TLC The Laser Center Inc.
SHARE FOR SHARE EXCHANGE AGREEMENT
THIS AGREEMENT is made and entered into as of December 15, 1996;
B E T W E E N:
TLC The Laser Center Inc., a corporation incorporated under the laws
of the Province of Ontario
(hereinafter referred to as "TLC")
OF THE FIRST PART,
- and -
20/20 Laser Centers, Inc., a corporation incorporated pursuant to
the laws of the State of Maryland
(hereinafter referred to as "20/20")
OF THE SECOND PART,
- and -
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
M.D., J. ▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D., ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(individually and as Trustee of ▇▇▇▇▇▇▇▇▇ Family Trust), ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ (hereinafter referred to as the "Insiders")
OF THE THIRD PART.
W I T N E S S E T H:
WHEREAS Company is engaged in the business of developing and
operating medical practices in the United States of America in which physicians
use excimer lasers to correct refractive vision disorders such as
nearsightedness and astigmatism (the "Business");
AND WHEREAS TLC is engaged in the business of developing and
operating medical practices in North America in which physicians use excimer
lasers to correct refractive vision disorders such as nearsightedness and
astigmatism and desires to acquire Company through a tax-free exchange of the
stock of 20/20 solely for voting stock of TLC pursuant to Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended (the "Code").
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AND WHEREAS the Insiders have agreed to deliver their shares in
20/20 commensurate with the execution and delivery of this Agreement, together
with the form of proxy evidencing an affirmative vote in favour of the Exchange
(as hereinafter defined);
NOW, THEREFORE, in consideration of the recitals and of the
respective covenants, representations, warranties and agreements herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
INTERPRETATION
1.1 Definitions
In this Agreement, unless something in the subject matter or context is
inconsistent therewith:
(a) "Agreement" means this agreement, the schedules, exhibits and all
amendments made hereto by written agreement between the parties;
(b) "Balance Sheet of 20/20" has the meaning set out in Section 3.4;
(c) "Balance Sheet of TLC" has the meaning set out in Section 4.5;
(d) "Business" has the meaning set forth in the first recital;
(e) "Business Day" means a day other than a Saturday, Sunday or
statutory holiday in Ontario or in the State of Maryland;
(f) "Closing" has the meaning set forth in Section 2.2 below;
(g) "Closing Date" has the meaning set forth in Section 2.2 below;
(h) "Code" means the Internal Revenue Code of 1986, as amended;
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(i) "Company" means 20/20 and each of the Subsidiaries;
(j) "Company Share" means a share of the voting common stock of 20/20;
(k) "Effective Time" means the time as of which the Exchange (as
hereinafter defined) is effective which, for purposes of this
Agreement, is intended to be, and may be used interchangeably with,
the Closing Date;
(l) "Exchange" has the meaning set out in Section 2.1(b);
(m) "Insiders" means ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, M.D., J. ▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D., ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (individually and as Trustee of ▇▇▇▇▇▇▇▇▇ Family
Trust), ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇, and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇.
(n) "Interim Consolidated Financial Statements of TLC" has the meaning
set out in Section 4.5;
(o) "Prospectus" means the prospectus of TLC dated September 24, 1996
relating to the offering of 3.5 million common shares of TLC;
(p) "Purchase Price" has the meaning set out in Section 2.1(a);
(q) "Shareholders" means all of the holders of the Company Shares;
(r) "Subsidiaries" means collectively 20/20 Laser Services (DC Metro),
LLC, 20/20 Laser Services (South Florida), LLP, 20/20 Laser Services
(Philadelphia Metro), LLP, 20/20 Laser Services (NY Metro I), LLC,
20/20 Laser Services (NY Metro II), LLC and 20/20 Laser Services
(Manhattan), LLC;
(s) "Threshold" has the meaning set out in Section 2.1(a);
(t) "TLC Share" means a voting common share without par value of TLC;
(u) "20/20 Financial Statements" has the meaning set out in Section 3.4;
and
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(v) "20/20 Financial Statements Date" means October 31, 1996..
1.2 Headings
The division of this Agreement into Articles and Sections and the
insertion of heading are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The terms of "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
1.3 Extended Meanings
In this Agreement, words importing the singular number shall include the
plural and vice versa, words importing the masculine gender shall include the
feminine and neuter genders and vice versa and words importing persons shall
include individuals, partnerships, associations, trusts, unincorporated
organizations and corporations.
1.4 Accounting Principles
Whenever in this Agreement reference is made to a calculation to be made
in accordance with generally accepted accounting principles, such reference
shall be deemed to be to the generally accepted accounting principles from time
to time adopted by the American Institute of Certified Public Accountants, or
any successor institute in the case of the Company, and the Canadian Institute
of Chartered Accountants, or any successor institute in the case of TLC,
applicable as at the date on which such calculation is made or required to be
made in accordance with generally accepted accounting principles.
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1.5 Exhibits
The following are the Exhibits annexed hereto and incorporated by
reference and deemed to be part hereof:
Exhibit 1 - Form of Legal Opinion of Proskauer ▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP, respecting 20/20
Compliance with Health Care Statutes;
Exhibit 2 - [Intentionally Deleted];
Exhibit 3 - Form of Legal Opinion of Tory ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ & Binnington and/or Arent Fox
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ respecting TLC
Corporate Matters;
Exhibit 4 - Form of Holdback Agreement;
Exhibit 5 - Form of Executive Officer Employment
Agreement for 20/20;
Exhibit 6 - Form of Shareholders' Certification; and
Exhibit 7 - Form of Insiders' Transmittal Letter; and
Exhibit 8 Form of Registration Rights Agreement.
Exhibit 9 - Form of Amended Loan Documents for Advance
1.6 Schedules
The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:
Schedule 3.1 - List of Company Shareholders;
Schedule 3.3 - List of Options and Warrants;
Schedule 3.6 - List of Title to Properties;
Encumbrances;
Schedule 3.7 - List of Leases;
Schedule 3.8 - List of Fixed Assets;
Schedule 3.9 - List of Material Contracts;
Schedule 3.10 - List of Restrictive Documents;
Schedule 3.11 - List of Litigation Proceedings;
Schedule 3.12 - Taxes
Schedule 3.14 - List of Insurance Policies;
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Schedule 3.15 - List of Intellectual Property;
Schedule 3.19 - List of Employees, Length of Service,
and Compensation and Benefit Plans;
Schedule 3.20 - List of Environmental Claims;
Schedule 3.22 - List of Bank Accounts, Powers of
Attorney and Related Party Contracts;
Schedule 3.24 - Miscellaneous Disclosures
Schedule 3.28 - Subsidiaries
Schedule 4.7 - List of TLC Restrictive Documents;
Schedule 4.8 - List of TLC Litigation Proceedings; and
Schedule 7.1 - Stock Options.
ARTICLE II
THE EXCHANGE AND RELATED TRANSACTIONS
2.1 The Exchange
(a) TLC offers to purchase from the Shareholders and the Insiders all of
the Company Shares upon and subject to the terms and conditions
hereof; provided however that this offer shall be contingent upon
the Shareholders and the Insiders of the Company selling in the
aggregate at least 80% of the Company Shares computed on a fully
diluted basis (the "Threshold");
(b) The purchase price to be paid for the Company Shares (the "Purchase
Price") shall be paid and satisfied by the allotment, issuance and
delivery to the Shareholders and Insiders of .37517 TLC Shares for
each Company Share (the "Exchange Ratio") or by the vesting of
certain Stock Options in the TLC Share Option Plan pursuant to the
provisions of Section 7.1 hereof. After making the calculation of
the Exchange Ratio for each Shareholder or Optionee (as defined in
Section 7.1 hereof), any fraction of .50 and above shall be rounded
up to the next whole TLC Share, and any fraction below .50 shall be
rounded down so that no fractional TLC Shares are issued. Subject to
the terms and conditions of this Agreement, the Shareholders and
Insiders shall surrender all of their Shares to TLC in exchange
solely for TLC Shares at the Effective Time (the "Exchange").
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(c) TLC hereby agrees that the amount of the Purchase Price shall be
added to the stated capital applicable to the common shares issued
by TLC.
2.2 The Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇ following the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated hereby, commencing at 9:00 a.m., local
time, on January 31, 1997 or such other date the parties may mutually determine
(the "Closing Date").
2.3 Actions at the Closing. At the Closing, (i) Shareholders and the Company
will deliver to TLC the various certificates, instruments, and documents
referred to in Article VII below; and (ii) TLC will deliver to the Company
various certificates, instruments and documents referred to in Article VIII
below or as may be required pursuant to the General Corporation Law of Maryland.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND INSIDERS
3.0 Representations of the Company and Insiders. The Company and Insiders,
jointly and severally, if applicable, except as otherwise indicated, represent,
warrant and agree as follows:
3.1 Ownership of Company Shares. The Shareholders and Insiders are the lawful
record owners of all of the outstanding Company Shares and with respect to the
Insiders only, their Shares are free and clear of all liens, encumbrances,
restrictions and claims of every kind; the Insiders have the legal right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby; the Exchange will result in the transfer to TLC of valid
title to the Company Shares owned by the Insiders, free and clear of all liens,
encumbrances, restrictions and claims of every kind. According to the books and
records of the Company, the numbers of shares owned by each Shareholder is
listed on Schedule 3.1. Attached hereto as Exhibit 6 is a copy of the
Shareholders' Certification which TLC may rely upon to be made by each
Shareholder as to his/her/its ownership of their respective Company Shares. The
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Company or the Insiders have not received any notice of any pledge, lien or
other encumbrance of any of the Company Shares except as described in Schedule
3.1.
