SUBORDINATED PLEDGE AND
SECURITY AGREEMENT
SUBORDINATED PLEDGE AND SECURITY AGREEMENT dated as of January 25,
2002, by OptiCare Health Systems, Inc. (the "Company") and each of the other
grantors listed on the signature pages hereof (each a "Grantor" and,
collectively, the "Grantors"), in favor of Palisade Concentrated Equity
Partnership, L.P. ("Palisade"), as collateral agent for the Secured Parties (as
hereinafter defined) (in such capacity, the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Restructure Agreement dated as of
December 17, 2001, as amended, among the Company, Palisade and ▇▇. ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, M.D. ("▇▇. ▇▇▇▇▇▇▇▇▇") (as the same has been and may be further
amended, restated, supplemented or otherwise modified from time to time, the
"Restructure Agreement"), the Secured Parties have agreed to make subordinated
loans to the Company in an aggregate principal amount of $14,000,000, such loans
to be evidenced by Senior Subordinated Secured Notes dated January ___, 2002 (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Notes") issued by the Company in favor of the Secured Parties,
upon the terms and subject to the conditions set forth therein;
WHEREAS, the Grantors, other than Company, are subsidiaries of Company
and will derive certain benefits from the Secured Parties making the loans to
the Company under the Restructure Agreement;
NOW, THEREFORE, in consideration of the premises and to induce the
Secured Parties to make the loans to the Company under the Restructure
Agreement, each Grantor hereby agrees with the Collateral Agent, for the benefit
of the Secured Parties, as follows:
ARTICLE I. DEFINED TERMS
SECTION 1.1 DEFINITIONS.
(a) Unless otherwise defined herein, terms defined in the Restructure
Agreement and used herein have the meanings given to them in the Restructure
Agreement.
(b) Terms used herein that are defined in the UCC have the meanings
given to them in the UCC, including the terms "Accounts", "Chattel Paper",
"Documents", "Equipment", "General Intangibles", "Instruments", "Inventory",
"Payment Intangible", "Proceeds", "Security", "Securities Account", "Securities
Intermediary" and "Security Entitlement".
(c) The following additional terms shall have the following meanings:
"Agreement" means this Subordinated Pledge and Security Agreement.
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"CapitalSource" means Capital Source Finance, LLC.
"CapitalSource Loan Agreement" means the Amended and Restated Revolving
Credit, Term Loan and Security Agreement, dated as of January ___, 2002, among
CapitalSource, the Company and the other Grantors.
"Collateral" has the meaning specified in Section 2.1.
"Event of Default" means any Event of Default as defined in the Notes.
"Lien" has the meaning specified in the CapitalSource Loan Agreement.
"Obligations" shall mean all amounts owing by the Company to the
Secured Parties, and any of their assignees, pursuant to the Notes, this
Agreement or the other Transaction Documents, including, without limitation, all
principal, interest, fees, expenses, attorneys' fees and any other sum
chargeable to Company under the Notes or any of the other Transaction Documents.
"Permitted Encumbrances" has the meaning specified in the CapitalSource
Loan Agreement.
"Pledged Collateral" means, collectively, the Pledged Notes, the
Pledged Stock, all certificates or other instruments representing any of the
foregoing and all Security Entitlements of any Grantor in respect of any of the
foregoing. Pledged Collateral may be General Intangibles or Investment Property.
"Pledged Notes" means all right, title and interest of any Grantor in
the Instruments evidencing all Indebtedness owed to such Grantor, including all
Indebtedness described on Schedule 2, issued by the obligors named therein.
"Pledged Stock" means the shares of capital stock owned by each
Grantor, including all shares of capital stock listed on Schedule 2.
"Secured Parties" means Palisade and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
"Securities Act" means the Securities Act of 1933, as amended.
"Subordination Agreement" means the Subordination Agreement dated as of
January ___, 2002 among the Secured Parties and CapitalSource, as such agreement
may be amended at any time or from time to time.
"Transaction Documents" means the Restructure Agreement, the Notes, the
Subordination Agreement and this Agreement and any attachments, exhibits or
annexes thereto or hereto.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the State of New York; provided, however, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of the Collateral Agent's security
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interest in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term "UCC" shall
mean the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.
"Vehicles" means all vehicles covered by a certificate of title law of
any state.
SECTION 1.2 CERTAIN OTHER TERMS.
(a) The words "herein," "hereof," "hereto" and "hereunder" and similar
words refer to this Agreement as a whole and not to any particular Article,
Section, subsection or clause in this Agreement.
