent true and complete copies of all of the Subordinated
     Debt Documents and the Preferred Stock Documents and each Borrower and each
     Guarantor  is  in  compliance  with  all  of  its  respective   obligations
     thereunder.

          (w) Siegel License Agreement.  The Borrowers have delivered to Agent a
     true and complete copy of the Siegel License  Agreement,  and the Borrowers
     party thereto are in compliance thereunder.

          (x) Absence of  Undisclosed  Liabilities.  Except as  disclosed in the
     Financial  Statements or listed on Schedule 11(x) hereof, as of the date of
     this  Agreement,  to  MTS's  knowledge,  (a)  neither  MTS  nor  any of its
     Subsidiaries  had  any  material   liability  of  any  nature  (matured  or
     unmatured,  fixed or contingent) which was not provided for or disclosed on
     the  Financial  Statements  except  current  liabilities  incurred  in  the
     ordinary  course of business  since April 30, 2002,  and (b) all  liability
     reserves  established  by MTS  and its  Subsidiaries  are  adequate  in all
     material  respects.  There are no material loss contingencies (as such term
     is used in Statement of Financial  Accounting Standards No. 5) known to MTS
     which are not adequately provided for in the Financial Statements.

          (y)  Interrelatedeness  of  Borrowers  and  Guarantors.  The  business
     operations  of each  Borrower  and  each  Guarantor  are  interrelated  and
     complement one another,  and such entities have a common business  purpose,
     with intercompany  bookkeeping and accounting  adjustments used to separate
     their respective properties, liabilities, and transactions. To permit their
     uninterrupted and continuous operations, such entities now require and will
     from time to time  hereafter  require funds and credit  accommodations  for
     general  business  purposes.  The  proceeds  of the Loans will  directly or
     indirectly benefit each Borrower and each Guarantor, severally and jointly,
     regardless  of  which  Borrower  requests  or  receives  part or all of the
     proceeds of such advances.

          (z) Individual  Material Adverse Effect on Closing Date. To the extent
     that any  representation and warranty contained in this Section 11 requires
     that there be no Individual  Material Adverse Effect with respect to any of
     the  individual  Obligors  making such  representation  and warranty,  such
     requirement  shall be only as of the Closing Date, and each subsequent time
     that such  representation  and warranty is made,  it shall only be required
     that there be no Material Adverse Effect with respect to such Obligors.

     12.  AFFIRMATIVE  COVENANTS.  Until payment and satisfaction in full of all
Liabilities and termination of this Agreement,  unless any Borrower or Guarantor
obtains  Agent's  prior  written  consent  waiving  or  modifying  any  of  such
Borrower's or such  Guarantor's  covenants  hereunder in any specific  instance,
each  Borrower  and each  Guarantor,  as  applicable,  covenants  and  agrees as
follows:

          (a)  Maintenance  of Records.  Each  Borrower and each  Guarantor,  as
     applicable,  shall at all times keep accurate and complete  books,  records
     and accounts with respect to all of such Obligor's business activities,  in
     accordance with sound accounting practices and GAAP,  consistently applied,
     and shall keep such books,  records and accounts,  and any copies  thereof,
     only at the addresses indicated for such purpose on Exhibit A;

          (b) Notices. Each Borrower and each Guarantor,  as applicable,  shall:

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                                       30

               (i) Locations.  Promptly (but in no event less than ten (10) days
          prior to the occurrence  thereof) notify Agent of the proposed opening
          of any new  place of  business  or new  location  of  Collateral,  the
          closing of any existing  place of business or location of  Collateral,
          any change in the  location  of such  Borrower's  or such  Guarantor's
          books,  records  and  accounts  (or copies  thereof),  the  opening or
          closing of any post  office  box,  the  opening or closing of any bank
          account  or,  if any of the  Collateral  consists  of  Goods of a type
          normally used in more than one state, the use of any such Goods in any
          state other than a state in which such Borrower or such  Guarantor has
          previously advised Agent that such Goods will be used.

               (ii)  Eligible  Accounts and  Inventory.  Promptly  upon becoming
          aware thereof,  notify Agent if any Account or Inventory identified by
          a  Borrower  to Agent as an  Eligible  Account or  Eligible  Inventory
          becomes ineligible for any reason.

               (iii)  Litigation and  Proceedings.  Promptly upon becoming aware
          thereof,  notify Agent of any actions or proceedings which are pending
          or  threatened  against any Borrower or Guarantor  which might have an
          Individual Material Adverse Effect on such Obligor, and any Commercial
          Tort  Claims  of any  Obligor  which may  arise,  which  notice  shall
          constitute such Obligor's authorization to amend Schedule 11(g) to add
          such Commercial Tort Claims.

               (iv) Names and  Tradenames.  Notify Agent within ten (10) days of
          the  change  of its name or the use of any  tradename,  assumed  name,
          fictitious name or division name not previously  disclosed to Agent in
          writing.

               (v) ERISA Matters. Promptly notify Agent of (x) the occurrence of
          any "reportable event" (as defined in ERISA) which might result in the
          termination by the Pension Benefit  Guaranty  Corporation (the "PBGC")
          of any  employee  benefit  plan  ("Plan")  covering  any  officers  or
          employees of a Borrower or a Guarantor,  any benefits of which are, or
          are required to be,  guaranteed by the PBGC, (y) receipt of any notice
          from  the PBGC of its  intention  to seek  termination  of any Plan or
          appointment of a trustee therefor or (z) its intention to terminate or
          withdraw from any Plan.

               (vi) Environmental  Matters.  Promptly notify Agent upon becoming
          aware of any investigation,  proceeding,  complaint, order, directive,
          claim, citation or notice with respect to any material  non-compliance
          with or  violation of the  requirements  of any  Environmental  Law by
          Borrower or the generation, use, storage,  treatment,  transportation,
          manufacture   handling,   production  or  disposal  of  any  Hazardous
          Materials or any other  environmental,  health or safety  matter which
          affects a Borrower or a  Guarantor,  as  applicable,  or its  business
          operations  or  assets  or any  properties  at which a  Borrower  or a
          Guarantor  has  transported,  stored  or  disposed  of  any  Hazardous
          Materials.

               (vii) Default;  Material Adverse Change. Promptly advise Agent of
          any Material  Adverse Effect or the occurrence of any Default or Event
          of Default  hereunder or under any of the Subordinated  Debt Documents
          or any of the Preferred Stock Documents.

               All of the foregoing  notices shall be provided by the Borrowers,
          on behalf of themselves and the Guarantors, as applicable, to Agent in
          writing.

<PAGE>
                                       31

          (c) Compliance with Laws and Maintenance of Permits. Each Borrower and
     each  Guarantor  shall  maintain  all  governmental  consents,  franchises,
     certificates, licenses, authorizations,  approvals and permits, the lack of
     which would have a Material  Adverse  Effect,  and each  Borrower  and each
     Guarantor  shall remain in compliance with all applicable  federal,  state,
     local and  foreign  statutes,  orders,  regulations,  rules and  ordinances
     (including,  without limitation,  Environmental Laws and statutes,  orders,
     regulations,  rules and ordinances relating to taxes, employer and employee
     contributions and similar items,  securities,  ERISA or employee health and
     safety)  the  failure  with which to comply  would have a Material  Adverse
     Effect.  Following any determination by Agent that there is non-compliance,
     or any condition  which requires any action by or on behalf of any Borrower
     or any Guarantor in order to avoid  non-compliance,  with any Environmental
     Law,  such  Borrower or Guarantor,  at  Borrowers'  expense,  will cause an
     independent  environmental  engineer  acceptable  to Agent to conduct  such
     tests of the relevant  site(s) as are appropriate and prepare and deliver a
     report  setting  forth the  results  of such  tests,  a  proposed  plan for
     remediation and an estimate of the costs thereof.

