FIRST AMENDMENT TO RESTRUCTURE AGREEMENT
THIS FIRST AMENDMENT is made as of the 5th day of January, 2002 by and
between PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P. ("Palisade"), Xxxx X.
Xxxxxxxxx ("Xx. Xxxxxxxxx") and OPTICARE HEALTH SYSTEMS, INC. ("OptiCare").
W I T N E S S E T H
WHEREAS, OptiCare, Palisade and Xx. Xxxxxxxxx entered into a certain
Restructure Agreement dated the 17th day of December 2001 (the "Restructure
Agreement"), which Restructure Agreement is subject to, among other things,
further negotiation between Palisade and Bank Austria Creditanstalt Corporate
Finance, Inc. as agent for the lenders ("Bank Austria") with regard to the
nature and amount of credit support that was to be supplied by Palisade to Bank
Austria in connection with a promissory note of OptiCare to be issued to Bank
Austria pursuant to the Restructure Agreement, and Palisade and Bank Austria
have determined that a satisfactory agreement regarding such credit support
cannot be reached, and
WHEREAS, OptiCare and Palisade now desire to modify the Restructure
Agreement to provide for Palisade and Xxxx X. Xxxxxxxxx, M. D. ("Xx. Xxxxxxxxx")
to make a loan to OptiCare in the amount of $14MM and an equity investment of
$4MM in OptiCare's participating preferred stock as described herein in order to
enable OptiCare to settle in full the obligations of OptiCare to Bank Austria,
thereby eliminating the need for such promissory note and such credit support,
and
WHEREAS, Palisade, OptiCare, and Xx. Xxxxxxxxx are desirous of amending
the Restructure Agreement to reflect such terms.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph D of the Section entitled "Background" is amended in its
entirety to read as follows:
"Palisade has agreed, and Xx. Xxxxxxxxx, at Palisade's insistence, and
as a condition to Palisade's investment in OptiCare, has agreed, on
the terms and subject to the conditions set forth in this Agreement,
to make preferred stock investments in, and to provide loans to,
OptiCare and certain of its subsidiaries, as provided below, to permit
OptiCare and certain of its subsidiaries to repay Bank Austria its
debt at a substantial discount and to repay the advance by Alexander
Enterprise under the Amended Bridge Loan. In exchange for such
preferred stock investments and such loans, Palisade and Xx. Xxxxxxxxx
shall
receive new participating preferred stock and warrants in OptiCare
(collectively, the "Warrants") and subordinated notes of OptiCare, all
as further described herein. All references in this Agreement to "Xx.
Xxxxxxxxx" with respect to such investment and the purchase of such
securities shall mean Xx. Xxxxxxxxx or his spouse, family members, or
a trust for the benefit of any of his family members."
2. Paragraph E. of the Section entitled "Background" is amended by
deleting "in reliance in part on credit support to be provided by Palisade." and
by inserting in its place the words "contingent upon the cash investments and
loans to be provided by Palisade and Xx. Xxxxxxxxx."
3. Paragraph F of the Section entitled "Background" is amended in its
entirety to read as follows:
"Palisade proposes to provide the investment and loan described herein
in order to allow OptiCare to make the cash payment to Bank Austria
described in Paragraph 2.12 in order to induce Bank Austria to accept
payment from OptiCare of significantly less than the debt due to it in
full settlement."
4. The first full sentence of Section 1. is amended by replacing the word
"Warrant " with the word "Warrants", and by inserting the words "shares of"
immediately following the words "the authorized number of."
5. The third and fourth sentences of Section 1. are amended and replaced
in their entirety by the following:
"This Agreement is contingent upon OptiCare and Bank Austria entering
into a definitive written agreement acceptable to Palisade in its sole
discretion regarding the nature and amount of cash to be paid by
OptiCare to Bank Austria in consideration for extinguishing all claims
of Bank Austria against OptiCare (the "Bank Austria Contingency"). At
any time from and after the date hereof, if either OptiCare or
Palisade, in its sole judgment, determines that a definitive agreement
satisfactory to it in all respects resolving the Bank Austria
Contingency has not been entered into, OptiCare or Palisade may, upon
notice to the other, terminate this Agreement. "
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6. Section 2 is amended and replaced in its entirety by the following:
"2. RESTRUCTURE DOCUMENTS. Subject to the conditions in this
Agreement, OptiCare, Palisade, and Xx. Xxxxxxxxx agree to the
following terms and to execute and deliver the following documents
(collectively, the "Restructure Documents"):
2.1. OptiCare is authorizing the issuance of 3,500,000
shares of Series B 12.5% voting convertible participating
preferred stock having terms substantially as set forth in the
Certificate of Designation attached as Schedule 2.1 (the "New
Preferred Stock") with an aggregate initial redemption value of
$1.40 per preferred share, for each share of New Preferred Stock
convertible into OptiCare Common Stock initially on a ten-for-one
basis (subject to adjustment as provided therein), with voting
rights on an as converted basis with OptiCare's Common Stock, as
provided therein, at any time and having the other terms
described therein, and will recommend that OptiCare's
shareholders approve an increase in the amount of authorized
shares of Common Stock to provide for the possible future
exercise of warrants being granted to Palisade and Xx. Xxxxxxxxx
and conversion of the New Preferred Stock along with the other
Shareholder Proposals.