(b) References herein to an Annex, Schedule, Article, Section,
subsection or clause refer to the appropriate Annex or Schedule to, or Article,
Section, subsection or clause in this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) Where the context requires, provisions relating to the Collateral
or any part thereof, when used in relation to a Grantor, shall refer to such
Grantor's Collateral or the relevant part thereof.
(e) Any reference in this Agreement to a Transaction Document shall
include all appendices, exhibits and schedules thereto, and, unless specifically
stated otherwise all amendments, restatements, supplements or other
modifications thereto, and as the same may be in effect at any and all times
such reference becomes operative.
(f) The term "including" means "including without limitation" except
when used in the computation of time periods.
(g) The terms "Collateral Agent" and "Secured Parties" includes their
respective successors.
(h) References in this Agreement to any statute shall be to such
statute as amended or modified and in effect from time to time.
ARTICLE II. SECURITY INTEREST
SECTION 2.1 GRANT OF SECURITY INTEREST. (a) To secure the payment and
performance of the Obligations, each Grantor hereby grants to the Collateral
Agent, for the benefit of the Secured Parties, a continuing security interest in
and lien upon, and pledges to Collateral Agent, for the benefit of the Secured
Parties, all of its right, title and interest in and to the following
(collectively and each individually, the "Collateral"):
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(i) all of such Grantor'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 Grantor'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 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 Grantor'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 Grantor; provided, however,
that the Collateral Agent shall not have a security interest in any rights under
any Government Contract of such Grantor 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 preceding paragraph (a), such grant of a
security interest shall not extend to, and the term "Collateral" shall not
include, any General Intangibles of any Grantor 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."
(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, the Collateral Agent
will have a good, valid and perfected 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 and Liens in favor of
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CapitalSource. No financing statement relating to any of the Collateral is on
file in any public office except those (i) on behalf of the Collateral Agent,
(ii) in favor of CapitalSource or its predecessor, Bank Austria, and/or (iii) in
connection with Permitted Liens.
SECTION 2.2 COLLATERAL ADMINISTRATION.
(a) Subject to the prior rights of CapitalSource pursuant to
CapitalSource Loan Agreement and Subordination Agreement, all Collateral (except
Deposit Accounts) will at all times be kept by the applicable Grantor at the
locations set forth on Schedule 5.18 to the CapitalSource Loan Agreement and
shall not, without thirty (30) calendar days prior written notice to the
Collateral Agent, be moved therefrom, and in any case shall not be moved outside
the continental United States.
(b) The Grantors shall keep accurate and complete records of their
Accounts and all payments and collections thereon and shall submit such records
to the Collateral Agent on such periodic bases as the Collateral Agent may
request. If requested by the Collateral Agent after an Event of Default, the
Grantors Lender shall execute and deliver to the Collateral Agent formal written
assignments of all of their Accounts weekly or daily as the Collateral Agent 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.
(c) Whether or not an Event of Default has occurred, any of the
Collateral Agent's officers, employees, representatives or agents shall have the
right, at any time during normal business hours, in the name of the Collateral
Agent, or any designee of the Collateral Agent, to verify the validity, amount
or any other matter relating to any Accounts of the Grantors. The Grantors shall
cooperate fully with the Collateral Agent in an effort to facilitate and
promptly conclude such verification process.
(d) To expedite collection, the Grantors shall endeavor in the first
instance to make collection of their Accounts for the Collateral Agent. Subject
to the rights of CapitalSource under the CapitalSource Loan Agreement and the
Subordination Agreement, the Collateral Agent shall have the right, at all times
after the occurrence of an Event of Default to notify (i) Account Debtors owing
Accounts to the Grantors other than Medicaid/Medicare Account Debtors that their
Accounts have been assigned to the Collateral Agent and to collect such Accounts
directly in its own name and to charge collection costs and expenses, including
reasonable attorney's fees, to the Grantors, and (ii) Medicaid/Medicare Account
Debtors that any Grantor has waived any and all defenses and counterclaims it
may have or could interpose in any such action or procedure brought by the
Collateral Agent to obtain a court order recognizing the assignment or security
interest and lien of the Collateral Agent in and to any Account or other
Collateral and that the Collateral Agent is seeking or may seek to obtain a
court order recognizing the assignment or security interest and lien of the
Collateral Agent in and to all Accounts and other Collateral payable by
Medicaid/Medicare Account Debtors.