          (d)  Inspection  and Audits.  Each Borrower and each  Guarantor  shall
     permit Agent,  or any Persons  designated by it, to call at such  Obligor's
     places of  business  at any  time;  provided  that,  so long as no Event of
     Default is  continuing,  the Agent shall give  reasonable  prior notice and
     shall call only during  regular  business hours and,  without  hindrance or
     delay, to inspect the  Collateral,  visit and inspect the properties of any
     Obligor, and to inspect, audit, check and make extracts from such Obligor's
     books, records, journals, orders, receipts and any correspondence and other
     data  relating  to  such   Obligor's   business,   the  Collateral  or  any
     transactions  between the parties hereto,  and shall have the right to make
     such verification  concerning such Obligor's business as Agent may consider
     reasonable  under the  circumstances.  Borrower shall furnish to Agent such
     information  relevant to Agent's rights under this Agreement as Agent shall
     at any time and from time to time  request.  Agent,  through its  officers,
     employees  or agents  shall  have the  right,  at any time and from time to
     time, in Agent's  name, to verify the validity,  amount or any other matter
     relating to any of any Borrower's Accounts, by mail,  telephone,  telegraph
     or otherwise.  Each Borrower and each Guarantor authorizes Agent to discuss
     the affairs,  finances  and  business of such  Obligor  with any  officers,
     employees or directors of such Obligor or with its Parent or any  Affiliate
     or the officers, employees or directors of its Parent or any Affiliate, and
     to discuss the  financial  condition of such  Obligor  with such  Obligor's
     independent  public  accountants.  Any such  discussions  shall be  without
     liability to Agent or to such Obligor's independent public accountants. The
     Borrowers shall pay to Agent all fees, costs and expenses incurred by Agent
     in the exercise of its rights hereunder,  at the rate of $750.00 per person
     per day, plus all out-of-pocket  expenses,  and all of such fees, costs and
     expenses shall constitute Liabilities hereunder, shall be payable on demand
     and, until paid, shall bear interest at the highest rate then applicable to
     Loans hereunder;

     (e) Insurance. Each Borrower and each Guarantor shall:

               (i) Keep the Collateral  owned by it properly  housed and insured
          for the full insurable  value thereof  against loss or damage by fire,
          theft,  explosion,   sprinklers,  collision  (in  the  case  of  motor
          vehicles) and such other risks as are  customarily  insured against by
          Persons  engaged in businesses  similar to that of such Obligor,  with
          such  companies,  in such amounts,  with such  deductibles,  and under
          policies in such form, as shall be reasonably  satisfactory  to Agent.
          Original (or certified) copies of such policies of insurance have been

<PAGE>
                                       32

          or shall be, within thirty (30) days of the date hereof,  delivered to
          Agent, together with evidence of payment of all premiums therefor, and
          shall contain a lender's loss payee and insured mortgagee endorsement,
          in form and  substance  acceptable  to Agent,  showing loss under such
          insurance  policies  payable to Agent (and  secondarily  liable to the
          Subordinated Lender). Such endorsement,  or an independent  instrument
          furnished to Agent,  shall  provide that the  insurance  company shall
          give Agent at least  thirty (30) days written  notice  before any such
          policy of insurance  is altered or canceled  and that no act,  whether
          willful or  negligent,  or default of any Borrower or any Guarantor or
          any other Person shall affect the right of Agent to recover under such
          policy of  insurance  in case of loss or  damage.  In  addition,  each
          Borrower and each  Guarantor  shall cause to be executed and delivered
          to  Agent an  assignment  of  proceeds  of its  business  interruption
          insurance  policies  (but so long as no Event of Default is continuing
          at the time  payment of  proceeds  is to be made  under such  business
          interruption  insurance policies (which shall not include insurance on
          the   Collateral),   Agent  will  not  apply  such   proceeds  to  the
          Liabilities,  but shall permit the  Borrowers to utilize such proceeds
          to operate their  business).  Each Borrower and each Guarantor  hereby
          direct  all  insurers  under  all  policies  of  insurance  to pay all
          proceeds payable thereunder  directly to Agent. Each Borrower and each
          Guarantor  irrevocably makes,  constitutes and appoints Agent (and all
          officers,  employees or agents  designated by Agent) as such Obligor's
          true and  lawful  attorney  (and  agent-in-fact)  for the  purpose  of
          making,   settling  and  adjusting   claims  under  such  policies  of
          insurance,  endorsing  the name of such  Obligor on any check,  draft,
          instrument  or other item of payment for the proceeds of such policies
          of insurance and making all  determinations and decisions with respect
          to such policies of insurance.

               (ii) Maintain, at its expense, such public liability, third party
          property damage and workers compensation insurance as is customary for
          Persons engaged in businesses similar to that of such Borrower or such
          Guarantor  with  such  companies  and  in  such  amounts,   with  such
          deductibles  and under  policies  in such form as shall be  reasonably
          satisfactory  to Agent  and  original  (or  certified)  copies of such
          policies have been or shall be, within thirty (30) days after the date
          hereof,  delivered to Agent,  together with evidence of payment of all
          premiums   therefor;   each  such  policy   (other  than  the  workers
          compensation  policy)  shall contain an  endorsement  showing Agent as
          additional insured thereunder and providing that the insurance company
          shall give Agent at least thirty (30) days written  notice  before any
          such policy shall be altered or canceled.

     If any Borrower or any Guarantor at any time or times  hereafter shall fail
     to obtain or maintain any of the policies of insurance required above or to
     pay any premium relating thereto,  then Agent, without waiving or releasing
     any  obligation  or default by such  Obligor  hereunder,  may (but shall be
     under no obligation  to) obtain and maintain such policies of insurance and
     pay such premiums and take such other actions with respect thereto as Agent
     deems advisable.  Such insurance,  if obtained by Agent, may, but need not,
     protect such  Obligor's  interests or pay any claim made by or against such
     Obligor  with  respect  to the  Collateral.  Such  insurance  may  be  more
     expensive  than the cost of insurance such Obligor may be able to obtain on
     its own and may be cancelled only upon such Obligor providing evidence that
     it has obtained  the  insurance as required  above.  All sums  disbursed by
     Agent in connection with any such actions,  including,  without limitation,
     court  costs,  expenses,  other  charges  relating  thereto and  reasonable
     attorneys' fees,  shall  constitute  Loans  hereunder,  shall be payable on
     demand by the  Borrowers to Agent and,  until paid,  shall bear interest at
     the highest rate then applicable to Loans hereunder.

<PAGE>
                                       33

          (f)  Collateral.  Each  Borrower  and each  Guarantor  shall  keep the
     Collateral  owned by it in good condition,  repair and order and shall make
     all necessary repairs to the Equipment and replacements thereof so that the
     operating  efficiency and the value thereof shall at all times be preserved
     and  maintained.  Each  Borrower and each  Guarantor  shall permit Agent to
     examine any of the  Collateral at any time wherever the  Collateral  may be
     located;  provided that, so long as no Event of Default is continuing,  the
     Agent  shall  give   reasonable   prior  notice  and  shall   perform  such
     examinations only during regular business hours, and each Borrower and each
     Guarantor shall,  promptly upon request therefor by Agent, deliver to Agent
     any  and all  evidence  of  ownership  of any of the  Equipment  including,
     without  limitation,  certificates of title and applications of title. Each
     Borrower and each Guarantor shall, at the request of Agent, indicate on its
     records  concerning  the  Collateral a notation,  in form  satisfactory  to
     Agent, of the security interest of Agent hereunder.

          (g) Use of  Proceeds.  All monies and other  property  obtained by any
     Borrower  from Agent  pursuant  to this  Agreement  shall be used solely as
     follows:  (a) the proceeds of the initial  Loans shall be used to refinance
     all existing  indebtedness of each Borrower or any Guarantor owing to South
     Trust  Bank;  and (b) the  proceeds  of all other  Loans  shall be used for
     working capital and general corporate purposes.

          (h) Taxes. Each Borrower and each Guarantor, as applicable, shall file
     all  required  tax returns and pay all of its taxes when due (after  giving
     effect to any available extensions),  including,  without limitation, taxes
     imposed by federal,  state or municipal agencies, and shall cause any liens
     for taxes to be promptly released;  provided,  that such Obligor shall have
     the right to contest the payment of such taxes in good faith by appropriate
     proceedings  so  long as (i) the  amount  so  contested  is  shown  on such
     Obligor's  financial records;  (ii) the contesting of any such payment does
     not give rise to a lien for taxes; (iii) such Obligor keeps on deposit with
     Agent (such deposit to be held without  interest) an amount of money which,
     in the  reasonable  judgment of Agent,  is sufficient to pay such taxes and
     any interest or penalties that may accrue thereon; and (iv) if such Obligor
     fails to prosecute such contest with reasonable diligence,  Agent may apply
     the money so deposited in payment of such taxes.  If such Obligor  fails to
     pay any such taxes and in the absence of any such contest by such  Obligor,
     Agent may (but shall be under no  obligation  to)  advance and pay any sums
     required  to pay any such taxes  and/or to secure  the  release of any lien
     therefor,  and  any  sums so  advanced  by  Agent  shall  constitute  Loans
     hereunder,  shall be payable by such Obligor to Agent on demand, and, until
     paid,  shall bear  interest at the highest  rate then  applicable  to Loans
     hereunder.

          (i)  Intellectual  Property.  Each  Borrower  and each  Guarantor,  as
     applicable, shall maintain adequate licenses, patents, patent applications,
     copyrights, service marks, trademarks, trademark applications,  tradestyles
     and tradenames to continue its business as heretofore conducted by it or as
     hereafter conducted by it.

          (j)  Senior   Management.   Each  Borrower  and  each  Guarantor,   as
     applicable,  shall cause the  Business to be managed by its present  senior
     management  team, or in the event any member of the senior  management team
     shall  cease to serve  for any  reason,  a  replacement  who is  reasonably
     satisfactory to the Agent.

<PAGE>
                                       34

          (k) Key Person Life Insurance.  MTS shall obtain, within 60 days after
     the Closing Date,  and thereafter  continuously  maintain in effect with an
     insurer  acceptable to Agent,  insurance upon the life of Todd E. Siegel in
     the amount of  $4,000,000,  Michael P. Conroy,  in the amount of $1,500,000
     and Michael Stevenson,  in the amount of $1,500,000 (each a "Life Insurance
     Policy" and collectively, the "Life Insurance Policies").