2.2. On the Effective Date, OptiCare will deliver (in
addition to shares of New Preferred Stock delivered pursuant to
Paragraphs 2.9 and 2.10) a certificate representing 2,571,429
shares of the New Preferred Stock to Palisade and a certificate
representing 285,714 shares of New Preferred Stock to Xx.
Xxxxxxxxx.
2.3. In connection with Palisade providing a loan to
OptiCare totaling $13,900,000 as set forth in Paragraph 2.6, on
the Effective Date, OptiCare will issue a warrant (the "Palisade
Warrant") to Palisade, permitting a purchase of 17,375,000 shares
of OptiCare Common Stock, a copy of which Palisade Warrant is
annexed as "Schedule 2.3".
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In connection with Xx. Xxxxxxxxx providing a loan as set
forth in Paragraph 2.6, on the Effective Date, OptiCare will
issue a warrant (the "Yimoyines Warrant") to Xx. Xxxxxxxxx,
permitting a purchase of 125,000 shares of OptiCare Common Stock,
which Yimoyines Warrant will be substantially identical to the
Palisade Warrant.
2.4. In payment of the New Preferred Stock, Palisade
shall, on the Effective Date, pay OptiCare a total of $3,600,000
and Xx. Xxxxxxxxx shall, on the Effective Date, pay OptiCare, in
immediately available funds, a total of $400,000, each pursuant
to the wire transfer instructions set forth in "Schedule 2.4".
2.5. OptiCare is borrowing from CapitalSource on the
Effective Date approximately $7,000,000 on an asset-based line
and an additional $3,000,000 under an equipment term loan, all
pursuant to the CapitalSource loan documents.
2.6. Palisade shall, on the Effective Date, loan to
OptiCare $13,900,000 pursuant to the subordinated secured note
from OptiCare and its subsidiaries to Palisade (the "Palisade
Note") annexed as "Schedule 2.6".
Xx. Xxxxxxxxx shall, on the Effective Date, loan to
OptiCare $100,000 pursuant to a subordinated secured note from
OptiCare and its subsidiaries to Xx. Xxxxxxxxx (the "Yimoyines
Note"), which Yimoyines Note will be substantially identical to
the Palisade Note.
The Palisade Note and the Yimoyines Note shall each bear
interest at 11.5% per annum and shall have a maturity date of ten
(10) years from the Effective Date.
2.7. To secure the Palisade Note and the Yimoyines Note,
OptiCare and its subsidiaries shall grant a security interest in
all of their assets, second and subordinate in all respects to
the security interest of
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CapitalSource. Palisade and Xx. Xxxxxxxxx agree to execute a
subordination agreement reasonably acceptable to CapitalSource.
2.8. OptiCare will use a portion of the proceeds of the
loans from CapitalSource, Palisade and Xx. Xxxxxxxxx and the
stock investments by Palisade and Xx. Xxxxxxxxx to settle the
claims of Bank Austria in full and to acquire certain assets of
Bank Austria pursuant to a Bank Austria Restructure Agreement to
be entered into by OptiCare and Bank Austria (which shall be
acceptable to Palisade in its sole discretion).
2.9. OptiCare will use a portion of the proceeds of the
stock investments by Palisade and Xx. Xxxxxxxxx to repay
$2,300,000 of principal plus interest of the Amended Bridge Loan
to Alexander Enterprise pursuant to the payoff agreement and
instructions attached as "Schedule 2.9".
2.10. As of the Effective Date, Palisade, as a
participant in the Amended Bridge Loan pursuant to the
Participation Agreement relating thereto, executed in connection
therewith and dated as of January 5, 2001 (the "Bridge Loan
Participation Agreement"), shall be issued, in lieu of cash
payment on account of its participation in the principal amount
of $400,000 in the Amended Bridge Loan, 285,714 shares of
OptiCare New Preferred Stock, plus additional shares of New
Preferred Stock for accumulated interest.
