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Title: |
Restructure Agreement |
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Date: |
2002 |
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78KB total |
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$52 |
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#423185 |
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RESTRUCTURE AGREEMENT
Agreement made this 17th day of December, 2001 between PALISADE
CONCENTRATED EQUITY PARTNERSHIP, L.P. ("Palisade"), Dean J. Yimoyines ("Dr.
Yimoyines") and OPTICARE HEALTH SYSTEMS, INC. ("OptiCare").
BACKGROUND
A. On or about August 13, 1999, OptiCare and certain of its subsidiaries
borrowed money from and entered into a loan agreement, which has been amended
from time to time (as amended, the "Loan Agreement") with Bank Austria
Creditanstalt Corporate Finance, Inc. as agent for the lenders ("Bank Austria").
B. As of November 1, 2001, OptiCare and certain of its subsidiaries owed
Bank Austria the sum of $29,700,000 of principal and approximately $1,900,000 of
interest. OptiCare is, and has been for a significant period of time, in default
of its obligations to Bank Austria under the Loan Agreement.
C. On or about October 10, 2000, OptiCare borrowed $2,250,000 for a
bridge financing arrangement with Alexander Enterprise Holdings Corp.
("Alexander Enterprise"), which bridge loan was increased by $500,000 to the
principal sum of $2,750,000 on or about January 5, 2001 (the "Amended Bridge
Loan"). Of the $500,000 increase of the bridge loan, Palisade provided $400,000
and Linda Yimoyines (the wife of Dr. Yimoyines) provided $50,000, each as a
participant with Alexander Enterprise in the Amended Bridge Loan.
D. Palisade has agreed, on the terms and subject to the conditions set
forth in this Agreement, to make an additional cash investment in, and provide
credit support 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 cash and credit support,
Palisade shall receive new preferred stock and warrants in OptiCare. At
Palisade's insistence, and as a condition to Palisade's investment in OptiCare,
{PAGE}
Dr. Yimoyines (or his spouse, immediate family members, or a trust for the
benefit of any of his family members) have agreed to provide an additional cash
investment, as provided below, to purchase new preferred stock. All references
in this Agreement to "Dr. Yimoyines" with respect to such investment and the
purchase of such stock shall mean Dr. Yimoyines or his spouse, family members,
or a trust for the benefit of any of his family members.
E. Palisade has assisted OptiCare in obtaining new financing from
CapitalSource Finance, LLC ("CapitalSource"), which, provided certain conditions
are satisfied, on the Effective Date (as defined below), will be loaning
OptiCare substantial sums in reliance in part on credit support to be provided
by Palisade.
F. Palisade entered into a letter of intent with Bank Austria to provide
Bank Austria with certain letters of credit or other credit support described in
Paragraph 2.12 in order to induce Bank Austria to accept payment of
significantly less than the debt due to it.
G. Palisade and Dr. Yimoyines each has agreed to accept new preferred
stock of OptiCare in lieu of repayment in cash for their respective
participations in, and accrued interest on, the Amended Bridge Loan.
NOW THEREFORE, for good and valuable consideration and intending to be
legally bound hereby, the parties hereto agree as follow:
1. EFFECTIVE DATE; CREDIT SUPPORT CONTINGENCY. OptiCare shall use its
best efforts to cause the issuance of New Preferred Stock, and the Warrant, an
increase in the authorized number of Common Stock, and the other proposals
listed on Annex A, (collectively, the "Shareholder Proposals") to be approved,
in accordance with applicable legal requirements, the provisions of OptiCare's
Certificate of Incorporation and Bylaws, and the requirements of the American
Stock Exchange, by consent of the holders of more than 50% of the OptiCare
voting stock or approval of OptiCare's shareholders at a meeting to be
scheduled, whichever is sooner. OptiCare shall submit the Shareholder Proposals
for
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{PAGE}
approval, accompanied by a recommendation of the OptiCare Board that the
Shareholder Proposals be approved, as promptly as practicable. Subject to the
appropriate approval of the shareholders on such date (the "Approval Date"), the
Effective Date, as used herein, shall mean the business day immediately
following the Approval Date or such later date on which the new financing from
Capital Source is consummated. This Agreement is contingent upon Palisade and
Bank Austria entering into a written agreement regarding the nature and amount
of credit support to be supplied by Palisade to Bank Austria in connection with
the $10,350,000 Bank Austria Note (defined below) and related matters (the
"Credit Support 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 Credit Support
Contingency has not been entered into, OptiCare or Palisade may, upon notice to
the other, terminate this Agreement. Upon such a termination, this Agreement
will be null and void and neither party will be in any way obligated or liable
under the terms hereof.
2. RESTRUCTURE DOCUMENTS. Subject to the conditions in this Agreement,
OptiCare and Palisade 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 conversion of the New Preferred Stock along with the other Shareholder
Proposals.