          (l) Siegel License Agreement. The Borrowers shall remain in compliance
     of their  obligations  under the Siegel License Agreement (giving effect to
     any applicable cure or grace periods therein).

          (m) Preferred Stock Documents.  The Borrowers and the Guarantors shall
     remain  in  compliance  of their  obligations  under  the  Preferred  Stock
     Documents (giving effect to any applicable cure or grace periods therein).

          (n)  Subordinated  Debt  Documents.  The Borrowers and the  Guarantors
     shall remain in compliance of their obligations under the Subordinated Debt
     Documents (giving effect to any applicable cure or grace periods therein).

          (o)  Borrower  Subsidiaries.  At such  time  that  the  assets  of any
     Guarantor  have a value of at least  $100,000,  valued at the higher of the
     book value and fair market value  thereof,  such  Guarantor  shall promptly
     become a  Borrower  hereunder,  and shall  enter  into such  documentation,
     including  a joinder  agreement  to this  Agreement  and an  allonge to any
     then-existing  promissory  notes,  and shall provide to Agent an opinion of
     counsel with respect to the  enforceability  of such  documents,  and shall
     execute or provide to Agent such further documentation as Agent in its sole
     discretion may require.

     13.  NEGATIVE  COVENANTS.  Until  payment and  satisfaction  in full of all
Liabilities  and  termination  of this  Agreement,  unless any  Borrower  or any
Guarantor obtains Agent's prior written consent waiving or modifying any of such
Obligor's covenants  hereunder in any specific instance,  each Borrower and each
Guarantor, as applicable, agrees as follows:

          (a) Guaranties.  No Borrower or Guarantor  shall assume,  guarantee or
     endorse,  or otherwise become liable in connection with, the obligations of
     any Person,  except by endorsement of instruments for deposit or collection
     or similar  transactions  in the ordinary  course of business,  except that
     each Guarantor may enter into a guaranty of the Subordinated  Debt, so long
     as such guaranty is subordinated  in a manner  satisfactory to the Agent in
     its sole discretion to any guaranty by such Guarantor of the Liabilities.

          (b) Indebtedness. No Borrower or Guarantor shall create, incur, assume
     or  become  obligated  (directly  or  indirectly),  for any  loans or other
     indebtedness of borrowed money other than the Loans,  except that each such
     Obligor may (i) borrow money from a Person other than Agent on an unsecured
     and subordinated  basis if a subordination  agreement in favor of Agent and
     in form and  substance  satisfactory  to Agent is executed and delivered to
     Agent relative thereto;  (ii) maintain its present  indebtedness  listed on
     Schedule  11(n)  hereto;  (iii)  incur  unsecured   indebtedness  to  trade
     creditors in the ordinary course of its business; (iv) incur purchase money
     indebtedness or capitalized  lease obligations not in excess of $100,000 in
     the  aggregate  each Fiscal Year in  connection  with Capital  Expenditures

<PAGE>
                                       35

     permitted  pursuant  to  Section 14 hereof;  (v) incur  indebtedness  under
     agreements  pursuant to which any Borrower is hedging against  increases in
     interest rates on such Borrower's  outstanding  floating rate indebtedness;
     provided that the  aggregate  amount so hedged at any time shall not exceed
     the amount of such  Borrower's  floating rate  indebtedness  outstanding at
     such time; and (vi) incur the  Subordinated  Debt, so long as such Obligors
     have entered into the Subordination Agreement.

          (c) Liens.  No  Borrower or  Guarantor  shall grant or permit to exist
     (voluntarily or involuntarily) any lien, claim,  security interest or other
     encumbrance whatsoever on any of its assets, other than Permitted Liens .

          (d) Mergers, Sales, Acquisitions,  Subsidiaries and Other Transactions
     Outside the Ordinary Course of Business. No Borrower or Guarantor shall (i)
     enter into any merger or consolidation; provided that a Guarantor may merge
     with and into  another  Guarantor  or into a Borrower  and any Borrower may
     merge with and into  another  Borrower,  so long as the  Borrowers  provide
     Agent at least thirty (30) days prior written notice  thereof;  (ii) change
     the state of such  Obligor's  incorporation  or enter into any  transaction
     which has the effect of changing the state of such Obligor's  incorporation
     other than as a result of a transaction  permitted  under clause (i); (iii)
     sell,  transfer lease or otherwise  dispose of any of its assets other than
     in the  ordinary  course  of  business;  provided,  however,  that  MTS and
     Packaging may transfer assets between  themselves and to those Subsidiaries
     acting as  Guarantors  or Borrowers at such time, so long as (a) no Default
     or Event of  Default  has  occurred,  or  would  occur as a result  of such
     transfer,  (b) MTS shall  deliver  written  notice to Agent at least thirty
     (30)  days  prior to any such  transfer  and (c)  such  Subsidiary  must be
     engaged in the Business; (iv) purchase the stock, other equity interests or
     all or a material  portion of the assets of any Person or  division of such
     Person other than in accordance  with Section 13(f) hereof;  (v) enter into
     any  other  transaction  outside  the  ordinary  course  of such  Obligor's
     business,  including,  without  limitation,  any  purchase,  redemption  or
     retirement  of any  shares of any  class of its  stock or any other  equity
     interest, and any issuance of any shares of, or warrants or other rights to
     receive  or  purchase  any  shares  of, any class of its stock or any other
     equity   interest;   provided,   that  MTS  may,  solely  for  purposes  of
     administrative efficiency, repurchase in the aggregate up to $50,000 of its
     common stock from shareholders  holding fractional shares or fewer than 100
     shares of its common  stock,  so long as (a) no Default or Event of Default
     shall have  occurred  prior to, or shall occur after giving  effect to, any
     such  repurchase and (b) MTS shall have sufficient  excess  availability at
     such time, as determined by Agent in its sole discretion, or (vi) create or
     form any Subsidiaries or enter into any joint ventures or partnerships with
     any other Person;  provided that MTS may create new Subsidiaries so long as
     (a) no default has  occurred  prior to, or would occur as a result of, such
     creation,  (b) MTS delivers written notice of such creation at least thirty
     (30)  days  prior  thereto,  (c)  such new  Subsidiary  is  engaged  in the
     Business,  and (iv) promptly upon its  creation,  each such new  Subsidiary
     becomes a  Guarantor  or a Borrower.  If such  Subsidiary  is created  with
     assets the value of which  equals or exceeds  $100,000,  as measured by the
     higher  of the book  value  and the fair  market  value  thereof,  such new
     Subsidiary shall become a Borrower immediately upon its creation.  Any such
     newly-created  Subsidiary shall execute appropriate  documentation in order
     to evidence its obligations as a Guarantor or Borrower, as the case may be,
     such as a  guaranty  or a joinder to this  Agreement  and an allonge to any
     then existing  promissory  notes,  and it shall  provide an  enforceability
     opinion with respect to such documents, certified articles of incorporation
     and an  officer's  certificate,  and shall  execute or provide such further
     documentation as Agent may require in its sole discretion.  Such Subsidiary
     shall in all  cases  grant  to Agent a  blanket  perfected  first  priority
     security  interest in all of its assets,  subject only to Permitted  Liens,
     and MTS shall pledge the capital  stock or other  equity  interests of such
     Subsidiary  to Agent and  deliver  the stock  certificates  and blank stock
     powers  therefor.  Notwithstanding  the foregoing,  under no  circumstances
     shall  any  Obligor  transfer  assets  to or  merge  with or into  LifeServ
     Technologies,   Inc.,  Medical  Technologies  Laboratories,   Inc.  or  any
     Subsidiary thereof.

<PAGE>
                                       36

          (e)  Dividends  and  Distributions.  No  Borrower or  Guarantor  shall
     declare or pay any  dividend or other  distribution  (whether in cash or in
     kind) on any class of its stock;  provided,  that MTS may make  payments of
     Permitted  Dividends so long as no Default or Event of Default has occurred
     prior  to, or would  occur  after  giving  effect  to,  such  payment,  and
     Subsidiaries of MTS may pay dividends to MTS.

          (f)  Investments;  Loans.  No Borrower or Guarantor  shall purchase or
     otherwise  acquire,  or  contract to purchase  or  otherwise  acquire,  the
     obligations  or stock of any Person  (an  "Investment")  other than  direct
     obligations of the United  States;  nor shall any Borrower or any Guarantor
     lend or otherwise  advance  funds to any Person except for advances made to
     employees,  officers and directors for travel and other expenses arising in
     the ordinary course of business;  provided,  however, that (a) MTS may make
     Investments in Packaging, and (b) MTS and Packaging may make Investments in
     any  Subsidiary  of MTS acting as a Guarantor or Borrower at such time,  so
     long as (i) no Default or Event of Default has occurred,  or would occur as
     a result of such Investment, (ii) MTS shall deliver written notice at least
     thirty (30) days prior to the making of any such  Investment and (iii) such
     Subsidiary must be engaged in the Business.  Notwithstanding the foregoing,
     under no  circumstances  shall any Obligor make an Investment in or lend or
     otherwise   advance   funds  to  LifeServ   Technologies,   Inc.,   Medical
     Technologies Laboratories, Inc. or any Subsidiary thereof.