3.2 Existence; Good Standing; Corporate Authority and Authorization. 20/20 is a
corporation duly organized, validly existing and in good standing under its
jurisdiction of incorporation or organization. Each of the Subsidiaries is a
limited partnership or limited liability company duly organized, validly
existing and in good standing under its jurisdiction of organization. 20/20 and
each of the Subsidiaries is qualified to do business and is in good standing in
all other jurisdictions in which the character or location of the properties
owned or leased by it or the nature of the business conducted by it makes such
qualification necessary. 20/20 has the power and authority to own its property
and to carry on its business as now being conducted. 20/20 has the full power
and authority to enter into and perform this Agreement. Compliance with the
terms and conditions hereof by 20/20 will not (i) violate or conflict with any
provision of the articles of incorporation, other constating documents of 20/20
or any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restrictions of any government, governmental
agency or court to which the Company or any of its property or assets is
subject, or (ii) result in the breach or termination of any provision of, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, require any notice or constitute a breach or default under any
note, bond, indenture, lease, agreement or other instrument or obligation to
which the Company is a party or by which any of the properties or assets of the
Company may be subject, bound or affected. No authorization, consent or approval
of any public body or authority is necessary to the validity of the transactions
contemplated by this Agreement. Except for the tender of Company Shares by the
Shareholders pursuant to Article V, all necessary approvals of the parties under
any contracts, commitments or understandings to which the Company is a party or
any other person required to permit the consummation on the part of the Company
of the transactions contemplated in this Agreement have been or will be obtained
by the Company or the Insiders on or before the Closing Date. Except for the
tender of Company Shares by the Shareholders pursuant to Article V, neither the
Company nor any Insider is otherwise a party to any contract or subject to any
other legal restriction that would prevent or restrict complete fulfillment by
the Company or the Insiders of all of the terms and conditions of this Agreement
or compliance with any of the Company's or the Insiders' obligations under it.
Except for the tender of Company Shares by the Shareholders pursuant to Article
V, the Company has taken all necessary corporate actions to authorize and
approve the execution, delivery and performance of this Agreement (including
approval by the Board of Directors of the Company). This Agreement constitutes a
legal, valid and binding obligation of the Company and the Insiders, enforceable
against the Company and
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the Insiders in accordance with its terms.
3.3 Capital Stock and Exclusive Dealing.
(a) 20/20 has an authorized capitalization consisting of Twenty Million
(20,000,000) shares of voting common stock, par value $.01 per share, of which
11,105,301 shares have been issued and outstanding to the Shareholders and the
Insiders, collectively. The Insider's Shares represent42%of the total issued and
outstanding Shares. All such shares have been duly authorized; are validly
issued; and, are fully paid and nonassessable. There are no other shares of
stock of 20/20 issued and outstanding. There are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements of any character providing for the purchase, issuance
or sale of any shares of the capital stock of 20/20 except as set out on
Schedule 3.3.
(b) Neither the Company nor the Insiders is engaged in any discussions or
negotiations for the purchase or sale of any shares of the Company Shares or
treasury shares except in connection with the transactions described herein.
3.4 Financial Statements. The Company has furnished TLC with the consolidated
balance sheets of the Company for the annual fiscal periods ended December 31,
1994 and December 31, 1995, and the ten (10) month interim period ended October
31, 1996 (the "Balance Sheet of 20/20") and the related consolidated statements
of income, shareholder's equity and changes in financial position for the
periods then ended (hereinafter collectively referred to as the "20/20 Financial
Statements"). The 20/20 Financial Statements have not been audited (except for
the audit conducted by representatives of TLC as referenced below), and have
been prepared by the Company. All such 20/20 Financial Statements are fairly
presented in accordance with generally accepted accounting principles
consistently followed according to past practice throughout the periods
indicated. The Balance Sheet of 20/20 presents fairly the financial position of
the Company at the dates thereof and, except as indicated therein, reflects in
accordance with generally accepted accounting principles claims against and
debts and liabilities of the Company, fixed or contingent, as at the dates
thereof, and the related consolidated statements of income, shareholder's equity
and changes in financial position fairly presents the results of the operations
of the Company and its Subsidiaries and the changes in the financial position
for the periods indicated. The 20/20 Financial Statements have been audited by
representatives of TLC.
3.5 Books and Records. The corporate records and minute books of the Company, as
made
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available to TLC and its representatives prior to the Closing Date, contain
complete and accurate records of all official meetings of and official corporate
actions or written consents by the respective shareholders and Board of
Directors of the Company and such meetings were duly held. The share certificate
books, registers of Shareholders, registers of transfers and registers of
directors are complete and accurate. The Company does not have any of its
corporate and financial records, systems, controls, data or information (other
than patient outcomes data) recorded, stored, maintained, operated or otherwise
wholly or partly dependent upon or held by any means (including any electronic,
mechanical or photographic process, whether computerized or not) which
(including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company.
3.6 Title to Properties; Encumbrances. Except as set forth in Schedule 3.6
attached hereto and made a part hereof and except for properties and assets
reflected in the Balance Sheet of 20/20 or acquired since the 20/20 Financial
Statement Date or which have been sold or otherwise disposed of in the ordinary
course of business, the Company has good, valid and merchantable title to (a)
all its properties and assets (personal, tangible and intangible), including,
without limitation, all the properties and assets reflected in the Balance Sheet
of 20/20, except as indicated in the notes thereto, and (b) all the properties
and assets purchased by the Company since the 20/20 Financial Statements Date;
in each case, each such property is subject to no encumbrance, lien, charge or
other restriction of any kind or character, except for (i) liens reflected in
the Balance Sheet of 20/20, (ii) purchase money liens, (iii) liens consisting of
zoning or planning restrictions, easements, permits and other restrictions or
limitations on the use of real property or irregularities in title thereto which
do not materially detract from the value of, or impair the use of, or otherwise
impair the marketability of the title or affect the use of such property by the
Company in the operation of its business and (iv) liens for current taxes,
assessments or governmental charges or levies on property not yet due and not
delinquent.
3.7 Leases. Schedule 3.7 attached hereto and made a part hereof contains an
accurate and complete list (including the location of an executed copy thereof)
of all leases to which the Company is a party as lessee or lessor. Each lease
set forth in Schedule 3.7 is in full force and effect. All rents and additional
rents (except as set forth on Schedule 3.7) due to date on each such lease have
been paid; in each case, the lessee has been in peaceable possession since the
commencement of the original term of such lease and is not in default thereunder
and (except as set forth on Schedule 3.7) no waiver, indulgence or postponement
of the lessee's obligations thereunder has been granted by the lessor; and
(except as set forth on Schedule 3.7) there exists no event of default or event,
occurrence, condition or act (including the execution and delivery of
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this Agreement) which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default under such
lease. Except as set forth on Schedule 3.7, the Company has not knowingly
violated or been given notice of violation of any of the terms or conditions
under any such lease in any material respect, and to the best knowledge,
information and belief of the Company and Insiders, all of the covenants to be
performed by any other party under any such lease have been fully performed. The
property leased by the Company is in a state of good maintenance and repair and
is adequate and suitable for the purposes for which it is presently being used
except for minor repairs which may be necessary in the ordinary course of
business.
3.8 Fixed Assets. Schedule 3.8 attached hereto and made a part hereof sets forth
a true, correct and complete description and location of each material item of
equipment, furniture, fixtures, and other items of tangible personal property
owned or leased by the Company and used in or useful or pertaining to the
Business or the operation thereof, including, without limitation, the excimer
lasers used at the Company's medical practice sites, whether or not reflected on
the books of the Company or in the possession of the Company and whether or not
presently in use.
3.9 Material Contracts. Except as set forth in Schedule 3.9 attached hereto and
made a part hereof, the Company is not now bound by (a) any agreement, contract
or commitment relating to the employment of any person by the Company, or any
bonus, deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement or other employee benefit plan, (b) any agreement,
indenture or other instrument which contains restrictions with respect to
payment of dividends or any other distribution in respect of its capital stock,
(c) any agreement contract or commitment relating to capital expenditures, (d)
any loan or advance to, or investment in, any other person or any agreement,
contract or commitment relating to the making of any such loan, advance or
investment, (e) any guarantee or other contingent liability in respect of any
indebtedness or obligation of Shareholders, or any other person or company
(other than the endorsement of negotiable instruments for collection in the
ordinary course of business), (f) any management service, consulting or any
other similar type contract, (g) any agreement, contract or commitment limiting
the freedom of the Company to engage in any line of business or to compete with
any other person, (h) any agreement, contract or commitment of the Company which
involves the payment in the aggregate of Twenty-Five Thousand and No/100 Dollars
U.S. ($25,000.00) or more. Each contract or agreement set forth in Schedule 3.9
is in full force and effect and to the best knowledge and belief of the Insiders
and the Company (except for the matters disclosed on Schedule 3.7 hereof) there
exists no default or event of default or event, occurrence, condition or act
(including the execution and delivery of this Agreement) which, with
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the giving of notice, the lapse of time or the happening of any other event or
condition, would become a default or event of default thereunder. Except for the
matters disclosed on Schedule 3.7 hereof, the Company has not knowingly violated
or been given notice of a violation of any of the terms or conditions of any
contract or agreement set forth in Schedule 3.9 in any material respect, and, to
the best knowledge, information and belief of the Company and Insiders, all of
the covenants to be performed by any other party thereto have been fully
performed.
3.10 Restrictive Documents. Except as set forth in Schedule 3.10 attached hereto
and made a part hereof, the Company is not subject to, or a party to, any
charter, bylaw, mortgage, lien, lease, license, permit, agreement, contract,
instrument, law, rule, ordinance, regulation, order, judgment or decree, or any
other restriction of any kind or character, which materially adversely affects
the business practices, operations or condition of the Company or any of its
assets or property, or which would prevent consummation of the transactions
contemplated by this Agreement or the continued operation of the Company's
business after the date hereof or the Closing Date on substantially the same
basis as heretofore operated or which would restrict the ability of the Company
to acquire any property or conduct business in any area.
3.11 Litigation. Except as set forth in Schedule 3.11 attached hereto and made a
part hereof, there is no action, suit, or proceeding at law or in equity by any
person or entity, or any arbitration or any administrative or other proceeding
by or before (or to the best knowledge, information and belief of the Company or
Insiders; any investigation by) any governmental or other instrumentality or
agency, pending, or to the best knowledge, information and belief of the Company
or Insiders, threatened, against or affecting the Company or any of its
properties or rights which could materially and adversely affect the right or
ability of the Company to carry on its business as now conducted, or which could
materially and adversely affect the condition, whether financial or otherwise,
or properties of the Company that would not otherwise be covered by adequate
insurance. Except as set forth on Schedule 3.11, the Company is not subject to
any judgment, order or decree entered in any lawsuit or proceeding which may
have a material adverse effect on any of its operations, business practices or
on its ability to acquire any property or conduct business in any area.