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{PAGE}
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 2,500,000 shares of the New Preferred Stock to Palisade
and a certificate representing 353,143 shares of New Preferred Stock to Dr.
Yimoyines; copies of such Certificates are annexed as "Schedule 2.2".
2.3. In consideration of Palisade providing credit support or
commitments set forth in Paragraphs 2.6 and 2.12, and for other assistance
provided by Palisade, on the Effective Date OptiCare will issue a warrant (the
"Warrant") to Palisade, permitting a purchase of 16,730,000 additional shares
(as such number may be adjusted to correspond to the total amount of credit
support or commitments provided by Palisade for OptiCare's benefit) of OptiCare
Common Stock, a copy of which Warrant is annexed as "Schedule 2.3".
2.4. In payment of the New Preferred Stock, Palisade shall, on the
Effective Date, pay OptiCare a total of $3,500,000 and Dr. Yimoyines shall, on
the Effective Date, pay OptiCare, in immediately available funds, a total of
$500,000, each pursuant to the wire transfer instructions set forth in "Schedule
2.4".
2.5. OptiCare is borrowing from CapitalSource on the Effective Date:
(A) $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.
(B) $5,000,000 on a Standby Letter of Credit Facility, all
pursuant to the CapitalSource loan documents.
2.6. CapitalSource's Standby Letter of Credit Facility of $5,000,000
will be supported and secured by either a letter of credit issued on the
Effective Date by a bank or other credit support acceptable to CapitalSource
which, subject to the terms and conditions in this Agreement, Palisade agrees to
supply.
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{PAGE}
2.7. OptiCare will use a portion of the proceeds of the loans from
CapitalSource to repay Bank Austria cash in the sum of $13,000,000 pursuant to a
Bank Austria Novation Agreement to be entered into.
2.8. OptiCare will use a portion of the proceeds of the Palisade stock
investment 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 2.8".
2.9. 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.
2.10. As of the Effective Date, Linda Yimoyines, 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 his
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).
2.11 On the Effective Date, OptiCare and its subsidiaries shall issue
a note to Bank Austria pursuant to the Bank Austria Novation Agreement in the
principal amount of $10,350,000 (hereinafter referred to as the "$10,350,000 BA
Note").
2.12. On the Effective Date, Palisade shall provide Bank Austria with
credit support acceptable to Bank Austria in the amount of $11,230,000 to secure
the $10,350,000 BA Note and interest.
2.13. If letters of credit are to be issued, OptiCare and Palisade
jointly and severally agree to execute a customary Reimbursement Agreement on
account of the
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{PAGE}
letters of credit being issued to Bank Austria and CapitalSource pursuant to the
terms of a Reimbursement Agreement in form and substance reasonably acceptable
to OptiCare and Palisade.
2.14. If requested by OptiCare, Palisade may from time to time in its
sole discretion provide additional funds to OptiCare by purchasing OptiCare's
12.5% convertible notes to enable OptiCare to repay the $10,350,000 BA Note and
$5,500,000 CapitalSource Standby Letter of Credit Facility. The terms of such
notes are described on the attached Schedule 2.14.
2.15. OptiCare agrees to submit to its shareholders at the next
shareholders' meeting, if not already approved as part of the Shareholder
Proposals, Amendment to the Performance Stock Program to provide 10% of the
fully diluted shares of Common Stock and Preferred Stock 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 Plan.
2.16. Palisade and Dr. Yimoyines on the one hand, and OptiCare on the
other, shall, as of the Effective Date, agree on and 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 the Common Stock of OptiCare issuable as a result of any
conversion of the New Preferred Stock or, exercise of the Warrant or conversion
of any 12.5% convertible notes issued to Palisade pursuant to paragraph 2.14.
2.17 OptiCare shall, on the Effective Date, obtain and deliver the
resignations of three (3) directors of its Board of Directors.
2.18 OptiCare shall, as of the Effective Date, amend its Bylaws to
include the provisions set forth in Schedule 2.18.
2.19 On the Effective Date, OptiCare shall pay to Norman Drubner,
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{PAGE}
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
2.19. OptiCare agrees to execute such Trust Agreement on the Effective Date.
3. FURTHER ASSURANCES. OptiCare and Palisade each agree to execute and
deliver, both before and after the Effective Date, all of those documents,
agreements and instruments and to take such other actions as may be reasonably
required by any other party to effectuate further the transactions contemplated
hereunder, provided that such documents, agreements, instruments and actions do
not impose any material additional liability on OptiCare or Palisade, as the
case may be.
