Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
TLC VISION (USA) CORPORATION,
EYES OF THE FUTURE, P.C.,
AND
FREDERIC B. KREMER, M.D.,
DATED AS OF JULY 11, 2005
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of July
11, 2005, by and among Eyes of the Future, P.C., a Pennsylvania professional
corporation ("EOF"), and Frederic B. Kremer, M.D. ("Kremer") on the one hand and
TLC Vision (USA) Corporation, a Delaware corporation ("TLC") on the other hand.
TLC, EOF and Kremer are referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, EOF is a Pennsylvania professional corporation which owns the
assets which are used by and/or result from the Physician Owners' practice of
medicine;
WHEREAS, the Physician Owners are medical doctors practicing medicine in
the Commonwealth of Pennsylvania;
WHEREAS, TLC has agreed to acquire the Purchased Assets (as hereinafter
defined) pursuant to the terms of this Agreement;
WHEREAS, simultaneously with the Closing of the Contemplated Transactions,
TLC shall transfer certain of the Purchased Assets used in connection with EOF's
ambulatory surgery center (the "ASC Assets") to DelVal ASC, LLC, a Delaware
limited liability company wholly owned by TLC (the "ASC LLC) and certain of the
Purchased Assets used in connection with EOF's laser refractive facilities (the
"Facilities Assets") to TLC Management (Delaware Valley), LLC (the "Management
LLC);
WHEREAS, simultaneously with the Closing of the Contemplated Transactions,
TLC, Frederic B. Kremer, M.D. P.C., a Pennsylvania professional corporation, and
Frederic B. Kremer, M.D., a Physician Owner, shall consummate a transaction
pursuant to which certain of the assets of Frederic B. Kremer, M.D., P.C., will
be sold to TLC (the "Frederic B. Kremer, M.D., P.C. Transaction Documents")
WHEREAS, simultaneously with the Closing of the Contemplated Transactions,
Michael Aronsky, M.D., Carol Hoffman, M.D., George Pronesti, M.D. and Anthony C.
Zacchei, M.D. (collectively referred to as the "Investor Physicians") are
consummating a transaction pursuant to which the Investor Physicians shall
purchase an eighteen percent (18%) interest in the aggregate in each of the ASC
LLC, and the Management LLC from TLC or an Affiliate of TLC (the "LLC Purchase
Transaction Documents"); and
WHEREAS, the Parties anticipate that the transaction contemplated by this
Agreement will further certain of their business objectives;
WHEREAS, the Parties desire to set forth in writing the terms and
conditions under which the transactions contemplated by this Agreement will be
consummated.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, it is agreed as
follows:
DEFINITIONS.
"Accounts Receivable" means all accounts and any and all rights to payment
of money or other forms of consideration of any kind (whether classified under
the Uniform Commercial Code as accounts, chattel paper, general intangibles or
otherwise) for goods sold or leased or for services rendered by EOF, or any
physician, optometrist, or other Person acting in the name of and on behalf of
EOF, including, but not limited to, accounts receivable, proceeds of any letters
of credit naming EOF as beneficiary, chattel paper, insurance proceeds related
to claims made for events prior to the Closing Date and which relate to the
personal property included in the Purchased Assets, contract rights, notes,
drafts, instruments, documents, acceptances and all other debts, obligations and
liabilities of whatever form from any other Person.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preface above.
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"Applicable Laws" has the meaning set forth in Section 3(r) below.
"ASC LLC" has the meaning set forth in the preface above.
"Assumed Contracts" includes all of EOF's rights and interests in and to
and obligations under the following contracts and agreements:
any and all leaseholds and subleaseholds in real property,
improvements, fixtures, and fittings thereon, and easements, rights-of-way, and
other appurtenances and hereditaments benefiting same (such as appurtenant
rights in and to public streets), as described on Schedule 1(a) attached hereto
(the "Real Property Leases");
any and all leases or subleases of equipment or other personal
property, and rights thereunder as described on Schedule 1(b) attached hereto;
and
any and all agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder and any other agreement or contract set forth on Schedule 1(c).