(e) As and when determined by the Collateral Agent in its reasonable
discretion, the Collateral Agent will perform the searches described in clauses
(i) and (ii) below against the Grantors (the results of which are to be
consistent with the Grantors' representations and warranties under this
Agreement), all at the Company's expense: (i) UCC searches with the
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Secretary of State and local filing offices of each jurisdiction where the
Company and/or any other Grantor is incorporated or organized or maintains its
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) Subject to the prior rights of CapitalSource under the
CapitalSource Loan Agreement and the Subordination Agreement, upon the
Collateral Agent's request after an Event of Default shall have occurred and be
continuing, the Grantors (i) shall provide prompt written notice to each Account
Debtor (other than Medicaid/Medicare Account Debtors) that the Collateral Agent
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 a lockbox account under the control and dominion of the Collateral
Agent or its representative, and each Grantor hereby authorizes the Collateral
Agent, upon any failure by any Grantor to send such notices and directions
within ten (10) calendar days after the Collateral Agent's request, to send any
and all similar notices and directions to such Account Debtors, and (ii) shall
do anything further that may be lawfully required by the Collateral Agent to
secure the Collateral Agent and effectuate the intentions of this Agreement. At
the Collateral Agent's request, each Grantor shall immediately deliver to the
Collateral Agent or its representative all items for which the Collateral Agent
or its representative 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.
SECTION 2.3 SUBORDINATION AGREEMENT. Notwithstanding anything to the
contrary herein contained, the lien and security interest granted to the
Collateral Agent in this Agreement shall be subject to the terms and conditions
of the Subordination Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the Collateral Agent and
the Secured Parties that:
SECTION 3.1 TITLE; NO OTHER LIENS. Except for the Lien granted to the
Collateral Agent pursuant to this Agreement and the other Liens permitted to
exist on the Collateral under the Transaction Documents and the CapitalSource
Loan Agreement, such Grantor is the record and beneficial owner of the Pledged
Collateral pledged by it hereunder constituting Instruments or certificated
securities, is the entitlement holder of all such Pledged Collateral
constituting Investment Property and has rights in or the power to transfer each
other item of Collateral in which a Lien is granted by it hereunder, free and
clear of any and all Liens.
SECTION 3.2 PERFECTION AND PRIORITY. The security interest granted
pursuant to this Agreement will constitute a valid and continuing perfected
security interest in favor of the Collateral Agent in the Collateral for which
perfection is governed by the UCC or filing with the United States Patent and
Trademark Office upon (i) the completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on such schedule, have been delivered to the Collateral Agent in
completed and duly executed form), (ii) the delivery to the Collateral Agent or
its bailee of all Collateral consisting of Instruments and certificated
securities, in each case properly endorsed for transfer to the
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Collateral Agent or in blank, or the execution of Control Account Agreements
with respect to Investment Property not in certificated form, and (iii) all
appropriate filings having been made with the United States Patent and Trademark
Office. Such security interest will be prior to all other Liens on the
Collateral, except for Liens in favor of CapitalSource and other Permitted
Liens.
SECTION 3.3 STATE OF INCORPORATION; CHIEF EXECUTIVE OFFICE. On the date
hereof, such Grantor's jurisdiction of organization, organizational
identification number, if any, and the location of such Grantor's chief
executive office or sole place of business is specified on Schedule 3.3.
SECTION 3.4 INVENTORY AND EQUIPMENT. On the date hereof, such Grantor's
Inventory and Equipment (other than mobile goods and Inventory or Equipment in
transit) are kept at the locations listed on Schedule 3.4.
SECTION 3.5 PLEDGED COLLATERAL.
(a) The Pledged Stock pledged hereunder by such Grantor are listed on
Schedule 3.5 and constitute that percentage of the issued and outstanding equity
of all classes of each issuer thereof as set forth on Schedule 3.5.
(b) All of the Pledged Stock has been duly and validly issued and are
fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
(d) All Pledged Collateral consisting of certificated securities or
Instruments has been delivered to the Collateral Agent or its bailee in
accordance with Section 4.4(a).
(e) There is no Pledged Collateral other than that represented by
certificated securities or Instruments in the possession of the Collateral
Agent.
SECTION 3.6 ACCOUNTS. No amount payable to such Grantor under or in
connection with any Account is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Collateral Agent or its bailee, properly
endorsed for transfer, to the extent delivery is required by Section 4.4.
SECTION 3.7 NO OTHER NAMES. Except as set forth on Schedule 3.7, within
the five-year period preceding the date hereof such Grantor has not had, or
operated in any jurisdiction, under any trade name, fictitious name or other
name other than its current legal name.
