SECOND AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT

 

 

<PAGE>

 

 

                                                                   Exhibit 10.44

 

                           SECOND AMENDED AND RESTATED

                           REVOLVING CREDIT, TERM LOAN

                             AND SECURITY AGREEMENT

 

                  THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN

AND SECURITY AGREEMENT (the "AGREEMENT") dated as of March 29, 2004, is entered

into between OPTICARE HEALTH SYSTEMS, INC., a Delaware corporation ("PARENT"),

OPTICARE EYE HEALTH CENTERS, INC., a Connecticut corporation ("OPTICARE"),

PRIMEVISION HEALTH, INC., a Delaware corporation ("PVH"), and OPTICARE

ACQUISITION CORPORATION, a Delaware corporation ("OPTICARE ACQUISITION",

together with Parent, Opticare, and PVH, individually and collectively, the

"BORROWER"), and CAPITALSOURCE FINANCE LLC, a Delaware limited liability company

("LENDER").

 

                  WHEREAS, Opticare, PVH, Consolidated Eye Care, Inc., a North

Carolina corporation ("CEC"), and Parent, as borrowers, the financial

institutions from time to time party thereto (the "PRIOR LENDERS"), Bank

Austria, AG, as LC Issuer and Bank Austria Creditanstalt Corporate Finance,

Inc., as agent for the Prior Lenders, are parties to that certain Amended and

Restated Loan and Security Agreement, dated as of August 13, 1999 (the "ORIGINAL

LOAN AGREEMENT"), pursuant to which, among other things, the Prior Lenders made

available to Borrower term loans in an aggregate original principal amount of

Twenty One Million Five Hundred Thousand ($21,500,000) and a revolving credit

facility providing for revolving loans of up to Twelve Million Seven Hundred

Thousand Dollars ($12,700,000) (collectively, the "PRIOR LOANS"); and

 

                  WHEREAS, Prime Vision Health, Inc. d/b/a OptiCare Eye Health

Network was merged into its parent, OptiCare Health Systems, Inc. as of December

31, 2003;

 

                  WHEREAS, Prior Lenders sold and assigned to Lender the Prior

Loans and all of their rights and obligations under the Loan Agreement and all

other documents related to the Prior Loans, and in connection therewith,

Borrower and Lender amended and restated the Original Loan Agreement and

restructured the Prior Loans and make available to Borrower a revolving credit

facility and a term loan pursuant to that certain Amended and Restated Revolving

Credit, Term Loan and Security Agreement dated as of January 25, 2002, which was

amended by that certain First Amendment to Amended and Restated Revolving

Credit, Term Loan and Security Agreement dated as of February 7, 2003, as

amended further by that certain Waiver and Second Amendment to Amended and

Restated Revolving Credit, Term Loan and Security Agreement dated as of November

14, 2003 (collectively, the "LOAN AGREEMENT");

 

                  WHEREAS, Borrower paid off the Overadvance (as defined herein)

and requested that the Overadvance be terminated by February 29, 2004, and

Lender agreed to such request;

 

                  WHEREAS, Borrower and Lender have agreed to further amend and

restate the Loan Agreement and structure the loans for Lender to make available

to Borrower (i) a revolving credit facility (the "REVOLVING FACILITY") in a

maximum principal amount at any time outstanding of up to FIFTEEN MILLION

DOLLARS ($15,000,000) (the "FACILITY CAP") and (ii) a term loan (the "TERM

LOAN") in a maximum principal amount of THREE MILLION DOLLARS ($3,000,000) (the

"MAXIMUM TERM LOAN AMOUNT"), the proceeds of which shall be used by Borrower for

refinancing Borrower's existing obligations and indebtedness and for working

capital needs in connection with its businesses of medical practice services,

managed care services and the purchase and resale of optical products; and

 

 

<PAGE>

 

                  WHEREAS, Lender is willing to restructure the loan facilities

under the Loan Agreement, and make the Revolving Facility and the Term Loan

available to Borrower upon the terms and subject to the conditions set forth

herein.

 

                  NOW, THEREFORE, in consideration of the foregoing and for

other good and valuable consideration, the receipt and adequacy of which hereby

are acknowledged, Borrower and Lender hereby agree as follows:

 

 

I.        DEFINITIONS

 

 

         1.1       GENERAL TERMS

 

                  For purposes of this Agreement, in addition to the definitions

above and elsewhere in this Agreement, the terms listed in Appendix A hereto

shall have the meanings given such terms in Appendix A, which is incorporated

herein and made a part hereof. All capitalized terms used which are not

specifically defined shall have meanings provided in Article 9 of the UCC in

effect on the date hereof to the extent the same are used or defined therein.

Unless otherwise specified herein or in Appendix A, any agreement or contract

referred to herein or in Appendix A shall mean such agreement as modified,

amended or supplemented from time to time. Unless otherwise specified, as used

in the Loan Documents or in any certificate, report, instrument or other

document made or delivered pursuant to any of the Loan Documents, all accounting

terms not defined in Appendix A elsewhere in this Agreement shall have the

meanings given to such terms in and shall be interpreted in accordance with

GAAP.

 

 

II.       ADVANCES, PAYMENT AND INTEREST

 

 

         2.1       THE REVOLVING FACILITY; OVERADVANCE

 

                  (a) Subject to the provisions of this Agreement, Lender shall

make Advances to Borrower under the Revolving Facility from time to time during

the Term, provided that, notwithstanding any other provision of this Agreement,

the aggregate amount of all Advances at any one time outstanding under the

Revolving Facility shall not exceed the lesser of (a) the Facility Cap, and (b)

the Availability. The Revolving Facility is a revolving credit facility, which

may be drawn, repaid and redrawn, from time to time as permitted under this

Agreement. Any determination as to whether there is availability within the

Borrowing Base for Advances shall be made by Lender in its sole discretion and

is final and binding upon Borrower. Unless otherwise permitted by Lender, each

Advance shall be in an amount of at least $1,000. Subject to the provisions of

this Agreement, Borrower may request Advances under the Revolving Facility up to

and including the value, in Dollars, of (i) eighty-five percent (85%) of the

Borrowing Base for Accounts Receivables, plus (ii) fifty-five percent (55%) of

the Borrowing Base for Eligible Inventory Costs, provided however, that the

advance rate for the Wise Eligible Inventory Costs shall be fifty percent (50%)

of the Borrowing Base relating to the Wise Eligible Inventory Costs, minus, if

applicable, amounts reserved pursuant to this Agreement (such calculated amount

being referred to herein as the "AVAILABILITY"). Notwithstanding the foregoing,

from November 14, 2003 through and including March 31, 2004, Borrower may

request Advances under the Revolving Facility up to and including the value, in

Dollars, of (i) fifty-five percent (55%) of the Borrowing Base for Eligible

Inventory Costs, including without limitation, Wise Eligible Inventory Costs.

From and after April 1, 2004, the Borrowing Base for Eligible Inventory Costs

shall automatically revert back to the formula specified in the fifth sentence

of this Section 2.1(a). Advances under the Revolving Facility automatically

shall be made for the payment of interest on the Revolving Note and other

Obligations on the date when due to the extent available and as provided for

herein.

 

 

 

                                       2

<PAGE>

 

                  (b) Lender has established the above-referenced advance rate

for Availability and, in its sole credit judgment, may further adjust the

Availability and such advance rate by applying percentages (known as "liquidity

factors") to Eligible Receivables by payor class based upon Borrower's actual

recent collection history for each such payor class (i.e., Medicare, Medicaid,

commercial insurance, etc.) in a manner consistent with Lender's underwriting

practices and procedures, including without limitation Lender's review and

analysis of, among other things, Borrower's historical returns, rebates,

discounts, credits and allowances (collectively, the "DILUTION ITEMS"). Such

liquidity factors and the advance rate for Availability may be adjusted by

Lender throughout the Term as warranted by Lender's underwriting practices and

procedures in its sole credit judgment. Also, Lender shall have the right to

establish from time to time in its sole credit judgment, reserves against the

Borrowing Base, which reserves shall have the effect of reducing the amounts

otherwise eligible to be disbursed to Borrower under the Revolving Facility

pursuant to this Agreement.

 

                  (c) Borrower shall be permitted to borrow, for the period of

time commencing on November 30, 2003 and expiring on February 29, 2004, in

addition to the Availability (the "OVERADVANCE") not to exceed, at any one time,

$700,000 (the "MAXIMUM OVERADVANCE AMOUNTS"). Each Overadvance shall be part of

the Revolving Facility, evidenced by the Revolving Note and, when aggregated

with all other Advances, subject at all times to the Facility Cap. The aggregate

balance of all Overadvances shall be due and payable in full in cash on February

29, 2004, and if the aggregate balance of all outstanding Overadvances exceeds

the Maximum Overadvance Amount, the Borrower shall immediately repay such

excess. No Overadvance shall be made at any time that a Default or Event of

Default shall have occurred and be continuing past any cure period. Any

mandatory prepayment of the Overadvances pursuant to Section 2.10 hereof shall

permanently reduce the Overadvance.