"Assumed Liabilities" has the meaning set forth in Section 2(b) below.
"CHAMPUS" means the Civilian Health and Medical Program of the Uniformed
Services.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contemplated Transactions" means all of the transactions contemplated by
this Agreement.
"Delaware Limited Liability Company Act" means the Delaware Limited
Liability Company Act, as amended, Title 6, Chapter 18 of the General Laws of
the State of Delaware.
"Effective Time" means 12:01 a.m. the day after the Closing Date.
"Employee Benefit Plans" has the meaning set forth in Section 3(p)(i)
below.
"Environmental Laws" means all federal, state, and local laws, rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder and other governmental requirements relating to pollution,
control of chemicals, storage and handling of petroleum products, management of
waste (including biohazardous or biomedical waste), discharges of materials into
the environment, health, safety, natural resources, and the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"EOF" has the meaning set forth in the preface above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means (a) the articles of incorporation, taxpayer and
other identification numbers, seals, minute books, transfer books, and other
documents relating to the organization, maintenance, and existence of EOF as a
professional corporation, (b) employment or noncompete agreements between EOF
and those licensed medical doctors and optometrists under contract with EOF to
provide medical services to EOF patients, (c) all patient records and patient
lists, (d) all insurance policies of EOF and all claims arising thereunder and
all prepaid expenses on malpractice insurance premiums, (e) the inventories,
cash, and Accounts Receivable disposed of, canceled, expended or collected, as
the case may be, by EOF after the date hereof and prior to the Closing in the
Ordinary Course of Business, (f) personal property of individual Physician
Owners and other professional corporation employees which is not included on the
financial statements of EOF, (g) EOF's cash on hand as of the Closing Date, (h)
EOF's third-party payor agreements other than EOF's Medicare provider agreement
(i) all drugs owned by EOF,(j) any rights of EOF under this Agreement or any
related document or under any other agreement between EOF on the one hand, and
TLC on the other hand entered into on or after the date of this Agreement, (k)
all Employee Benefit Plans or other pension or profit sharing plans of EOF, (l)
all interests in real property owned by EOF (excluding leasehold or subleasehold
interests), (m) the names "Dr. Frederic B. Kremer" and "Kremer" other
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than the use of such names with respect to the provision of professional
ophthalmology services or optometric professional services, refractive surgical
services, eyeglasses and other eyewear, and any other healthcare services
related to diseases and surgery of the eye; and (n) the property and assets
expressly designated on Schedule 1(d).
"FBK" means Frederic B. Kremer, M.D., P.C.
"FBK Purchase Agreement" means that certain Asset Purchase Agreement by and
among TLC Vision (USA) Corporation, Frederic B. Kremer, M.D., P.C. and Frederic
B. Kremer dated July 11, 2005.
"Frederic B. Kremer, M.D., P.C. Transaction Documents" has the meaning set
forth in the premises.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Body" means any:
(a) Nation, state, county, city, town, burrow, village, district or
other jurisdiction;
(b) Federal, state, local, municipal, foreign or other government;
(c) Governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission,
court, tribunal or other entity exercising governmental or
quasi-governmental powers);
(d) Multi-national organization or body;
(e) Body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power; or
(f) Official of any of the foregoing.
"Hazardous Materials" has the meaning set forth in Section 3(s) below.
"Health Care Law" means all federal, state or local laws, statutes, codes,
ordinances, regulation manuals or principles of common law relating to
healthcare regulatory matters, including without limitation (i) 42 U.S.C.