3.12 Taxes. (a) For purposes of this Agreement, (i) "Taxes" shall mean all
taxes, assessments, charges, duties, fees, levies or other governmental charges
(including interest, penalties or additions associated therewith) (including,
without limitation, federal, state, city, county, local, foreign, or other
income, franchise, capital, withholding, real or tangible property, employment,
unemployment compensation, transfer, sales, use, excise and all other taxes of
any
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kind) imposed by the United States or any state, city, county, country or
foreign government or subdivision or agency thereof, whether disputed or not,
and (ii) "Transaction" means any one or more transactions, acts, events, or
omissions of whatsoever nature.
(b) The Company has filed on a timely basis all returns and reports, including
all estimated returns and reports of every kind, and have timely given all
notices, in respect of Taxes required to be filed or given under applicable law
within the applicable statute of limitations period. Such returns, reports and
notices are complete and accurate in all material respects. All Taxes shown on
such returns or reports have been, and all Taxes subsequently assessed with
respect to the periods and or Transactions to which such returns or reports
relate have been or will be, timely, and fully paid except for amounts that the
Company is contesting in good faith, as set forth in Schedule 3.12. Except as
set forth in Schedule 3.12, no extensions of time to file such reports or
returns or waivers of statutes of limitation have been granted. The provisions
in the 20/20 Financial Statements for Taxes currently payable are adequate in
all material respects to provide for such Taxes for which the Company may be
liable in respect of periods or Transactions through the dates thereof. The
Company has not recorded any deferred taxes in the 20/20 Financial Statements.
The federal income taxes of the Company have not been examined by the Internal
Revenue Service (the "IRS"). To the best knowledge of the Company and the
Insiders, no fact or condition exists relating to any past or present
Transaction, except as set forth in Schedule 3.12, which, if known to any tax
authority having jurisdiction, would likely result in a successful challenge by
such authority of the treatment or omission of such factor or condition on any
tax return, report or notice of the Company. The Company has made all payments
of estimated Taxes required to be made under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and any comparable provisions of
state, local or foreign law. All such amounts that are required to be remitted
to any taxing authority have been duly remitted, except for such amounts as the
Company is contesting in good faith as set forth in Schedule 3.12. Except as set
forth in Schedule 3.12, there is no pending nor, to the best of the Company's
knowledge, threatened or contemplated action, audit, proceeding or investigation
for the assessment or collection of Taxes of the Company. Except as set forth in
Schedule 3.12, there are no requests for rulings, outstanding subpoenas or
requests for information with respect to Taxes of the Company, proposed
reassessments of any property owned or leased by the Company, or similar matters
pending with respect to any taxing authority. Except as set forth in Schedule
3.12, no power of attorney has been granted by the Company with respect to any
matter relating to Taxes which is currently in force. Any adjustment of Taxes of
the Company made by the IRS in any examination which is required to be reported
to the appropriate state, local or foreign taxing authorities has been reported
and any additional amount due with respect
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thereto has been paid except for amounts that the Company is contesting in good
faith, as set forth in Schedule 3.12.
(c) The Company has not received any material revenue agent's reports, or other
material written assertions of deficiencies or other liabilities for Taxes, with
respect to past records for which the limitations period has not run.
No power of attorney granted by the Company with respect to any taxes is
currently in force and the Company is not a party to any agreement for the
allocation or sharing of taxes, and the Company has never been a member of any
affiliated group tax return, and the Company has no liability for the taxes of
any person under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local or foreign law). The Company has not, with regard to any assets
or property held, acquired or to be acquired by it, filed a consent to the
application of Section 341(f) of the Code, and it is not a party to any
agreement, contract or arrangement that could result, on account of the
transactions contemplated by this Agreement, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
All monies required to be withheld from employees of the Company for income
taxes, social security and unemployment insurance taxes have been withheld or
collected and paid, when due, to the appropriate governmental authority, or if
such payment is not yet due, an adequate reserve has been established and the
Company has otherwise complied in all material respects with applicable laws,
rules, and regulations relating to tax withholding and remittance from
employees.
The Company is not a "United States Real Property Holding Corporation" as
defined in Section 897 of the Code.
The term "return" or "tax return" shall include any return declaration, report,
estimate, information return and statement required to be filed with or supplied
to any taxing authority in connection with any Taxes.
3.13 Liabilities. The Company has no material outstanding claims, liabilities or
indebtedness, contingent or otherwise, except as set forth in the Balance Sheet
of 20/20 other than liabilities incurred subsequent to the 20/20 Financial
Statement Date in the ordinary course of business not involving borrowings by
the Company or as may have been disclosed in Schedules attached hereto or
otherwise disclosed and consented to by TLC. Neither the Company nor Insiders
15
knows of any default in respect to the terms or conditions of any indebtedness
for which it may be obligated on, whether directly, indirectly or as endorser or
guarantor. The Company and Insiders represent and warrant that they have not
received any notice, verbal or otherwise, that any of the holders and payees of
any and all such liabilities, material or otherwise, intend to accelerate or
demand payment from the Company of any such liabilities as a result of the
consummation of the transactions herein described.
3.14 Insurance. Schedule 3.14 attached hereto and made a part hereof, sets out a
summary of the risk insured against and amount of coverage for all insurance
policies which the Company maintains with respect to its Business, properties or
employees. All such policies are in full force and effect and there currently
exists no right of termination on the part of the insurance carriers as a result
of any prior default on the part of the Company. Such policies, with respect to
their amounts and types of coverage, are believed to be adequate to insure
against material risks to which the Company and its property and assets are
normally exposed in the operation of its business. Since the 20/20 Financial
Statement Date there has not been any material adverse change in the Company's
relationship with its insurers or in the premiums payable pursuant to such
policies. The Company has no reason to believe that the insurance policies in
Section 3.14 will not be renewed or will only be renewed on the basis that there
will be a material increase in the premium payable thereon.
3.15 Intellectual Properties. For the purposes of this Section 3.15,
"Intellectual Property" means any and all right, title and interest of the
Company in and to: patents, registered or unregistered tradenames, trademarks
and servicemarks and registered or unregistered copyrights and applications
therefor; trade secrets, customer lists, methodologies, proprietary development
and marketing information and know-how, inventions, inventors' notes, drawings,
and designs associated with any of the foregoing, relating to the business of
the Company. Schedule 3.15 contains a complete list of all tradenames,
trademarks, and servicemarks that are registered or applications for which have
applications for registration have been filed with the Patent and Trademark
Office, and a list of all materials which have been filed with the Copyright
Office for copyright protection.
(a) The Company has full and exclusive right, title and interest in and
to the Intellectual Property, free and clear of all claims, liens,
encumbrances, licenses and other interest, except for those
specifically disclosed on Schedule 3.15, and the Company has no
obligation to any other person or entity with respect to the
Intellectual Property, except as disclosed in Schedule 3.15. The
Company has the
16
right to bring actions for infringement of the Intellectual
Property, and none of the Intellectual Property infringes the rights
of any other person except with respect to outstanding litigation
disclosed in Schedule 3.11.
(b) Schedule 3.15 accurately identifies all rights, licensed to the
Company by third parties, the ownership as well as the registered or
unregistered status of all the foregoing being separately stated.
The Intellectual Property is adequate for the conduct of the
business of the Company. Services provided by the Company do not
infringe the rights owned by any other person or entity. No holder
of any equity security, director, officer or employee of the Company
owns, directly or indirectly, any interest in (i) any Intellectual
Property, or (ii) any other rights which infringe upon, conflict
with, or relate to any Intellectual Property which may supplement,
substitute for or compete with any of rights now used by the
Company.
3.16 Compliance with Laws. The Company is in compliance in all material respects
with all applicable laws, regulations, orders, judgments and decrees of each and
every jurisdiction in which the Company is doing business, including applicable
Federal and State laws and regulations, the violation of which would have a
material adverse effect on the Company.
3.17 Accounts and Notes Receivable. To the best knowledge of the Company and the
Insiders, the amount of accounts and notes receivable, unbilled invoices and
other debts (collectively the "accounts receivable") due or recorded in the
records and books of account of the Company as being due to the Company on the
20/20 Financial Statement Date less the amount reserved for bad debts in the
20/20 Financial Statements, are a reasonable estimate of the collectible portion
of the accounts receivable. There has been no material adverse change since the
20/20 Financial Statement Date in the amount of accounts receivable or other
debts due the Company or the allowances with respect thereto, or accounts
payable of the Company, from that reflected in the Consolidated Balance Sheet of
20/20.
3.18 Employment Relations. Except as set forth on Schedule 3.11, (a) the Company
is in compliance in all material respects with all federal, state or other
applicable laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment and wages and hours, and has not
and is not engaged in any unfair labour practice which would have a material
adverse effect on the Company; (b) no unfair labour practice complaint against
the Company is pending before the National Labour Relations Board; (c) there is
no labour
17
strike, dispute, slow down or stoppage actually pending or, to the best
knowledge and belief of the Company and the Insiders, threatened against or
involving the Company; (d) no representation question exists respecting the
employees of the Company; (e) no grievance which might have a material adverse
effect upon the Company or the conduct of its business exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefor has been asserted; (f) no collective bargaining
agreement is in effect or currently being negotiated by the Company; and (g) the
Company has not experienced any material labour difficulty since the Company's
inception. There has not been, and to the best knowledge and information of
Insiders, there will not be, any material adverse change in relations with
employees of the Company as a result of any announcement and completion of the
transactions contemplated by the Agreement.
3.19 Employees and Employee Benefit Plans:
(a) List of Employees and Plans. Set forth in Schedule 3.19 attached
hereto and made a part hereof is an accurate and complete list of
all employees, their length of service, employees compensation and
employee benefit plans ("Employee Benefit Plans") within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA,
established, maintained or contributed to by the Company (including,
for this purpose and for the purpose of all of the representations
in this Section 3.19, all employers (whether or not incorporated)
which by reason of common control are treated together with the
Company and/or the Shareholders as a single employer within the
meaning of Section 414 of the Code).
(b) Other Plans. The Company does not presently maintain any employee
benefit plans or any other pension, welfare or retirement benefit
plans, except as set forth on Schedule 3.19.