 

 

         2.2       THE REVOLVING NOTE; MATURITY

 

                  (a) All Advances under the Revolving Facility shall be

evidenced by the Revolving Note, payable to the order of Lender, duly executed

and delivered by Borrower and dated the Closing Date, evidencing the aggregate

indebtedness of Borrower to Lender resulting from Advances under the Revolving

Facility, from time to time. Lender hereby is authorized, but is not obligated,

to enter the amount of each Advance under the Revolving Facility and the amount

of each payment or prepayment of principal or interest thereon in the

appropriate spaces on the reverse of or on an attachment to the Revolving Note.

Lender will account to Borrower monthly with a statement of Advances under the

Revolving Facility and charges and payments made pursuant to this Agreement, and

in the absence of manifest error, such accounting rendered by Lender shall be

deemed presumptive and conclusive unless Lender is notified by Borrower in

writing to the contrary within thirty (30) calendar days of Receipt of each

accounting, which notice shall be deemed an objection only to items specifically

objected to therein.

 

                  (b) All amounts outstanding under the Revolving Note and other

Obligations shall be due and payable in full, if not earlier in accordance with

this Agreement, on the earlier of (i) the occurrence of an Event of Default if

required pursuant hereto or Lender's demand upon an Event of Default, and (ii)

the last day of the Revolver Term (such earlier date being the "MATURITY DATE").

 

 

 

 

         2.3       REVOLVING NOTE INTEREST

 

                  Interest on outstanding Advances under the Revolving Note

shall be payable monthly in

 

 

 

                                        3

<PAGE>

 

arrears on the first day of each calendar month at an annual rate of Prime Rate

plus 1.5%, provided, however, that, notwithstanding, any provision of any Loan

Document, (i) the interest on all outstanding Overadvances under the Revolving

Note shall be payable monthly in arrears on the first day of each calendar month

at an annual rate of Prime Rate plus 5.5%, (ii) the interest on all outstanding

Advances (including all Overadvances) under the Revolving Note shall be not less

than 5.75%, and (iii) in each case shall be calculated on the basis of a 360-day

year and for the actual number of calendar days elapsed in each interest

calculation period. Interest accrued on each Advance under the Revolving Note

shall be due and payable on the first day of each calendar month, in accordance

with the procedures provided for in Section 2.5 and Section 2.9, commencing

February 1, 2002, and continuing until the later of the expiration of the Term

and the full performance and irrevocable payment in full in cash of the

Obligations and termination of this Agreement.

 

 

 

         2.4       REVOLVING FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER

                  BORROWING CERTIFICATE

 

                  So long as no Default or Event of Default shall have occurred

and be continuing, Borrower may give Lender irrevocable written notice

requesting an Advance under the Revolving Facility by delivering to Lender not

later than 11:00 a.m. (New York City Time) at least one (1) (but not more than

four (4) Business Days before the proposed borrowing date of such requested

Advance (the "BORROWING DATE"), a completed Borrowing Certificate and relevant

supporting documentation satisfactory to Lender, which shall (i) specify the

proposed Borrowing Date of such Advance which shall be a Business Day, (ii)

specify the principal amount of such requested Advance, (iii) certify the

matters contained in Section 4.2, and (iv) specify the amount of any Medicare or

Medicaid recoupments and/or recoupments of any third-party payor being sought,

requested or claimed, or, to Borrower's knowledge, threatened against Borrower

or Borrower's affiliates. Each time a request for an Advance is made (and, in

any event and regardless of whether an Advance is being requested, once a month

as of the fifteenth (15th) day of each month for the month then ended during the

Term (and more frequently if Lender shall so request until the Obligations are

indefeasibly paid in cash in full and this Agreement is terminated), Borrower

shall deliver to Lender a Borrowing Certificate accompanied by a separate

detailed aging and categorizing of Borrower's accounts receivable and inventory

detail and such other supporting documentation with respect to the figures and

information in the Borrowing Certificate as Lender shall reasonably request from

a credit or security perspective or otherwise. On each Borrowing Date, Borrower

irrevocably authorizes Lender to disburse the proceeds of the requested Advance

to the appropriate Borrower's account(s) as set forth on Schedule 2.5, in all

cases for credit to the appropriate Borrower (or to such other account as to

which the appropriate Borrower shall instruct Lender) via Federal funds wire

transfer no later than 4:00 p.m. New York City Time.

 

 

         2.5       REVOLVING FACILITY COLLECTIONS; REPAYMENT; BORROWING

                  AVAILABILITY AND LOCKBOX

 

                  Each Borrower shall maintain one or more lockbox accounts

(individually and collectively, the "LOCKBOX ACCOUNT") with one or more banks

acceptable to Lender and to Borrower (each, a "LOCKBOX BANK"), and shall execute

with each Lockbox Bank one or more agreements acceptable to Lender (individually

and collectively, the "LOCKBOX AGREEMENT"), and such other agreements related

thereto as Lender may require. Each Borrower shall ensure that all collections

of their respective Accounts and all other cash payments received by any

Borrower are paid and delivered directly from Account Debtors and other Persons

into the appropriate Lockbox Account. The Lockbox Agreements shall provide that

the Lockbox Banks immediately will transfer all funds paid into the Lockbox

Accounts into a depository account or accounts maintained by Lender or an

affiliate of Lender at such bank as Lender may communicate to Borrower from time

to time (the "CONCENTRATION

 

 

 

                                       4

<PAGE>

 

ACCOUNT"), except, with respect only to Accounts payable by Medicaid/Medicare

Account Debtors, as instructed by the applicable Borrower to whom such Accounts

are payable as permitted pursuant to the applicable Lockbox Agreement.

Notwithstanding and without limiting any other provision of any Loan Document,

Lender shall apply, on a daily basis, all funds transferred into the

Concentration Account pursuant to the Lockbox Agreement and this Section 2.5 in

such order and manner as determined by Lender. To the extent that any Accounts

collections of any Borrower or any other cash payments received by any Borrower

are not sent directly to the appropriate Lockbox Account but are received by any

Borrower or any of such Borrower's affiliates, such collections and proceeds

shall be held in trust for the benefit of Lender and immediately remitted (and

in any event within two (2) Business Days), in the form received, to the

appropriate Lockbox Account for immediate transfer to the Concentration Account.

Borrower acknowledges and agrees that compliance with the terms of this Section

2.5 is an essential term of this Agreement, and that, in addition to and

notwithstanding any other rights Lender may have hereunder, under any other Loan

Document, under applicable law or at equity, upon each and every failure by any

Borrower or any of their affiliates to comply with any such terms Lender shall

be entitled to assess a non-compliance fee which shall operate to increase the

Applicable Rate by two percent (2.0%) per annum during any period of

non-compliance, whether or not a Default or an Event of Default occurs or is

declared, provided that nothing shall prevent Lender from considering any

failure to comply with the terms of this Section 2.5 to be a Default or an Event

of Default. All funds transferred to the Concentration Account for application

to the Obligations under the Revolving Facility shall be applied to reduce the

Obligations under the Revolving Facility, but, for purposes of calculating

interest hereunder, shall be subject to a five (5) Business Day clearance

period. If as the result of collections of Accounts and/or any other cash

payments received by any Borrower pursuant to this Section 2.5 a credit balance

exists with respect to the Concentration Account, such credit balance shall not

accrue interest in favor of a Borrower, but shall be available to the

appropriate Borrower in accordance with the terms of this Agreement. If

applicable, at any time prior to the execution of all or any of the Lockbox

Agreements and operation of all or any of the Lockbox Accounts, each Borrower

and their affiliates shall direct all collections or proceeds it receives on

Accounts or from other Collateral to the accounts(s) and in the manner specified

by Lender in its sole discretion. Notwithstanding the foregoing, following the

five (5) Business Day clearance period, if no Default or Event of Default has

occurred, all funds transferred to the Concentration Account shall be applied by

Lender first to the remaining Overadvances until no amounts are outstanding with

respect thereto and then to the remaining Obligations under the Revolving

Facility; otherwise all funds transferred to the Concentration Account shall be

applied by Lender in such order as Lender may determine.

 

 

 

         2.6       REPAYMENT OF EXCESS ADVANCES

 

                  Any balance of Advances under the Revolving Facility

outstanding at any time in excess of the lesser of the Facility Cap or the

Availability shall be immediately due and payable by Borrower without the

necessity of any demand, at the Payment Office, whether or not a Default or

Event of Default has occurred or is continuing and shall be paid in the manner

specified in Section 2.9.

 

 

         2.7       TERM LOAN; REQUEST FOR INCREASE

 

                  (a) Subject to the terms and conditions set forth in this

Agreement, Lender agrees to loan to Borrower on the Closing Date the Term Loan

to be constituted of a single draw of not more than the Maximum Term Loan

Amount, to be disbursed to the appropriate Borrower's account(s) as set forth on

Schedule 2.6 or as otherwise directed by Borrower in writing, provided that, the

amount drawn under

 

 

 

                                       5

<PAGE>

 

the Term Loan shall not be greater than 40% of the value of Borrower's

Equipment, as determined by Lender in its sole discretion. The Term Loan is not

a revolving credit facility, and any repayments of principal shall be applied to

permanently reduce the Term Loan. The Term Loan shall be evidenced by the Term

Note.