Sections 1320a-7, 7a and 7b, which are commonly referred to as the "Federal
Anti-Kickback Statute"; (ii) 42 U.S.C. Section 1395nn, which is commonly
referred to as the "Stark Statute"; (iii) 31 U.S.C Sections 3729-3733, which is
commonly referred to as the "Federal False Claims Act"; (iv) Titles XVIII and
XIX of the Social Security Act, implementing regulations and program manuals;
and (v) 42 U.S.C. Sections 1320d-1320d-8 and 42 C.F.R. Sections 160, 162 and
164, which is commonly referred to as HIPAA.
"Indemnified Person" means any Person entitled to indemnity under this
Agreement.
"Investor Physician" has the meaning set forth in the preface above.
"IRS" means the Internal Revenue Service.
"Knowledge" of a particular fact or other matter by an individual means the
actual knowledge of such individual. EOF shall be deemed to have Knowledge of a
particular fact or matter if Kremer, Jim Staats or Tara Hopewell has, or at any
time had, Knowledge of that fact or other matter. TLC shall be deemed to have
the Knowledge of a particular fact or matter if James C. Wachtman, Steve Rasche,
Bob Ryan, Bill Leonard, or Patty Larson has, or at any time had, Knowledge of
that fact or other matter.
"Liability" means with respect to any Person, any liability or obligation
of such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.
"Loss" has the meaning set forth in Section 9(b) below.
"Management LLC" means TLC Management (Delaware Valley), LLC, a Delaware
limited liability agreement and wholly owned subsidiary of TLC.
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"Management Co. Operating Agreement" means the Limited Liability Company
Agreement of TLC Management (Delaware Valley), LLC, as defined in the Delaware
Limited Liability Company Act.
"Material Adverse Effect" or "Material Adverse Change" means any effect or
change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating results, operations, or business prospects
of EOF taken as a whole except for (i) effects or changes that are generally
applicable to the industries or markets in which EOF operates; (ii) changes in
the United States or world financial markets or general economic conditions,
(iii) effects arising from war or terrorism or (iv) the public announcement of
the Contemplated Transactions.
"Medicaid" means any state program pursuant to which health care providers
are paid or reimbursed for care given or goods afforded to indigent persons and
administered pursuant to a plan approved by the Centers for Medicare and
Medicaid Services under Title XIX of the Social Security Act.
"Medical Waste" includes, but is not limited to, pathological waste, blood,
sharps, wastes from surgery or autopsy, dialysis waste, including contaminated
disposable equipment and supplies, cultures and stock of infectious agents and
associated biological agents, contaminated animals, isolation wastes,
contaminated equipment, laboratory waste, various other biological waste and
discarded materials contaminated with or exposed to blood, excretion or
secretion from human beings or animals, and any substance, pollutant, material
or contaminant listed or regulated under the Medical Waste Tracking Act of 1988,
42 U.S.C. Sections 6992, et seq.
"Medical Waste Law" means the Medical Waste Tracking Act of 1988, as
amended, the U.S. Public Vessel Medical Waste Anti-Dumping Act of 1988, 33
U.S.C.A. Sections 2501, et seq., the Marine Protection, Research and Sanctuaries
Act of 1972, 33 U.S.C.A. Sections 1401, et seq., the Occupational Safety and
Health Act, 29 U.S.C.A. Sections 651, et seq., the United States Department of
Health and Human Services, National Institute for Occupational Self-Safety and
Health Infectious Waste Disposal Guidelines, Publication No. 88-119, all
regulations and orders issued pursuant to any of the foregoing, and any other
federal, state, regional, county, municipal or other local laws, regulations and
ordinances insofar as they purport to regulate Medical Waste or impose
requirements relating to Medical Waste.
"Medicare" means any medical program established under Title XVIII of the
Social Security Act and administered by the Centers for Medicare and Medicaid
Services.
"Necessary Authorizations" means, with respect to EOF, all certificates of
need, authorizations, certifications, consents, approvals, permits, licenses,
notices, accreditations and exemptions, filings and registrations, and reports
required by Applicable Laws, which are required or necessary to the lawful
ownership and operation of EOF's business.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice.
"Parties" has the meaning set forth in the preface above.
