Document:

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                                                                    May 12, 2003

OptiCare Health Systems, Inc.
87 Grandview Avenue
Waterbury, CT 06708

Ladies and Gentlemen:

         Palisade Concentrated Equity Partnership, L.P. ("Palisade") hereby
exchanges the entire amount of principal and interest due under that Senior
Subordinated Secured Note dated January 25, 2002 (the "Palisade Note") executed
by OptiCare Health Systems, Inc. ("OptiCare"), which Palisade and OptiCare agree
is equal to $16,130,232, into 403,256 shares of Series C Preferred Stock, par
value $.001 per share (the "Series C Preferred Stock").

         Linda Yimoyines ("Ms. Yimoyines" and collectively with Palisade, the
"Holders") hereby exchanges the entire amount of principal and interest due
under that Senior Subordinated Secured Note dated January 25, 2002 (collectively
with the Palisade Note, the "Notes") executed by OptiCare, which Ms. Yimoyines
and OptiCare agree is equal to $116,045, into 2,902 shares of Series C Preferred
Stock.

         On the date hereof OptiCare shall issue and deliver to (i) Palisade a
stock certificate evidencing 403,256 shares of Series C Preferred Stock and (ii)
Ms. Yimoyines a stock certificate evidencing 2,902 shares of Series C Preferred
Stock (collectively, the "Shares"), and on the date hereof a copy of such
certificate has been faxed to each Holder.

         A. Representations and Warranties; Covenants

         1. Each of the Holders represents and warrants to Opticare that such
Holder (i) is acquiring the Shares for such Holder's own account for the purpose
of investment, and (ii) is not acquiring the Shares with a view to, or for
resale in connection with, a distribution, nor with any present intention of
distributing or selling the Shares and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or the securities laws of any state. Each of the Holders understands that until
the Shares have been registered under the Securities Act and applicable state
securities laws each certificate representing such Shares shall bear a legend
substantially similar to the following:

                THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
                THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS AND
                MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
                THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
                COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH
                RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
                COUNSEL FOR THE HOLDER OF THESE

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                SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT
                SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
                THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
                ACT.

         2. Each of the Holders represents and warrants to OptiCare that such
Holder is an "accredited investor" as such term is defined in Regulation D under
the Securities Act.

         3. Palisades represents and warrants to OptiCare that (i) it has the
right and power under its organizational documents to execute, deliver and
perform its obligations hereunder; (ii) this Letter Agreement has been duly
authorized by all necessary partnership action, and (iii) the officer executing
and delivering this Letter Agreement has the requisite right, power, capacity
and authority to do so on behalf of such partnership.

         4. Ms. Yimoyines represents and warrants to OptiCare that she has the
legal capacity to execute this Letter Agreement.

         5. OptiCare represents and warrants to each of the Holders that (i) it
has the right and power under its charter and bylaws to execute, deliver and
perform its obligations hereunder; (ii) this Letter Agreement has been duly
authorized by all necessary corporate or action, and (iii) the officer executing
and delivering this Letter Agreement has the requisite right, power, capacity
and authority to do so on behalf of such corporation.

         6. OptiCare represents and warrants to each of the Holders that (i) an
amendment to its Certificate of Incorporation that increases its authorized
number of shares of common stock, par value $.001 per share (the "Common
Stock"), to 150,000,000 shares (the "Shareholder Proposal") was submitted for
approval by OptiCare to its shareholders at its next meeting of shareholders,
which is scheduled to be held on May 19, 2003, in accordance with applicable
legal requirements, the provisions of OptiCare's Certificate of Incorporation
and Bylaws, and the requirements of the American Stock Exchange, and (ii) the
OptiCare Board of Directors has recommended that the shareholders approve the
Shareholder Proposal. OptiCare covenants to each of the Holders that, after such
approval is obtained, it shall promptly list the Common Stock issuable upon
conversion of the Series C Preferred Stock on The American Stock Exchange.