 

                  (b) Lender acknowledges that Borrower may request an increase

in the Maximum Term Loan Amount based upon an increase in the volume of

Borrower's Equipment. Borrower acknowledges that any such increase is subject to

Lender's credit committee approval.

 

 

                  (c) Notwithstanding the foregoing, Lender agrees to advance to

Borrower on November 14, 2003, an amount equal to $315,286 to be constituted of

a single draw, which shall be evidenced by Term Note B and for all purposes of

this Agreement be considered a portion of the Term Loan."

 

 

         2.8       TERM NOTE INTEREST

 

                  Interest on the outstanding balance of the Term Loan under the

Term Note shall be payable monthly in arrears on the first day of each calendar

month at an annual rate of the Prime Rate plus 3.5%, provided, however, that,

notwithstanding, any other provision of any Loan Document, the interest on the

outstanding principal balance of the Term Loan under the Term Note shall be not

less than 9%, in each case calculated on the basis of a 360-day year and for the

actual number of calendar days elapsed in each interest calculation period.

Interest accrued on the Term Loan shall be due and payable on the first day of

each calendar month commencing March 1, 2002, and continuing until the later of

the expiration of the Term Loan Term and the full performance and irrevocable

payment in full in cash of the Obligations and termination of this Agreement.

Advances under the Revolving Facility shall be made automatically for the

payment of interest on the Term Loan and other Obligations on the date when due

to the extent available and as provided for herein.

 

 

         2.9       REPAYMENT OF TERM LOAN; MATURITY

 

                  Payment of principal and all other amounts outstanding under

the Term Loan and all other Obligations due hereunder shall be due and payable

monthly, on the basis of a 7-year amortization, with payment in full of the

balance due upon the earlier of termination or the Term Loan Maturity Date. The

Term Note shall mature, if not earlier in accordance with this Agreement, on the

Term Loan Maturity Date. The Term Loan shall be repaid, based upon a seven (7)

year amortization schedule until such time as Lender conducts an audit of the

Inventory relating to Wise, and to Lender's satisfaction, there is sufficient

value to support a fifteen (15) year amortization schedule as a basis for

repayment of the Term Loan, which such change may be affected by a writing

signed by Lender, without further formal amendment hereof.

 

         2.10      OTHER MANDATORY PREPAYMENTS ON TERM LOAN

 

                  In addition to and without limiting any provision of any Loan

Document:

 

                   (a) if a Change of Control occurs, on or prior to the first

Business Day following the date of such Change of Control, Borrower shall prepay

the Term Loan, including, without limitation, all outstanding Advances and all

other Obligations, in full in cash together with accrued interest thereon to

 

 

 

                                       6

<PAGE>

 

the date of prepayment and all other amounts owing to Lender under the Loan

Documents related to the Term Loan provided, however, that no prepayment

hereunder shall be required for any Change of Control caused by an equity

investment as long as Borrower is not otherwise in default under this Agreement;

and

 

                  (b) if Borrower sells or otherwise disposes any of its assets

or properties (other than in the ordinary course of Borrower's business),

receives any property damage insurance award which is not used to repair or

replace the property covered thereby, then it shall apply 100% of the proceeds

thereof first to the permanent repayment of any outstanding Overadvances,

together with accrued interest thereon and all other Obligations owing to Lender

under the Loan Documents related to such Overadvances, second to the prepayment

of the Term Loan, together with accrued interest thereon and all other

Obligations owing to Lender under the Loan Documents related to the Term Loan,

and third to all other Obligations owing to Lender under the Loan Documents,

such payment to be applied at such time and in such manner and order as Lender

shall decide in its sole discretion.

 

 

         2.11      INTENTIONALLY OMITTED

 

 

         2.12      INTENTIONALLY OMITTED

 

         2.13      INTENTIONALLY OMITTED

 

 

         2.14      PAYMENTS BY LENDER

 

                  Should any amount required to be paid under any Loan Document

be unpaid when due, such amount may be paid by Lender, which payment shall be

deemed a request for an Advance under the Revolving Facility as of the date such

payment is due, and Borrower irrevocably authorizes disbursement of any such

funds to Lender by way of direct payment of the relevant amount, interest or

Obligations. No payment or prepayment of any amount by Lender or any other

Person shall entitle any Person to be subrogated to the rights of Lender under

any Loan Document unless and until the Obligations have been fully performed and

paid irrevocably in cash and this Agreement has been terminated. Any sums

expended by Lender as a result of any Borrower's or any Guarantor's failure to

pay, perform or comply with any Loan Document or any of the Obligations may be

charged to Borrower's account as an Advance under the Revolving Facility and

added to the Obligations.

 

 

         2.15      GRANT OF SECURITY INTEREST; COLLATERAL

 

                  (a) To secure the payment and performance of the Obligations,

each Borrower hereby grants to Lender a continuing security interest in and Lien

upon, and pledges to Lender, all of its right, title and interest in and to the

following (collectively and each individually, the "COLLATERAL"), which security

interest is intended to be a first priority security interest:

 

                           (i) all of such Borrower's tangible personal

property, including without limitation all present and future Inventory and

Equipment (including items of equipment which are or become Fixtures), now owned

or hereafter acquired;

 

                           (ii) all of such Borrower's intangible personal

property, including without limitation all present and future Accounts,

securities, contract rights, Permits, General Intangibles, Chattel Paper,

Documents, Instruments and Deposit Accounts, rights to the payment of money or

other

 

 

                                       7

<PAGE>

 

forms of consideration of any kind, tax refunds, insurance proceeds, now owned

or hereafter acquired, and all intangible and tangible personal property

relating to or arising out of any of the foregoing;

 

                           (iii) all of such Borrower's present and future

Government Contracts and rights thereunder and the related Government Accounts

and proceeds thereof, now or hereafter owned or acquired by such Borrower;

provided, however, that Lender shall not have a security interest in any rights

under any Government Contract of such Borrower or in the related Government

Account where the taking of such security interest would be a violation of an

express prohibition contained in the Government Contract (for purposes of this

limitation, the fact that a Government Contract is subject to, or otherwise

refers to, Title 31, ss. 203 or Title 41, ss. 15 of the United States Code shall

not be deemed an express prohibition against assignment thereof) or is

prohibited by applicable law; and

 

                           (iv) any and all additions to any of the foregoing,

and any and all replacements, products and proceeds (including insurance

proceeds) of any of the foregoing.

 

                  (b) Notwithstanding the foregoing provisions of this Section

2.15, such grant of a security interest shall not extend to, and the term

"Collateral" shall not include, any General Intangibles of Borrower to the

extent that (i) such General Intangibles are not assignable or capable of being

encumbered as a matter of law or under the terms of any license or other

agreement applicable thereto (but solely to the extent that any such restriction

shall be enforceable under applicable law) without the consent of the licensor

thereof or other applicable party thereto, and (ii) such consent has not been

obtained; provided, however, that the foregoing grant of a security interest

shall extend to, and the term "Collateral" shall include, each of the following:

(a) any General Intangible which is in the nature of an Account or a right to

the payment of money or a proceed of, or otherwise related to the enforcement or

collection of, any Account or right to the payment of money, or goods which are

the subject of any Account or right to the payment of money, (b) any and all

proceeds of any General Intangible that is otherwise excluded to the extent that

the assignment, pledge or encumbrance of such proceeds is not so restricted, and

(c) upon obtaining the consent of any such licensor or other applicable party

with respect to any such otherwise excluded General Intangible, such General

Intangible as well as any and all proceeds thereof that might theretofore have

been excluded from such grant of a security interest and from the term

"Collateral."

 

                  (c) In addition to the foregoing, to secure the payment and

performance of the Obligations, (i) Parent shall pledge to Lender all of the

securities it owns in Opticare and PVH, and (ii) PVH will pledge to Lender all

of the securities it owns in connection with its subsidiaries who are listed on

Schedule 2.15 hereto, in each case pursuant to the Stock Pledge Agreement.

 

                  (d) Upon the execution and delivery of this Agreement, and

upon the proper filing of the necessary financing statements and proper delivery

of the necessary stock certificates, without any further action, Lender will

have a good, valid and perfected first priority Lien and security interest in

the Collateral, subject to no transfer or other restrictions or Liens of any

kind in favor of any other Person except for Permitted Liens. No financing

statement relating to any of the Collateral is on file in any public office

except those (i) on behalf of Lender, and/or (ii) in connection with Permitted

Liens.

 

 

         2.16      COLLATERAL ADMINISTRATION

 

                  (a) All Collateral (except Deposit Accounts) will at all times

be kept by Borrower at the locations set forth on Schedule 5.18 hereto and shall

not, without thirty (30) calendar days prior written notice to Lender, be moved

therefrom, and in any case shall not be moved outside the continental United

States.