          (g) Fundamental  Changes,  Line of Business.  No Borrower or Guarantor
     shall amend its organizational  documents without the prior written consent
     of the Agent, which consent shall not be unreasonably  withheld,  or change
     its Fiscal Year or enter into a new line of business  materially  different
     from the Business.

          (h)  Equipment.  No Borrower or Guarantor  shall (i) permit any of its
     Equipment to become a Fixture to real property unless such real property is
     owned by such  Obligor and is subject to a mortgage  in favor of Agent,  or
     (ii) permit any  Equipment  to become an  accession  to any other  personal
     property unless such personal  property is subject to a first priority lien
     in favor of Agent.

          (i) Use of Proceeds.  Neither Borrower nor any Affiliate shall use any
     portion of the proceeds of the Loans,  either  directly or indirectly,  for
     the purpose of (i)  purchasing  any  securities  underwritten  or privately
     placed by ABN AMRO Securities (USA) Inc.  ("AASI"),  an affiliate of Agent,
     (ii) purchasing  from AASI any securities in which AASI makes a market,  or
     (iii) refinancing or making payments of principal, interest or dividends on
     any  securities  issued by Borrower  or any  Affiliate,  and  underwritten,
     privately placed or dealt in by AASI.

<PAGE>
                                       37

          (j)  Affiliate  Transactions.  Expect as set forth on  Schedule  11(i)
     hereto or as permitted  pursuant to Section  11(c)  hereof,  no Borrower or
     Guarantor  shall  conduct,  permit or suffer to be conducted,  transactions
     with  Affiliates  for the purchase or sale of  Inventory or services  other
     than in the  ordinary  course of  business  pursuant to terms that are less
     favorable  to such  Obligor  than the terms upon which  such  transfers  or
     transactions  would  have  been made had they been made to or with a Person
     that is not an Affiliate.

          (k)  Subordinated  Debt Payments.  No Borrower or Guarantor shall make
     any payments of principal or interest on the Subordinated  Debt;  provided,
     however,  that, so long as no Default or Event of Default has occurred,  or
     would occur as a result of such payment,  the Borrowers may make  scheduled
     payments of interest on the  Subordinated  Debt to the extent  permitted by
     the terms of the Subordination Agreement .

          (l) Certain Warrant and Preferred Stock Provisions.  No Borrower shall
     or Guarantor make any make-whole payment in cash with respect to either the
     Warrant  Shares or the shares of common stock to be issued upon  conversion
     of any of the shares of Preferred Stock.

     14. FINANCIAL  COVENANTS.  MTS and its Subsidiaries shall maintain and keep
in full force and effect each of the financial covenants set forth below:

          (a) Tangible Net Worth.  MTS and its  Subsidiaries  on a  consolidated
     basis shall maintain at all times during each time period set forth below a
     Tangible  Net Worth of not less than the  amount set forth  below  opposite
     each such time period:



              Period                              Tangible Net Worth
              ------                              ------------------

   As of March 31, 2002 and at all         $400,000
   times until June 29, 2002

   As of June 30, 2002 and at all          $4,000,000
   times until December 30, 2002

   As of December 31, 2002 and at all      $4,200,000
   times until March 30, 2003

   As of March 31, 2003                    $4,600,000

   As of April 1, 2003 and at all          The greater of (i) $4,600,000 and
   times until March 30, 2004              (ii) 95% of Tangible Net Worth at
                                           March at March 31, 2003

   As of March 31, 2004                    $800,000 plus the greater of (i)
                                           $4,600,000 and (ii) 95% of Tangible
                                           Net Worth at March 31, 2003 (the
                                           2004 Tangible Net Worth Requirement")

<PAGE>
                                       38


   As of April 1, 2004 and at all          The greater of (i) the 2004 Tangible
   times until March 30, 2005              NetWorth Requirement and (ii) 95% of
                                           Tangible Net Worth at March 31, 2004

   As of March 31, 2005                    $800,000 plus the greater of (i) the
                                           2004 Tangible Net Worth Requirement
                                           and (ii) 95% of Tangible Net Worth at
                                           March  31, 2004 (the "2005 Tangible
                                           Net Worth Requirement")

   As of April 1, 2005 and at all          The greater of (i) the 2005 Tangible
   times thereafter                        Net Worth Requirement and (ii) 95% of
                                           Tangible Net Worth at March 31, 2005


          (b)  Debt  Service  Coverage  Ratio.  MTS  and its  Subsidiaries  on a
     consolidated  basis will  maintain a Debt Service  Coverage  Ratio for each
     time  period  set forth  below of not less  than the ratio set forth  below
     opposite each such time period:


                  Measuring Period                 Debt Service Coverage Ratio
                  ----------------                 ---------------------------

     Fiscal quarter ending September 30, 2002              1.10:1.00

     Two fiscal quarters ending December 31, 2002          1.10:1.00

     Twelve months ending March 31, 2003,                  1.25:1.00
     March 31, 2004 and March 31, 2005

     Fiscal quarter ending June 30, 2003, September        1.10:1.00
     30 and December 31 of each year, in each case
     together with the three preceding fiscal quarters


          (c)  Interest   Coverage  Ratio.   MTS  and  its   Subsidiaries  on  a
     consolidated  basis will maintain an Interest  Coverage Ratio for each time
     period set forth below of not less than the ratio set forth below  opposite
     each such time period:


              Measuring Period                        Interest Coverage Ratio
              ----------------                        -----------------------

  Fiscal quarter ending September 30, 2003                    2.20:1.00

  Two fiscal quarters ending December 31, 2002                2.20:1.00

  Fiscal quarter ending March 31, 2003, and each              2.20:1.00
  each fiscal quarter thereafter, in each case with
  the preceding three fiscal quarters

<PAGE>
                                       39


          (d) Capital  Expenditure  Limitations.  MTS and its  Subsidiaries on a
     consolidated  basis shall not make  Capital  Expenditures  in excess of One
     Million  Eight  Hundred  Thousand  Dollars  ($1,800,000.00)  during any one
     Fiscal Year, commencing with the Fiscal Year ending March 31, 2003.

     15.  DEFAULT.  The  occurrence of any one or more of the  following  events
shall  constitute  an  "Event  of  Default"  by  the  Borrowers  and  Guarantors
hereunder;  provided, however, that once an Event of Default occurs, it shall be
deemed to continue until such time as it shall been waived in writing by Agent:

          (a) Payment. The failure of any Obligor to pay when due, declared due,
     or demanded by agent, any of the Liabilities;  provided, however, that with
     respect to any payment other than a payment of  principal,  interest or the
     fees set forth  herein,  the  failure to pay such  amount by the earlier of
     three days after the due date  specifically  set forth in any  request  for
     payment therefor.

          (b) Breach of this Agreement and the Other Agreements.  The failure of
     any Obligor to perform,  keep or observe any of the covenants,  conditions,
     promises, agreements or obligations of such Obligor under this Agreement or
     any of the Other Agreements  (other than those  specifically  enumerated in
     Section 15 hereof),  and such failure continues  unremedied for a period of
     fifteen  (15)  days  after  the  earlier  of (i)  notice  from the Agent to
     Borrowers of the existence of such failure, or (ii) the date any Authorized
     Officer of any Borrower  knows of the existence of such  failure;  provided
     that,  in the event such  failure is  incapable  of remedy or consists of a
     default of any of the financial  covenants  contained in Section 14 hereof,
     or was willfully  caused or permitted by any Borrower,  Borrowers shall not
     be entitled to any notice or grace hereunder.

          (c) Breaches or Amendments of Other Obligations. A default or event of
     default or breach under,  or other failure of any Obligor to perform,  keep
     or  observe  any of the  covenants,  conditions,  promises,  agreements  or
     obligations of such Obligor (after the expiration of any applicable cure or
     grace  periods)  under:  (i)  any of the  Subordinated  Debt  Documents  or
     Preferred Stock  Documents,  or any of the  Subordinated  Debt Documents or
     Preferred  Stock  Documents  shall be amended or  modified  in any  respect
     prohibited  hereunder  without Agent's prior written  consent;  or (ii) any
     other  agreement with any Person,  if such failure is reasonably  likely to
     have a Material Adverse Effect.

          (d) Breach of Representations and Warranties. The making or furnishing
     by any  Obligor  to Agent  of any  representation,  warranty,  certificate,
     schedule,  report or other communication  within or in connection with this
     Agreement or the Other Agreements or in connection with any other agreement
     between such Obligor and Agent or Lender,  which is untrue or misleading in
     any respect.