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SECTION 3.8 DEPOSIT ACCOUNTS; CONTROL ACCOUNTS. The only Deposit
Accounts or Securities Accounts maintained by any Grantor on the date hereof are
those listed on Schedule 3.8, which sets forth such information separately for
each Grantor.
SECTION 3.9 OTHER FINANCING STATEMENTS. There are no financing
statements (or similar statement or instrument of registration under the law of
any jurisdiction) covering or purporting to cover any interest of any kind in
the Collateral except as disclosed on Schedule 3.9.
ARTICLE IV. COVENANTS
As long as the Note remains outstanding, unless the Collateral Agent
otherwise consents in writing, each Grantor agrees with the Collateral Agent
that:
SECTION 4.1 GENERALLY. Such Grantor shall (a) except for the security
interest created by this Agreement and other Permitted Liens and except as
permitted by the Notes, not create or permit to exist any Lien upon or with
respect to any of the Collateral; (b) not use or permit any Collateral to be
used unlawfully or in violation of any provision of this Agreement, the
CapitalSource Loan Agreement, any other Transaction Document, any applicable law
or any policy of insurance covering the Collateral; (c) not sell, transfer or
assign (by operation of law or otherwise) any Collateral, if such sale, transfer
or assignment is prohibited by the Notes or other Transaction Documents; (d) not
enter into any agreement or undertaking restricting the right or ability of such
Grantor or the Collateral Agent to sell, assign or transfer any of the
Collateral if such restriction would have a Material Adverse Effect, except as
permitted by the Transaction Documents; and (e) promptly notify the Collateral
Agent of its entry into any agreement or assumption of undertaking that
restricts the ability to sell, assign or transfer any of the Collateral
regardless of whether or not it has a Material Adverse Effect.
SECTION 4.2 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER
DOCUMENTATION.
(a) Except as provided by the Transaction Documents, such Grantor will
maintain the security interest created by this Agreement as a perfected security
interest having at least the priority described in Section 3.2 and shall defend
such security interest against the claims and demands of all Persons.
(b) Such Grantor will furnish to the Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Collateral Agent may
reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of the Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further action as the Collateral Agent
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including the filing of any financing or continuation statement under the UCC
(or other similar
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laws) in effect in any jurisdiction with respect to the security interest
created hereby and the execution and delivery of Control Agreements.
SECTION 4.3 CHANGES IN LOCATIONS, NAME, ETC.
(a) Except upon fifteen (15) days' prior written notice to the
Collateral Agent and delivery to the Collateral Agent of (i) all additional
executed financing statements and other documents reasonably requested by the
Collateral Agent to maintain the validity, perfection and priority of the
security interests provided for herein and (ii) if applicable, a written
supplement to Schedule 3.4 showing any additional location at which Inventory or
Equipment shall be kept, such Grantor will not:
(i) change its state of incorporation or the location of its chief
executive office from that referred to in Section 3.3; or
(ii) change its name, identity or corporate structure to such an extent
that any financing statement filed in connection with this Agreement would
become misleading.
(b) Such Grantor will keep and maintain at its own cost and expense
satisfactory and complete records of the Collateral, including a record of all
payments received and all credits granted with respect to the Collateral and all
other dealings with the Collateral. If requested by the Collateral Agent, the
security interest of the Collateral Agent shall be noted on the certificate of
title of each Vehicle.
SECTION 4.4 PLEDGED COLLATERAL.
(a) Such Grantor will (i) deliver to the Collateral Agent or its
bailee, all certificates and Instruments representing or evidencing any Pledged
Collateral, whether now existing or hereafter acquired, in suitable form for
transfer by delivery or, as applicable, accompanied by such Grantor's
endorsement, where necessary, or duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Collateral
Agent and (ii) maintain all other Pledged Collateral constituting Investment
Property in a Control Account. Subject to the rights of CapitalSource under the
CapitalSource Loan Agreement and the Subordination Agreement, the Collateral
Agent shall have the right, at any time in its discretion and without notice to
the Grantor, to transfer to or to register in its name or in the name of its
nominees any or all of the Pledged Collateral. The Collateral Agent or its
bailee shall have the right at any time to exchange certificates or instruments
representing or evidencing any of the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
(b) Except as provided in Article V, such Grantor shall be entitled to
receive all cash dividends paid in respect of the Pledged Collateral (other than
liquidating or distributing dividends) with respect to the Pledged Collateral.