 

 

 

                                       8

<PAGE>

 

                  (b) Borrower shall keep accurate and complete records of its

Accounts and all payments and collections thereon and shall submit such records

to Lender on such periodic bases as Lender may request. In addition, if Accounts

of Borrower in an aggregate face amount in excess of $250,000 become ineligible

because they fall within one of the specified categories of ineligibility set

forth in the definition of Eligible Receivables, Borrower shall notify Lender of

such occurrence on the report due on the fifteenth (15th) day of each month

unless an earlier Request for Advance is submitted following such occurrence and

the Borrowing Base shall thereupon be adjusted to reflect such occurrence. If

requested by Lender, Borrower shall execute and deliver to Lender formal written

assignments of all of its Accounts weekly or daily as Lender may request,

including all Accounts created since the date of the last assignment, together

with copies of claims, invoices and/or other information related thereto. To the

extent that collections from such assigned accounts exceed the amount of the

Obligations, such excess amount shall not accrue interest in favor of Borrower,

but shall be available to the Borrower upon Borrower's written request.

 

                   (c) Whether or not an Event of Default has occurred, any of

the Lender's officers, employees, representatives or agents shall have the

right, at any time during normal business hours, in the name of Lender, any

designee of Lender or Borrower, to verify the validity, amount or any other

matter relating to any Accounts of Borrower. Borrower shall cooperate fully with

Lender in an effort to facilitate and promptly conclude such verification

process.

 

                  (d) To expedite collection, Borrower shall endeavor in the

first instance to make collection of its Accounts for Lender. Lender shall have

the right at all times after the occurrence of an Event of Default to notify (i)

Account Debtors owing Accounts to Borrower other than Medicaid/Medicare Account

Debtors that their Accounts have been assigned to Lender and to collect such

Accounts directly in its own name and to charge collection costs and expenses,

including reasonable attorney's fees, to Borrower, and (ii) Medicaid/Medicare

Account Debtors that Borrower has waived any and all defenses and counterclaims

it may have or could interpose in any such action or procedure brought by Lender

to obtain a court order recognizing the assignment or security interest and lien

of Lender in and to any Account or other Collateral and that Lender is seeking

or may seek to obtain a court order recognizing the assignment or security

interest and lien of Lender in and to all Accounts and other Collateral payable

by Medicaid/Medicare Account Debtors.

 

                   (e) As and when determined by Lender in its reasonable

discretion, Lender will perform the searches described in clauses (i) and (ii)

below against Borrower and Guarantors (the results of which are to be consistent

with Borrower's representations and warranties under this Agreement), all at

Borrower's expense: (i) UCC searches with the Secretary of State of the

jurisdiction of organization of each Borrower and Guarantor and the Secretary of

State and local filing offices of each jurisdiction where Borrower and/or any

Guarantors maintains their respective executive offices, a place of business or

assets; and (ii) judgment, federal tax lien and corporate and partnership tax

lien searches, in each jurisdiction searched under clause (i) below.

 

                   (f) Borrower (i) shall provide prompt written notice to its

current bank to transfer all items, collections and remittances to the

Concentration Account, (ii) upon Lender's request after an Event of Default

shall have occurred and be continuing, shall provide prompt written notice to

each Account Debtor (other than Medicaid/Medicare Account Debtors) that Lender

has been granted a lien and security interest in, upon and to all Accounts

applicable to such Account Debtor and shall direct each Account Debtor to make

payments to the appropriate Lockbox Account, and Borrower hereby authorizes

Lender, upon any failure to send such notices and directions within ten (10)

calendar days (or ten (10) calendar days after the Person becomes an Account

Debtor), to send any and all similar notices and directions to such Account

Debtors as set forth on Schedule 2.16 hereto, and (iii) shall do anything

 

 

 

                                       9

<PAGE>

 

further that may be lawfully required by Lender to secure Lender and effectuate

the intentions of the Loan Documents. At Lender's request, Borrower shall

immediately deliver to Lender all items for which Lender must receive possession

to obtain a perfected security interest and all notes, certificates, and

documents of title, chattel paper, warehouse receipts, instruments, and any

other similar instruments constituting Collateral.

 

         2.17      PROMISE TO PAY; MANNER OF PAYMENT

 

                  Borrower absolutely and unconditionally promises to pay

principal, interest and all other amounts payable hereunder, or under any other

Loan Document, without any right of rescission and without any deduction

whatsoever, including any deduction for any setoff, counterclaim or recoupment,

and notwithstanding any damage to, defects in or destruction of the Collateral

or any other event, including obsolescence of any property or improvements. Any

payments made by Borrower (other than payments automatically paid through

Advances under the Revolving Facility as provided herein), shall be made only by

wire transfer on the date when due, without offset or counterclaim, in Dollars,

in immediately available funds to such account as may be indicated in writing by

Lender to Borrower from time to time. Any such payment received after 3:00 p.m.

New York City Time on the date when due shall be deemed received on the

following Business Day. Whenever any payment hereunder shall be stated to be due

or shall become due and payable on a day other than a Business Day, the due date

thereof shall be extended to, and such payment shall be made on, the next

succeeding Business Day, and such extension of time in such case shall be

included in the computation of payment of any interest (at the interest rate

then in effect during such extension) and/or fees, as the case may be.

 

 

         2.18      POWER OF ATTORNEY

 

         Lender is hereby irrevocably made, constituted and appointed the true

and lawful attorney for Borrower (without requiring any of them to act as such)

with full power of substitution to do the following: (i) endorse the name of any

such Person upon any and all checks, drafts, money orders, and other instruments

for the payment of money that are payable to such Person and constitute

collections on its or their Accounts; (ii) execute in the name of such Person

any financing statements, schedules, assignments, instruments, documents, and

statements that it is or they or are obligated to give Lender under any of the

Loan Documents; and (iii) do such other and further acts and deeds in the name

of such Person that Lender may deem necessary or desirable to enforce any

Account or other Collateral or to perfect Lender's security interest or lien in

any Collateral. In addition, if any such Person breaches its obligation

hereunder to direct payments of Accounts or the proceeds of any other Collateral

to the appropriate Lockbox Account, Lender, as the irrevocably made, constituted

and appointed true and lawful attorney for such Person pursuant to this

paragraph, may, by the signature or other act of any of Lender's officers or

authorized signatories (without requiring any of them to do so), direct any

federal, state or private payor or fiscal intermediary to pay proceeds of

Accounts or any other Collateral to the appropriate Lockbox Account.

 

 

 

III.       FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE

 

 

         3.1       COMMITMENT FEES; WARRANTS

 

                  On the Closing Date, Borrower paid to Lender (a) three

quarters of one percent (.75%) of the Facility Cap as a commitment fee for the

Revolver; (b) 1% of the Maximum Term Loan Amount as a commitment fee for the

Term Loan, and (c) shall grant to Lender the Warrants to purchase 250,000 shares

at $0.14 per share of Opticare Health Systems, Inc.'s common stock. On February

7, 2003,

 

                                        10

<PAGE>

simultaneous with Opticare Acquisition becoming a Borrower hereunder pursuant to

the requirements of Section 7.6(b), Borrower paid to Lender an additional

nonrefundable commitment fee of $37,500 (equal to .75% of the $5,000,000

increase to the Facility Cap).

 

 

         3.2       UNUSED LINE FEE

 

                  Borrower shall pay to Lender monthly an unused line fee (the

"UNUSED LINE FEE") in an amount equal to .50 % (per annum) of the difference

derived by subtracting (i) the daily average amount of the balances under the

Revolving Facility outstanding during the preceding month, from (ii) the

Facility Cap. The Unused Line Fee shall be payable monthly in arrears on the

first day of each successive calendar month (starting with the month in which

the Closing Date occurs).

 

 

         3.3       COLLATERAL MANAGEMENT FEE

 

                  Borrower shall pay Lender as additional interest a monthly

collateral management fee (the "COLLATERAL MANAGEMENT Fee") equal to 0.083% of

the daily average amount of the balances under the Revolving Facility

outstanding during the preceding month. The Collateral Management Fee shall be

payable monthly in arrears on the first day of each successive calendar month

(starting with the month in which the Closing Date occurs).