(c) Employee Benefit Plans. No "reportable event" (as such term is
defined in Section 4043(b) of ERISA) or "prohibited transaction" (as
such term is defined in Section 406 of ERISA and Section 4975(c) of
the Code would be assessable) has occurred with respect to the
Employee Benefit Plans. The Company has complied with all terms and
conditions of, and has no liabilities or obligations under the
Employee Benefit Plans except as shown in the 20/20 Financial
Statements and
18
accompanying footnotes. All Employee Benefit Plans has been
maintained in full compliance with all laws, including, without
limitation, ERISA and the Code, of all governmental authorities, and
all notices, reports and other filings required to be delivered or
filed under applicable laws with respect to the Employee Benefit
Plans. None of the Employee benefit Plans is a multi-employer plan
within the meaning of Section 3(37) of ERISA.
3.20 Environmental Laws and Regulations. The Company has heretofore made
available to TLC any and all information relating to the following items: (a)
the nature and quantities of any hazardous substances (as defined below)
generated, transported or disposed of by the Company since its inception,
together with a description of the location of each such activity, and (b) a
summary of the nature and quantities of any hazardous substances that have been
disposed of or found at any site or facility owned or operated presently or at
any previous time by the Company. The Company's existing and prior uses of the
real property owned and leased by it comply and have at all times during the
Company's occupancy complied with, and the Company is not in violation of, and
has not violated, in connection with the ownership, lease, occupancy, use,
maintenance, or operation of the property or the conduct of its business, any
applicable federal, state, county or local statutes, laws, regulations, rules,
ordinances, codes, licenses or permits relating in any way to the protection of
the environment, including, without limitation, the Clean Air Act, the Federal
Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act
of 1976 ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), the Toxic Substances Control Act, any
analogous state laws, and any amendments or extensions of the foregoing and the
regulations promulgated thereunder (collectively, the "Environmental Laws"). The
Company has not received any notice of any work, repairs, construction or
capital expenditures required by the Environmental Laws with respect to any of
its properties or its business. Neither the Company nor the Insiders have
received notice that any, of the Company's leased or owned properties is
contaminated by or contains any hazardous substance except as set forth on
Schedule 3.20. No claim, action, suit or proceeding is pending or, to the
Company's or Insiders's knowledge, threatened against the Company, before any
court or other governmental authority or arbitration tribunal, relating to
hazardous substances, pollution or the environment, and there is no outstanding
judgment, order, writ, injunction, decree or award against or affecting the
Company or its assets with respect to the same. To the knowledge of the Company
or Insiders, there has never been, and there is not presently occurring, any
release or disposal by the Company of any hazardous substance on or from any of
the Company's leased or owned properties in violation of any Environmental Laws.
The Company has not received any notice from any government agency or private or
public
19
entity advising it that it is responsible for response costs with respect to a
release, a threatened release or clean up of chemicals produced by, or resulting
from, any business, commercial, or industrial activities, operations, or
processes, including, but not limited to, hazardous substances, and has not
received any information requests under CERCLA from any government agency.
Neither the Company nor Insiders have received any notice of a violation of any
Environmental Laws in connection with the ownership, use, maintenance, or
operation of any of the Company's leased or owned real properties by the owner
thereof or any other person except as disclosed on Schedule 3.20. Except as
disclosed in Schedule 3.20, to the best knowledge of the Company and the
Insiders, there are no facts or circumstances which the Company reasonably
expects could form the basis for the assertion of any Claim (as defined below)
against the Company relating to environmental matters including, but not limited
to, any Claim arising from past or present environmental practices asserted
under the Environmental Laws, which the Company believes might have a material
adverse effect on the business, results of operations, financial condition or
prospects of the Company taken as a whole.
As used herein, "hazardous substances(s)" include any pollutants, contaminants,
dangerous substances, toxic substances, solid waste, hazardous wastes, hazardous
materials, or hazardous substances as defined in or pursuant to RCRA or CERCLA,
or any other federal, state or local environmental law, ordinance, rule or
regulation, except that, for purposes of this Agreement, "petroleum" (including
crude oil or any faction thereof) shall be deemed a "hazardous substance."
"Release" and "disposal" shall have the same meanings as defined in CERCLA and
RCRA. "Claim" shall mean any and all claims, demands, causes of actions, suits,
proceedings, administrative proceedings, losses, judgments, attorneys' fees, and
any other expenses incurred, assessed or sustained by or against the Company or
any of its subsidiaries. See Section 9.2 hereof for additional obligations of
the Company and Insiders with respect to environmental matters.
3.21 Interests in Competitors, Suppliers, Etc. As of the Closing Date, neither
the Insiders nor any persons holding the position of officer or director or any
similar position of the Company owns or possesses, directly or indirectly, any
financial interest in, or is a director, officer or employee of, any
corporation, firm, association or business organization which is engaged in the
same or similar business as the Company, or is a competitor or potential
competitor of the Company. Ownership of securities of a company whose securities
are registered under the Securities Exchange Act of 1934, not in excess of 5% of
any class of such securities, shall not be deemed to be a financial interest for
purposes of this Section 3.21 or in Section 3.22.
20
3.22 Bank Accounts, Powers of Attorney and Related Party Contracts. Set forth in
Schedule 3.22 attached hereto and made a part hereof is an accurate and complete
list showing (a) the name and address of each bank in which the Company has an
account or safe deposit box, the number of any such account or any such box, the
names of all persons authorized to draw thereon or to have access thereto and
the current balances maintained in all such accounts, (b) the names of all
persons, if any, holding powers of attorney, authorized to draw thereon or have
access thereto from the Company and a summary statement of the terms thereof,
and (c) copies of contracts of Company with any individual or other entity in
which any shareholder of the Company has a financial interest.
3.23 No Changes Prior to Closing Date. During the period from the 20/20
Financial Statement Date through and including the Closing Date, except as
expressly provided for and stated in this Agreement or as set forth in any
Exhibit or Schedule hereto, the Company will not have, without the express
written consent of TLC, (i) incurred any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise), except in the ordinary
course of business, (ii) permitted any of its assets to be subjected to any
mortgage, pledge, lien, security interest, encumbrance, restriction or charge of
any kind except in the ordinary course of business and except for purchase money
financing to acquire equipment, (iii) sold, transferred or otherwise disposed of
any assets except in the ordinary course of business, (iv) made any capital
expenditure or commitment therefor in excess of $25,000.00 (U.S.), except in the
ordinary course of business, (v) declared or paid any dividend or made any
distribution on any shares of its capital stock, or redeemed, purchased or
otherwise acquired any shares of its capital stock or any option, warrant or
other right to purchase or acquire any such shares, (vi) made any bonus payments
or profit sharing distributions or payments of any like kind to the employees,
shareholders, officers or directors of the Company except in the ordinary course
of business, (vii) increased its indebtedness for borrowed money, except current
borrowings from TLC, or made any loan to any employee, person or entity, (viii)
written off as uncollectible any notes or accounts receivable, except write-offs
in the ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material to the Company and its
subsidiaries, (ix) granted any increase in the rate of wages, salaries, bonuses
or other remuneration to any executive employee or other employee, except in the
ordinary course of business, (x) cancelled or waived any claims or rights of
substantial value, (xi) made any change in any method of business accounting,
except in the usual and ordinary manner and in the ordinary course of its
business, (xii) changed the ownership of the shares of the Company's common
stock or its capital structure (whether by the issuance or redemption of shares
or by granting of options) in contemplation of effecting the Exchange, (xiii)
retired, purchased,
21
redeemed or reacquired any shares of its common stock, (xiv) paid any management
fees, rent, compensation or other similar fees or expenses to a Shareholder or
Insider or any affiliate of a Shareholder or Insider in an amount inconsistent
with past practices (except as disclosed and provided for in contracts that are
part of the Exhibits), or (xv) agreed, whether or not in writing, to do any of
the foregoing.
3.24 Disclosure. No representation, warranty or covenant in Article III of this
Agreement, the financial statements referred to in Section 3.4 above, or any
attached Schedule, Exhibit or certificate delivered pursuant to the terms
hereof, contains any untrue statement of a material fact, or omits any statement
of a material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Company or Insiders which
materially and adversely affects the business, prospects or financial condition
of the Company, its properties or assets, which has not been disclosed and set
forth in this Agreement. The Company has disclosed to TLC the matters set forth
in Schedule 3.24.
3.25 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of an Insider or the Company is, or will be, entitled to any commission
or broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
3.26 Agreements, Judgments and Decrees Affecting Insiders. The Insiders
represent and warrant to TLC that they are not subject to any agreement,
judgment or decree adversely affecting their ability to provide services to the
Company to enter into this Agreement; or, to consummate the transactions
contemplated herein.
3.27 Copies of Documents. The Company and Insiders have caused to be made
available for inspection and copying by TLC, true, complete and correct copies
of all documents referred to in this Agreement or in any Schedule attached
hereto and made a part hereof. To the best of their knowledge, information and
belief, the Company and Insiders warrant and represent that they have given TLC
access to all information relating to the Company's capital structure, its
business operations and all additional information which TLC has requested.
3.28 Subsidiaries. Except for the Subsidiaries and except as set forth in
Schedule 3.28, 20/20 does not own, directly or indirectly, any capital stock or
other equity securities of any corporation, partnership, limited liability
company or other entity to have any direct or indirect
22
equity or ownership interest in any business other than the business conducted
by the Company. With respect to each Subsidiary and except as set forth in
Schedule 3.28: (a) 20/20 owns directly or indirectly all of such Subsidiary's
outstanding equity ownership (b) all such outstanding equity ownership is duly
and validly issued; (c) there are no outstanding options, warrants, rights,
contracts, commitments, understandings, or arrangements by which the Subsidiary
is bound to issue any additional shares of its equity ownership or any security
convertible thereunto or exercisable or exchangeable therefor; (d) the
Subsidiary is qualified or licensed to do business in the jurisdictions
identified in Schedule 3.28, which are all of the jurisdictions in which the
character of its properties or the nature of its business makes such
qualification or licensing necessary (except for such jurisdictions in which the
failure to so qualify or be licensed could not have a material adverse effect on
the business, properties, condition (financial or otherwise), results of
operations or prospects of such Subsidiary; and (e) complete correct copies of
each Subsidiary's limited partnership agreement or limited liability company
operating agreement, as the case may be, as amended to date and as now in effect
have been delivered to TLC.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF TLC
4.0 Representations, Warranties and Covenants of TLC. TLC represents, warrants
and covenants as follows:
4.1 Existence and Good Standing. TLC is a corporation duly organized and validly
subsisting under the laws of the Province of Ontario and is a reporting issuer
not in default under the Securities Act (Ontario).