Any sums paid upon or in respect of any of the Pledged Collateral upon the
liquidation or dissolution of any issuer of any of the Pledged Collateral, any
distribution of capital made on or in respect of any of the Pledged Collateral
or any property distributed upon or with respect to any of the Pledged
Collateral pursuant to the recapitalization or reclassification of the capital
of any issuer of Pledged Collateral or pursuant to the reorganization thereof
shall, unless otherwise subject to a perfected security interest in favor of the
Collateral Agent, be delivered to the Collateral Agent to be held by it
hereunder as
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additional collateral security for the Secured Obligations. If any sums of money
or property so paid or distributed in respect of any of the Pledged Collateral
shall be received by such Grantor, such Grantor shall, until such money or
property is paid or delivered to the Collateral Agent, hold such money or
property in trust for the Collateral Agent, segregated from other funds of such
Grantor, as additional security for the Secured Obligations.
(c) Except as provided in Article V, such Grantor will be entitled to
exercise all voting, consent and corporate rights with respect to the Pledged
Collateral; provided, however, that no vote shall be cast, consent given or
right exercised or other action taken by such Grantor which would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Restructure Agreement, this Agreement or any other Transaction
Document or, without prior notice to the Collateral Agent, to enable or take any
other action to permit any issuer of Pledged Collateral to issue any stock or
other equity securities of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of any issuer of Pledged Collateral.
(d) Such Grantor shall not grant control over any Investment Property
to any Person other than CapitalSource or the Collateral Agent, except as
permitted pursuant to the Transaction Documents.
(e) In the case of each Grantor which is an issuer of Pledged
Collateral, such Grantor agrees to be bound by the terms of this Agreement
relating to the Pledged Collateral issued by it and will comply with such terms
insofar as such terms are applicable to it.
SECTION 4.5 ACCOUNTS.
(a) Such Grantor will not, other than in the ordinary course of
business consistent with its past practice, (i) grant any extension of the time
of payment of any Account, (ii) compromise or settle any Account for less than
the full amount thereof, (iii) release, wholly or partially, any Person liable
for the payment of any Account, (iv) allow any credit or discount on any
Account, or (v) amend, supplement or modify any Account in any manner that could
adversely affect the value thereof.
(b) The Collateral Agent shall have the right to make test
verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and such Grantor shall furnish all such
assistance and information as the Collateral Agent may reasonably require in
connection therewith. At any time and from time to time, upon the Collateral
Agent's request and at the expense of the relevant Grantor, such Grantor shall
cause independent public accountants or others satisfactory to the Collateral
Agent to furnish to the Collateral Agent reports showing reconciliations, aging
and test verifications of, and trial balances for, the Accounts; provided,
however, that unless a Default or Event of Default shall be continuing, the
Collateral Agent shall request no more than four such reports during any
calendar year.
SECTION 4.6 VEHICLES. Upon the request of the Collateral Agent, within
thirty (30) days after the date of such request and, with respect to any
Vehicles acquired by such
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Grantor subsequent to the date of any such request, within thirty (30) days
after the date of acquisition thereof, such Grantor shall file all applications
for certificates of title/ownership indicating the Collateral Agent's first
priority security interest in the Vehicle covered by such certificate, and any
other necessary documentation, in each office in each jurisdiction which the
Collateral Agent shall deem advisable to perfect its security interests in the
Vehicles.
SECTION 4.7 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge
or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of income or profits therefrom, as
well as all claims of any kind (including claims for labor, materials and
supplies) against or with respect to the Collateral, except that no such charge
need be paid if the amount or validity thereof is currently being contested in
good faith by appropriate proceedings, reserves in conformity with GAAP with
respect thereto have been provided on the books of such Grantor and such
proceedings could not reasonably be expected to result in the sale, forfeiture
or loss of any material portion of the Collateral or any interest therein.
SECTION 4.8 INSURANCE. Such Grantor shall cause all insurance
maintained by it pursuant to the Restructure Agreement to name the Collateral
Agent on behalf of the Secured Parties as additional insured or loss payee, as
appropriate, and to provide that no cancellation, material addition in amount or
material change in coverage shall be effective until after thirty (30) days'
written notice thereof to the Collateral Agent.
ARTICLE V. REMEDIAL PROVISIONS
SECTION 5.1 CODE AND OTHER REMEDIES COLLATERAL:
(a) During the continuance of an Event of Default, subject to the
provisions of the Subordination Agreement, the Collateral Agent may exercise, in
addition to all other rights and remedies granted to it in this Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party under the UCC or
any other applicable law.