4A. OPTICARE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
OptiCare represents, warrants and covenants (all of which shall
survive the execution and delivery of this Restructure Agreement and the
Closing) to the following matters, except as expressly set forth on the
disclosure schedule attached to this Restructure Agreement:
4.A.1 Authorized and Outstanding Shares of Capital Stock. As of the
date hereof, the authorized capital stock of OptiCare consists of 50,000,000
shares of Common Stock, $0.001 par value per share (the "Common Stock"), of
which a total of 12,815,092 shares of Common Stock are issued and outstanding,
and 5,000,000 shares of Preferred Stock, $0.001 par value per share (the
"Preferred Stock"), of which 418,803 shares of Series A Convertible Preferred
Stock are issued and outstanding. All of such issued and outstanding shares are
validly issued, fully paid and non-assessable. After giving effect to the
transactions to be consummated at or before the Closing, the authorized capital
stock of OptiCare will consist of 75,000,000 shares of Common Stock, of which a
total of 12,815,042 shares of Common Stock will be issued and outstanding and
5,000,000 shares of preferred stock. All of the shares of Common Stock,
Preferred Stock and New Preferred Stock to be issued and outstanding immediately
after giving effect to the Closing will, at such time, be
7
{PAGE}
validly issued, fully paid and non-assessable. There is no existing option,
warrant, call, commitment or other agreement to which OptiCare is a party
requiring, and there are no convertible securities of OptiCare outstanding which
upon conversion would require, the issuance of any additional shares of stock of
OptiCare or other securities convertible into shares of equity securities of
OptiCare, other than the New Preferred Stock and the Warrants. There are no
agreements to which OptiCare is a party or, to the knowledge of OptiCare, to
which any stockholder or warrant holder of OptiCare is a party in its capacity
as such, with respect to the voting or transfer of the stock of OptiCare. There
are no stockholders' preemptive rights or rights of first refusal or other
similar rights with respect to the issuance of stock by OptiCare, other than
pursuant to the Restructuring Documents. True and correct copies of the
certificate of incorporation and by-laws of OptiCare, as currently in effect,
have been delivered to Palisade.
4.A.2. Authorization and Issuance of New Preferred Stock. This
Agreement, and the issuance of the New Preferred Stock and the Warrants to
Palisade in accordance with the terms hereof, have been duly authorized by the
Board of Directors of OptiCare. Upon delivery to Palisade of the New Preferred
Stock and the Warrants at the Closing in accordance with the terms hereof, (i)
this Agreement and the issuance of the New Preferred Stock and the Warrants will
have been duly authorized by all necessary corporate action on the part of
OptiCare (including any necessary approval by the stockholders of OptiCare),
(ii) the New Preferred Stock will have been validly issued and will be fully
paid and non-assessable, free and clear of all pledges, liens, encumbrances and
preemptive rights, and (iii) the Warrants will have been validly issued and will
represent the right to acquire the Warrant Shares described therein on the terms
set forth therein.
4.A.3. Securities Laws. Assuming the representations of Palisade in
Section 5.6 are true and correct, the offer, issuance, sale and delivery of the
New Preferred Stock and the Warrants, as provided in this Restructure Agreement
and the Restructure Documents, are exempt from the registration requirements of
the Securities Act and all applicable state securities laws, and are otherwise
in compliance with such laws. Neither
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{PAGE}
OptiCare nor any Person duly authorized to act on its behalf has taken or will
take any action (including, without limitation, any offering of any securities
of OptiCare under circumstances which would require the integration of such
offering with the offering of the New Preferred Stock or the Warrants under the
Securities Act) which might subject the offering, issuance or sale of the New
Preferred Stock or the Warrants to the registration requirements of Section 5 of
the Securities Act.
4.A.4. Delaware GCL Section 203. The Board of Directors of OptiCare
duly adopted with respect to the transactions by which Palisade acquired its
2,000,000 shares of OptiCare Common Stock and became an "interested
stockholder". Such resolutions have not been repealed or modified as of the date
hereof.
4.A.5. Corporate Existence; Compliance with Law. Each of OptiCare and
its Subsidiaries, if any, (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware in the case of
OptiCare and its jurisdiction of incorporation in the case of OptiCare's
Subsidiaries; (ii) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership or lease of
property or the conduct of its business requires such qualification (except for
jurisdictions in which such failure to so qualify or to be in good standing
would not have a Material Adverse Effect); (iii) has the requisite corporate
power and authority and the legal right to own, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease, and to conduct its business as now being conducted; (iv) has, or has
applied for, all material licenses, permits, consents or approvals from or by,
and has made all material filings with, and has given all material notices to,
all governmental authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance with its certificate
of incorporation and by-laws; and (vi) is in compliance with all applicable
provisions of law, except for such non-compliance which would not have a
Material Adverse Effect.
4.A.6. Subsidiaries. Except as set forth on Schedule 4.A.6 attached
hereto, all outstanding shares of capital stock of each Subsidiary are owned by
OptiCare or a
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{PAGE}
wholly owned Subsidiary of OptiCare. There are no options, warrants, rights to
purchase or similar rights covering capital stock for any such Subsidiary.