 

 

         3.4       REVOLVER TERMINATION FEE; TERM LOAN FINANCE FEE

 

                  (a) Revolver Early Termination Fee. If (i) Borrower terminates

the Revolving Facility under Section 11.1 hereof, (ii) Borrower is required to

make payment in full of the Revolving Facility and/or Obligations relating to

the Revolving Facility upon the occurrence of an Event of Default, (iii) a

voluntary or involuntary Change of Control or payment pursuant to Section 2.11

occurs, (iv) any other voluntary or involuntary prepayment of the Revolving

Facility and/or Obligations relating to the Revolving Facility by Borrower or

any other Person occurs (other than reductions to zero of the outstanding

balance of the Revolving Facility resulting from the ordinary course operation

of the provisions of Section 2.5), whether by virtue of Lender's exercising its

right of set-off or otherwise, (v) Lender accelerates the Revolving Note or

makes any demand on the Revolving Note, or (vi) any payment or reduction of the

outstanding balance of the Revolving Note and/or the Revolving Facility is made

during a bankruptcy, reorganization or other proceeding or is made pursuant to

any plan of reorganization or liquidation or any Debtor Relief Law, (each, a

"REVOLVER TERMINATION"), then, at the effective date of any such termination,

Borrower shall pay Lender (in addition to the then outstanding principal,

accrued interest and other Obligations relating to the Revolving Facility

pursuant to the terms of this Agreement and any other Loan Document), as yield

maintenance for the loss of bargain and not as a penalty, an amount equal to (x)

if the revolver termination occurs prior to December 31, 2004, 2% of the

Facility Cap, or (y) if the revolver termination occurs on or after December 31,

2004, but prior to expiration of the Revolving Facility Term, 1% of the Facility

Cap; provided, however, that in the event the revolver termination arises

pursuant to a voluntary prepayment of the Revolving Facility and Obligations

relating to the Revolving Facility by Borrower pursuant to a refinancing by a

third party commercial financial institution whose primary business is providing

senior secured financing the yield maintenance for the loss of bargain shall be

equal to an amount equal to (x) if the revolver termination occurs prior to

December 31, 2004, the greater of (1) 2% of the Facility Cap and (2) the Yield

Maintenance Amount, and (y) if the revolver termination occurs prior to

expiration of the Revolving Facility Term, the greater of (1) 1% of the Facility

Cap and (2) the Yield Maintenance Amount.

 

 

 

                                       11

<PAGE>

 

                  (b) Term Loan Finance Fee. Upon (i) termination of the Term

Loan for any reason, (ii) acceleration of the Term Loan on account of any

bankruptcy proceeding, liquidation or Debtor Relief Law, or (iii) upon repayment

of the Term Loan in full (each, a "TERM LOAN TERMINATION"), then, at the

effective date of any such Term Loan Termination, Borrower shall pay Lender (in

addition to the then outstanding principal, accrued interest and other

Obligations relating to the Term Loan owing under the Term Loan pursuant to the

terms of this Agreement and any other Loan Document), as yield maintenance for

the loss of bargain and not as a penalty, an amount equal to two percent (2%) of

the Term Loan amount.

 

 

         3.5       COMPUTATION OF FEES; LAWFUL LIMITS

 

                  All fees hereunder shall be computed on the basis of a year of

360 days and for the actual number of days elapsed in each calculation period,

as applicable. In no contingency or event whatsoever, whether by reason of

acceleration or otherwise, shall the interest and other charges paid or agreed

to be paid to Lender for the use, forbearance or detention of money hereunder

exceed the maximum rate permissible under applicable law which a court of

competent jurisdiction shall, in a final determination, deem applicable hereto.

If, due to any circumstance whatsoever, fulfillment of any provision hereof, at

the time performance of such provision shall be due, shall exceed any such

limit, then, the obligation to be so fulfilled shall be reduced to such lawful

limit, and, if Lender shall have received interest or any other charges of any

kind which might be deemed to be interest under applicable law in excess of the

maximum lawful rate, then such excess shall be applied first to any unpaid fees

and charges hereunder, then to unpaid principal balance owed by Borrower

hereunder, and if the then remaining excess interest is greater than the

previously unpaid principal balance, Lender shall promptly refund such excess

amount to Borrower and the provisions hereof shall be deemed amended to provide

for such permissible rate. The terms and provisions of this Section 3.5 shall

control to the extent any other provision of any Loan Document is inconsistent

herewith.

 

 

         3.6       DEFAULT RATE OF INTEREST

 

                  Upon the occurrence and during the continuation of an Event of

Default, the Applicable Rate of interest in effect at such time with respect to

the Obligations shall be increased by 3.0% per annum (the "DEFAULT RATE").

 

 

 

         3.7       ACKNOWLEDGEMENT OF JOINT AND SEVERAL LIABILITY

 

                  Each Borrower acknowledges that it is jointly and severally

liable for all of the Obligations under the Loan Documents. Each Borrower

expressly understands, agrees and acknowledges that (i) it is affiliated by

common ownership, (ii) each Borrower desires to have the availability of one

common credit facility instead of separate credit facilities, (iii) each

Borrower has requested that Lender extend such a common credit facility on the

terms herein provided, (iv) Lender will be lending against, and relying on a

lien upon, all of the Borrowers' assets even though the proceeds of any

particular loan made hereunder may not be advanced directly to a particular

Borrower, (v) each Borrower will nonetheless benefit by the making of all such

loans by Lender and the availability of a single credit facility of a size

greater than each could independently warrant, and (vi) all of the

representations, warranties, covenants, obligations, conditions, agreements and

other terms contained in the Loan Documents shall be applicable to and shall be

binding upon each Borrower.

 

 

 

                                        12

<PAGE>

 

         3.8       WARRANTS

 

                  As additional consideration for the extensions of credit

hereunder and as more fully described in the Warrant Agreement, Systems shall

issue and deliver to CapitalSource Holdings LLC on the Closing Date, the

Warrant. The Warrant and number of securities purchasable upon exercise of the

Warrant shall be subject to adjustment and shall be subject to various rights in

favor of Lender as set forth in the Warrant Agreement.

 

 

         3.9       ALLOCATION OF PURCHASE PRICE

 

                  Under both GAAP consistently applied and the regulations of

the Internal Revenue Service, the issuance to Lender of the Term Note and the

Warrant for an aggregate purchase price equal to the aggregate principal amount

of the Term Note being so purchased results in the creation of "original issue

discount" on such Term Note (which original issue discount may also be deemed to

constitute the value of any Warrant issued in connection with the issuance of

such Term Note), and such regulations require the determination of the value of

any warrant so delivered. Pursuant to GAAP consistently applied and applicable

Treasury Regulations, Borrower and Lender agree to allocate $298,170 of the

purchase price to the Term Note and the remaining $18,300 of the purchase price

to the Warrant and that such allocation reflects the relative fair market values

of the Term Note and the Warrant as of their issue date. Borrower and Lender

agree to recognize and adhere to the determinations and allocations of original

issue discount and valuation of the Warrant set forth herein for all federal and

state income tax purposes. In the event of any proposed transfer of the Term

Note by Lender, Lender shall, prior to such transfer, mark the Term Note with a

legend pertaining to the original issue discount in the form required by

Treasury Regulation Section 1.1275-3(b)(1).

 

 

 

IV.       CONDITIONS PRECEDENT

 

 

         4.1       CONDITIONS TO INITIAL ADVANCE, FUNDING OF TERM LOAN AND

                  CLOSING

 

                  The obligations of Lender to consummate the transactions

contemplated herein and to make the initial Advance under the Revolving Facility

(the "INITIAL ADVANCE") and to fund the Term Loan are subject to the

satisfaction, in the sole judgment of Lender, of the following:

 

                  (a) (i) Borrower shall have delivered to Lender (A) the Loan

Documents to which it is a party, each duly executed by an authorized officer of

Borrower and the other parties thereto, (B) a Borrowing Certificate for the

Initial Advance under the Revolving Facility executed by an authorized officer

of Borrower, and (ii) each Guarantor shall have delivered to Lender the Loan

Documents to which such Guarantor is a party, each duly executed and delivered

by such Guarantor or an authorized officer of such Guarantor, as applicable, and

the other parties thereto;

 

                  (b) all in form and substance satisfactory to Lender in its

sole discretion, Lender shall have received (i) a report of Uniform Commercial

Code financing statement, tax and judgment lien searches performed with respect

to each Borrower and Guarantor in each jurisdiction determined by Lender in its

sole discretion, and such report shall show no Liens on the Collateral (other

than Permitted Liens), (ii) each document (including, without limitation, any

Uniform Commercial Code financing statement) required by any Loan Document or

under law or requested by Lender to be filed, registered or recorded to create

in favor of Lender, a perfected first priority security interest upon the

Collateral, and (iii) evidence of each such filing, registration or recordation

and of the payment by Borrower of any necessary fee, tax or expense relating

thereto;

 

 

 

                                        13

<PAGE>

 

                  (c) Lender shall have received (i) the Charter and Good

Standing Documents, all in form and substance acceptable to Lender, (ii) a

certificate of the corporate secretary or assistant secretary of each Borrower

dated the Closing Date, as to the incumbency and signature of the Persons

executing the Loan Documents, in form and substance acceptable to Lender, (iii)

the written legal opinion of counsel for Borrower and Guarantors, in form and

substance satisfactory to Lender and its counsel; and (iv) a certificate

executed by an authorized officer of each Borrower, which shall constitute a

representation and warranty by such Borrower as of the Closing Date and the

applicable Borrowing Date and the date of funding of the Term Loan that the

conditions contained in this Agreement have been satisfied;

 