(b) Without limiting the generality of Section 5.1(a), subject to the
provisions of the Subordination Agreement, upon an Event of Default, the
Collateral Agent, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon any Grantor or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Collateral Agent or any Secured Party or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Collateral Agent shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in any Grantor, which right or equity is
hereby waived and
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released. Each Grantor further agrees, at the Collateral Agent's request, to
assemble the Collateral and make it available to the Collateral Agent at places
which the Collateral Agent shall reasonably select, whether at such Grantor's
premises or elsewhere. The Collateral Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 5.1, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Collateral Agent and any Secured Party,
including reasonable attorneys' fees and disbursements, to the payment in whole
or in part of the Secured Obligations, in such order as the Transaction
Documents shall prescribe, and only after such application and after the payment
by the Collateral Agent of any other amount required by any provision of law,
need the Collateral Agent account for the surplus, if any, to any Grantor. To
the extent permitted by applicable law, each Grantor waives all claims, damages
and demands it may acquire against the Collateral Agent or any Secured Party
arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition.
SECTION 5.2 ACCOUNTS AND PAYMENTS IN RESPECT OF GENERAL INTANGIBLES.
(a) Subject to the rights of CapitalSource under the CapitalSource Loan
Agreement and the Subordination Agreement, if required by the Collateral Agent
at any time during the continuance of an Event of Default, any payments of
Accounts or payments in respect of General Intangibles, when collected by any
Grantor, shall be forthwith (and, in any event, within two Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such
Grantor to the Collateral Agent if required, in a Cash Collateral Account,
subject to withdrawal by the Collateral Agent as provided in Section 5.4. Until
so turned over, such payments shall be held by such Grantor in trust for the
Collateral Agent, segregated from other funds of such Grantor. Each such deposit
of Proceeds of Accounts and payments in respect of General Intangibles shall be
accompanied by a report identifying in reasonable detail the nature and source
of the payments included in the deposit.
(b) Subject to the rights of CapitalSource under the CapitalSource Loan
Agreement and the Subordination Agreement, at the Collateral Agent's request,
during the continuance of an Event of Default, each Grantor shall deliver to the
Collateral Agent all original and other documents evidencing, and relating to,
the agreements and transactions which gave rise to the Accounts or payments in
respect of General Intangibles, including all original orders, invoices and
shipping receipts.
(c) The Collateral Agent may, without notice, at any time during the
continuance of an Event of Default, limit or terminate the authority of a
Grantor to collect its Accounts or amounts due under General Intangibles or any
thereof.
(d) Subject to the rights of CapitalSource under the CapitalSource Loan
Agreement and the Subordination Agreement, the Collateral Agent in its own name
or in the name of others may at any time during the continuance of an Event of
Default communicate with Account Debtors to verify with them to the Collateral
Agent's satisfaction the existence, amount and terms of any Accounts or amounts
due under any General Intangibles.
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(e) Subject to the rights of CapitalSource under the CapitalSource Loan
Agreement and the Subordination Agreement, upon the request of the Collateral
Agent at any time during the continuance of an Event of Default, each Grantor
shall notify Account Debtors that the Accounts or General Intangibles have been
collaterally assigned to the Collateral Agent and that payments in respect
thereof shall be made directly to the Collateral Agent. In addition, the
Collateral Agent may at any time during the continuance of an Event of Default
enforce such Grantor's rights against such Account Debtors and obligors of
General Intangibles.
(f) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Accounts and payments in respect of General
Intangibles to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise thereto. Neither the Collateral Agent nor any Secured
Party shall have any obligation or liability under any agreement giving rise to
an Account or a payment in respect of a General Intangible by reason of or
arising out of this Agreement or the receipt by the Collateral Agent nor any
Secured Party of any payment relating thereto, nor shall the Collateral Agent
nor any Secured Party be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any agreement giving rise to an
Account or a payment in respect of a General Intangible, to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party thereunder, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
SECTION 5.3 PLEDGED COLLATERAL.