"PBGC" has the meaning set forth in Section 3(p)(ii) below.
"Pennsylvania Professional Corporation Act" means the Pennsylvania
Professional Corporation Act of the State of Pennsylvania, as amended.
"Permitted Encumbrances" has the meaning set in Section 2(b).
"Person" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a Governmental Body (or any department, agency,
or political subdivision thereof).
"Physician Owners" means Frederic B. Kremer, M.D., Michael Aronsky, M.D.,
Carol Hoffman, M.D., George Pronesti, M.D., and Anthony C. Zacchei, M.D.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced,
brought, conducted or heard by or before, or otherwise involving, any
governmental body or arbitrator.
"Provider" has the meaning ascribed to it in the Services Agreement.
"Provider Employment Agreement" has the meaning ascribed to it in the
Services Agreement.
"Purchase Price" has the meaning set forth in Section 2(a) below.
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"Purchased Assets" means all of EOF's right, title, and interest in and to
the following assets of EOF owned as of the Closing Date:
any and all furniture, fixtures, office furnishings, tools and similar
property, equipment and other capital assets of EOF, including but not limited
to the items described on Schedule 1(b) attached hereto;
any and all inventory of supplies, janitorial and office supplies, and
other disposables and consumables on hand or under order on the Closing Date
(excluding drugs);
any and all intangible assets, goodwill, going concern value, service
marks and service names (whether registered or unregistered), and applications
therefor, all rights in and to internet domain names presently used by EOF,
telephone numbers presently used by EOF, all intellectual property used in
connection with the operations of EOF (including the names "Dr. Frederic B.
Kremer" and "Kremer", with respect to the provision of professional
ophthalmology services or optometric professional services, refractive surgical
services, eyeglasses and other eyewear, and any other healthcare services
related to diseases and surgery of the eye) and goodwill associated therewith,
and licenses and sublicenses granted and obtained with respect thereto (not
necessary for the practice of medicine), and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions in which EOF operates;
any and all claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment which have accrued as a result of the operation of business of EOF
(except any such item relating to the payment of Taxes);
any and all franchises, approvals, permits, licenses (not necessary
for the practice of medicine), Medicare provider numbers related to the
operation of the ASC Assets, orders, registrations, certificates, variances, and
similar rights obtained from governments and governmental agencies which are
assignable;
any and all books, records, ledgers, files, documents, correspondence,
lists, plats, architectural plans, drawings, and specifications, creative
materials, advertising and promotional materials, studies, reports, and other
printed or written materials (excluding patient medical records), and other
writings used in connection with the operations of EOF whatsoever;
data processing programs, software programs, computer printouts,
databases and hardware and related items used in the conduct of the business of
EOF, including, without limitation, accounting, invoices, auditing and data
processing bases and programs;
EOF's Accounts Receivable which shall be delivered to TLC upon receipt
by EOF;
all other assets, personal property, tangible and intangible personal
property used by EOF in connection with the operation of its business (except
for the Excluded Assets).
a restrictive covenant agreement, executed by Frederic B. Kremer,
M.D., one of the Physician Owners, in the form attached hereto as Exhibit 1(a).
The term "Purchased Assets" shall not include any specific item included
within the definition of Excluded Assets set forth herein.
"Real Property Leases" has the meaning set forth within the definition of
Assumed Contracts in this Section 1.
"Requisite EOF Approval" means the affirmative vote of the holders of the
requisite percentage of the shares of EOF which is required by the Pennsylvania
Professional Corporation Act to approve the transactions contemplated by this
Agreement.
"Requisite TLC Approval" means the affirmative vote of a majority of the
TLC directors in favor of this Agreement.
"Retained Liabilities" has the meaning ascribed to it in Section 2(b).