                  (d) Lender shall have received a certificate of the chief

financial officer (or, in the absence of a chief financial officer, the chief

executive officer) of Borrower, on a consolidated basis, in form and substance

satisfactory to Lender (each, a "SOLVENCY CERTIFICATE"), certifying (i) the

solvency of such Person after giving effect to the transactions and the

Indebtedness contemplated by the Loan Documents, and (ii) as to such Person's

financial resources and ability to meet its obligations and liabilities as they

become due, to the effect that as of the Closing Date and the Borrowing Date for

the Initial Advance and the date of funding of the Term Loan and after giving

effect to such transactions and Indebtedness: (A) the assets of such Person, at

a Fair Valuation, exceed the total liabilities (including contingent,

subordinated, unmatured and unliquidated liabilities) of such Person, and (B) no

unreasonably small capital base with which to engage in its anticipated business

exists with respect to such Person;

 

                  (e) Lender shall have completed examinations, the results of

which shall be satisfactory in form and substance to Lender, of the Collateral,

the financial statements and the books, records, business, obligations,

financial condition and operational state of each Borrower and Guarantor, and

each such Person shall have demonstrated to Lender's satisfaction that (i) its

operations comply, in all respects deemed material by Lender, in its sole

judgment, with all applicable federal, state, foreign and local laws, statutes

and regulations, (ii) its operations are not the subject of any governmental

investigation, evaluation or any remedial action which could result in any

expenditure or liability deemed material by Lender, in its sole judgment, and

(iii) it has no liability (whether contingent or otherwise) that is deemed

material by Lender, in its sole judgment;

 

                  (f) Lender shall have received all fees, charges and expenses

payable to Lender on or prior to the Closing Date pursuant to the Loan

Documents;

 

                  (g) all in form and substance satisfactory to Lender in its

sole discretion, Lender shall have received such consents, approvals and

agreements, including, without limitation, any applicable Landlord Waivers and

Consents with respect to any and all leases set forth on Schedule 5.4, from such

third parties as Lender and its counsel shall determine are necessary or

desirable with respect to (i) the Loan Documents and/or the transactions

contemplated thereby, and/or (ii) claims against any Borrower or Guarantor or

the Collateral;

 

                  (h) Borrower shall be in compliance with Section 7.13(b) and

Section 6.5, and Lender shall have received (i) certified copies of all such

insurance policies, and (ii) original certificates of such insurance policies

confirming that they are in effect and that the premiums due and owing with

respect thereto have been paid in full and naming Lender as loss payee and

additional insured, as appropriate;

 

 

 

                                       14

<PAGE>

 

                  (i) all corporate and other proceedings, documents,

instruments and other legal matters in connection with the transactions

contemplated by the Loan Documents (including, but not limited to, those

relating to corporate and capital structures of Borrower) shall be satisfactory

to Lender;

 

                  (j) Lender shall have received, in form and substance

satisfactory to Lender, (i) each of the Assigned Documents, the Assigned Stock

and all related documents, agreements and instruments, including assignments of

all Liens, security interests and Uniform Commercial Code financing statements

relating thereto, and (ii) release and termination of any and all Liens,

security interest and/or Uniform Commercial Code financing statements not

assigned to Lender in, on, against or with respect to any of the Collateral

(other than Permitted Liens);

 

                   (k) the Warrant shall have been delivered to Lender and the

Warrant and a Registration Rights Agreement in connection therewith shall have

been executed and delivered to Lender, all in form and substance satisfactory to

Lender; and

 

                   (l) Lender shall have received the stock certificates

representing the Assigned Stock.

 

 

         4.2       CONDITIONS TO EACH ADVANCE AND FUNDING OF TERM LOAN

 

                  The obligations of Lender to make any Advance (including,

without limitation, the Initial Advance) and to fund the Term Loan are subject

to the satisfaction, in the sole judgment of Lender, of the following additional

conditions precedent:

 

                  (a) Borrower shall have delivered to Lender a Borrowing

Certificate for the Advance executed by an authorized officer of Borrower, which

shall constitute a representation and warranty by Borrower as of the Borrowing

Date of such Advance that the conditions contained in this Section 4.2 have been

satisfied; provided, however, that any determination as to whether to fund

Advances or extensions of credit shall be made by Lender in its sole discretion;

provided, however, that Lender acknowledges that it has received a satisfactory

Borrowing Certificate for the Initial Advance;

 

                   (b) each of the representation and warranties made by Borrower

in or pursuant to this Agreement shall be accurate, before and after giving

effect to such Advance and/or funding the Term Loan, and no Default or Event of

Default shall have occurred or be continuing or would exist after giving effect

to the Advance under the Revolving Facility or the funding of the Term Loan on

such date;

 

                  (c) immediately after giving effect to the requested Advance,

the aggregate outstanding principal amount of Advances under the Revolving

Facility shall not exceed the lesser of the Availability and the Facility Cap

and the aggregate outstanding principal amount of the Term Loan shall not exceed

the lesser of the Maximum Term Loan Amount and 40% of the value of the

Equipment, as determined by Lender;

 

                  (d) except as disclosed in the historical financial

statements, there shall be no liabilities or obligations with respect to

Borrower of any nature whatsoever which, either individually or in the

aggregate, would reasonably be likely to have a Material Adverse Effect;

 

                  (e) Borrower shall have on file with the appropriate office of

the Internal Revenue Service an IRS Form 8821 designating Lender to receive

copies of tax information relating to payroll and income taxes; and

 

 

 

                                       15

<PAGE>

 

                  (e) there shall not have occurred any Material Adverse Change

or Material Adverse Effect or Liability Event.

 

 

V.        REPRESENTATIONS AND WARRANTIES

 

                  Each Borrower, jointly and severally, represents and warrants

as of the date hereof, the Closing Date, each Borrowing Date and, if applicable,

the date of funding of the Term Loan as follows:

 

 

         5.1        ORGANIZATION AND AUTHORITY

 

                  Each Borrower is a corporation duly organized, validly

existing and in good standing under the laws of its state of formation. Each

Borrower (i) has all requisite corporate power and authority to own its

properties and assets and to carry on its business as now being conducted and as

contemplated in the Loan Documents, (ii) is duly qualified to do business in

every jurisdiction in which failure so to qualify could reasonably be expected

to have a Material Adverse Effect, and (iii) has all requisite power and

authority (A) to execute, deliver and perform the Loan Documents to which it is

a party, (B) to borrow hereunder, (C) to consummate the transactions

contemplated under the Loan Documents, and (D) to grant the Liens with regard to

the Collateral pursuant to the Security Documents to which it is a party. No

Borrower is an "investment company" registered or required to be registered

under the Investment Company Act of 1940, as amended, or is controlled by such

an "investment company."

 

 

         5.2       LOAN DOCUMENTS

 

                  The execution, delivery and performance by Borrower of the

Loan Documents to which it is a party, and the consummation of the transactions

contemplated thereby, (i) have been duly authorized by all requisite action of

each such Person and have been duly executed and delivered by or on behalf of

each such Person; (ii) do not violate any provisions of (A) applicable law,

statute, rule, regulation, ordinance or tariff, (B) any order of any

Governmental Authority binding on any such Person or any of their respective

properties, or (C) the certificate of incorporation or bylaws (or any other

equivalent governing agreement or document) of any such Person, or any agreement

between any such Person and its respective shareholders, members, partners or

equity owners or among any such shareholders, members, partners or equity

owners; (iii) are not in conflict with, and do not result in a breach or default

of or constitute an event of default, or an event, fact, condition or

circumstance which, with notice or passage of time, or both, would constitute or

result in a conflict, material breach, material default or event of default

under, any indenture, agreement or other instrument to which any such Person is

a party, or by which the properties or assets of such Person are bound; (iv)

except as set forth therein, will not result in the creation or imposition of

any Lien of any nature upon any of the properties or assets of any such Person,

and (iv) except as set forth on Schedule 5.2, do not require the consent,

approval or authorization of, or filing, registration or qualification with, any

Governmental Authority or any other Person. When executed and delivered, each of

the Loan Documents to which Borrower is a party will constitute the legal, valid

and binding obligation of Borrower, enforceable against Borrower in accordance

with its terms, subject to the effect of any applicable bankruptcy, moratorium,

insolvency, reorganization or other similar law affecting the enforceability of

creditors' rights generally and to the effect of general principles of equity

which may limit the availability of equitable remedies (whether in a proceeding

at law or in equity).

 

 

 

 

                                        16

<PAGE>

 

         5.3       SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS

 

                  Borrower has no Subsidiaries other than those listed on

Schedule 5.3 hereto. Schedule 5.3 also states the authorized and issued

capitalization of each Borrower, the number and class of equity securities

and/or ownership, voting or partnership interests issued and outstanding of

Borrower and the record and beneficial owners thereof (including options,

warrants and other rights to acquire any of the foregoing). The outstanding

equity securities and/or ownership, voting or partnership interests of Borrower

have been duly authorized and validly issued and are fully paid and

nonassessable, and each Person listed on Schedule 5.3 owns beneficially and of

record all the equity securities and/or ownership, voting or partnership

interests it is listed as owning free and clear of any Liens other than Liens

created by the Security Documents. Schedule 5.3 also lists the directors,

members, managers and/or partners of Borrower. Except as listed on Schedule 5.3,

Borrower does not own an interest or participates or engages in any joint

venture, partnership or similar arrangements with any Person.