<PAGE>
                                       40

          (e)  Loss  of  Collateral.   The  uninsured   (subject  to  reasonable
     deductibles) loss, theft, damage or destruction of, or (except as permitted
     hereby) sale,  lease or  furnishing  under a contract of service of, any of
     the Collateral.

          (f) Levy,  Seizure or  Attachment.  The  making or any  attempt by any
     Person to make any levy,  seizure or attachment  upon any of the Collateral
     if either (i) there is an imminent  risk of  forfeiture  or (ii) such levy,
     seizure or  attachment  remains  undischarged  or unstayed  for ten or more
     days.

          (g)  Bankruptcy  or  Similar  Proceedings.  The  commencement  of  any
     proceedings in bankruptcy by or against any Obligor or for the  liquidation
     or  reorganization  of any  Obligor,  or  alleging  that  such  Obligor  is
     insolvent  or  unable  to  pay  its  debts  as  they  mature,  or  for  the
     readjustment  or  arrangement  of any  Obligor's  debts,  whether under the
     United  States  Bankruptcy  Code or under any other law,  whether  state or
     federal,  now or  hereafter  existing,  for the relief of  debtors,  or the
     commencement  of  any  analogous  statutory  or  non-statutory  proceedings
     involving any Obligor  (each,  together with the  appointment of a receiver
     and any of the other actions  constituting a Default in clause (h) below, a
     "Proceeding");  provided, however, that if such commencement of proceedings
     against such Obligor is  involuntary,  such action shall not  constitute an
     Event of Default unless such  proceedings  are not dismissed  within thirty
     (30) days after the  commencement  of such  proceedings;  provided  further
     that, upon the occurrence of an Event of Default under this clause (g) with
     respect to any  Guarantor  which has assets the value of which is less than
     $50,000,  as measured by the higher of book value and market value thereof,
     at such time, and to which no assets have been  transferred by any Borrower
     or other Guarantor at any time subsequent to the Closing Date, the remedies
     provided  the Agent in Section 16 hereof  shall be solely  with  respect to
     such  Guarantor and such  Guarantor's  assets,  so long as the liability or
     obligation  owing by such  Guarantor  which  caused such  Proceeding  to be
     commenced  arose prior to the Closing  Date and no Borrower or Guarantor at
     any time prior to the Closing Date had any knowledge  thereof or is also in
     any manner and to any extent responsible for such liability or obligation.

          (h) Appointment of Receiver.  The appointment of a receiver or trustee
     for any Obligor,  for any of the Collateral or for any substantial  part of
     any  Obligor's  assets  or the  institution  of  any  proceedings  for  the
     dissolution,  or  the  full  or  partial  liquidation,  or  the  merger  or
     consolidation,  of any Obligor which is a  corporation,  limited  liability
     company or a partnership;  provided,  however,  that if such appointment or
     commencement  of  proceedings  against  such Obligor is  involuntary,  such
     action shall not constitute an Event of Default unless such  appointment is
     not revoked or such  proceedings are not dismissed  within thirty (30) days
     after the commencement of such proceedings; provided further that, upon the
     occurrence of an Event of Default under this clause (h) with respect to any
     Guarantor  which has  assets  the value of which is less than  $50,000,  as
     measured  by the  higher of book value and market  value  thereof,  at such
     time, and to which no assets have been transferred by any Borrower or other
     Guarantor at any time subsequent to the Closing Date, the remedies provided
     the  Agent in  Section  16  hereof  shall be solely  with  respect  to such
     Guarantor  and  such  Guarantor's  assets,  so  long  as the  liability  or
     obligation  owing by such Guarantor which caused any Proceeding  under this
     clause (h) to be commenced  arose prior to the Closing Date and no Borrower
     or  Guarantor  at any time  prior  to the  Closing  Date had any  knowledge
     thereof or is also in any manner  and to any  extent  responsible  for such
     liability or obligation.

<PAGE>
                                       41

          (i) Judgment.  The entry of any judgment or order in excess of $50,000
     against any Obligor which remains unsatisfied or undischarged and in effect
     for thirty  (30) days after such  entry  without a stay of  enforcement  or
     execution.

          (j)  Dissolution  of  Obligor.  The  dissolution  or winding up of any
     Obligor;  provided, that a Guarantor may be dissolved, so long as the Agent
     is given at least ten (10) days prior written notice and such Guarantor has
     no assets at the time; and if such  Guarantor has assets,  such assets must
     promptly be transferred to a Borrower or any other Guarantor.

          (k) Default or Revocation of Guaranty.  The  occurrence of an event of
     default (after the expiration of applicable  cure or grace periods)  under,
     or the revocation or termination of, any agreement,  instrument or document
     executed and delivered by any Person to Agent pursuant to which such Person
     has guaranteed to Agent the payment of all or any of the Liabilities or has
     granted  Agent a  security  interest  in or lien  upon  some or all of such
     Person's real and/or personal  property to secure the payment of all or any
     of the Liabilities.

          (l) Criminal  Proceedings.  The institution in any court of a criminal
     proceeding  against any Obligor alleging the commission of a felony, or the
     indictment of any Obligor for any felony.

          (m) Change of Control. A Change of Control shall have occurred.

          (n) Change of Management.  Any Borrower fails to cause its business to
     be managed by its  present  senior  management  team,  or, in the event any
     member shall cease to serve for any reason, a replacement who is reasonably
     acceptable to Agent.

          (o) Termination of Life Insurance Policies.  Any of the Life Insurance
     Policies  shall be  terminated,  or the Life  Insurance  Policies  shall be
     scheduled to terminate within thirty (30) days, and the Borrowers shall not
     have delivered a satisfactory  renewal  thereof to Agent;  or the Borrowers
     shall fail to pay any premium on any of any of the Life Insurance  Policies
     when due; or the  Borrowers  shall take any other  action that  impairs the
     value of any of any of the Life Insurance Policies.

          (p) Material  Adverse  Effect.  A Material  Adverse  Effect shall have
     occurred.

          (q) Siegel  License  Agreement.  There  shall  occur a breach of or an
     event of default  (beyond any  applicable  cure or grace periods) under the
     Siegel License Agreement or it shall be materially amended or modified in a
     manner  adverse to the Borrowers or it shall be  terminated  (other than in
     connection  with any  acquisition by a Borrower of direct  ownership of the
     rights currently licensed to MTS thereunder).

     16. REMEDIES UPON AN EVENT OF DEFAULT.

          (a) Upon the  occurrence  of an Event of Default  described in Section
     15(g)  or  15(h)  hereof,  all of the  Liabilities  shall  immediately  and
     automatically become due and payable,  without notice of any kind. Upon the
     occurrence  of any other  Event of  Default,  all  Liabilities  may, at the
     option of Agent,  and without demand,  notice or legal process of any kind,
     be declared, and immediately shall become, due and payable.

<PAGE>
                                       42

          (b) Upon the  occurrence  of an Event of Default,  Agent may  exercise
     from time to time any rights and remedies available to it under the Uniform
     Commercial  Code and any other  applicable  law in addition  to, and not in
     lieu of, any rights and remedies  expressly granted in this Agreement or in
     any of the Other  Agreements,  and all of Agent's rights and remedies shall
     be  cumulative  and  non-exclusive  to the  extent  permitted  by  law.  In
     particular,  but not by way of  limitation  of the  foregoing,  Agent  may,
     without notice, demand or legal process of any kind, take possession of any
     or all of the Collateral (in addition to Collateral of which it already has
     possession),  wherever it may be found, and for that purpose may pursue the
     same wherever it may be found,  and may enter onto any of the Borrowers' or
     Guarantor's  premises  where any of the  Collateral may be, and search for,
     take possession of, remove,  keep and store any of the Collateral until the
     same shall be sold or otherwise disposed of, and Agent shall have the right
     to store the same at any of the Borrowers'  premises without cost to Agent.
     At Agent's request, each Borrower shall assemble the Collateral and make it
     available  to Agent at one or more  places  to be  designated  by Agent and
     reasonably  convenient to Agent and the Borrowers.  The Borrowers recognize
     that if the  Borrowers  fail to perform,  observe or discharge any of their
     Liabilities under this Agreement or the Other Agreements,  no remedy at law
     will  provide  adequate  relief to Agent,  and agrees  that Agent  shall be
     entitled to  temporary  and  permanent  injunctive  relief in any such case
     without the  necessity  of proving  actual  damages.  Any  notification  of
     intended  disposition  of any of the  Collateral  required  by law  will be
     deemed to be a reasonable  authenticated  notification  of  disposition  if
     given at least ten (10) calendar days prior to such disposition.  Agent may
     disclaim any warranties that might arise in connection with the sale, lease
     or other disposition of the Collateral and has no obligation to provide any
     warranties at such time. Any Proceeds of any disposition by Agent of any of
     the  Collateral  may be applied  by Agent to the  payment  of  expenses  in
     connection  with  the  Collateral,  including,  without  limitation,  legal
     expenses and reasonable attorneys' fees actually incurred,  and any balance
     of such  proceeds may be applied by Agent toward the payment of such of the
     Liabilities,  and in such order of  application,  as Agent may from time to
     time elect.