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge
or other security interest other than (a) mechanic's, materialmen's or similar
lien, (b) liens for taxes not yet due and payable or for taxes that the taxpayer
is contesting in good faith through appropriate proceedings, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Services Agreement" means that certain Service Agreement dated as of the
Closing Date by and among Management LLC and the Successor Medical Practice
attached hereto as Exhibit 1(b).
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Successor Medical Practice" shall mean Delaware Valley Vision Associates
Group, LLC, which is a party to the Services Agreement.
"Third-Party Claim" means any claim against any Indemnified Person by a
Person that is not a party to this Agreement, whether or not involving a
Proceeding.
"TLC" has the meaning set forth in the preface above.
"TLC - DEL" means TLC Management (Delaware Valley), LLC, a Delaware limited
liability company and wholly owned subsidiary of TLC.
"TLC - DEL Operating Agreement" means the Limited Liability Company
Agreement of TLC - DEL, as defined in the Delaware Limited Liability Company
Act.
Basic Transaction.
Purchase and Sale of Assets. At the Closing, on and subject to the
terms and conditions of this Agreement, EOF agrees to transfer, sell, convey and
deliver to TLC and TLC agrees to purchase, all of the Purchased Assets and EOF
agrees to assign and TLC agrees to assume or cause an Affiliate to assume all of
the Assumed Contracts for a price equal to cash in the amount of Twenty-Nine
Million Two Hundred Five Thousand and 00/100 Dollars ($29,205,000) (the
"Purchase Price") to be paid or satisfied as set forth in Section 2(c).
Assumption of Liabilities.
TLC or an Affiliate of TLC shall assume at the Effective Time,
and shall perform or discharge on or after the Effective Time, only
(A) the contracts, leases, commitments, obligations and liabilities of
EOF which are included in the definition of Assumed Contracts; (B)
EOF's trade accounts payable and other short-term obligations incurred
in the Ordinary Course of Business no more than thirty (30) days prior
to the Closing Date; and (C) the Security Interests described on
Schedule 2(b) (the "Permitted Encumbrances") (the foregoing (A), (B)
and (C) are hereinafter collectively referred to as the "Assumed
Liabilities"), and neither TLC nor any of its Affiliates shall assume
any other liabilities of EOF.
Other than the Assumed Liabilities, neither TLC nor any of its
Affiliates shall be deemed to have assumed, nor shall TLC or any of
its Affiliates assume any Liability of EOF including but not limited
to: (A) any Liability which may be incurred by reason of any breach of
or default under contracts, leases, commitments or obligations of EOF
which occurred prior to the Effective Time; (B) any Liability for any
employee benefits payable to employees of EOF, including, but not
limited to, liabilities arising under any Employee Benefit Plan of
EOF; (C) any Liability based upon or arising out of a violation of any
laws by EOF, including, without limiting the generality of the
foregoing, any such liability which may arise in connection with
agreements, contracts, commitments or provision of services by EOF or
any Physician Owner; (D) any Liability based upon or arising out of
any tortious or wrongful actions of EOF or any Physician Owner, (E)
any Liability for the payment of any taxes imposed by law on EOF
arising from any activities of EOF prior to the Effective Time or by
reason of the transactions contemplated by this
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Agreement; (F) any Liability for the payment of legal fees incurred by
EOF prior to the Closing; (G) any term debt of EOF not included in the
Permitted Encumbrances; or (H) any trade accounts payable not included
in the Assumed Liabilities (collectively the "Retained Liabilities").
Purchase Price. TLC shall pay the Purchase Price at the Closing in
cash, payable by wire transfer or delivery of immediately available funds. EOF
and Kremer acknowledge and agree that the Purchase Price shall be distributed as
soon as possible on or after the Closing Date, subject to necessary reserves to
satisfy obligations of EOF.
The Closing. The closing of the transaction (the "Closing") shall take
place at the offices of Blank Rome LLP, One Logan Square, Philadelphia,
Pennsylvania, commencing at 9:00 a.m. local time on July 11, 2005 (the "Closing
Date").