 

 

         5.4       TITLE TO PROPERTIES; ACQUISITIONS

 

                  (a) Each Borrower (i) is the sole owner and has good, valid

and marketable title to, or a valid leasehold interest in, all of its properties

and assets, including the Collateral, whether personal or real, subject to no

transfer restrictions or Liens of any kind except for Permitted Liens, and (ii)

is in compliance in all material respects with each lease to which it is a party

or otherwise bound. Schedule 5.4 lists all real properties (and their locations)

owned or leased by or to, and all other assets or property that are leased or

licensed by, Borrower and all leases (including leases of leased real property)

covering or with respect to such properties and assets. Borrower enjoys peaceful

and undisturbed possession under all such leases and such leases are all the

leases necessary for the operation of such properties and assets, are valid and

subsisting and are in full force and effect.

 

                  (b) The Wise Asset Purchase Agreement has been executed and

delivered by each party thereto and the Wise Acquisition and other transactions

contemplated thereby have been consummated, and the terms and conditions of the

Wise Asset Purchase Agreement constitute the valid and binding obligations of

each party thereto, enforceable in accordance with their terms, subject to

applicable bankruptcy, insolvency, reorganization, moratorium and other laws

affecting creditors' rights generally and to general principals of equity,

regardless of whether considered in a proceeding in law or in equity. Opticare

Acquisition owns the "Assets" (as defined in the Wise Asset Purchase Agreement)

free and clear of all Liens other than Permitted Liens.

 

 

         5.5       OTHER AGREEMENTS

 

                  Borrower is not (i) a party to any judgment, order or decree

or any agreement, document or instrument, or subject to any restriction, which

would affect its ability to execute and deliver, or perform under, any Loan

Document or to pay the Obligations, (ii) in default in the performance,

observance or fulfillment of any obligation, covenant or condition contained in

any agreement, document or instrument to which it is a party or to which any of

its properties or assets are subject, which default, if not remedied within any

applicable grace or cure period could reasonably be likely to have a Material

Adverse Effect, nor is there any event, fact, condition or circumstance which,

with notice or passage of time or both, would constitute or result in a

conflict, breach, default or event of default under, any of the foregoing which,

if not remedied within any applicable grace or cure period could reasonably be

likely to have a Material Adverse Effect; or (iii) a party or subject to any

agreement, document or instrument with respect to, or obligation to pay any,

service or management fee with respect to, the ownership, operation, leasing or

performance of any of its business or any facility, nor is there any manager

with respect to any such facility.

 

 

                                       17

<PAGE>

 

         5.6       LITIGATION

 

                   Except as set forth on Schedule 5.6 hereto, there is no

action, suit, proceeding or investigation pending or, to their knowledge,

threatened against Borrower that (i) questions or could prevent the validity of

any of the Loan Documents or the right of Borrower to enter into any Loan

Document or to consummate the transactions contemplated thereby, (ii) could

reasonably be likely to be or have, either individually or in the aggregate, any

Material Adverse Change or Material Adverse Effect, or (iii) could reasonably be

expected to result in any Change of Control or other change in the current

ownership, control or management of Borrower. Borrower is not aware that there

is any basis for the foregoing. Borrower is not a party or subject to any order,

writ, injunction, judgment or decree of any Governmental Authority. There is no

action, suit, proceeding or investigation initiated by Borrower currently

pending. Borrower has not any existing accrued and/or unpaid Indebtedness to any

Governmental Authority or any other governmental payor.

 

 

         5.7       HAZARDOUS MATERIALS

 

                  Borrower is in compliance in all material respects with all

applicable Environmental Laws. Borrower has not been notified of any action,

suit, proceeding or investigation (i) relating in any way to compliance by or

liability of Borrower under any Environmental Laws, (ii) which otherwise deals

with any Hazardous Substance or any Environmental Law, or (iii) which seeks to

suspend, revoke or terminate any license, permit or approval necessary for the

generation, handling, storage, treatment or disposal of any Hazardous Substance.

 

 

         5.8       POTENTIAL TAX LIABILITY; TAX RETURNS; GOVERNMENTAL REPORTS

 

                  (a) Borrower (i) has not received any oral or written

communication from the Internal Revenue Service with respect to any

investigation or assessment relating to the Borrower directly, or relating to

any consolidated tax return which was filed on behalf of Borrower, (ii) is not

aware of any year which remains open pending tax examination or audit by the

IRS, and (iii) is not aware of any information that could give rise to an IRS

tax liability or assessment.

 

                  (b) Except as set forth on Schedule 5.8, Borrower (i) has

filed all federal, state, foreign (if applicable) and local tax returns and

other reports which are required by law to be filed by Borrower, and (ii) has

paid all taxes, assessments, fees and other governmental charges, including,

without limitation, payroll and other employment related taxes, in each case

that are due and payable, except only for items that Borrower is currently

contesting in good faith and that are described on Schedule 5.8.

 

 

         5.9       FINANCIAL STATEMENTS AND REPORTS

 

                  All financial statements and financial information relating to

Borrower that have been or may hereafter be delivered to Lender by Borrower are

accurate and complete and have been prepared in accordance with GAAP

consistently applied with prior periods. Borrower has no material obligations or

liabilities of any kind not disclosed in such financial information or

statements, and since the date of the most recent financial statements submitted

to Lender, there has not occurred any Material Adverse Change, Material Adverse

Effect or Liability Event or, to Borrower's knowledge, any other event or

condition that could reasonably be expected to have a Material Adverse Effect or

Liability Event.

 

 

                                       18

<PAGE>

 

         5.10      COMPLIANCE WITH LAW

 

                  Except as set forth in Schedule 5.10, Borrower (i) is in

compliance with all material laws, statutes, rules, regulations, ordinances and

tariffs of any Governmental Authority applicable to Borrower and/or Borrower's

business, assets or operations, including, without limitation, ERISA and

Healthcare Laws, and (ii) is not in violation of any order of any Governmental

Authority or other board or tribunal. There is no event, fact, condition or

circumstance which, with notice or passage of time, or both, would constitute or

result in any noncompliance with, or any violation of, any of the foregoing, in

each case except where noncompliance or violation could not reasonably be

expected to have a Material Adverse Effect. Borrower has not received any notice

that Borrower is not in compliance in any respect with any of the requirements

of any of the foregoing. Borrower has (a) not engaged in any Prohibited

Transactions as defined in Section 406 of ERISA and Section 4975 of the Internal

Revenue Code of 1986, as amended, and the rules and regulations promulgated

thereunder, (b) not failed to meet any applicable minimum funding requirements

under Section 302 of ERISA in respect of its plans and no funding requirements

have been postponed or delayed, (c) no knowledge of any amounts due but unpaid

to the Pension Benefit Guaranty Corporation, or of any event or occurrence which

would cause the Pension Benefit Guaranty Corporation to institute proceedings

under Title IV of ERISA to terminate any of the employee benefit plans, (d) no

fiduciary responsibility under ERISA for investments with respect to any plan

existing for the benefit of Persons other than its employees or former

employees, or (e) not withdrawn, completely or partially, from any

multi-employer pension plans so as to incur liability under the MultiEmployer

Pension Plan Amendments of 1980. With respect to Borrower, there exists no event

described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and

4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12

C.F.R. ss. 2615.3 has not been waived. Borrower has maintained in all material

respects all records required to be maintained by the Joint Commission on

Accreditation of Healthcare Organizations, the Food and Drug Administration,

Drug Enforcement Agency and State Boards of Pharmacy and the federal and state

Medicare and Medicaid programs as required by the Healthcare Laws and, to the

best knowledge of Borrower, there are no presently existing circumstances which

likely would result in material violations of the Healthcare Laws. There is no

Liability Event.

 

 

         5.11      INTELLECTUAL PROPERTY

 

                  Except as set forth on Schedule 5.11, Borrower does not own,

license or utilize, and is not a party to, any patents, patent applications,

trademarks, trademark applications, service marks, registered copyrights,

copyright applications, copyrights, trade names, trade secrets, software or

licenses (collectively, the "INTELLECTUAL PROPERTY").

 

 

          5.12      LICENSES AND PERMITS; LABOR

 

                  Borrower is in compliance with and has all Permits and

Intellectual Property necessary or required by applicable law or Governmental

Authority for the operation of its businesses. All of the foregoing are in full

force and effect and not in known conflict with the rights of others. Borrower

is not (i) in breach of or default under the provisions of any of the foregoing,

nor is there any event, fact, condition or circumstance which, with notice or

passage of time or both, would constitute or result in a conflict, material

breach, material default or event of default under, any of the foregoing, (ii) a

party to or subject to any agreement, instrument or restriction that is so

unusual or burdensome that it might have a Material Adverse Effect, and/or (ii)

and has not been, involved in any labor dispute, strike, walkout or union

organization which could reasonably be likely to have a Material Adverse Affect.