4.A.7. Corporate Power; Authorization; Enforceable Obligations. The
execution, delivery and performance by OptiCare of this Restructure Agreement,
the other Restructure Documents to which OptiCare is a party and all instruments
and documents to be delivered by OptiCare, the issuance and sale of the New
Preferred Stock and the Warrants and the consummation of the other transactions
contemplated by any of the foregoing: (i) are within OptiCare's and its
Subsidiaries' corporate power and authority; (ii) have been duly authorized by
the Board of Directors of OptiCare; (iii) as of the Closing and assuming due
approval of the Company's stockholders, will have been duly authorized by all
necessary or proper corporate action (including any required action of
stockholders of OptiCare); (iii) are not in contravention of any provision of
OptiCare's Certificate of Incorporation or by-laws or any of its Subsidiaries'
certificate of incorporation or by-laws; (iv) will not violate any law or
regulation, or any order or decree of any court or governmental instrumentality;
(v) will not conflict with or result in the breach or termination of, constitute
a default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which OptiCare
or any of its Subsidiaries is a party or by which OptiCare, any of its
Subsidiaries or any of their property is bound; (vi) will not result in the
creation or imposition of any Lien upon any of the property of OptiCare (other
than Liens in favor of Palisade and/or Capital Source); and (vii) do not require
the consent or approval of, or any filing with, any governmental authority or
regulatory organization or any other Person. Each of the Restructure Documents
has been duly executed and delivered by OptiCare and constitutes a legal, valid
and binding obligation of OptiCare, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether
10
{PAGE}
enforcement is sought in a proceeding at law or in equity).
4.A.8. Financial Statements.
(a) The audited consolidated balance sheet of OptiCare as of December
31, 2000, and the related consolidated statements of income, retained earnings
and cash flows for the year then ended and the unaudited consolidated balance
sheet of OptiCare as at September 30, 2001 (the "Financial Statements") and the
related unaudited consolidated statements of income, retained earnings and cash
flows for the [nine] months then ended, copies of which have been delivered to
Palisade, have been, except as noted therein and with respect to the unaudited
financial statements for the absence of footnotes, prepared in conformity with
GAAP consistently applied throughout the periods involved and present fairly in
all material respects the consolidated financial position of OptiCare as at the
dates thereof, and the consolidated results of its operations and cash flows for
the periods then ended, subject, in the case of the interim financial
statements, to normal year-end audit adjustments, subject to the qualification
of the auditors' report of Deloitte & Touche.
(b) Except as set forth in the Financial Statements and Schedule
4.A.8.(b), neither OptiCare nor any of its Subsidiaries has any material
obligations, contingent or otherwise, including, without limitation, liabilities
for charges, long-term leases or unusual forward or long-term commitments, other
than those incurred since September 30, 2001, in the ordinary course of
business.
(c) No dividends or other distributions have been declared, paid or
made upon any shares of capital stock of OptiCare, nor have any shares of
capital stock of OptiCare been redeemed, retired, purchased or otherwise
acquired for value by OptiCare since September 30, 2001.
4.A.9. Ownership of Property. Neither OptiCare nor any of its
Subsidiaries owns any real estate. Each of OptiCare and its Subsidiaries has
good and marketable title to, or valid leasehold interests in, all of its
material properties and assets
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{PAGE}
free and clear of all Liens, except for those which would not reasonably be
expected to result in a Material Adverse Effect. Neither OptiCare nor any of its
Subsidiaries is obligated under or a party to, any option, right of first
refusal or any other contractual right to purchase, acquire, sell, assign or
dispose of any real property owned or leased by OptiCare or such Subsidiary.
4.A.10. Material Contracts; Indebtedness. OptiCare's Annual Report on
Form 10-K for the year ended December 31, 2000 and Quarterly Reports on Form
10-Q for the quarters ended March 31, 2001, June 30, 2001 and September 30,
2001, in each case as filed with the SEC, contain a true, correct and complete
list of all contracts to which OptiCare or any of its Subsidiaries is a party
that would qualify as "Material Contracts" under SEC Regulation S-K, Item 601,
other than the Restructure Documents. Each such Material Contract is a valid and
binding agreement of OptiCare or one of its Subsidiaries (as the case may be)
enforceable against OptiCare or such Subsidiary in accordance with its terms
(subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity)), and neither OptiCare nor any of its Subsidiaries has any knowledge
that any such Material Contract is not a valid and binding agreement against the
other parties thereto except as set forth on Schedule 4.A.10. Each of OptiCare
and its Subsidiaries has fulfilled all material obligations required pursuant to
such Material Contracts to have been performed by OptiCare or such Subsidiary on
its part. Neither OptiCare nor any of its Subsidiaries is in default or breach,
nor to OptiCare's or such Subsidiary's knowledge is any third party in default
or breach, under or with respect to any such Material Contract, except where
such default or breach would not reasonably be expected to result in a Material
Adverse Effect. Except as set forth on Schedule 4.A.10., neither OptiCare nor
any of its Subsidiaries has any Indebtedness or any Liens on its assets except
as expressly contemplated by the Restructure Documents.