Deliveries at Closing. At the Closing, (i) TLC will deliver to EOF the
various certificates, instruments, and documents referred to in Section 7(b)
below; (ii) EOF will deliver to TLC the various certificates, instruments, and
documents referred to in Section 7(a) below.
Proration. The following prorations among the Parties shall be made as
of the Closing Date, with EOF remaining liable to the extent such items relate
to any time period up to the Closing Date and TLC being liable to the extent
such items relate to periods on and after the Closing Date:
Any ad valorem taxes, including, without limitation, personal
property taxes and assessments, and other taxes, if any, on or with
respect to the Purchased Assets,
Rents, additional rents, taxes and other items payable by EOF
under any lease, license, permit, contract or any other agreement or
arrangement to be assigned to or assumed by TLC, and
The amount of rents, taxes, and charges for sewer, water, fuel,
telephone, electricity, and other utilities; provided, that if
practicable, a meter reading shall be taken on the Closing Date and
the respective obligations of the Parties determined in accordance
with such readings.
To the extent possible, the net amount of all such prorations will be
settled in cash at the Closing. If the actual expense of any of the above items
for the billing period in which the Closing Date falls is not known at the
Closing, the proration shall be made based on the expense incurred in the
previous billing cycle, for expenses billed less often than quarterly, and on
the average expense incurred in the preceding three (3) billing periods, for
expenses billed quarterly or more often.
Taxes and Expenses. EOF shall be responsible for any business,
occupation, withholding or similar tax or taxes of any kind related to EOF's
business for any period prior to the Closing Date. All applicable sales, use
(excluding use taxes associated with the transfer of Purchased Assets by TLC
into or out of any State in which EOF presently operates) and tangible taxes,
documentary stamp taxes, filing and recording costs and other transfer taxes,
costs and fees relating to the transfer of title to the Purchased Assets, and
the consummation of the transactions described herein, shall be paid by EOF.
Allocation. The Parties agree to allocate the Purchase Price among the
Purchased Assets (and all other capitalizable costs) for tax purposes in
accordance with their relative fair market values and Schedule 2(h) reflects the
agreed upon fair market value of certain assets.
Employees. As of the Closing Date, EOF shall terminate all the
employees of EOF. TLC or an Affiliate of TLC may offer to hire such terminated
employees (other than Providers) as it desires. Each Provider listed on Schedule
2(i) to this Agreement shall become an employee of the Successor Medical
Practice and shall execute a Provider Employment Agreement. EOF shall retain
responsibility under any and all employment agreements with respect to
terminated employees. EOF hereby covenants and agrees that it will take whatever
steps are necessary to pay or fund completely or reserve completely for any
accrued benefits, where applicable, or vested accrued benefits for which EOF or
any entity might have any liability whatsoever arising from any salary, wage,
benefit, bonus, sick leave, insurance, employment tax or similar liability of
EOF to any employee or other person or entity (including,
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without limitation, any Employee Benefit Plan of EOF and any liability under
employment contracts with EOF) allocable to services performed prior to the
Closing Date. EOF acknowledges that the purpose and intent of this covenant is
to assure that TLC shall have no liability whatsoever at any time in the future
with respect to any of EOF's employees during the term of their employment by
EOF, including, without limitation, any Employee Benefit Plan of EOF.
Other Assignments and Transfers. EOF shall transfer all of its patient
records and inventory of drugs to the Successor Medical Practice on the Closing
Date. EOF shall, at the request of TLC and to the extent permitted by the
Centers for Medicare and Medicaid Services, assign all its rights in and to its
Medicare provider number relating to the ambulatory surgery center to the ASC
LLC. If requested by TLC within one hundred twenty (120) days of the Closing
Date, EOF acknowledges and agrees to execute and deliver any and all documents
and instruments reasonably necessary to transfer such provider number to the ASC
LLC.
Representations and Warranties of EOF and Kremer. EOF and Kremer
represent and warrant to TLC that the statements contained in this Section 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section 3).