          (c) Without  limiting the rights of Agent or Lender  under  applicable
     law,  Agent  and  Lender  have a right of  set-off,  a lien  against  and a
     security  interest in all property of the Borrowers and the  Guarantors now
     or at any time in the  possession  of Agent or Lender or any  affiliate  of
     Agent or Lender in any capacity  whatsoever,  including  but not limited to
     any  balance of any  deposit,  trust or agency  account,  or any other bank
     account, as security for all Liabilities. At any time and from time to time
     following  the  occurrence  and during the  continuance  of a Default or an
     Event of Default,  Agent may without notice or demand, set off and apply or
     cause to be set-off and applied any and all  deposits  (general or special,
     time  or  demand,  provisional  or  final)  at  any  time  held  and  other
     indebtedness  at any time owing by Agent,  Lender or any affiliate of Agent
     or Lender to or for the credit of any Borrower or any Guarantor against any
     or all of the Liabilities.

     17. CONDITIONS PRECEDENT.  Agent and Lender shall be under no obligation to
consummate the  transactions  contemplated  by this Agreement  until each of the
conditions  listed in this Section 17 has been  satisfied.  Whenever a condition
contained  herein requires  delivery of an agreement or other document to Agent,
each  such   agreement  or  other  document  shall  be  in  form  and  substance
satisfactory to Agent in its reasonable discretion.

<PAGE>
                                       43

          (a) Lender shall have received each agreement, document and instrument
     duly executed by each of the Borrowers and Guarantors  party  thereto,  and
     each other agreement,  opinion, report, approval, consent,  certificate and
     other  document set forth on the closing  document list attached  hereto as
     Schedule 17(a) (the "Closing Document List");

          (b) The  Preferred  Stock  shall  have been  issued  to Eureka  and/or
     certain of its Affiliates on terms and conditions  reasonably acceptable to
     the Agent and MTS shall have received at least  $2,000,000 in cash proceeds
     therefrom.

          (c) The  Subordinated  Debt shall have been issued to the Subordinated
     Lender on terms and conditions  reasonably  acceptable to the Agent and MTS
     shall have received at least $4,000,000 in cash proceeds therefrom.

          (d) The  Subordination  Agreement shall have been duly executed by all
     parties thereto.

          (e) A  payoff  letter  from  South  Trust  Bank of  Alabama,  National
     Association  ("South  Trust  Bank"),  together  with such other  documents,
     instruments and agreements as may be required by Agent (including,  without
     limitation,  UCC-3 termination statements) to effectuate the termination of
     the South Trust Bank credit facility with the Borrowers and the Guarantors,
     as  applicable,  and the release of the lien of South Trust Bank on any and
     all of Borrowers' and  Guarantors'  assets and to evidence the discharge of
     all debts, liabilities and obligations of the Borrowers and the Guarantors,
     to South Trust Bank and its Affiliates.

          (f) The  Borrowers  shall  cause to be  executed in favor of Agent and
     delivered  to Agent a Landlord's  Agreement  from each lessor of the leased
     properties set forth on Exhibit A;

          (g) The Borrowers  shall cause the Siegel Family Trust to have entered
     into a Trademark  Patent Security  Agreement with Agent granting a lien and
     security  interest  in all of the  intellectual  property  licensed  by the
     Siegel Family Trust to the Borrowers.

          (h) The Borrowers  shall cause each bailee,  warehouseman,  or similar
     party at any  warehouse  set forth in Exhibit A to execute  and  deliver to
     Agent a Warehouseman's Letter;

          (i) The Borrowers shall execute and deliver to Agent a Patent Security
     Agreement;

          (j) The  Borrowers  shall  execute  and  deliver to Agent a  Trademark
     Security Agreement;

          (k) The  Borrowers  shall  deliver to Agent (i)  historical  financial
     statements  as  required  by  Agent,  including  but not  limited  to draft
     financial  statements  for the Fiscal  Year  ended  March 31,  2002,  and a
     monthly  statement for the month of April 2002; (ii) projections of MTS and
     its Subsidiaries, on a consolidated basis forecasting its operating results
     for the Fiscal Year ending March 31, 2003, which  projections shall include
     consolidated balance sheets, profit and loss statements,  cash receipts and
     disbursements and availability, all prepared on a monthly basis;

<PAGE>
                                       44

          (l) The Borrowers  shall deliver Agent an appraisal of the  Borrowers'
     Equipment,  showing an aggregate  appraised value on an orderly liquidation
     and  forced  liquidation  basis of not less than Eight  Hundred  Ninety-One
     Thousand  Dollars  ($891,000),  which appraisal must be in form and content
     satisfactory  to the Agent and  performed by Dove Bid  Valuation  Services,
     Inc.;

          (m) The Borrowers shall deliver to Agent copies of all other material,
     including the Siegel License Agreement, and contracts and agreements of the
     Borrowers as Agent may require;

          (n) The  Borrowers  shall  deliver to Agent  copies of all real estate
     leases to which any Borrower is a party;

          (o) Since March 31, 2002, no event shall have  occurred  which has had
     or could  reasonably  be expected  to have a Material  Adverse  Effect,  as
     determined by Agent in its sole discretion;

          (p) Agent shall have received payment in full of all fees and expenses
     payable to it by the Borrowers or any other Person in connection  herewith,
     on or before  disbursement  of the initial  Loans  hereunder  or out of the
     proceeds of such initial Loans;

          (q) Agent shall have determined that,  immediately after giving effect
     to the making of the initial Loans requested to be made on the date hereof,
     the  Borrowers  shall have Minimum Net  Availability  of not less than Five
     Hundred Thousand Dollars ($500,000);

          (r) The Obligors  shall have  executed and delivered to Agent all such
     other  documents,  instruments  and agreements  which Agent  determines are
     reasonably necessary to consummate the transactions contemplated hereby and
     under the Other Agreements.

          (s)  The  Borrowers  and  Guarantors,  as  applicable,  shall  deliver
     evidence that they are in compliance with all applicable  federal and state
     legal requirements deemed material by Agent, including  environmental laws,
     rules and regulations, and there shall not be a default or event of default
     under any of its material obligations to third parties or contracts (to the
     extent such obligations will continue after the Closing Date).

     18.   INDEMNIFICATION.   The  Borrowers   agree  to  defend  (with  counsel
satisfactory to Agent),  protect,  indemnify and hold harmless Agent and Lender,
each affiliate or subsidiary of Agent and Lender,  and each of their  respective
officers,  directors,  employees,  attorneys  and agents  (each an  "Indemnified
Party") from and against any and all liabilities,  obligations, losses, damages,
penalties,  actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature (including,  without limitation, the disbursements and the
reasonable  fees of counsel  actually  incurred  for each  Indemnified  Party in
connection  with  any  investigative,  administrative  or  judicial  proceeding,
whether or not the Indemnified Party shall be designated a party thereto), which
may be imposed on,  incurred  by, or asserted  against,  any  Indemnified  Party
(whether  direct,  indirect or  consequential  and whether based on any federal,
state or local laws or regulations,  including,  without limitation,  securities
laws and  regulations,  Environmental  Laws and commercial laws and regulations,
under common law or in equity,  or based on contract or otherwise) in any manner

<PAGE>
                                       45

relating to or arising out of this Agreement or any Other Agreement, or any act,
event or transaction  related or attendant  thereto,  the making or issuance and
the  management of the Loans or any Letters of Credit or the use or intended use
of the proceeds of the Loans or any Letters of Credit;  provided,  however, that
the Borrowers shall not have any obligation  hereunder to any Indemnified  Party
with respect to matters  caused by or resulting  from the willful  misconduct or
gross negligence of such  Indemnified  Party. To the extent that the undertaking
to indemnify set forth in the preceding sentence may be unenforceable because it
is violative  of any law or public  policy,  the  Borrowers  shall  satisfy such
undertaking  to the maximum extent  permitted by applicable  law. Any liability,
obligation,  loss,  damage,  penalty,  cost or expense covered by this indemnity
shall be paid to each  Indemnified  Party  within  10 days  after  demand,  and,
failing prompt  payment,  shall,  together with interest  thereon at the highest
rate  then  applicable  to  Loans  hereunder  from  the  date  incurred  by each
Indemnified  Party until paid by the Borrowers,  be added to the  Liabilities of
the Borrowers and be secured by the  Collateral.  The provisions of this Section
18 shall survive the satisfaction  and payment of the other  Liabilities and the
termination of this Agreement.

     19.  NOTICE.  All written  notices and other  written  communications  with
respect to this Agreement shall be sent by certified (return receipt  requested)
or overnight mail, by a nationally  recognized  overnight  courier  service,  by
telecopy or delivered in person, and in the case of Agent shall be sent to it at
c/o LaSalle Business Credit, Inc., 1735 Market Street, 6th Floor,  Philadelphia,
PA 19103, Attention: Jeffrey M. Joslin, facsimile number: (267) 386-8844, with a
copy to Wolf, Block,  Schorr and Solis-Cohen LLP, 1650 Arch Street,  22nd Floor,
Philadelphia, PA 19103-2097, Attention: Bruce R. Lesser, Esq., facsimile number:
(215)  405-3902;  and in the case of the Borrowers  shall be sent to them at the
notice address set forth on Schedule A hereto,  or as otherwise  directed by the
Borrowers  in writing.  All notices  shall be deemed  given upon actual  receipt
thereof or refusal of delivery.