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4.A.11. Employment and Labor Agreements. Neither OptiCare nor any of
its Subsidiaries has any employment, consulting or management agreements
covering management of OptiCare or any of its Subsidiaries, other than
agreements included in the "Material Contracts" referred to above.
4.A.12. Other Ventures. Neither OptiCare nor any of its Subsidiaries
is engaged in any joint venture or partnership with any other Person.
4.A.13. Taxes. All material federal, state, local and foreign tax
returns, reports and statements required to be filed by OptiCare and its
Subsidiaries have been timely filed with the appropriate governmental authority
and all such returns, reports and statements are true, correct and complete in
all material respects. All material charges and other impositions due and
payable for the periods covered by such returns, reports and statements have
been paid prior to the date on which any fine, penalty, interest or late charge
may be added thereto for nonpayment thereof, or any such fine, penalty,
interest, late charge or loss has been paid. Proper and accurate amounts have
been withheld by OptiCare and its Subsidiaries from its employees for all
periods in material compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign law and
such withholdings have been timely paid to the respective governmental agencies.
Neither OptiCare nor any of its Subsidiaries has executed or filed with the IRS
or any other governmental authority any agreement or other document extending,
or having the effect of extending, the period for assessment or collection of
any charges. No tax audits or other administrative or judicial proceedings are
pending or threatened with regard to any charges for which OptiCare or any
Subsidiary may be liable and no assessment of charges is proposed against
OptiCare or any Subsidiary.
4.A.14. No Litigation. Except as set forth on Schedule 4.A.14, no
action, claim or proceeding is now pending or, to the knowledge of OptiCare or
its Subsidiaries, threatened against OptiCare or any of its Subsidiaries, at
law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local
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government or of any agency or subdivision thereof, or before any arbitrator or
panel of arbitrators.
4.A.15. Brokers. No broker or finder acting on behalf of OptiCare or
any of its Subsidiaries brought about the consummation of the transactions
contemplated pursuant to this Restructure Agreement and neither OptiCare nor any
of its Subsidiaries has any obligation to any Person in respect of any finder's
or brokerage fees (or any similar obligation) in connection with the
transactions contemplated by this Restructure Agreement.
4.A.16. Patents, Trademarks, Copyrights and Licenses. OptiCare and
each of its Subsidiaries, to its knowledge, owns or holds perpetual, irrevocable
licenses under, all patents, patent applications, copyrights, service marks,
trademarks and registrations and applications for registration thereof, and
trade names, know-how, trade secrets, formulae and other intellectual property
necessary to continue to conduct its business as heretofore conducted by it, as
now being conducted by it and as contemplated to be conducted in the reasonably
foreseeable future (collectively, the "Required Intellectual Property"), and
free of any restrictions and without any known conflicts with the rights of
others. OptiCare or one of its Subsidiaries is the legal and beneficial owner of
all right, title and interest in and to the Required Intellectual Property,
having good title thereto, free and clear of any and all mortgages, liens,
security interests and charges, and no other Person has or shall have any
ownership interest with respect to the Required Intellectual Property. To
OptiCare's knowledge, (i) OptiCare and each of its Subsidiaries conducts and has
conducted their respective businesses without infringement or claim (whether or
not resulting in litigation) of infringement or violation of, or conflict with,
any license, patent, copyright, service mark, trademark, trade name, trade
secret or other intellectual property right of others, and (ii) neither the
Required Intellectual Property nor the disclosing, copying, using or selling of
the Required Intellectual Property, or of products or services embodying the
Required Intellectual Property, violates, infringes or otherwise conflicts or
interferes with any patent, copyright, service mark, trademark, trade name,
trade secret or other intellectual property
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right of others. To OptiCare's knowledge, there is no material infringement by
others of any license, patent, copyright, service mark, trademark, trade name,
trade secret or other intellectual property right of OptiCare or any of its
Subsidiaries. Neither OptiCare nor any of its Subsidiaries has previously
forfeited, assigned, transferred, conveyed or otherwise encumbered any right,
title or interest in the Required Intellectual Property, and none of them has
granted to any third party any license to use the Required Intellectual
Property, or any covenant not to sue for use of the Required Intellectual
Property.
4.A.17. No Material Adverse Effect; Ordinary Course of Business. No
event has occurred since September 30, 2001, other than a general economic,
social or political condition, which has had or could be reasonably expected to
have a Material Adverse Effect. Since September 30, 2001, OptiCare and each of
its Subsidiaries has conducted its operations only in the ordinary course of
business consistent with past practice.
4.A.18. ERISA.
(a) Neither OptiCare, any of its Subsidiaries nor any ERISA Affiliate
has ever maintained or contributed or been obligated to contribute to any
Pension Plan subject to Title IV of ERISA.