4.2 Corporate Authority and Authorization. TLC has the corporate power and
authority to own its property and to carry on its business as now being
conducted and to make, execute, deliver and perform this Agreement. This
Agreement has been duly authorized and approved by all required corporate action
of TLC (including approval by its Board of Directors), and this Agreement is a
valid and binding obligation of TLC enforceable against TLC in accordance with
the terms of this Agreement.
4.3 Existence; Good Standing; Corporate Authority and Authorization. TLC is
qualified to do business in all jurisdictions in which the character or location
of the properties owned or leased by TLC or the nature of the business conducted
by TLC makes such qualification
23
necessary. TLC has the power to own its property and to carry on its business as
now being conducted. TLC has the full power and authority to enter into and
perform this Agreement and consummate the Exchange. Compliance with the terms
and conditions hereof will not (i) violate or conflict with any provision of the
articles of incorporation or bylaws of TLC or any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restrictions of any government, governmental agency or court to which TLC is
subject, or (ii) result in the breach or termination of any provision of, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, require any notice or constitute a breach or default under any
note, bond, indenture, lease, agreement or other instrument or obligation to
which TLC is a party or by which any of the properties or assets of TLC may be
subject, bound or affected. Except for the approval of The Toronto Stock
Exchange referred to in Section 7.7, no authorization, consent or approval of
any public body or authority is necessary to the validity of the transactions
contemplated by this Agreement. Except for the approval of The Toronto Stock
Exchange referred to in Section 7.7., all necessary approvals of the parties
under any contracts, commitments or understandings to which TLC is a party or
any other person required to permit the consummation on the part of TLC of the
transactions contemplated in this Agreement have been or will be obtained by TLC
on or before the Closing Date. TLC is not otherwise a party to any contract or
subject to any other legal restriction that would prevent or restrict complete
fulfilment by TLC of all of the terms and conditions of this Agreement or
compliance with any of the obligations under it.
4.4 Capital Stock. TLC has an authorized capitalization consisting of an
unlimited number of shares designated as common shares, no par value per share,
of which 20,747,026 shares have been issued and are outstanding (the "TLC
Stock"). All such shares have been duly authorized; are validly issued; and, are
fully paid and non-assessable. There are no outstanding options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance or sale
of any shares of the capital stock of TLC other than as set out in the
Prospectus or granted in the ordinary course. The shares of TLC to be issued to
the Shareholders and the Insiders on the Closing Date will be duly authorized,
validly issued and fully paid and non-assessable.
4.5 Financial Statements and No Material Changes. TLC has furnished the Insiders
and the Company with the Consolidated Financial Statements of TLC for the fiscal
periods ended May 31, 1995 and May 31, 1996 (the "Consolidated Financial
Statements of TLC") and the interim period ended August 31, 1996 (pro-forma to
reflect the offering described in the Prospectus) and as updated to September
14, 1996 in the Prospectus and the related consolidated
24
statements of income, shareholder's equity and changes in financial position for
the periods then ended. The Consolidated Financial Statements of TLC have been
audited, but not the interim consolidated financial statements which have been
prepared by TLC. The interim consolidated balance sheet and related statement of
income of TLC as at August 31, 1996 are hereinafter collectively referred to as
the "Interim Consolidated Financial Statements of TLC". All such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently followed according to past practice throughout the
periods indicated. The Interim Consolidated Financial Statements of TLC fairly
presents the financial position of TLC at the date thereof and, except as
indicated therein, reflects all claims against and all debts and liabilities of
TLC, fixed or contingent, as at the date thereof, and the related statement of
income, shareholder's equity and changes in financial position fairly present
the results of the operations of the TLC and the changes in the financial
position for the periods indicated.
4.6 Title to Properties; Encumbrances. Except as set forth in the Prospectus and
except for properties and assets reflected in the Interim Consolidated Financial
Statements of TLC or acquired since the date of the Consolidated Financial
Statements of TLC or which have been sold or otherwise disposed of in the
ordinary course of business, TLC and its subsidiaries have good, valid and
merchantable title to (a) all their properties and assets (personal, tangible
and intangible), including, without limitation, all the properties and assets
reflected in the Consolidated Financial Statements of TLC, except as indicated
in the notes thereto, and (b) all the properties and assets purchased by TLC
since August 31, 1996; in each case, each such property is subject to no
encumbrance, lien, charge or other restriction of any kind or character, except
for (i) liens reflected in the Interim Consolidated Financial Statements, (ii)
purchase money security interests; (iii) liens consisting of zoning or planning
restrictions, easements, permits and other restrictions or limitations on the
use of real property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, or otherwise impair the
marketability of the title or affect the use of such property by TLC in the
operation of its business and (iv) liens for current taxes, assessments or
governmental charges or levies on property not yet due and not delinquent.
4.7 Restrictive Documents. Except as set forth in Schedule 4.7, TLC is not
subject to, or a party to, any charter, bylaw, mortgage, lien, lease, license,
permit, agreement, contract, instrument, law, rule, ordinance, regulation,
order, judgment or decree, or any other restriction of any kind or character,
which materially adversely affects the business practices, operations or
condition of TLC and its subsidiaries or any of their assets or property, or
which would prevent consummation of the transactions contemplated by this
Agreement or the continued operation of
25
TLC's and its subsidiaries' business after the date hereof or the Closing Date
on substantially the same basis as heretofore operated or which would restrict
the ability of TLC and its subsidiaries to acquire any property or conduct
business in any area.
4.8 Litigation. Except as set forth in Schedule 4.8 attached hereto and made a
part hereof, there is no action, suit, proceeding at law or in equity by any
person or entity, or any arbitration or any administrative or other proceeding
by or before (or to the best knowledge, information and belief of TLC any
investigation by) any governmental or other instrumentality or agency, pending,
or to the best knowledge, information and belief of TLC, threatened, against or
affecting TLC and its subsidiaries or any of their properties or rights which
could materially and adversely affect the right or ability of TLC and its
subsidiaries to carry on their businesses as now conducted, or which could
materially and adversely affect the condition, whether financial or otherwise,
or properties of TLC and its subsidiaries; and TLC does not know of any valid
basis for any such action, proceeding or investigation. Neither TLC nor its
subsidiaries are subject to any judgment, order or decree entered in any lawsuit
or proceeding which may have a material adverse effect on any of their
operations, business practices or on their ability to acquire any property or
conduct business in any area.
4.9 Taxes. TLC has filed, will file or has caused to be filed, within the times
and within the manner prescribed by law, all federal, provincial/state, local
and foreign income tax returns and all other tax reports and returns which are
required to be filed by, or with respect to, TLC and its subsidiaries. Such
returns and reports reflect accurately all required and appropriate liability
for taxes of TLC and its subsidiaries for the periods covered thereby. All
federal, national, provincial/state, local and foreign income, profits,
franchise, sales, use, occupancy, excise and other taxes and assessments
(including interest and penalties) payable by, or due from, TLC and its
subsidiaries have been fully paid or adequately disclosed and fully provided for
in the books and financial statements of TLC and its subsidiaries, including the
Interim Consolidated Financial Statements, and will be accrued fully through the
Closing Date. All federal, national, provincial/state, local, state and foreign
income tax liabilities of TLC and its subsidiaries have been finally determined
and paid by TLC and its subsidiaries for all fiscal years to and including the
fiscal year ended May 31, 1996. No examination, audit or inquiry of any tax
return, national, provincial/state, state or otherwise, of TLC and its
subsidiaries is currently in progress and neither TLC nor its subsidiaries have
received notice of intent to commence any inquiry, audit or examination of any
such tax return from any taxing authority. Except as provided herein, there are
no outstanding agreements or waivers extending the statutory period of
limitations applicable to any tax return of TLC and its subsidiaries.
26
4.10 Liabilities. Neither TLC nor its subsidiaries have any material outstanding
claims, liabilities or indebtedness, contingent or otherwise, except as set
forth in the Interim Consolidated Financial Statements and other than
liabilities incurred subsequent to the date of the Interim Consolidated
Financial Statements in the ordinary course of business not involving borrowings
by TLC and its subsidiaries or as may have been disclosed and consented to by
TLC. TLC does not know of any default in respect to the terms or conditions of
any indebtedness for which it may be obligated on, whether directly, indirectly
or as endorser. TLC represents and warrant that, to the best of its knowledge
and belief, the holders and payees of any and all such liabilities, material or
otherwise, will not accelerate or demand payment from TLC and its subsidiaries
of any such liabilities as a result of the consummation of the transactions
herein described.
4.11 Compliance with Laws. TLC and its subsidiaries are in compliance in all
material respects with all applicable laws, regulations, orders, judgments and
decrees of each and every jurisdiction in which TLC and its subsidiaries are
doing business, including applicable Canadian and Federal and State laws and
regulations, the violation of which would have a material adverse effect on TLC
and its subsidiaries. TLC has made all required filings necessary with the
Toronto Stock Exchange.
4.12 No Changes to Capital Structure Prior to Closing Date. During the period
from the date of the Prospectus through and including the Closing Date, TLC will
not have, without the express written consent of the Company (i) declared or
paid any cash or stock dividend, (ii) changed its capital structure by
redemption, stock split, merger, reorganization or consolidation except for the
issuance of shares in the ordinary course of business and except for the
over-allotment described in the Prospectus and issuances for acquisitions in the
ordinary course of business, (iii) entered into any transaction that requires
the approval of its shareholders, or (iv) agreed, whether or not in writing to
do any of the foregoing.
4.13 Disclosure. No representation, warranty or covenant in Article IV of this
Agreement, the financial statements referred to in Section 4.5 above, or any
attached Schedule, Exhibit or certificate delivered in accordance with the terms
hereof or any document or statement in writing which has been supplied by or on
behalf of TLC and its subsidiaries, or by any of TLC's or any of its
subsidiaries' directors or officers, in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
any statement of a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact known to TLC which
materially and adversely affects the business, prospects or financial
27
condition of TLC, its properties or assets, which has not been disclosed and set
forth in this Agreement.
4.14 Broker's or Finder's Fees. No agent, broker, person or firm acting on
behalf of TLC is, or will be, entitled to any commission or broker's or finder's
fees from any of the parties hereto, or from any person controlling, controlled
by or under common control with any of the parties hereto, in connection with
any of the transactions contemplated herein.