     20. CHOICE OF GOVERNING LAW; CONSTRUCTION;  FORUM SELECTION. This Agreement
and the Other  Agreements to which they are party are submitted by the Borrowers
and the  Guarantors  to Agent for Agent's  acceptance  or  rejection  at Agent's
principal  place of business as an offer by Borrower to borrow monies from Agent
and Lender now and from time to time  hereafter,  and shall not be binding  upon
Agent or Lender or become effective until accepted by Agent, in writing, at said
place of business.  If so accepted by Agent and Lender,  this  Agreement and the
Other  Agreements  shall be deemed to have been made at said place of  business.
THIS AGREEMENT AND THE OTHER  AGREEMENTS SHALL BE GOVERNED AND CONTROLLED BY THE
INTERNAL  LAWS  OF  THE  COMMONWEALTH  OF  PENNSYLVANIA  AS  TO  INTERPRETATION,
ENFORCEMENT,   VALIDITY,  CONSTRUCTION,  EFFECT,  AND  IN  ALL  OTHER  RESPECTS,
INCLUDING,  WITHOUT  LIMITATION,  THE  LEGALITY OF THE  INTEREST  RATE AND OTHER
CHARGES,  BUT  EXCLUDING  PERFECTION  OF THE SECURITY  INTERESTS  IN  COLLATERAL
LOCATED OUTSIDE OF THE COMMONWEALTH OF PENNSYLVANIA, WHICH SHALL BE GOVERNED AND
CONTROLLED BY THE LAWS OF THE RELEVANT  JURISDICTION IN WHICH SUCH COLLATERAL IS
LOCATED. If any provision of this Agreement shall be held to be prohibited by or
invalid under  applicable law, such provision  shall be ineffective  only to the
extent of such prohibition or invalidity,  without invalidating the remainder of
such provision or remaining provisions of this Agreement.

<PAGE>
                                       46

     To induce Agent and Lender to accept this Agreement,  the Borrowers and the
Guarantors  irrevocably  agree  that,  subject  to  Agent's  sole  and  absolute
election, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT,  ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT,  THE OTHER AGREEMENTS OR THE COLLATERAL
SHALL BE  LITIGATED  IN COURTS  HAVING  SITUS  WITHIN THE CITY OF  PHILADELPHIA,
COMMONWEALTH OF  PENNSYLVANIA.  THE BORROWERS AND THE GUARANTORS  HEREBY CONSENT
AND SUBMIT TO THE  JURISDICTION  OF ANY LOCAL,  STATE OR FEDERAL  COURTS LOCATED
WITHIN SAID CITY AND STATE.  Each  Borrower and each  Guarantor  agrees that all
service of process may be made upon such Obligor.  The Borrowers and  Guarantors
agree  that all  service  of  process  may be made upon such  Obligor by mail or
messenger  directed to such  Obligor at the address  provided on the  Schedule A
hereto.  THE BORROWER AND EACH GUARANTOR  HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION  BROUGHT  AGAINST SUCH OBLIGOR BY
AGENT IN ACCORDANCE WITH THIS SECTION.

     21.  MODIFICATION  AND BENEFIT OF AGREEMENT.  This  Agreement and the Other
Agreements  may not be  modified,  altered or amended  except by an agreement in
writing  signed by the  Borrowers,  Guarantors  or such other  Persons who are a
party to such Other  Agreement  and Agent.  No Borrower or  Guarantor  may sell,
assign or  transfer  this  Agreement,  or the Other  Agreements  or any  portion
thereof,   including,   without  limitation,  such  Borrower's  rights,  titles,
interest, remedies, powers or duties hereunder and thereunder. Each Borrower and
each Guarantor  hereby consents to Agent's sale,  assignment,  transfer or other
disposition,  at any time and from time to time hereafter, of this Agreement, or
the Other  Agreements,  or of any portion thereof,  or  participations  therein,
including,  without  limitation,  Agent's rights,  titles,  interest,  remedies,
powers and/or duties and agrees that it shall execute and deliver such documents
as Agent may request in connection with any such sale,  assignment,  transfer or
other disposition.

     22.  HEADINGS  OF  SUBDIVISIONS.  The  headings  of  subdivisions  in  this
Agreement  are for  convenience  of  reference  only,  and shall not  govern the
interpretation of any of the provisions of this Agreement.

     23. POWER OF ATTORNEY.  Each Borrower and each Guarantor  acknowledges  and
agrees that its appointment of Agent as its attorney and  agent-in-fact  for the
purposes specified in this Agreement is an appointment  coupled with an interest
and shall be irrevocable  until all of the Liabilities are satisfied and paid in
full and this Agreement is terminated.

     24. CONFIDENTIALITY.  Each Borrower, each Guarantor,  Agent and Lender each
hereby  agrees and  acknowledges  that any and all  information  relating to any
Borrower or  Guarantor  which is (i)  furnished  by any Borrower or Guarantor to
Agent or Lender (or to any affiliate of Agent or Lender);  and (ii)  non-public,
confidential  or proprietary in nature,  shall be kept  confidential by Agent or
Lender or such affiliate in accordance with applicable law;  provided,  however,
that such information and other credit information  relating to such Borrower or
such  Guarantor may be  distributed  by Agent or Lender or such affiliate to its
directors, officers, employees, attorneys, affiliates, assignees,  participants,
auditors,  agents  and  regulators,  and,  upon  the  order  of a court or other
governmental agency having jurisdiction over Agent, Lender or such affiliate, to
any other party.  Each Borrower,  each Guarantor,  Agent and Lender each further
agrees that this  provision  shall survive the  termination  of this  Agreement.
Notwithstanding  the foregoing,  each Borrower and each Guarantor hereby consent
to the Agent's publishing a tombstone or similar  advertising  material relating
to the financing transaction contemplated by this Agreement.

<PAGE>
                                       47

     25. COUNTERPARTS.  This Agreement and any amendments,  waivers, consents or
supplements  may be  executed  in any number of  counterparts  and by  different
parties  hereto in separate  counterparts,  each of which,  when so executed and
delivered,  shall be deemed an original,  but all of which counterparts together
shall constitute but one agreement.

     26.  ELECTRONIC  SUBMISSIONS.  Upon not less than  thirty  (30) days' prior
written notice (the  "Approved  Electronic  Form  Notice"),  Agent may permit or
require that any of the  documents,  certificates,  forms,  deliveries  or other
communications,  authorized,  required or  contemplated by this Agreement or the
Other  Agreements,  be  submitted  to Agent in  "Approved  Electronic  Form" (as
hereinafter   defined),   subject  to  any  reasonable  terms,   conditions  and
requirements in the applicable  Approved  Electronic Forms Notice.  For purposes
hereof  "Electronic Form" means e-mail,  e-mail  attachments,  data submitted on
web-based forms or any other communication method that delivers machine readable
data or information to Agent, and "Approved Electronic Form" means an Electronic
Form that has been  approved in writing by Agent  (which  approval  has not been
revoked or  modified by Agent) and sent to the  Borrowers  or  Guarantors  in an
Approved Electronic Form Notice.  Except as otherwise  specifically  provided in
the applicable  Approved  Electronic  Form Notice,  any  submissions  made in an
applicable  Approved  Electronic  Form shall have the same force and effect that
the same  submissions  would  have had if they had been  submitted  in any other
applicable  form  authorized,  required or contemplated by this Agreement or the
Other Agreements.

     27. WAIVER OF JURY TRIAL; OTHER WAIVERS.

          (a) EACH BORROWER, EACH GUARANTOR, AGENT AND LENDER EACH HEREBY WAIVES
     ALL  RIGHTS TO TRIAL BY JURY IN ANY  ACTION OR  PROCEEDING  WHICH  PERTAINS
     DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY OF THE OTHER AGREEMENTS,  THE
     LIABILITIES,  THE COLLATERAL, ANY ALLEGED TORTIOUS CONDUCT BY ANY BORROWER,
     ANY  GUARANTOR,  AGENT  OR  LENDER  OR  WHICH,  IN  ANY  WAY,  DIRECTLY  OR
     INDIRECTLY,  ARISES  OUT OF OR  RELATES  TO THE  RELATIONSHIP  BETWEEN  THE
     BORROWERS AND THE GUARANTORS, ON THE ONE HAND, AND AGENT AND LENDER, ON THE
     OTHER HAND. IN NO EVENT SHALL AGENT OR LENDER BE LIABLE FOR LOST PROFITS OR
     OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.