         7. OptiCare represents and warrants to each of the Holders that,
immediately prior to the consummation of the transactions contemplated by this
Letter Agreement, the authorized capital stock of OptiCare consists of (i)
75,000,000 shares of Common Stock, of which a total of 29,958,277 shares of
Common Stock are issued and outstanding, and (ii) 5,000,000 shares of Preferred
Stock, par value $.001 per share, of which (a) 550,000 shares are designated as
Series A Convertible Preferred Stock, par value $.001 per share, of which no
shares are issued and outstanding, (b) 3,500,000 shares are designated as Series
B 12.5% Voting Cumulative Convertible Participating Preferred Stock, par value
$.001 per share (the "Series B Preferred Stock"), of which 3,204,959.8 shares
are issued and outstanding, and (c) 406,158 shares are designated Series C
Preferred Stock, of

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which no shares are issues and outstanding. OptiCare further represents and
warrants to each of the Holders that: (A) except for the outstanding shares of
Series B Preferred Stock and as set forth on Schedule A-7 attached hereto, there
is no existing option, warrant, call, commitment or other agreement to which
OptiCare is a party requiring, and there are no convertible securities of
OptiCare outstanding which upon conversion would require, the issuance of any
additional shares of stock of OptiCare or other securities convertible into
shares of equity securities of OptiCare; (B) except as set forth in OptiCare's
Certificate of Incorporation and Bylaws, there are no agreements to which
OptiCare is a party or, to the knowledge of OptiCare, to which any stockholder
or warrant holder of OptiCare is a party in its capacity as such, with respect
to the voting or transfer of stock of OptiCare; (C) except as set forth on
Schedule A-7, there are no stockholders' preemptive rights or rights of first
refusal or other similar rights with respect to the issuance of stock by
OptiCare; and (D) true and correct copies of the Certificates of Incorporation
and Bylaws of OptiCare, as currently in effect, have been delivered to counsel
to Palisade.

         8. OptiCare represents and warrants to each of the Holders that: (i)
the Shares, when issued and delivered in exchange for the Notes in accordance
with the terms of this Letter Agreement, will be duly authorized, validly issued
and fully paid and non-assessable, free and clear of all pledges, liens,
encumbrances and preemptive rights, and (ii) upon (A) approval of the
Shareholder Proposal by the shareholders of OptiCare, (B) the acceptance by the
Delaware Secretary of State of the Amendment to the Certificate of Incorporation
of OptiCare (the "Certificate of Amendment") described in the Shareholder
Proposal, and (C) issuance upon conversion of the Shares in accordance with the
terms of OptiCare's Certificate of Incorporation, as amended by the Certificate
of Amendment, the Common Stock issuable upon conversion of the Shares will be
duly and validly issued, fully paid and nonassessable and will be free of free
and clear of al pledges, liens, encumbrances and preemptive rights.

         9. OptiCare represents and warrants to each of the Holders that, with
regard to the consummation of the transactions contemplated by this Letter
Agreement, the Company has complied with (i) all laws, statutes, governmental
regulations, judicial or administrative tribunal orders, judgments, writs,
injunctions, decrees, stock exchange rules and similar commands applicable to it
and its business, and all unwaived terms and provisions of all agreements,
instruments, and commitments to which it is a party or to which it or any of its
assets or properties is subject, except for any noncompliances that, both
individually and in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on the Shares or OptiCare's business,
assets, operations or financial condition, and (ii) its Certificate of
Incorporation and Bylaws, as currently in effect.

         10. OptiCare represents and warrants to each of the Holders that (i)
the audited consolidated balance sheet of OptiCare as of December 31, 2002, and
the related consolidated statements of operations and cash flows for the year
then ended (the "Financial Statements"), have been, except as noted therein,
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods

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involved and present fairly in all material respects the consolidated financial
position of OptiCare as at the dates thereof, and the consolidated results of
its operations and cash flows for the periods then ended, and (ii) except as set
forth on Schedule A-10 attached hereto, OptiCare does not have any material
obligations contingent or otherwise, including, without limitation, liabilities
for charges, long-term leases or unusual forward or long-term commitments, other
than those incurred since December 31, 2002, in the ordinary course of business.