ARTICLE V
SHAREHOLDER APPROVAL
5.0 TLC acknowledges that Shareholders and Insiders holding in the aggregate at
least 80% of the Company Shares must accept TLC's offer for the Exchange. The
Insiders agree that concurrent with the execution of this Agreement, they will
tender to TLC their Shares in accordance with the terms of the Exchange, and
will execute and deliver a letter of transmittal substantially in the form
attached hereto as Exhibit 7free from all liens, charges, encumbrance,
restrictions and claims of every kind whatsoever to be held by TLC pending the
Closing. In the event that TLC does not receive tenders in excess of the
Threshold from the Shareholders and Insiders, TLC, the Insiders and the Company
acknowledge and agree that each of TLC, the Company and the Insiders have the
right to terminate the Exchange contemplated herein, in which case TLC shall
return to the Insiders all of their respective Company Shares. The Insiders
hereby covenant and agree that after their Company Shares have been tendered to
TLC, they will recommend to the Shareholders that they tender their respective
Company Shares pursuant to the terms of the Exchange, and that they will not do
anything, directly or indirectly, to influence the Shareholders not to tender
their Shares pursuant to the Exchange.
28
ARTICLE VI
CONDUCT OF BUSINESS
6.0 Conduct of Business of the Company. The Company and Insiders represent,
warrant and agree that during the period from the 20/20 Financial Statement Date
to the Closing Date, the Company shall have, and Insiders shall have caused the
Company to have, conducted its business operations according to the ordinary and
usual course of business and to have used its best efforts to preserve intact
its business organization, kept available the services of its officers and
employees, and maintained satisfactory relationships with vendors, licensor,
suppliers, distributors, clients and others having business relationships with
the Company. Notwithstanding such agreements, pending the Closing Date and
except as may be first approved by TLC or as is otherwise permitted or required
by this Agreement, the Company and Insiders will cause (a) the Company's
articles of incorporation and bylaws to be maintained in their form as of the
date of this Agreement, (b) the Company to refrain from entering into any
contract or commitment except contracts in the ordinary course of business (c)
the Company to refrain from making any change affecting any bank, safe deposit
or power of attorney arrangements of the Company, and (d) the Company to refrain
from taking any action referred to in Section 3.23 that would make such
statements untrue during the period from the 20/20 Financial Statement Date to
the Closing Date. The Company shall, and the Insiders shall cause the Company
to, confer on a regular and frequent basis with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ to report material operational matters relative to ongoing business
operations of the Company. The Company shall, and Insiders shall cause the
Company to, notify TLC of any emergency or other change in the normal course of
its business or in the operation of its properties and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), adjudicatory proceedings (to include lawsuits,
arbitration or mediation), budget meetings or submissions involving any material
property of the Company, and to keep TLC fully informed of such events and
permit its representatives prompt access to all materials prepared in connection
therewith.
6.1 Exclusive Dealing. Through the Closing Date, neither the Company nor the
Insiders shall have taken, and Insiders shall have caused the Company to refrain
from taking, any action to, directly or indirectly, encourage, initiate or
engage in discussions or negotiations with, or provide any information to, any
corporation, partnership, person, or other entity or group, other than TLC,
concerning any sale of substantial assets, purchase of stock, merger or similar
transaction involving the Company, its capital stock and the business or assets
of the Company.
29
6.2 Review of the Company. TLC may, prior to the Closing Date, through its
representatives, review the properties, books and records of the Company and its
financial and legal condition as they deem necessary or advisable to familiarize
themselves with such properties and other matters; such review shall not,
however, modify, extinguish or otherwise affect TLC's ability to rely upon any
of the representations and warranties made by the Company or Insiders hereunder.
Insiders shall cause the Company to permit TLC and its representatives to have,
after the date of execution hereof, full access to the premises and to all the
books and records of the Company and to cause the officers of the Company to
furnish TLC with such financial and operating data and other information with
respect to the business and properties of the Company as TLC shall from time to
time reasonably request. In the event of termination of this Agreement, TLC
shall return to the Company and Insiders and keep confidential any material
information obtained from the Company or Insiders concerning the Company and its
properties, operations and business (unless such information is readily
ascertainable from public or published information or trade sources) or the same
ceases to be material (or becomes so ascertainable), shall not use any of such
information to compete with the Company, either directly or indirectly, and
shall return to the Company all copies of any schedules, statements, documents
or other written information obtained in connection herewith.
6.3 Fulfilment of Agreement. The Company and the Insiders shall deliver or cause
to be delivered on the Closing Date, and thereafter at such other times and
places as shall be reasonably agreed upon, such additional instruments as TLC
may reasonably request for the purpose of consummating and carrying out this
Agreement and its terms, conditions and requirements.
6.4 Best Efforts. The Company and the Insiders shall use its best efforts to
take, or cause to be taken, all action or do, or cause to be done, all things
necessary, proper or advisable under this Agreement, applicable laws and
regulations to enable, consummate, make effective and evidence the transactions
contemplated hereby.
6.5 Insiders Release. The Insiders hereby release, remise and forever discharge
the Company, and their officers, agents, representatives, directors, employees
and insurers, and their respective successors and assigns, and each of them
(hereinafter individually and collectively referred to as the "Releases") of and
from any and all liabilities, claims, demands, of every nature, character or
description, now accrued or which may hereafter accrue, without limitation of
law, equity or otherwise, based in whole or in part on any facts, conduct,
activities, transactions, events or occurrence known or unknown, which have or
allegedly have existed,
30
occurred, happened, arisen or transpired from the beginning of time to the date
of this Release (the "Released Claims"). Each of the Insiders represents and
warrants that no claim released herein has been assigned, expressly, impliedly
or by operation of law, and that all claims of each of the Shareholders and
Insiders released herein are owned by them, and they have the sole authority to
release them. Each of the Insiders agrees that he/she shall forever refrain and
forebear from commencing, instituting or prosecuting any lawsuit, action or
proceeding, judicial, administrative or otherwise, or otherwise attempting to
collect or enforce any Released Claims which are released and discharged herein.
ARTICLE VII
COVENANTS OF TLC
7.0 Advance of $1.5 Million U.S. to 20/20 TLC shall advance the sum of U. S.
$1.5 million (the "Advance") when (i) this Agreement is signed, (ii) the
respective Boards of Directors of TLC and 20/20 approve the transactions
contemplated herein, (iii) Shareholders holding at least the Threshold amount of
Company Shares indicate in writing that they have agreed to accept the tender
offer being made by TLC pursuant to this Agreement, and (iv) the Company
executes and delivers the amended loan documents in the form attached hereto as
Exhibit 9, and (iv) the Insiders and U.S.A. Medical Resources deliver all
Company Shares owned or controlled by each of them pursuant to Section 8.13 The
Advance shall be based upon the same terms and conditions as the Interim
Financing more particularly described in paragraph 13 of that certain Letter
Agreement dated October 4, 1996 between 20/20 and TLC (the "Letter of Intent"),
provided however that the Interim Financing and Advance shall have a maturity
date of one (1) year from the date that TLC makes its election or is deemed to
have made its election pursuant to Section 13.12 of the Letter of Intent. The
loan documents for the Interim Financing shall be in the form of Exhibit 9
attached hereto.
7.1 Stock Options. The persons listed on Schedule 7.1 (the "Optionees")
currently have outstanding options to purchase Company Shares in the respective
amounts set forth in Schedule 7.1. (the "Company Stock Options"). The Company
agrees that, except as set forth below, all of such Company Stock Options shall
be either exercised (and included in the offer for the Exchange) or settled out
and terminated at Closing, unless TLC reasonably agrees to other arrangements.
The Company may issue some shares for little or no compensation in order to
settle out outstanding Company Stock Options, so long as the shares issued does
not cause the
31
outstanding Company Shares to exceed the total cap of Company Shares to be
purchase pursuant to Section 8.14 hereof. In addition, with respect to the
outstanding qualified incentive stock options held by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇, as described in Schedule 7.1 and with
respect to the outstanding nonqualified stock options held by ▇▇▇▇ ▇▇▇▇▇▇▇,
M.D., J. ▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D., and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, M.D., as described in
Schedule 7.1, TLC agrees to work with the Company to make arrangements so that
the economic benefit and favorable tax treatment that such optionees are
currently entitled to will be preserved to the greatest extent possible without
material detriment to the Company or TLC.
7.2 Governmental Filings; Compliance with Laws. TLC has made, or will make prior
to Closing, all necessary filings required under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Act. In
addition, the tender offer to be made by TLC to the Shareholders pursuant to
this Agreement shall be conducted in compliance with all applicable laws, rules
and regulations.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF TLC
8.0 Conditions to Obligations of TLC. The obligation of TLC to consummate the
Exchange and other transactions described herein on the Closing Date is subject
to satisfaction of the following conditions.
8.1 Opinions of the Insiders's Counsel; Certificate of Shareholders. Insiders
The Company shall have furnished TLC with a favourable opinion, (i) of
Proskauer, Rose respecting Company compliance with all relevant health law
statutes substantially as set out in Exhibit 1 in form and substance
satisfactory to TLC and its counsel, and (ii) a favourable opinion dated the
Closing Date, of Shaw, Pittman, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ in form and substance
satisfactory to TLC and its counsel.
8.2 Good Standing. Insiders shall have delivered to TLC (a) copies of the
Company's articles of incorporation and/or organization, including all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation, (b) certificates from the
Secretary of State or other appropriate official of the respective jurisdictions
of incorporation and/or organization to the effect that the Company is in good
standing, (c) copies of the operating agreements of the Subsidiaries certified
by the appropriate officers of the Company.
32
8.3 No Material Adverse Change. From the date of this Agreement to the Closing
Date, there shall have been no material adverse change in the assets or
liabilities, the business or condition, financial or otherwise, the results of
operations, or prospects of the Company, and the Company and Insiders shall have
delivered to TLC a certificate, dated the Closing Date, to such effect. The
parties acknowledge that the Company is currently operating on a negative cash
flow basis and that based upon the Company's projected revenues, it will
continue having negative cash flow between the date of this Agreement and the
Closing.
8.4 Truth of Representations and Warranties. The representations and warranties
of the Company and Insiders contained in this Agreement or in any Exhibit or
Schedule delivered pursuant thereto shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date (as though
made on and as of the Closing Date) except (i) to the extent such
representations and warranties are by their express provisions made as of a
specified date and (ii) for the effect of transactions contemplated by the
Agreement, and the Chief Executive Officer of the Company and Insiders shall
have delivered to TLC on the Closing Date a certificate, dated the Closing Date,
to such effect.