(b) Palisade will not have (i) any obligation to make any
contribution to any Multiemployer Plan or (ii) any withdrawal liability from any
such Multiemployer Plan under Section 4201 of ERISA which it would not have had
if it had not purchased the New Preferred Stock from OptiCare at the Closing in
accordance with the terms of this Restructuring Agreement.
(c) The Pension Plans intended to be qualified under Section 401 of
the IRC have received determination letters that they are so qualified and that
the trusts maintained pursuant thereto are exempt from federal income taxation
under Section 501 of the IRC, and, to the knowledge of OptiCare and its
Subsidiaries, nothing has occurred with
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respect to the operation of the Pension Plans which could cause the loss of such
qualification or exemption or the imposition of any material liability, penalty,
or tax under ERISA or the IRC.
(d) All contributions required by law or pursuant to the terms of the
Pension Plans (without regard to any waivers granted under Section 412 of the
IRC) to any funds or trusts established thereunder or in connection therewith
have been made by the due date thereof (including any valid extension) and no
accumulated funding deficiencies exist in any of the Pension Plans. There is no
"amount of unfunded benefit liabilities" as defined in Section 4001(a)(18) of
ERISA in any of the respective Pension Plans. Each of the respective Pension
Plans are fully funded in accordance with the actuarial assumptions used by the
PBGC (if applicable) to determine the level of funding required in the event of
the termination of the Pension Plan and all benefit liabilities do not exceed
the assets of such Pension Plans. There has been no "reportable event" as that
term is defined in Section 4043 of ERISA and the regulations thereunder with
respect to the Pension Plans which would require the giving of notice, or any
event requiring disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of
ERISA.
(e) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notices regarding the Benefit Plans
with the Secretary of Labor and the Secretary of the Treasury or the furnishing
of such documents to the participants or beneficiaries of the Benefit Plans.
(f) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Benefit Plans, the assets of any of the
trusts under such Benefit Plans or the Plan sponsor or the Plan administrator,
or against any fiduciary of the Benefit Plans with respect to the operation of
such Benefit Plans (other than routine benefit claims), nor does OptiCare or any
of its Subsidiaries have knowledge of facts which could form the basis for any
such claim or lawsuit. All amendments and actions required to bring the Benefit
Plans into conformity in all material respects with all of the applicable
provisions of ERISA and other applicable laws have been made or taken except to
the
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extent that such amendments or actions are not required by law to be made or
taken until a date after the Closing Date.
(g) The Benefit Plans have been maintained, in all material respects,
in accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and
neither OptiCare nor any of its Subsidiaries or, to the knowledge of OptiCare
and its Subsidiaries, "party in interest" or "disqualified person" with respect
to the Benefit Plans has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the IRC or Section 406 of ERISA.
(h) None of OptiCare, any of its Subsidiaries or any ERISA Affiliate
has terminated any Pension Plan, or incurred any outstanding liability under
Section 4062 of ERISA to the PBGC, or to a trustee appointed under Section 4042
of ERISA. None of OptiCare, any of its Subsidiaries or any ERISA Affiliate
maintains retired life and retired health insurance plans which are Welfare
Plans and which provide for continuing benefits or coverage for any participant
or any beneficiary of a participant except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and
at the expense of the participant or the participant's beneficiary. OptiCare,
all of its Subsidiaries and all ERISA Affiliates which maintain a Welfare Plan
have complied in all material respects with the notice and continuation
requirements of COBRA and the regulations thereunder.
(i) None of OptiCare, any of its Subsidiaries or any ERISA Affiliate
has contributed or been obligated to contribute to a Multiemployer Plan as of
the Closing. None of OptiCare, any of its Subsidiaries or any ERISA Affiliate
has withdrawn in a complete or partial withdrawal from any Multiemployer Plan
prior to the Closing Date, nor has any of them incurred any liability due to the
termination or reorganization of a Multiemployer Plan. None of OptiCare, any of
its Subsidiaries, any ERISA Affiliate or any organization to which OptiCare is a
successor or parent corporation, within the meaning of Section 4069(b)
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of ERISA, has engaged in any transaction, within the meaning of Section 4069 of
ERISA.
4.A.19. Insurance. OptiCare maintains policies of insurance covering
OptiCare and its Subsidiaries against such risks (including, without limitation,
policies of life, fire, theft, employee fidelity and other casualty and
liability insurance) and in such amounts as are believed by OptiCare's
management to be prudent and as are customary for the industry in which OptiCare
or its Subsidiaries operate.
4.A.20. Accounts Receivable. All accounts receivable of OptiCare and
its Subsidiaries reflected in the Financial Statements represent good faith
transactions in the ordinary course of business by OptiCare or such Subsidiary
and are valid and genuine. The reserves for bad debts are adequate based on
OptiCare's experience.
4.A.21. Minute Books. The minute books of OptiCare accurately reflect
all formal corporate action of the stockholders and Board of Directors of
OptiCare in all materal respects.
4.A.22. Environmental Protection.