2.11. As of the Effective Date, Xxxxx Xxxxxxxxx, as a
participant in the Amended Bridge Loan pursuant to the Bridge
Loan Participation Agreement relating thereto, shall be issued,
in lieu of cash payment on account of her participation in the
principal amount of $50,000 in the Amended Bridge Loan, 35,714
shares of OptiCare New Preferred Stock, plus additional shares of
New Preferred Stock for accumulated interest.
2.12. OptiCare agrees to submit to its shareholders at
the next shareholders' meeting, if not already approved as part
of the Shareholder Proposals, an Amendment to the Performance
Stock Program to provide 10% of the fully diluted shares of
Common Stock, Preferred Stock and
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Warrants outstanding to be issued to OptiCare's key employees and
directors and to extend the date thereof to December 31, 2006.
Palisade agrees to vote its stock and the proxies entitling it to
vote for approval of such amendment.
2.13. Palisade and Xx. Xxxxxxxxx on the one hand, and
OptiCare on the other, shall, as of the Effective Date, enter
into a Registration Rights Agreement regarding the Common Stock
of OptiCare currently held by Palisade, the Common Stock issuable
pursuant to warrants currently held by Palisade and Xx.
Xxxxxxxxx, and the Common Stock of OptiCare issuable as a result
of any conversion of the New Preferred Stock or on the exercise
of any of the Warrants issued to Palisade and to Xx. Xxxxxxxxx
pursuant to this Agreement.
2.14 OptiCare shall, on the Effective Date, obtain and
deliver the resignations of three (3) directors of its Board of
Directors.
2.15 OptiCare shall, as of the Effective Date, amend its
Bylaws to include the provisions set forth in "Schedule 2.15".
2.16 On the Effective Date, OptiCare shall pay to Xxxxxx
Xxxxxxx, Trustee of the OptiCare D&O Tail Policy Trust (the "Tail
Policy Trust"), the sum of $225,000 to be held under and for the
purposes of the Tail Policy Trust. A copy of the Trust Agreement
of the Tail Policy Trust is annexed as "Schedule 2.16". OptiCare
agrees to execute such Trust Agreement on the Effective Date."
7. The first sentence of Section 4.A.2 is amended to add "and the
Palisade Note and the Yimoyines Note" immediately following "the Warrants", and
to add the words "and to Xx. Xxxxxxxxx" immediately following "to Palisade."
8. The second sentence of Section 4.A.2 is amended to add "and the
Palisade Note and the Yimoyines Note" immediately following "the Warrants"
[other than in clause (iii)], to add the words "and to Xx. Xxxxxxxxx"
immediately following "to Palisade," to add the words "(as defined therein)"
immediately
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following the words "Warrant Shares described therein," and to add a new clause
(iv) reading: "(iv) the Palisade Note and the Yimoyines Note will have been
validly issued and will represent legal, valid and binding obligations of
OptiCare enforceable in accordance with their terms."
9. Section 4.A.4 is amended and replaced in its entirety with the
following:
"4.A.4. Delaware GCL Section 203. The Board of Directors of OptiCare
duly adopted resolutions approving the transactions by which Palisade
acquired its 2,000,000 shares of OptiCare Common Stock and became an
"interested stockholder" prior to such transactions. Such resolutions
have not been repealed or modified as of the date hereof."
10. Section 4.A.7 is amended by adding the words "and the Palisade Note
and the Yimoyines Note" immediately following "the Warrants" and by adding the
words, "Xx. Xxxxxxxxx" immediately following "in favor of Palisade."
11. Section 4.A.24 is amended by replacing the reference to "Sections 1.01
to 1.23" by reference to "Sections 4.A.1 to 4.A.23" and by adding the following
new sentence:
"Palisade shall be entitled to receive at the time of the Closing such
officers' certificates, legal opinions or other documents as Palisade
may reasonably request to confirm such representations."
12. Subsection 4.B.1(f) is amended and replaced in its entirety with the
following:
"(f) Conversion Stock. OptiCare will at all times, so long as the New
Preferred Stock or Warrants are outstanding, reserve such authorized
shares of Common Stock as are necessary for the full conversion or
exercise of the New Preferred Stock and Warrants. The issuance of
shares of such Common Stock upon conversion of the New Preferred Stock
or exercise of the Warrants will be duly authorized by all necessary
corporate action on the part of OptiCare and, when issued upon
conversion of the New Preferred Stock or exercise of the Warrants in
accordance with the terms thereof, such Common Stock will have been
validly issued and will be fully paid and non-assessable."
13. The definition of "Permitted Liens" in Section 4.D is amended by
adding the words "and
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G. E. Capital Corporation" immediately after the words "Xx. Xxxxxx."
