OPTICARE HEALTH SYSTEMS, INC.
WARRANT AGREEMENT
This agreement (this "Agreement") is made as of October 10, 2000, by
and between OPTICARE HEALTH SYSTEMS, INC., a Delaware corporation (the
"Company") with offices located at 00 Xxxxxxxxx Xxxxxx and MEDICI I INVESTMENT
CORP., a British Virgin Islands corporation (the "Warrant Recipient")
WHEREAS, an affiliate of the Warrant Recipient agreed to make certain
loans to the Company pursuant to a subordinated note of even date herewith (the
"Subordinated Note"); and
WHEREAS, in order to induce an affiliate of the Warrant Recipient to
make such loans and enter into the Subordinated Note, the Company has agreed to
execute and deliver to the Warrant Recipient the Warrant hereinafter described;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION I
AUTHORIZATION AND ISSUANCE OF WARRANTS
1.1 Authorization. The Company will have authorized before the Closing
(as defined in Section 2.1) the issuance hereunder of a warrant (the "Warrant")
to purchase 2,250,000 shares of its Common Stock par value $.001 per share (the
"Shares").
1.2 Issuance of the Warrant. At the Closing, and subject to the terms
and conditions hereof, the Company shall issue a Warrant to the Warrant
Recipient to purchase 2,250,000 Shares. No payment shall be required of the
Warrant Recipient in consideration of receipt of the Warrant.
SECTION 2
CLOSING DATE; DELIVERY
2.1 Closing. The closing of the issuance of the Warrant hereunder (the
"Closing") shall take place at the Company offices on October 10, 2000, or at
such other place and time upon which the Company and the Warrant Recipient shall
agree. The date of Closing is referred to as the "Closing Date".
1
2.2 Delivery. At the Closing, the Company shall deliver to the Warrant
Recipient a Warrant to purchase 2,250,000 Shares.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Warrant Recipient
that:
3.1 Certificate of Incorporation and Bylaws. The Company has delivered
to the Warrant Recipient true, correct, and complete copies of the Company's
Certificate of Incorporation, as amended through the date hereof, and the
Company's bylaws, as amended through the date hereof.
3.2 Corporate Power. The Company has all requisite legal and corporate
power and authority to execute and deliver this Agreement, to issue the Warrant
hereunder, to issue the Shares upon exercise of the Warrant, and to carry out
and perform its obligations under the terms of this Agreement.
3.3 Authorization. All corporate action on the part of the Company, its
officers, directors, and its stockholders necessary for the authorization,
execution, delivery, and performance of this Agreement by the Company, the
authorization, sale issuance and delivery of the Warrant, the Shares and the
performance of all of the Company's obligations hereunder and thereunder have
been taken or will be taken prior to the Closing. This Agreement constitutes a
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its respective terms, subject to (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief, or other
equitable remedies. The Shares, when issued in accordance with this Agreement,
will be duly and validly issued, fully paid and nonassessable, and will have the
rights, preferences, privileges, and restrictions as set forth in the
Certificate of Incorporation. The Shares, when issued, will be free of any
liens, claims, encumbrances or restrictions on transfer, except as specifically
set forth in the Certificate of Incorporation, this Agreement, and the Warrant.
The Shares are not subject to any preemptive rights or rights of first refusal.
3.4 The Company hereby agrees to provide the Warrant Recipient and/or
the Warrant Recipient's affiliates with two demand registration rights
(commencing on March 31, 2001) and Piggyback Registration Rights in respect of
the shares underlying the Warrant, containing standard and customary protections
and limitations, which are embodied in a separate registration rights agreement
that is reasonably satisfactory to both the Company and the Warrant Recipient.
2
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE WARRANT RECIPIENT
The Warrant Recipient hereby represents and warrants to the Company
with respect to the issuance of the Warrant and purchase of the Shares
thereunder as follows:
4.1 Investor Qualification. The Warrant Recipient is either (a) an
"accredited investor", as such term is defined in Rule 501 of Regulation D as
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
or, (b) if the Warrant Recipient is not an "accredited investor" then the
Warrant Recipient has such knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of an investment in the
Warrant and the Shares issuable upon exercise of the Warrant, and in the Warrant
Recipient's judgment, has obtained sufficient information about the Company or
its subsidiaries to evaluate the merits and risks of such an investment.
4.2 Securities Unregistered. The Warrant Recipient understands and
acknowledges that neither the Warrant nor the Shares issuable upon exercise of
the Warrant have been registered under the Securities Act.
4.3 Investment. The Warrant is being acquired by the Warrant Recipient
only for investment for the Warrant Recipient's own account, and not as a
nominee or agent and not with a view to the resale or distribution thereof in
contravention of applicable laws, and the Warrant Recipient has no present
intention of selling, granting any participation in or otherwise distributing
any interest therein within the meaning of the Securities Act. The Warrant
Recipient does not have any contracts, understandings, agreements or
arrangements with any person to sell, transfer or grant participation to such
person or any third person, with respect to the Warrant.