(a) Except for reasonable quantities of maintenance and office
supplies, all real property owned, leased or otherwise operated by OptiCare and
its Subsidiaries (each, a "Facility") is free of contamination from any
substance, waste or material within the definition of a substance which is toxic
or hazardous under any Environmental Law ("Hazardous Substance"), including,
without limitation, any asbestos, pcb, radioactive substance, methane, volatile
hydrocarbons, industrial solvents, oil or petroleum or chemical liquids or
solids, liquid or gaseous products, or any other material or substance which has
in the past or could at any time in the future cause or constitute a health,
safety, or environmental hazard to any Person or property or could reasonably be
expected to result in any liabilities and costs of more than $100,000 or which,
in either case, could have a Material Adverse Effect. Neither OptiCare nor any
of its Subsidiaries has caused or suffered to occur any release, spill,
migration, leakage, discharge, spillage, uncontrolled
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loss, seepage, or filtration of Hazardous Substances at or from the Facility (a
"Spill") which could reasonably be expected to result in liabilities and costs
in excess of $100,000.
(b) OptiCare and each Subsidiary has generated, treated, stored and
disposed of any Hazardous Substances in full compliance with applicable
Environmental Laws, except for such non-compliances which would not have a
Material Adverse Effect.
(c) OptiCare and each Subsidiary has obtained, or has applied for,
and is in full compliance with and in good standing under all permits required
under Environmental Laws (except for such failures which would not have a
Material Adverse Effect) and neither OptiCare nor any of its Subsidiaries has
any knowledge of any proceedings to substantially modify or to revoke any such
permit.
(d) There are no investigations, proceedings or litigation pending
or, to OptiCare's or its Subsidiaries' knowledge, threatened affecting or
against OptiCare, any of its Subsidiaries or the Facilities relating to
Environmental Laws or Hazardous Substances.
(e) Since January 1, 1999, neither OptiCare nor any of its
Subsidiaries has received any communication or notice (including, without
limitation, requests for information) indicating the potential for liabilities
and costs against OptiCare or its Subsidiaries relating to Environmental Laws or
Hazardous Substances.
4.A.23. Full Disclosure. The information contained in this
Restructure Agreement, any other Restructure Document, the Financial Statements
and any written statement furnished by or on behalf of OptiCare pursuant to the
terms of this Restructure Agreement do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained herein and therein not misleading in light of the circumstances under
which made.
4.A.24. Representations True at Closing. The representations set
forth in Sections 1.01 through 1.23 above will be true and correct in all
material respects at the time
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of the Closing as if made at such time.
4.B. COVENANTS
4.B.1 Affirmative Covenants. OptiCare covenants and agrees that
from and after the date hereof (except as otherwise provided herein, or unless
Palisade has given its prior written consent) so long as Palisade continues to
hold more than fifty (50%) percent of the voting power of OptiCare:
(a) Stockholder Approval. OptiCare will proceed as promptly as
practicable to seek the affirmative consents of its stockholders to each of the
proposals described in the attached Annex A, in accordance with the applicable
regulations of the SEC and the American Stock Exchange, the requirements of
Delaware corporation law and OptiCare's Certificate of Incorporation and Bylaws,
it being understood that Palisade and its controlled affiliates will vote in
favor thereof or give their written consents thereto in accordance with Section
1 hereof.
(b) Books and Records. OptiCare shall, and shall cause its
Subsidiaries to, keep adequate records and books of account with respect to
their business activities, in which proper entries, reflecting all of their
financial transactions, are made in accordance with GAAP.
(c) Financial and Business Information.
(i) Monthly Information. Commencing with the month
ending December 31, 2001, upon request OptiCare will deliver
to Palisade as soon as practicable after the end of each
month, but in any event within 20 days thereafter, such
monthly financial information with respect to OptiCare and
its Subsidiaries as Palisade may reasonably request.
(ii) Annual Information. OptiCare will deliver to
Palisade
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as soon as practicable after the end of each fiscal year of
OptiCare, but in any event within 90 days thereafter, (A) an
audited consolidated balance sheet of OptiCare and its
Subsidiaries, if any, as at the end of such year, and (B)
audited consolidated statements of income, retained earnings
and cash flows of OptiCare and its Subsidiaries, if any, for
such year, setting forth in each case in comparative form
the figures for the previous year. Such statements shall be
(1) prepared in accordance with GAAP consistently applied,
(2) in reasonable detail and (3) certified by independent
certified public accountants of recognized national standing
selected by OptiCare and reasonably acceptable to Palisade.
(iii) Filings. OptiCare will deliver to Palisade,
promptly upon their becoming available, one copy of each
report, notice or proxy statement sent by OptiCare to its
stockholders generally, and of each regular or periodic
report (pursuant to the Exchange Act) and any registration
statement, prospectus or other writing (other than
transmittal letters) (including without limitation, by
electronic means) pursuant to the Securities Act filed by
OptiCare with (i) the SEC or (ii) any securities exchange on
which shares of Common Stock of OptiCare are listed.