8.5 Performance of Agreements. Each and all of the agreements of the Company and
Insiders to be performed on or before the Closing Date pursuant to the terms
hereof shall have been duly performed, and the Chief Executive Officer of the
Company and Insiders shall not be in breach of any covenant in this Agreement
and shall have delivered to TLC a certificate, dated the Closing Date, to such
effect.
8.6 No Litigation Threatened. No action or proceeding shall have been instituted
or, to the best knowledge, information and belief of the Company or Insiders
shall have been threatened before a court or other government body or by any
public authority to restrain or prohibit any of the transactions contemplated
hereby. The Chief Executive Officer of the Company and Insiders shall have
delivered to TLC a certificate, dated the Closing Date, to such effect.
8.7 Approvals and Consents. All governmental and other consents, filings, and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been obtained by TLC or the Company
including, without limitation, the following to be obtained or completed by TLC:
(i) approval from the Toronto Stock Exchange relating to the listing of the TLC
Shares issued to the Shareholders pursuant to the Exchange, and (ii) any filings
required under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Act.
33
8.8 Intra-Company Debt. All indebtedness to the Company, other than travel and
similar advances in the ordinary course of business, from Insiders or any
directors, officers and employees of the Company shall have been repaid to the
Company in full.
8.9 Insiders Employment Agreement. ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ shall have executed and delivered an
Employment Agreement with TLC on terms satisfactory to TLC, substantially in the
form attached as Exhibit 5. The parties understand that the bracketed items are
still to be finally agreed upon.
8.10 Resignations of Directors. TLC shall have received the resignations of all
directors of the Company. The Employment Agreement for ▇▇▇▇ ▇▇▇▇▇ shall be
amended in accordance with previous discussions among the parties to the
satisfaction of TLC.
8.11 Holdback Agreement. The Shareholders and Insiders shall have entered into a
Holdback Agreement substantially in the form attached hereto as Exhibit 4.
8.12 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents incident thereto,
shall be reasonably satisfactory in form and substance to TLC and its counsel,
and to the Company and its counsel.
8.13 Delivery from Insiders. The Insiders and U.S.A. Medical Resources shall
have irrevocably tendered and delivered all Company Shares owned or controlled
by them to TLC in contemplation of the Exchange on the date of execution of this
Agreement duly endorsed for transfer and such Shares are free from all liens,
charges, encumbrances, restrictions and claims of every kind whatsoever.
8.14 Company Shares and Options. The total of Company Shares to be purchased
hereunder and Company Options to be assumed pursuant to Section 7.1 hereof shall
not exceed the equivalent of Twelve Million Five Hundred Thousand (12,500,000)
Company Shares in the aggregate, except for the Company Options that are to be
assumed by TLC pursuant to the last sentence of Section 7.1 hereof. Except for
the Company Options to be assumed by TLC pursuant to the last sentence of
Section 7.1 hereof, all options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance, or sale of any shares of the
capital stock of the Company shall have been converted to Company Shares
(subject to the cap set forth above) or shall have been cancelled or otherwise
terminated.
34
8.15 Threshold. The Shareholders shall have tendered pursuant to the Exchange a
sufficient number of Company Shares exceeding the Threshold.
8.16 Conditions for the Benefit of TLC. In case any covenant of Company or
condition to be performed or complied with for the benefit of TLC at or prior to
the Closing Date shall not have been performed or complied with at or prior to
the Closing Date in any material respect, TLC may, without limiting any other
right that TLC may have, at its sole option, either:
(a) terminate this Agreement by notice to Company and the Insiders, and
in such event TLC shall be released from all obligations hereunder;
or
(b) waive compliance with any such term, covenant or condition in whole
or in part on such terms as may be agreed upon without prejudice to
any of its rights of rescission in the event of non-performance of
any other term, covenant or condition in whole or in part;
and, if TLC terminates this Agreement pursuant to this Section and the term,
covenant or condition for which TLC has terminated this Agreement was a breach
of representation, warranty or covenant set forth in Articles III or VI hereof
(unless such breach of representation, warranty or covenant was caused by
circumstances that were reasonably beyond the control of the Company or the
Insiders), the Company shall be liable to TLC for any losses, damages or
expenses incurred by TLC as a result of such breach.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND
INSIDERS
9.0 Conditions to Obligations of the Company and Insiders. The obligations of
the Shareholders, the Insiders and the Company to consummate the Exchange and
other transactions described herein on the Closing Date is subject to
satisfaction of the following conditions:
9.1 Opinions of Counsel for TLC. TLC shall have furnished the Company with
opinions, dated the Closing Date, of Tory ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ and
Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
35
& ▇▇▇▇ substantially in the form set forth in Exhibit 3 hereto, including an
opinion of tax counsel to the effect that the Exchange constitutes a tax-free
exchange under Section 368(a)(1)(B) of the Internal Revenue Code of 1986.
9.2 Truth of Representations and Warranties. The representations and warranties
of TLC contained in this Agreement shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date; and TLC shall have delivered to the
Company on the Closing Date a certificate, dated the Closing Date, to such
effect.
9.3 Performance of Agreements. Each and all of the agreements of TLC to be
performed on or before the Closing Date pursuant to the terms hereof shall have
been duly performed in all material respects, and TLC shall have delivered to
the Company a certificate, dated the Closing Date, to such effect.
9.4 Insiders Employment Agreement. TLC shall have executed and delivered
employment agreements with ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇,
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇ subsntailly in the form attached as Exhibit 5.
9.5 Proceedings. All proceedings to be taken in connection with the transactions
contemplated by this Agreement and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Company and the Insiders
and their counsel.
9.6 Approvals and Consents. All governmental and other consents, filings, and
approvals, if any, necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been obtained by TLC or the Company
including, without limitation, the following to be obtained or completed by TLC:
(i) approval from The Toronto Stock Exchange relating to the listing of the TLC
Shares issued to the Shareholders pursuant to the Exchange, and (ii) any filings
required under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Act.
9.7 Reaching Threshold. The Shareholders shall have tendered pursuant to the
Exchange a sufficient number of Company Shares exceeding the Threshold.
9.8 TLC Advance. TLC shall have advanced a further U.S. $1.5 million to the
Company pursuant to the terms of Article VII hereof.
36
9.9 Payment of Purchase Price. Each of the Shareholders who have tendered their
Company Shares and the Insiders shall have received TLC Shares pursuant to the
Exchange and the Purchase Price described in Section 2.1, subject to the terms
and conditions of the Holdback Agreement.
9.10 Conditions for the Benefit of Company. In case any covenant of TLC or
condition to be performed or complied with for the benefit of Company at or
prior to the Closing Date shall not have been performed or complied with at or
prior to the Closing Date in any material respect, the Company may, without
limiting any other right that the Company may have, at its sole option, either:
(a) terminate this Agreement by notice to TLC, and in such event Company
shall be released from all obligations hereunder; or
(b) waive compliance with any such term, covenant or condition in whole
or in part on such terms as may be agreed upon without prejudice to
any of its rights of rescission in the event of non-performance of
any other term, covenant or condition in whole or in part;
and, if Company terminates this Agreement pursuant to this Section and the term,
covenant or condition for which Company has terminated this Agreement was one
that TLC had covenanted to ensure has been performed or complied with, TLC shall
be liable to the Company for any losses, damages or expenses incurred by the
Company as a result of such breach.
9.11 Directors of TLC Following the Exchange. TLC shall have appointed one (1)
representative director of the Shareholders to the board of TLC and three (3)
representative directors to the board of TLC The Laser Center Inc. (Delaware).
9.12 Registration Rights Agreement. TLC shall have executed and delivered to the
Company the Registration Rights Agreement substantially in the form attached
hereto as Exhibit 8.
37
ARTICLE X
SURVIVAL OF REPRESENTATIONS, INDEMNITY
10.0 Survival of Representations. The covenants of all parties in the
Registration Rights Agreement attached hereto as Exhibit 8 and the Holdback
Agreement attached hereto as Exhibit 4 shall survive the Exchange. The other
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing through the date 24 months after the Closing
Date; provided, however, that representations and warranties in Section 3.12
relating to the tax year listed in the left-hand column below shall survive the
Closing through December 31 of the year set forth below opposite such tax year:
tax year ended December 31 survival date through September 30
1996 2001
1995 2000
1994 1999
1993 1998
The survival dates set forth in this Section shall be the last date on which any
party may seek indemnification under Article X or any other remedy it may be
entitled to with respect to any representations, warranty, covenant or agreement
under this Agreement which survives until such date.
10.2 Indemnification.
(a) From and after the Closing Date, the Shareholders, including the
Insiders, shall indemnify, defend and hold harmless TLC and its
officers, directors, employees and agents, against and from any
claim, liability, obligation, loss, damage, assessment, judgment,
cost and expense (including, without limitation, reasonable
attorney's and accountant's fees and costs and expenses reasonably
incurred in investigating, preparing, defending against or
prosecuting any litigation, claim, action, suit, proceeding or
demand) of any kind or character arising out of or in any manner
incident, relating or attributable to (i) the failure of or
inaccuracy in any representation or breach of warranty of the
Company or Insiders contained in
38
Article III or VI of this Agreement or any certifications delivered
by the Company or the Insiders pursuant to Article VII hereof, (ii)
any failure by Insiders or the Company to perform or observe any
covenant or agreement to be performed or observed by either of them
under this Agreement or under any certificates or other documents or
agreements executed by either of them in connection with this
Agreement, and (iii) with respect to the use of the Company's leased
and owned real properties prior to the Closing Date, any claim
asserted by any person, entity, agency, organization or body against
TLC or the Company, as a result of the handling, generation,
treatment, storage, disposal (including off-site disposal),
transport, release, discharge, spill, or emission of any hazardous
or toxic substances or wastes, solid wastes, pollutants or
contaminants on, at or about any of the Company's leased or owned
real properties, or the costs and expenses associated with cleaning
up, removing, disposing of or otherwise eliminating any oil, toxic
substance, hazardous substance, pollutant, solid waste, waste, or
contaminant, therefrom, provided, however, that such obligation to
indemnify under clauses (i) through (iii) above shall not arise
unless and until the aggregate amount owed under such clauses
exceeds the sum of $100,000, in which case TLC shall be entitled to
indemnification for all amounts described in clauses (i) through
(iii) above in excess of $100,000.00.