4.4 Advice. The Warrant Recipient has had an opportunity to seek
outside advice and has sought such advice to the extent the Warrant Recipient
deemed appropriate with respect to the terms and conditions of this Agreement.
4.5 Risks. The Warrant Recipient acknowledges that he can bear the
economic risk of his investment in the Warrant and Subordinated Note and the
Shares issuable upon exercise of the Warrant for an indefinite period of time
and has alone, or together with a financial advisor of his selection, such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment therein. The Warrant Recipient
understands that the Warrant and the Shares issuable upon exercise of the
Warrant will be characterized as "restricted securities" under federal
securities laws since they are being acquired in a transaction not involving a
public offering and that under such laws and applicable regulations the Warrant
and the Shares issuable upon exercise of the Warrant may not be resold without
registration or an exemption from registration under the Securities Act. The
Warrant Recipient represents
3
that he is familiar with and understands the resale limitations imposed by the
Securities Act and the rules and regulations promulgated thereunder.
4.6 Legend. The Warrant Recipient understands and agrees that the
certificates evidencing the Shares issuable upon exercise of the Warrant will
bear an appropriate legend evidencing the restricted nature of such Shares
indicating that no transfer of any of such Shares may be made unless such Shares
are registered under the Securities Act or an exemption from such registration
is available, and that the Company will instruct its transfer agent not to
transfer any such Shares unless such transfer shall be made in compliance with
such legend. The legend shall be substantially in the form set forth below:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THESE SHARES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS DULY REGISTERED UNDER
THE ACT OR UNLESS, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, SUCH TRANSACTION IS EXEMPT FROM THE
REGISTRATION PROVISIONS OF THE ACT."
4.7 Miscellaneous. Warrant Recipient understands that the Warrant is
being offered and issued to it in reliance on specific exclusions from the
registration requirements of federal and state securities laws of the United
States, and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Warrant Recipient set forth herein in order to determine the applicability of
such exclusions and the suitability of Warrant Recipient to acquire the Warrant.
4.8 Binding Obligation. This Agreement will constitute the valid and
legally binding obligation of such Warrant Recipient, enforceable in accordance
with its respective terms, subject to (i) laws of general application relating
to bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies.
[Such Warrant Recipient, if not a natural person, has full corporate or
partnership, as the case may be, power and authority to enter into and to
perform its obligations under this Agreement in accordance with its terms. Such
Warrant Recipient represents that it has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company.]
4
SECTION 5
CONDITIONS TO CLOSING
The Company's obligation to issue the Warrant at the Closing, is at the
option of the Company, subject to the fulfillment on or prior to the Closing
Date of the following conditions:
5.1 Representation and Warranties. The representations and warranties
made by the Warrant Recipient in Section 4 of this Agreement shall have been
true and correct when made, and shall be true and correct as of the Closing
Date.
5.2 No Litigation. No action, suit or other proceeding shall be pending
or threatened before any court, tribunal, or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated hereby, or seeking to obtain substantial damages in respect thereof
or which would otherwise materially and adversely affect the Company, its
business, assets, prospects or financial condition.
SECTION 6
GENERAL PROVISIONS
6.1 Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of Delaware.
6.2 Successors and Assigns; Third Party Beneficiaries. Except as
otherwise expressly limited herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors (including successor trustees,
in the case of a trustee), assigns, heirs, executors, and the administrators of
the parties hereto. Nothing in this Agreement, expressed or implied, is intended
to confer upon any party other than the parties hereto and their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
6.3 Entire Agreement; Amendment and Waiver. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subject matter hereof and thereof and supersedes all prior agreements
among the parties. Any term of this Agreement may be amended, and the observance
of any term hereof may be waived (either generally or in a particular instance)
only with the written consent of the Warrant Recipient and the written consent
of the Company.
6.4 Survival. The representations, warranties, covenants, and
agreements made herein shall survive the closing of the transactions
contemplated hereby for one year.
5
6.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered by fax only,
delivered to the addressee with confirmed answer back on a business day during
normal business hours.
6.6 Delays or Omissions. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any of the parties, shall be
cumulative and not alternative.
6.7 References. Unless the context otherwise requires, any reference to
a "Section" refers to a section of this Agreement. Any reference to "this
Section" refers to the whole number section in which such reference is
contained.
6.8 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms. The court in its discretion may substitute for the excluded provision an
enforceable provision which in economic substance reasonably approximates the
excluded provision.
6.9 Pronouns. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the identity of the person
or persons may require.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and enforceable against
the parties actually executing such counterpart, and all of which, when taken
together, shall constitute one instrument.
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first set forth above.
WITNESSETH: COMPANY:
OPTICARE HEALTH SYSTEMS, INC.
-------------------------------
By: /s/ Xxxx X. Xxxxxxxxx
------------------------------- ---------------------------------
Name: Xxxx X. Xxxxxxxxx, M.D.
Title: President
WARRANT RECIPIENT:
--------------------------------
MEDICI I INVESTMENT CORP.
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------- ---------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director
7