(a) During the continuance of an Event of Default, subject to the
rights of CapitalSource under the CapitalSource Loan Agreement and the
Subordination Agreement, upon notice by the Collateral Agent to the relevant
Grantor or Grantors, (i) the Collateral Agent shall have the right to receive
any and all Proceeds of the Pledged Collateral and make application thereof to
the Secured Obligations, and (ii) the Collateral Agent or its nominee may
exercise (A) all voting, consent, corporate and other rights pertaining to the
Pledged Collateral at any meeting of shareholders, partners or members, as the
case may be, of the relevant issuer or issuers of Pledged Collateral or
otherwise and (B) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to the Pledged Collateral
as if it were the absolute owner thereof (including the right to exchange at its
discretion any and all of the Pledged Collateral upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any issuer of Pledged Stock, the right to deposit and deliver any
and all of the Pledged Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Collateral Agent may determine), all without liability except to account for
property actually received by it, but the Collateral Agent shall have no duty to
any Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(b) In order to permit the Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant hereto and
to receive all dividends and other distributions which it may be entitled to
receive hereunder, (i) each Grantor shall promptly execute and deliver (or cause
to be executed and delivered) to the Collateral
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Agent all such proxies, dividend payment orders and other instruments as the
Collateral Agent may from time to time reasonably request and (ii) without
limiting the effect of clause (i) above, such Grantor hereby grants to the
Collateral Agent an irrevocable proxy to vote all or any part of the Pledged
Collateral and to exercise all other rights, powers, privileges and remedies to
which a holder of the Pledged Collateral would be entitled (including giving or
withholding written consents of shareholders, partners or members, as the case
may be, calling special meetings of shareholders, partners or members, as the
case may be, and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Collateral on the record books of the issuer thereof) by any other
Person (including the issuer of such Pledged Collateral or any officer or agent
thereof) during the continuance of an Event of Default and which proxy shall
only terminate upon the payment in full of the Obligations.
(c) Each Grantor hereby expressly authorizes and instructs each issuer
of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with
any instruction received by it from the Collateral Agent in writing that (A)
states that an Event of Default has occurred and is continuing and (B) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that such issuer
shall be fully protected in so complying and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Collateral directly to the Collateral Agent.
SECTION 5.4 PROCEEDS TO BE TURNED OVER TO COLLATERAL AGENT. All
Proceeds received by the Collateral Agent hereunder shall be held by the
Collateral Agent in a Cash Collateral Account. All Proceeds while held by the
Collateral Agent in a Cash Collateral Account (or by such Grantor in trust for
the Collateral Agent) shall continue to be held as collateral security for the
Secured Obligations and shall not constitute payment thereof until applied to
such Secured Obligations.
SECTION 5.5 WAIVER; DEFICIENCY. Each Grantor shall remain liable for
any deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Collateral Agent or any Secured
Party to collect such deficiency.
ARTICLE VI. THE COLLATERAL AGENT
SECTION 6.1 COLLATERAL AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each Grantor hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of such Grantor and in the name of
such Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, during the continuance of an Event of Default, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Collateral Agent the power and right, on behalf of
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such Grantor, without notice to or assent by such Grantor, to do any or all of
the following (in each case subject to the provisions of the Subordination
Agreement):
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes, acceptances
or other instruments for the payment of moneys due under any Account or
General Intangible or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Collateral Agent for the purpose of
collecting any and all such moneys due under any Account or General
Intangible or with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver, and
have recorded, any and all agreements, instruments, documents and papers as
the Collateral Agent may request to evidence the Collateral Agent's security
interest in such Intellectual Property and the goodwill and General
Intangibles of such Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 5.1
or 5.5, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (A) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Collateral Agent or as the Collateral Agent shall
direct; (B) ask or demand for, collect, and receive payment of and receipt
for, any and all moneys, claims and other amounts due or to become due at
any time in respect of or arising out of any Collateral; (C) sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral; (D)
commence and prosecute any suits, actions or proceedings at law or in equity
in any court of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of any Collateral;
(E) defend any suit, action or proceeding brought against such Grantor with
respect to any Collateral; (F) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, give such discharges or
releases as the Collateral Agent may deem appropriate; and (G) generally,
sell, transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the
Collateral Agent were the absolute owner thereof for all purposes, and do,
at the Collateral Agent's option and such Grantor's expense, at any time, or
from time to time, all acts and things which the Collateral Agent deems
necessary to protect, preserve or realize upon the Collateral and the
Collateral Agent's and the Secured Parties' security interests therein and
to effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.
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Anything in this Section 6.1(a) to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 6.1(a) unless an Event of Default shall be
continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Collateral Agent, at its option, but without
any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.
(c) The expenses of the Collateral Agent incurred in connection with
actions undertaken as provided in this Section 6.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Notes, from the date of payment by the Collateral
Agent to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Collateral Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
SECTION 6.2 DUTY OF COLLATERAL AGENT. The Collateral Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession shall be to deal with it in the same manner as the
Collateral Agent deals with similar property for its own account. Neither the
Collateral Agent, any Collateral Agent nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Collateral Agent hereunder are solely to protect the Collateral
Agent's interest in the Collateral and shall not impose any duty upon the
Collateral Agent or any Collateral Agent to exercise any such powers. The
Collateral Agent and the Secured Parties shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.