         11. The parties hereto agree that all representations and warranties
made herein shall survive for one year after the date hereof other than the
representations and warranties of OptiCare set forth in Sections A.5, A.6, A.8
and A.9, which shall survive indefinitely.

         B. Miscellaneous

         1. Each of the Holders understands that the Shares shall bear a legend
substantially similar to the following:

                THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE OWNED BY A
                PERSON OR PERSONS WHO MAY BE CONSIDERED AN AFFILIATE FOR
                PURPOSES OF RULE 144 UNDER THE SECURITIES ACT. NO TRANSFER OF
                THESE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE UNLESS THE
                ISSUER HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT
                THAT SHARES MAY BE SOLD PURSUANT TO RULE 144 OR ANOTHER
                AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND THE RULES AND
                REGULATIONS THEREUNDER.

         2. The undersigned, as the holders of all of the issued and outstanding
shares of Series B Preferred Stock, hereby consent to the filing of the
Certificate of Designations, Rights and Preferences of the Series C Preferred
Stock and to the issuance of the Series C Preferred Stock in accordance hereof.

         3. This Letter Agreement shall be governed by and construed in
accordance with the laws of the State of New York governing contracts to be made
and performed therein without giving effect to principles of conflicts of law,
and, with respect to any dispute arising out of this Letter Agreement, each
party hereby consents to the exclusive jurisdiction of the courts sitting in
such State.

         4. This Letter Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same document.

         5. OptiCare shall reimburse the Holders for all reasonable
out-of-pocket expenses, including reasonable fees and disbursements of
Palisade's counsel, up to

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$10,000, in connection with the transactions contemplated by this Letter
Agreement.

         6. The Holders will execute and deliver to OptiCare any writings and do
all things necessary or reasonably requested by OptiCare to carry into effect
the provisions and intent of this Letter Agreement, including, without
limitation, assuring OptiCare that any security interests in any collateral or
assets of OptiCare granted to the Holders pursuant to the terms of the Notes and
related documentation have been terminated, providing evidence of such
termination and/or returning any collateral that is in their position.

         7. The Holders hereby consent to OptiCare's filing of UCC Financing
Statement Amendments, on behalf of the Holders, terminating any UCC filings made
by the Holders related to the Notes. OptiCare shall send Palisade copies of all
such UCC Financing Statements.

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         IN WITNESS WHEREOF, the undersigned have executed this Letter Agreement
on May 12, 2003.

                           PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.

                           By:      Palisade Concentrated Holdings, LLC
                                    General Partner

                           By:      /s/ Eric J. Bertrand
                                    -------------------------------------
                                    Member

                           /s/ Linda Yimoyines
                           ----------------------------------------------
                           LINDA YIMOYINES

                           OPTICARE HEALTH SYSTEMS, INC.

                           By:      /s/ Dean J. Yimoyines
                                    -------------------------------------

                                       6<PAGE>

                               AMENDMENT NO. 1 TO
                          REGISTRATION RIGHTS AGREEMENT

         AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (the "Amendment")
dated as of May 12, 2003 by and among OptiCare Health Systems, Inc., a Delaware
corporation (the "Company"), Palisade Concentrated Equity Partnership, L.P., a
Delaware limited partnership ("Palisade"), Linda Yimoyines, an individual
resident of the State of Connecticut ("Ms. Yimoyines"), and CapitalSource
Finance, LLC, a Delaware limited liability company ("CapitalSource").

                                   WITNESSETH:

         WHEREAS, the parties hereto entered into a Registration Rights
Agreement dated as of January 25, 2002 (the "Registration Rights Agreement");

         WHEREAS, the Company is issuing to Palisade and Ms. Yimoyines 406,158
shares of its Series C Preferred Stock, par value $.001 per share (the "Series C
Preferred Stock"), pursuant to Letter Agreement made as of the date hereof by
and among the Company, Palisade and Ms. Yimoyines; and

         WHEREAS, the parties hereto desire to amend the Registration Rights
Agreement in order to (i) provide that the shares of Common Stock, par value
$.001 per share, issuable upon conversion of any shares of Series C Preferred
Stock are included in the definition of "Registrable Securities" in the
Registration Rights Agreement, and (ii) correct a scriveners error contained in
Section 8(i).