 

 

 

 

                                       19

<PAGE>

 

         5.13      NO DEFAULT

 

                  There does not exist any Default or Event of Default or any

event, fact, condition or circumstance which, with the giving of notice or

passage of time or both, would constitute or result in a Default or Event of

Default.

 

 

         5.14      DISCLOSURE

 

                  No Loan Document nor any other agreement, document,

certificate, or statement furnished to Lender by or on behalf of Borrower in

connection with the transactions contemplated by the Loan Documents, nor any

representation or warranty made by Borrower in any Loan Document, contains any

untrue statement of material fact or omits to state any fact necessary to make

the statements therein not materially misleading. There is no fact known to

Borrower that has not been disclosed to Lender in writing that could reasonably

be likely to have a Material Adverse Effect.

 

 

         5.15      EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN

                  CONTRACTS

 

                  Except as contemplated by the Loan Document or as otherwise

set forth on Schedule 5.15, Borrower (i) has no outstanding Indebtedness, (ii)

is not subject or party to any mortgage, note, indenture, indemnity or guarantee

of, with respect to or evidencing any Indebtedness of any other Person, or (iii)

does not own or hold any equity or long-term debt investments in, and does not

have any outstanding advances to or any outstanding guarantees for the

obligations of, or any outstanding borrowings from, any Person. Borrower has

performed all material obligations required to be performed by Borrower pursuant

to or connection with any items listed on Schedule 5.15 and there has occurred

no breach, default or event of default under any document evidencing any such

items or any fact, circumstance, condition or event which, with the giving of

notice or passage of time or both, would constitute or result in a breach,

default or event of default thereunder.

 

 

         5.16      OTHER AGREEMENTS

 

                  Except as set forth on Schedule 5.16, (i) there are no

existing or proposed agreements, arrangements, understandings or transactions

between Borrower and any of Borrower's officers, members, managers, directors,

stockholders, partners, other interest holders, employees or affiliates or any

members of their respective immediate families, and (ii) none of the foregoing

Persons are directly or indirectly, indebted to or have any direct or indirect

ownership, partnership or voting interest in, to Borrower's knowledge, any

affiliate of Borrower or any Person with which Borrower has a business

relationship or which competes with Borrower (except that any such Persons may

own stock in (but not exceeding two (2%) percent of the outstanding capital

stock of) any publicly traded company that may compete with Borrower.

 

 

         5.17      INSURANCE

 

                  Borrower has in full force and effect such insurance policies

as are customary in its industry and as may be required pursuant to Section 6.5

hereof. All such insurance policies are listed and described on Schedule 5.17.

 

 

         5.18      NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL

 

                  During the preceding five years, Borrower has not conducted

business under or used any name (whether corporate, partnership or assumed)

other than as shown on Schedule 5.18A. Borrower

 

 

 

                                       20

<PAGE>

 

is the sole owner of all of its names listed on Schedule 5.18A, and any and all

business done and invoices issued in such names are Borrower's sales, business

and invoices. Each trade name of Borrower represents a division or trading style

of Borrower. Borrower maintains its places of business and chief executive

offices only at the locations set forth on Schedule 5.18B, and all Accounts of

Borrower arise, originate and are located, and all of the Collateral and all

books and records in connection therewith or in any way relating thereto or

evidence the Collateral are located and shall be only, in and at such locations.

All of the Collateral is located only in the continental United States.

 

 

         5.19      NON-SUBORDINATION

 

                  The Obligations are not subordinated in any way to any other

obligations of Borrower or to the rights of any other Person, except as

disclosed on Schedule 5.19.

 

 

         5.20      ACCOUNTS

 

                  In determining which Accounts are Eligible Receivables, Lender

may rely on all statements and representations made by Borrower with respect to

any Account. Unless otherwise indicated in writing to Lender, each Account of

Borrower (i) is genuine and in all respects what is purports to be and is not

evidenced by a judgment, (ii) arises out of a completed, bona fide sale and

delivery of goods or rendering of Services by Borrower in the ordinary course of

business and in accordance with the terms and conditions of all purchase orders,

contracts, certifications, participations, certificates of need and other

documents relating thereto or forming a part of the contract between Borrower

and the Account Debtor, (iii) is for a liquidated amount maturing as stated in a

claim or invoice covering such sale of goods or rendering of Services, a copy of

which has been furnished or is available to Lender, (iv) together with Lender's

security interest therein, is not and will not be in the future (by voluntary

act or omission by Borrower), subject to any offset, lien, deduction, defense,

dispute, counterclaim or other adverse condition, is absolutely owing to

Borrower and is not contingent in any respect or for any reason (except Accounts

owed or owing by Medicaid/Medicare Account Debtors that may be subject to offset

or deduction under applicable law), (v) there are no facts, events or

occurrences which in any way impair the validity or enforceability thereof or

tend to reduce the amount payable thereunder from the face amount of the claim

or invoice and statements delivered to Lender with respect thereto, (vi) to the

best of Borrower's knowledge, (A) the Account Debtor thereunder had the capacity

to contract at the time any contract or other document giving rise thereto was

executed and (B) such Account Debtor is solvent, (vii) to the best of Borrower's

knowledge, subject to subsection (x) below, there are no proceedings or actions

which are threatened or pending against any Account Debtor thereunder which

might result in any material adverse change in such Account Debtor's financial

condition or the collectibility thereof, (viii) has been billed and forwarded to

the Account Debtor for payment in accordance with applicable laws and is in

compliance and conformance with any requisite procedures, requirements and

regulations governing payment by such Account Debtor with respect to such

Account, and, if due from a Medicaid/Medicare Account Debtor, is properly

payable directly to Borrower, (ix) Borrower has obtained and currently has all

Permits necessary in the generation thereof, and (x) Borrower has disclosed to

Lender on each Borrowing Certificate the amount of all Accounts of Borrower for

which Medicare is the Account Debtor and for which payment has been denied and

subsequently appealed pursuant to the procedure described in the definition of

Eligible Receivables hereof, and Borrower is pursuing all available appeals in

respect of such Accounts.

 

 

 

 

                                        21

<PAGE>

 

         5.21      HEALTHCARE

 

                  Without limiting or being limited by any other provision of

any Loan Document, Borrower has timely filed or caused to be filed all cost and

other reports of every kind required by law, agreement or otherwise. Subject to

subsection (x) of Section 5.21, there are no claims, actions or appeals pending

(and Borrower has not filed any claims or reports which could reasonably result

in any such claims, actions or appeals) before any commission, board or agency

or other Governmental Authority, including, without limitation, any intermediary

or carrier, the Provider Reimbursement Review Board or the Administrator of the

Center for Medicare and Medicaid Services, with respect to any state or federal

Medicare or Medicaid cost reports or claims filed by Borrower, or any

disallowance by any commission, board or agency or other Governmental Authority

in connection with any audit of such cost reports. No validation review or

program integrity review related to Borrower or the consummation of the

transactions contemplated herein or to the Collateral have been conducted by any

commission, board or agency or other Governmental Authority in connection with

the Medicare or Medicaid programs, and to the knowledge of Borrower, no such

reviews are scheduled, pending or threatened against or affecting any of the

providers, any of the Collateral or the consummation of the transactions

contemplated hereby.

 

 

         5.22      SURVIVAL

 

                  Borrower makes the representations and warranties contained

herein with the knowledge and intention that Lender is relying and will rely

thereon. All such representations and warranties will survive the execution and

delivery of this Agreement, the making of the Advances under the Revolving

Facility and the funding of the Term Loan.

 

 

 

VI.       AFFIRMATIVE COVENANTS

 

                  Each Borrower, jointly and severally, covenants and agrees

that, until full performance and satisfaction, and indefeasible payment in full

in cash, of all the Obligations and termination of this Agreement:

 

 

         6.1       FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION

 

                  (a) Financial Reports. Borrower shall furnish to Lender (i) as

soon as available and in any event within ninety (90) calendar days after the

end of each fiscal year of Borrower, audited annual consolidated and

consolidating financial statements of Borrower, including the notes thereto,

consisting of a consolidated and consolidating balance sheet at the end of such

completed fiscal year and the related consolidated and consolidating statements

of income, retained earnings, cash flows and owners' equity for such completed

fiscal year, which financial statements shall be prepared and certified without

qualification by an independent certified public accounting firm satisfactory to

Lender and accompanied by related management letters, if available, and (ii) as

soon as available and in any event within forty-five (45) calendar days after

the end of each calendar month, unaudited consolidated and consolidating

financial statements of Borrower consisting of a balance sheet and statements of

income, retained earnings, cash flows and owners' equity as of the end of the

immediately preceding calendar month. With each such financial statement,

Borrower shall also deliver a certificate of its chief financial officer stating

that (A) all such financial statements shall be prepared in accordance with GAAP

consistently applied with prior periods, (B) such person has reviewed the

relevant terms of the Loan Documents and the condition of Borrower