SECTION 6.3 EXECUTION OF FINANCING STATEMENTS. Each Grantor authorizes
the Collateral Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Collateral
Agent reasonably determines appropriate to perfect the security interests of the
Collateral Agent under this Agreement. A photographic or other reproduction of
this Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any jurisdiction.
SECTION 6.4 AUTHORITY OF COLLATERAL AGENT. Each Grantor acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or
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resulting or arising out of this Agreement shall, as between the Collateral
Agent and the Grantors, the Collateral Agent shall be conclusively presumed to
be acting as agent for the Secured Parties with full and valid authority so to
act or refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
ARTICLE VII. MISCELLANEOUS
SECTION 7.1 AMENDMENTS IN WRITING. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
in accordance with the Restructure Agreement.
SECTION 7.2 NOTICES. All notices, requests and demands to or upon the
Collateral Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 9.3 of the Restructure Agreement; provided, however,
that any such notice, request or demand to or upon any Grantor shall be
addressed to such Grantor at the Company's notice address set forth below their
signature hereto.
SECTION 7.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES.
Neither the Collateral Agent nor any Collateral Agent shall by any act (except
by a written instrument pursuant to Section 7.1), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or Event of Default. No failure to exercise, nor any
delay in exercising, on the part of the Collateral Agent or any Collateral
Agent, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Collateral Agent or the
Secured Parties of any right or remedy hereunder on any one occasion shall not
be construed as a bar to any right or remedy which the Collateral Agent or the
Secured Parties would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
SECTION 7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Collateral Agent and each Collateral Agent and their successors and
assigns; provided, however, that no Grantor may assign, transfer or delegate any
of its rights or obligations under this Agreement without the prior written
consent of the Collateral Agent.
SECTION 7.5 COUNTERPARTS. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same agreement.
SECTION 7.6 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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SECTION 7.7 SECTION HEADINGS. The Article and Section titles contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not part of the agreement of the parties hereto.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement together with the other
Transaction Documents represents the entire agreement of the parties and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
SECTION 7.9 GOVERNING LAW. This agreement and the rights and
obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York without regard
to the principles thereof relating to conflict of laws.
SECTION 7.10 RELEASE OF COLLATERAL. Upon the payment in full of all
Obligations, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Collateral Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Collateral Agent shall deliver to such Grantor any Collateral of such Grantor
held by the Collateral Agent hereunder and execute and deliver to such Grantor
such documents as such Grantor shall reasonably request to evidence such
termination.
SECTION 7.11 REINSTATEMENT. Each Grantor further agrees that, if any
payment made by any Grantor or other Person and applied to the Obligations is at
any time annulled, avoided, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid, or
the proceeds of Collateral are required to be returned by any Collateral Agent
to such Grantor, its estate, trustee, receiver or any other party, under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or repayment, any Lien or other Collateral securing
such liability shall be and remain in full force and effect, as fully as if such
payment had never been made or, if prior thereto the Lien granted hereby or
other Collateral securing such liability hereunder shall have been released or
terminated by virtue of such cancellation or surrender), such Lien or other
Collateral shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect any Lien or other Collateral securing the obligations of any
Grantor in respect of the amount of such payment.
SECTION 7.12 CAPITALSOURCE APPOINTED REPRESENTATIVE. The Grantors, the
Collateral Agent and the Secured Parties acknowledge that CapitalSource shall
act as representative and bailee of the Collateral Agent for purposes of
maintaining possession or control of certain items of Collateral as contemplated
by this Agreement.
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IN WITNESS WHEREOF, each of the undersigned has caused this
Subordinated Pledge and Security Agreement to be duly executed and delivered as
of the date first above written.
GRANTORS:
OPTICARE HEALTH SYSTEMS, INC.
By:
----------------------------------
Name:
Title:
PRIMEVISION HEALTH, INC.
By:
----------------------------------
Name:
Title:
Address:
OPTICARE EYE HEALTH CENTERS, INC.
By:
----------------------------------
Name:
Title:
Address:
ACCEPTED AND AGREED:
PALISADE CONCENTRATED EQUITY
PARTNERSHIP, L.P., as Collateral Agent
By:
----------------------------------
Name:
Title:
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