         NOW, THEREFORE IT IS AGREED:

         Section 1. Amendments to Section 1 of the Registration Rights
Agreement. (a) The following new defined terms are added to Section 1 of the
Registration Rights Agreement:

         Agreement: the Registration Rights Agreement dated as of January 25,
         2002 by and among OptiCare Health Systems, Inc., a Delaware
         corporation, Palisade Concentrated Equity Partnership, L.P., a Delaware
         limited partnership, Linda Yimoyines, an individual resident of the
         State of Connecticut, and CapitalSource Finance, LLC, a Delaware
         limited liability company, and all amendments thereto.

         Series C Preferred Stock: shares of Series C Preferred Stock, par value
         $.001 per share, of the Company.

         (b) The defined term "Registrable Securities" is hereby deleted and the
following new defined term is inserted in lieu thereof:

         Registrable Securities: (i) All shares of Common Stock held by the
         Holders, (ii) all shares of Common Stock issuable upon conversion of
         any Series B Preferred Stock and Series C Preferred Stock held by the
         Holders, (iii) all shares of Common Stock

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         issuable upon exercise of any Warrants held by the Holders, and (iv)
         any securities issued or issuable with respect to the shares of Common
         Stock described in clauses (i), (ii), or (iii) of this sentence by way
         of a stock dividend or stock split or in connection with a combination
         of shares, recapitalization, merger, consolidation or other
         reorganization, until such shares of Common Stock or other securities
         are not Restricted Securities as defined in Section 2(a).

         Section 2. Amendment to Section 8 of the Registration Rights Agreement.
Section 8(i) is hereby deleted and the following is inserted in lieu thereof:

         (i) Entire Agreement. This Agreement sets forth the entire agreement
         and understanding between the parties and supercedes all proposals,
         commitments, writings, negotiations, discussions, agreements and
         understandings, oral or written, of every kind and nature between them
         concerning the subject matter hereof. This Agreement may not be amended
         or otherwise modified except in a writing signed by all parties hereto.
         No discharge of the terms hereof shall be deemed valid unless by full
         performance by the parties or by a writing signed by the parties. A
         waiver by any party of any breach or violation of any provision of this
         Agreement shall not be deemed or construed as a waiver of any other
         breach or violation hereof.

         Section 3. Further Assurances. Each party hereby agrees, at any time
and from time to time after the date hereof, at the reasonable request of the
other parties, to execute and deliver such other agreements, certificates or
instruments as may be reasonably requested in order to more effectively amend
the Registration Rights Agreement as set forth above or to evidence or confirm
this Amendment.

         Section 4. Effect of Amendment. The parties hereby ratify and confirm
all of the provisions of the Registration Rights Agreement, as amended hereby,
and agree and acknowledge that the same as so amended remains in full force and
effect.

         Section 5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York governing
contracts to be made and performed therein without giving effect to principles
of conflicts of law, and, with respect to any dispute arising out of this
Amendment, each party hereby consents to the exclusive jurisdiction of the
courts sitting in such State.

         Section 6. Counterparts. This Amendment may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.

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         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.

                               OPTICARE HEALTH SYSTEMS, INC.

                               By: /s/ Dean J. Yimoyines
                                   -------------------------------------------
                               Name: Dean J. Yimoyines
                               Title: CEO

                               PALISADE CONCENTRATED EQUITY PARTNERSHIP, L.P.

                               By: Palisade Concentrated Holdings, LLC
                                   General Partner

                               By: /s/ Eric J. Bertrand
                                   -------------------------------------------
                               Name: Eric J. Bertrand
                               Title: Member

                               CAPITALSOURCE FINANCE, LLC

                               By: /s/ Kathleen Miko
                                   -------------------------------------------
                               Name: Kathleen Miko
                               Title: Vice President

                               /s/ Linda Yimoyines
                               -----------------------------------------------
                               Linda Yimoyines

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