(iv) Notices. OptiCare will immediately advise Palisade
in writing of any event or development which would
reasonably be expected to (i) have a Material Adverse Effect
or (ii) make any of OptiCare's representations in this
Agreement untrue or incorrect if such representation was
made as of the time of occurrence of such event.
(v) Other Information. If requested by Palisade,
OptiCare will (i) make available to Palisade such other
information respecting
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OptiCare's or any of its Subsidiaries' business, financial
condition or prospects as Palisade may, from time to time,
reasonably request and (ii) allow Palisade to review the
books and records of OptiCare and/or its Subsidiaries.
(d) Compliance with Law. OptiCare shall, and shall cause each of
its Subsidiaries to, comply with all laws, including environmental laws,
applicable to it, except where the failure to comply would not be reasonably
likely to result in a Material Adverse Effect.
(e) Redemption of New Preferred Stock. OptiCare agrees to redeem
the New Preferred Stock in accordance with the terms of the Certificate of
Incorporation (including the Certificate of Designation) and the Restructure
Documents.
(f) Conversion Stock. OptiCare will at all times, so long as the
New Preferred Stock, Warrants, or any convertible notes of OptiCare held by
Palisade, 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 and any outstanding convertible notes. The issuance of shares of such
Common Stock upon conversion of the New Preferred Stock or exercise of the
Warrants and any outstanding convertible notes 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 and any
outstanding convertible notes in accordance with the terms thereof, such Common
Stock will have been validly issued and will be fully paid and non-assessable.
(g) OptiCare shall not authorize and shall not permit any of its
subsidiaries to make any payment in excess of $50,000 (other than payments made
in the ordinary course of business) without the prior written consent of
Palisade.
4.C. INDEMNIFICATION
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OptiCare agrees to indemnify and hold harmless each of Palisade and
its affiliates and their respective officers, directors, agents and employees
from and against any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind ("Losses") which may be imposed upon, incurred by or
asserted against Palisade or such other indemnified Persons in any manner
relating to or arising out of any untrue representation, breach of warranty or
failure to perform any covenants or agreement by OptiCare contained herein or in
any agreement by OptiCare delivered pursuant to Section 2 hereof or arising out
of any Environmental Law applicable to OptiCare or its Subsidiaries or otherwise
relating to or arising out of the transactions contemplated hereby, other than
such Losses arising out of Palisade's or such other indemnified Person's gross
negligence, willful misconduct, or breach of its representations and warranties
contained herein and excepting any untrue representation or breach of warranty
of which Palisade had actual knowledge.
4.D. DEFINITIONS
"Benefit Plans" shall mean, collectively, all "employee benefit
plans", as defined in Section 3(3) of ERISA, and any other employee benefit
arrangements or payroll practices, including, without limitation, severance pay,
sick leave, vacation pay, salary continuation for disability, consulting or
other compensation agreements, retirement, deferred compensation, bonus, stock
purchase, hospitalization, medical insurance, life insurance and scholarship
programs currently maintained by OptiCare and any of its Subsidiaries or to
which OptiCare or any of its Subsidiaries contributes or is obligated to
contribute thereunder or with respect to which OptiCare or any of its
Subsidiaries could continue to have any liability.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance
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sheet, other than, in the case of OptiCare or a Subsidiary of OptiCare, any such
lease under which OptiCare or such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Environmental Laws" shall mean all federal, state and local laws,
statutes, ordinances and regulations, now or hereafter in effect, and in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including, without limitation, any
applicable judicial or administrative order, consent decree or judgment,
relative to the applicable real estate, relating to the regulation and
protection of human health, safety, the environment and natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to OptiCare, any trade or
business (whether or not incorporated) under common control with OptiCare and
which, together with OptiCare, is treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding Palisade and
each other person which would not be an ERISA Affiliate if Palisade did not own
any issued and outstanding shares of stock of OptiCare.
"ERISA Event" means (a) a reportable event described in Section
4043(b) or 4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a
Title IV Plan or a Multiemployer Plan; (b) the withdrawal of OptiCare, any of
its Subsidiaries or any ERISA
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Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of OptiCare, any of its
Subsidiaries or any ERISA Affiliate from any Multiemployer Plan; (d) notice of
reorganization or insolvency of a Multiemployer Plan; (e) the filing of a notice
of intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (f) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to
make any required contribution to a Title IV Plan or Multiemployer Plan; (h) the
imposition of a lien under Section 412 of the Code or Section 302 of ERISA on
OptiCare or any of its Subsidiaries or any ERISA Affiliate; or (i) any other
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Title IV Plan or Multiemployer Plan or the imposition
of any liability under Title IV of ERISA, other than for PBGC premiums due but
not delinquent under Section 4007 of ERISA.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Indebtedness" shall mean (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of real property or other
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