          (b)  Each  Borrower  and  each   Guarantor   hereby   waives   demand,
     presentment,  protest  and notice of  nonpayment,  and  further  waives the
     benefit of all valuation, appraisal and exemption laws.

<PAGE>
                                       48

          (c) Each Borrower and each Guarantor  hereby waives the benefit of any
     law that would otherwise restrict or limit Agent or Lender or any affiliate
     of Agent or Lender in the exercise of its respective right, which is hereby
     acknowledged  and agreed to, to set-off  against the  Liabilities,  without
     notice at any time hereafter, any indebtedness, matured or unmatured, owing
     by Agent or Lender or such  affiliate of Agent or Lender to any Borrower or
     any Guarantor,  including, without limitation, any deposit account at Agent
     or Lender or such affiliate.

          (d) EXCEPT AS REQUIRED BY ANY  APPLICABLE  LAW, EACH BORROWER AND EACH
     GUARANTOR  HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR
     TO THE  EXERCISE BY AGENT OR LENDER OF ITS  RESPECTIVE  RIGHTS TO REPOSSESS
     THE COLLATERAL OF SUCH BORROWER OR SUCH GUARANTOR  WITHOUT JUDICIAL PROCESS
     OR TO REPLEVY, ATTACH OR LEVY UPON SUCH COLLATERAL.

          (e) Agent's failure, at any time or times hereafter, to require strict
     performance  by any  Borrower or any  Guarantor  of any  provision  of this
     Agreement  or any of the  Other  Agreements  shall  not  waive,  affect  or
     diminish any right of Agent  thereafter  to demand  strict  compliance  and
     performance  therewith.  Any  suspension  or waiver by Agent of an Event of
     Default  under  this  Agreement  or any  default  under  any  of the  Other
     Agreements  shall not  suspend,  waive or affect any other Event of Default
     under  this  Agreement  or  any  other  default  under  any  of  the  Other
     Agreements,  whether the same is prior or subsequent thereto and whether of
     the same or of a different kind or character. No delay on the part of Agent
     in the  exercise of any right or remedy  under this  Agreement or any Other
     Agreement shall preclude other or further  exercise thereof or the exercise
     of any right or remedy. None of the undertakings,  agreements,  warranties,
     covenants and  representations of the Borrowers or Guarantors  contained in
     this  Agreement  or any of the Other  Agreements,  and no Event of  Default
     under this Agreement or default under any of the Other  Agreements shall be
     deemed to have been suspended or waived by Agent unless such  suspension or
     waiver is in  writing,  signed by a duly  authorized  officer  of Agent and
     directed to the Borrowers and  Guarantors,  as applicable,  specifying such
     suspension or waiver.

     28. AGENT AND LENDER. The relationship  between Agent and Lender in respect
of the  transaction  contemplated  to occur under this  Agreement  and the Other
Agreements,  and the respective  rights and  obligations of each such party with
respect thereto,  shall be governed by separate agency  agreements to be entered
into between Agent and Lender.

     29.  JOINT AND  SEVERAL  OBLIGATIONS.  Each  Borrower  shall be jointly and
severally  liable with each other Borrower for the payment and performance  when
due of all Liabilities.

                         [SIGNATURES ON FOLLOWING PAGE]

<PAGE>
                                       49

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.

                                     AGENT:

                                     LASALLE BUSINESS CREDIT, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:


                                     LENDER:

                                     STANDARD FEDERAL BANK NATIONAL ASSOCIATION

                                     By:  _________________________________
                                     Name:
                                     Title:


                                     BORROWERS:

                                     MEDICAL TECHNOLOGY SYSTEMS, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:


                                     MTS PACKAGING SYSTEMS, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:


                                     GUARANTORS:

                                     MEDICATION MANAGEMENT TECHNOLOGIES, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:


<PAGE>
                                       50


                                     CLEARWATER MEDICAL SERVICES, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     MEDICAL TECHNOLOGY LABORATORIES, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     MEDICATION MANAGEMENT SYSTEMS, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     SYSTEMS PROFESSIONALS, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     CART-WARE, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     VANGARD PHARMACEUTICAL PACKAGING, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:


<PAGE>
                                       51



                                     LIFESERV TECHNOLOGIES, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     PERFORMANCE PHARMACY SYSTEMS, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:

                                     MTS SALES AND MARKETING, INC.

                                     By:  _________________________________
                                     Name:
                                     Title:





<PAGE>

                                    EXHIBIT A

                        BUSINESS AND COLLATERAL LOCATIONS

     Attached to and made a part of that certain Loan and Security  Agreement of
even date herewith by and among MEDICAL TECHNOLOGY SYSTEMS,  INC., MTS PACKAGING
SYSTEMS,  INC.  ("Borrowers"),  LASALLE  BUSINESS  CREDIT,  INC.  ("Agent")  and
STANDARD FEDERAL BANK NATIONAL ASSOCIATION ("Lender").

                         (A) Each Borrower's Business Locations (please indicate
                    which  location is the  principal  place of business  and at
                    which locations  originals and all copies of each Borrower's
                    books, records and accounts are kept).

                  1.

                  2.

                  3.

                         (B) Other locations of Collateral  (including,  without
                    limitation,   warehouse  locations,   processing  locations,
                    consignment  locations)  and all post  office  boxes of each
                    Borrower.  Please indicate the relationship of such location
                    to each Borrower (i.e. public warehouse, processor, etc.).

                  1.

                  2.

                  3.

                         (C) Bank Accounts of each Borrower (other than those at
                    LaSalle Bank National Association):

Bank (with address)             Account Number                   Type of Account
-------------------             --------------                   ---------------

                  1.

                  2.

                  3.


<PAGE>

                                    EXHIBIT B

                             COMPLIANCE CERTIFICATE

     Attached to and made a part of that certain Loan and Security Agreement, as
it may be amended in accordance with its terms from time to time,  including all
exhibits  attached  thereto  (the  "Agreement")  of even date  herewith  between
MEDICAL TECHNOLOGY  SYSTEMS,  INC., MTS PACKAGING SYSTEMS,  INC.  ("Borrowers"),
LASALLE  BUSINESS  CREDIT,  INC.  ("Agent")  and STANDARD  FEDERAL BANK NATIONAL
ASSOCIATION ("Lender")

     This Certificate is submitted pursuant to Section 11(c) of the Agreement.

     The  undersigned  hereby  certifies  to  Agent  that as of the date of this
Certificate:

1. The undersigned is the __________________________ of the Borrowers.

2. There exists no event or  circumstance  which is or which with the passage of
time,  the giving of notice,  or both would  constitute an Event of Default,  as
that term is  defined  in the  Agreement,  or, if such an event or  circumstance
exists, a writing  attached hereto  specifies the nature thereof,  the period of
existence  thereof and the action that  Borrowers have taken or proposes to take
with respect thereto.

3.  No  material  adverse  change  in the  condition,  financial  or  otherwise,
business,  property,  or results of operations of Borrowers  have occurred since
[date of last Compliance  Certificate/last  financial statements delivered prior
to  closing],  or, if such a change  has  occurred,  a writing  attached  hereto
specifies the nature thereof and the action that Borrowers have taken or propose
to take with respect thereto.

4.  Borrowers  are  in  compliance  with  the  representations,  warranties  and
covenants in the  Agreement,  or, if Borrowers  are not in  compliance  with any
representations,  warranties or covenants in the Agreement,  a writing  attached
hereto  specifies the nature  thereof,  the period of existence  thereof and the
action that Borrowers have taken or proposes to take with respect thereto.

5. The  financial  statements  of the  Borrowers  being  concurrently  delivered
herewith  have been prepared in accordance  with GAAP  consistently  applied and
there  have  been no  material  changes  in  accounting  policies  or  financial
reporting  practices  of  the  Borrowers  since  [date  of the  last  compliance
certificate/date of last financial statements delivered prior to closing] or, if
any such change has occurred,  such changes are set forth in a writing  attached
hereto.

6. Attached hereto is a true and correct  calculation of the financial covenants
contained in the Agreement.

7. The officer  executing this  Certificate and making the statements  contained
herein is making such statements to the best of his/her  knowledge,  information
and  belief.  However,  in no way  does  such  qualification  affect  any of the
obligations,  representations  and warranties of the Borrowers  herein or in the
Agreement.

<PAGE>
                                        2


                                      MEDICAL TECHNOLOGY SYSTEMS, INC.

                                      By:  __________________________________
                                           Title:

                                      MTS PACKAGING SYSTEMS, INC.

                                      By:  __________________________________
                                           Title:



<PAGE>

                                       3


                                   SCHEDULE 1


                      Address for Borrowers and Guarantors


                  12920 Automobile Boulevard
                  Clearwater, FL 33762
                  Attention:  Todd Siegel, President
                  Facsimile Number:  (727) 540-0547

                  With a copy to:

                  Kilpatrick Stockton LLP
                  301 South College Street, Suite 3500
                  Charlotte, NC 28202
                  Attention: Francis C. Pray, Esq.
                  Facsimile Number: (704) 371-8306



</TEXT>
</DOCUMENT>