(b) From and after the Closing Date, TLC agrees to indemnify, defend and
hold harmless the Shareholders including Insiders against and from
any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense (including, without limitation,
reasonable attorney's an accountant's fees and costs and expenses
reasonably incurred in investigating, preparing, defending against
or prosecuting any litigation, claim, action, suit, proceeding or
demand) of any kind or character arising out of or in any manner
incident, relating or attributable to (i) the inaccuracy in any
representation or breach of warranty of TLC contained in this
Agreement, in any Schedule or in any certificate, instrument or
other document or agreement executed by TLC in connection with this
Agreement or otherwise made or given in writing in connection with
this Agreement, or (ii) any failure by TLC to perform or observe any
covenant, agreement or condition to be performed or observed by them
under this Agreement or under any certificates or other documents or
agreements executed by either of them in connection with this
Agreement; provided, however, that such obligation to indemnify
shall not arise unless and until the aggregate amount owed under the
foregoing exceeds the sum
39
of $100,000 in which case the Shareholders and Insiders shall be
entitled to indemnification for all amounts in excess of $100,000.
(c) If TLC believes that a matter has occurred that entitles it to
indemnification under Section 10.2 (a) or Shareholders believe that
a matter has occurred that entitles them to indemnification under
Section 10.2(b), TLC or the Shareholders, as the case may be (the
"Indemnified Party"), shall give written notice to the party or
parties against whom indemnification is sought (each of whom is
referred to herein as an "Indemnifying Party") describing such
matter in reasonable detail. The Indemnified Party shall be entitled
to give such notice prior to the establishment of the amount of its
losses, liabilities, costs or damages, and to supplement its claim
from time to time thereafter by further notices as they are
established. Each Indemnifying Party shall send a written response
to such claim for indemnification within thirty (30) days after
receipt of the claim stating its acceptance or objection to the
indemnification claim, and explaining its position in respect
thereto in reasonable detail. If such Indemnifying Party does not
timely respond, it will be deemed to have accepted the Indemnified
Party's indemnification claim as specified in the notice given by
the Indemnified Party and the Indemnifying Party shall have been
deemed to have waived any further rights to object to the subject
matter of such notice either at law or in equity. If the
Indemnifying Party gives a timely objection notice, then the parties
will negotiate in good faith to attempt to resolve the dispute. Upon
the expiration of an additional thirty (30) day period from the date
of the objection notice or such longer period as to which the
Indemnified and Indemnifying Parties may agree, any such dispute
shall be submitted to arbitration in Bethesda, Maryland to a member
of a "Big Six" accounting firm mutually appointed by the Indemnified
and Indemnifying Parties (or, in the event the Indemnified and
Indemnifying Parties cannot agree on a single such member, to a
panel of three members of a "Big Six" accounting firm selected in
accordance with the rules of such American Arbitration Association),
who shall promptly arbitrate such dispute in accordance with the
rules of such Association and report to the parties upon such
disputed items, and such report shall be final, binding and
conclusive on the parties. Judgment upon the award by the
arbitrator(s) may be entered in any court having jurisdiction. The
prevailing party in any such arbitration shall be entitled to
recover from, and have paid by, the other party hereto to all fees
and disbursements of such arbitrator or arbitrators and its
reasonable attorney's fees,
40
costs and expenses incurred in such arbitration.
(d) If a third person asserts a claim against an Indemnified Party in
connection with the matter involved in such claim, the Indemnified
Party shall promptly (but in no event later than ten (10) days prior
to the time at which an answer or other responsive pleading or
notice with respect to the claim is required) notify the
Indemnifying Party of such claim. The Indemnifying Party shall have
the right, at its election, to pursue the defense or settlement of
such claim by giving prompt notice to the Indemnified Party that it
will do so, such election to be made and notice given in any event
at least five (5) days prior to the time at which an answer or other
responsive pleading or notice with respect thereto is required. If
the Indemnifying Party makes such election, the Indemnifying Party
may conduct the defense of such claim through counsel of its
choosing (subject to the Indemnified Party's approval, not to be
unreasonably withheld), will be responsible for the expenses of such
defense, and shall be bound by the results of its defense or
settlement of the claim to the extent it produces damage or loss to
the Indemnified Party. The Indemnifying Party shall not settle such
claims without prior written notice to and consultation with the
Indemnified Party, and no such settlement involving any injunction
or other remedy that could have a material adverse effect on the
Indemnified Party may be agreed to without its consent. As long as
the Indemnifying Party is diligently contesting any such claim in
good faith, the Indemnified Party shall not pay or settle any such
claim. If the Indemnifying Party does not make such election, or
having made such election does not proceed diligently to defend such
claim prior to the time at which an answer or other responsive
pleading or notice with respect thereto is required, or does not
continue diligently to contest such claim, then the Indemnified
Party may conduct the defense and proceed with such claim in its
exclusive discretion, and the Indemnifying Party shall be bound by
any defense or settlement that the Indemnified Party may make in
good faith with respect to such claim. The parties agree to
cooperate in defending such third party claims, and the defending
party shall have reasonable access to records, information and
personnel in control of the other party which are pertinent to the
defense thereof.
(e) The parties acknowledge and agree that this Article X requires that
all disputed claims shall be submitted to arbitration in accordance
with Section 10.2(c). The parties also acknowledge that recourse
under this Article X shall be limited as set
41
forth in the Holdback Agreement attached hereto as Exhibit 4.
(f) In the event the Shareholders make a claim for indemnification
pursuant to this Section 10.2, the Shareholders shall be entitled to
collect any damages in the form of TLC Shares rather than cash, if
necessary to protect the tax-free treatment of the Exchange under
Section 368 (a)(1)(B) of the Code.
ARTICLE XI
MISCELLANEOUS
11.1 Knowledge of Insiders. Where any representation or warranty contained in
this Agreement is expressly qualified by reference to the knowledge, information
and belief of Insiders, the Insiders hereby confirm that they have made such due
and diligent inquiry as they deem necessary and appropriate as to the matters
that are the subject of such representations and warranties. However, where a
representation or warranty is qualified by reference to having received or not
received "notice" of an event or matter, then no affirmative inquiry shall be
required.
11.2 Professional Expenses. The Company (on behalf of itself), Insiders and TLC
(on behalf of itself) shall each pay all of their own professional expenses
relating to negotiating, drafting and closing the transactions contemplated by
this Agreement, including, without limitation, the fees and expenses of their
respective counsel, financial advisers and accountants.
11.3 Governing Law. The interpretation and construction of this Agreement and
all matters relating hereto shall be governed by the laws of the State of
Maryland.
11.4 Jurisdiction. Any judicial proceeding brought to enforce any arbitration
judgment may be brought in the appropriate courts of ▇▇▇▇▇▇▇▇▇▇ County, State of
Maryland or the United States District Court District of Maryland, Southern
Division and, by execution and delivery of this Agreement, each of the parties
to this Agreement accepts for himself or itself the exclusive jurisdiction of
the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. The prevailing party in any
such action shall be entitled to an award of its attorney's fees, paralegal
fees, costs and expenses incurred at the trial and appellate levels and in any
proceedings in Bankruptcy Court.
42
11.5 Publicity. Except as otherwise required by law, or as may be mutually
consented and agreed to, none of the parties hereto shall issue any press
release or make any other public statement, in each case relating to or in
connection with or arising out of this Agreement or the matters contained
herein, without obtaining the prior approval of both TLC and the Company to the
contents and the manner of presentation and publication thereof, provided,
however, TLC shall have the right to make a public announcement of the execution
of this Agreement and a disclosure of the basic terms and conditions of this
Agreement if advised to do so by its legal counsel in connection with the
reporting and disclosure obligations of TLC under applicable securities laws.
11.6 Notices. Any notice or other communications required or permitted hereunder
shall be sufficiently given if delivered in person or sent by express mail or by
registered or certified mail, postage prepaid, addressed as follows:
(i) If to TLC:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(ii) If to Company:
20/20 Laser Centers, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, CEO
43
(iv) If to the Insiders:
c/o 20/20 Laser Centers, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, General Counsel
or such other address as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered, sent or mailed.
11.7 Assignment. This Agreement may not be transferred, assigned, pledged or
hypothecated by any party hereto.
11.8 Counterparts. This Agreement may be executed in one or more counterparts,
all of which taken together shall constitute one instrument.
11.9 Entire Agreement. This Agreement, including the other documents referred to
herein which form a part hereof, contains the entire understanding of the
parties hereto with respect to the subject matter contained herein and therein.
This Agreement supersedes all prior agreements and understandings among the
parties with respect to such subject matter.
11.10 Amendments. This Agreement may not be changed orally, but only by an
agreement in writing signed by TLC, Insiders and Company.
11.11 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof will not in any way be affected or impaired
thereby.
11.12 Third Party Beneficiaries. Each party hereto intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person other than the parties hereto.
11.13 Best Efforts. All parties hereto agree to use their best efforts and all
due diligence to fulfil all requirements of this Agreement and conditions to the
Closing as soon as practicable.
11.14 Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the
44
Company, TLC, the Insiders, and their respective successors, heirs and legal
representatives, but neither this agreement nor any rights hereunder may be
assigned by either party without the advanced written consent of the other
party.
11.15 Time of the Essence. Time shall be of the essence of this Agreement.
[End of Page 44]
45
IN WITNESS WHEREOF, each of the parties herein below stated has executed
this Agreement as of the date and year first above written.
Attest: TLC THE LASER CENTER INC.
By:
------------------------- ------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice-President, Acquisitions
20/20 LASER CENTERS, INC.
By:
------------------------- ------------------------------
▇▇▇▇ ▇▇▇▇▇
Chief-Executive Officer
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇ ▇. ▇▇▇▇▇
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
46
)
------------------------------ ---------------------------------------
Witness ) J. ▇▇▇▇▇ ▇▇▇▇▇▇▇, O.D.
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇▇▇▇ ▇▇▇▇, CPA
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.,
individually and as Trustee of
▇▇▇▇▇▇▇▇▇ Family Trust
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇ ▇. ▇▇▇▇▇
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇ ▇. ▇▇▇▇▇▇
)
)
------------------------------ ---------------------------------------
Witness ) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