14. Section 6.1 is amended and replaced in its entirety by the following:
"6.1 OptiCare agrees that for so long as Palisade holds more than 50%
of the voting power of OptiCare, (i) OptiCare's Board of Directors
will consist of not more than five members (or such greater number as
Palisade may reasonably request), and (ii) OptiCare shall cause such
number of persons designated by Palisade from time to time to be
nominated for, and elected to, the Board of Directors of OptiCare so
that if desired by Palisade a number of directors equal to the minimum
number necessary to constitute a majority of the Board of Directors of
OptiCare will be persons so designated by Palisade.
15. Section 6.2 is amended and replaced in its entirety by the following:
"6.2 For so long as Palisade holds more than 50% of the voting power
of OptiCare, OptiCare shall not take any of the following actions
without the approval of a majority of its Independent Directors (as
defined below):
(a) Issuance to Palisade or any affiliate of Palisade (other
than pursuant to the terms of securities then held by Palisade) of (A)
any new class or series of preferred stock out of the "blank check"
preferred stock authorized by OptiCare's certificate of incorporation,
as amended from time to time, (B) any new class or series of preferred
stock authorized or to be authorized hereafter under an amendment of
the certificate of incorporation of the OptiCare, or (C) any security
convertible into or exchangeable for (with or without payment of any
additional consideration) any of the securities described in clauses A
or B hereof.
(b) For purposes of this Section 6, "Independent Director"
means a director who qualifies as an "independent director" under Rule
121 of the American Stock Exchange.
(c) No amendment of this Section 6.2 shall be made without the
approval of the Independent Directors.
16. Section 7 is amended and replaced in its entirety by the following:
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"7. TERMINATION. Palisade shall have the right, in its sole
discretion, to terminate this Agreement at any time, by notice to
OptiCare (in which case this Agreement shall cease to be of any
further force and effect), in the event that (i) the Bank Austria
Contingency is not satisfied in Palisade's sole discretion, (ii) the
Bank Austria Restructure Agreement referred to in Paragraph 2.8
terminates in accordance with its terms without the transactions
contemplated thereby having been consummated, (iii) Capital Source
advises Palisade or OptiCare that Capital Source is not prepared to
proceed to consummate the financing described in Paragraph 2.5, or
(iv) any of the Shareholder Proposals is disapproved by OptiCare's
shareholders. OptiCare shall have the right, in its sole discretion,
to terminate this Agreement at any time, by notice to Palisade (in
which case this Agreement shall cease to be of any further force and
effect), in the event that the Bank Austria Contingency is not
satisfied in OptiCare's sole discretion."
17. Section 8 is amended by deleting the last full sentence thereof.
18. Section 9.3 is amended by replacing the words "Xxxxxxx, Xxxxxxxx &
Xxxxxxxx, P.C." with "Xxxxxxx Xxxxxxx LLP," and by renumbering subsection (B) as
subsection (C), and by inserting a new subsection (B) as follows:
(B) If to Xx. Xxxxxxxxx:
Xxxx X. Xxxxxxxxx, MD
OptiCare Eye Health Centers, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
With a copy to:
Xxxx X. Xxxxxxxxx, MD
Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
19. Subsection 9.6 is amended and replaced in its entirety by the
following:
"9.6. Jurisdiction. OptiCare, Palisade and Xx. Xxxxxxxxx each agree to
submit to the jurisdiction of the United States District Court for the
Southern District of New York, as well as the jurisdiction of all
courts to which an appeal may be
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taken from the aforesaid court for the purpose of any suit, action or
proceeding arising out of or with respect to this Agreement or any of
the Restructure Documents and each waives any objections they each may
have as to venue in such courts."
20. A new Section 9.7 is added as follows:
"9.7. Attorney Fees and Expenses. OptiCare shall reimburse Palisade
for all reasonable out-of-pocket expenses including fees and
disbursements of its counsel in connection with this Restructure
Agreement and the closing of the transactions contemplated hereby."
21. The rights, privileges, duties and obligations of the parties under
the Restructure Agreement shall, except as modified above, remain unchanged and
in full force and effect.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first written above.
Signed, Sealed and Delivered PALISADE CONCENTRATED EQUITY
in the Presence of: PARTNERSHIP, L.P.
By: Palisade Concentrated Holdings LLC,
its General Partner
----------------------------------
---------------------------------- By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Member
/s/ Xxxxxx X. Xxxxxx
----------------------------------
/s/ Xxxxx X. Xxxxxxxxx /s/ Xxxx X. Xxxxxxxxx
---------------------------------- ----------------------------------------
Xxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxx
---------------------------------- OPTICARE HEALTH SYSTEMS, INC.
/s/ Xxxxx X. Xxxxxxxxx
---------------------------------- By: /s/ Xxxxxxx X. Xxxxxxxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: CFO/VP
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