Organization, Qualification, and Power. EOF is a professional
corporation duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Pennsylvania. EOF is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction in which
the character or location of the properties owned or the business conducted by
EOF makes such qualification necessary. EOF has the full power and authority to
carry on the business in which it is engaged and to own and use the properties
owned, leased and used by it.
Ownership Interest of EOF. Schedule 3(b) sets forth the number of
shares each Physician Owner holds in EOF. Except as set forth on Schedule 3(b),
there are no other shares, options, warrants or convertible debt of any form
authorized or outstanding.
Authorization of Transaction. Subject to obtaining any required
approvals from any Governmental Body, EOF has the full power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of EOF and
the Kremer, enforceable in accordance with its terms and conditions.
Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any Governmental Body,
professional regulatory organization or court to which EOF is subject or any
provision of the articles of incorporation or bylaws of EOF or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which EOF is a party or by which it is bound
or to which any of its assets is subject (or result in the imposition of any
Security Interest upon any of its assets). Except as set forth on Schedule 3(d),
EOF is not required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Body in order for EOF to
consummate the transactions contemplated by this Agreement.
Title; Condition. EOF has, or will have on the Closing Date, legal and
beneficial title to, or leasehold interest in, all of its tangible and
intangible property free and clear of any Security Interest other than the
Permitted Encumbrances. Except for real and personal property leased to or
licensed by EOF, EOF's tangible and intangible property (other than service
marks and service names) are not subject to any lien, lease, conditional sales
agreement, option, right of first refusal or any other encumbrance or charge
other than the Permitted Encumbrances. To the Knowledge of EOF, EOF has legal
and beneficial title to its service marks and service names free and clear of
any claims of any other Person.
Tangible Assets. EOF owns or leases all land, buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted. Each tangible asset is free from defects, has been
33
maintained in accordance with normal industry practice and is in operating
condition (subject to normal wear and tear).
Subsidiaries and Investments. EOF does not own, directly or
indirectly, any capital stock or other equity ownership or proprietary interest
in any other corporation, partnership, association, limited liability company,
trust, joint venture or other entity.
Financial Statements. EOF has delivered to TLC: (a) a combined audited
balance sheet of EOF and Frederic B. Kremer, M.D., P.C. ("FBK") as of December
31, 2004 (including the notes thereto, the "Balance Sheet"), and the related
audited statements of income and cash flows for the fiscal year then ended,
including in each case the notes thereto, together with the report thereon of
Gocial Gerstein, LLC independent certified public accountants; (b) combined
audited balance sheets of EOF and FBK as of December 31 in each of the fiscal
years 2000 through 2003 and the related audited statements of income for each of
the fiscal years then ended, including in each case the notes thereto; and (c)
an unaudited balance sheet of EOF and FBK as of March 31, 2005, (the "Interim
Balance Sheet") and the related statements of income for the three (3) months
then ended. Such financial statements fairly present (and the financial
statements delivered pursuant to Section 0 will fairly present) the financial
condition and the results of operations and cash flows of EOF and FBK as of the
respective dates and for the periods referred to in such financial statements,
all in accordance with GAAP, except with respect to the interim statements which
do not comply with GAAP due to the absence of notes and the need for normal
year-end adjustments. The financial statements referred to in this Section and
delivered pursuant to Section 0 reflect and will reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed, in the case of the audited financial statements, in the
notes to such financial statements. The financial statements have been and will
be prepared from and are in accordance with the accounting records of EOF and
FBK. EOF's auditors have not issued any letters to EOF's board of directors
thereof during the thirty-six (36) months preceding the execution of this
Agreement.
No Changes Prior to Closing Date. During the period from December 31,
2004 through the date hereof EOF has not (i) incurred any liability or
obligation of any nature (whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated and
whether due or to become due), except in the Ordinary Course of Business, (ii)
written off as uncollectible any notes or Accounts Receivable, except write-offs
in the Ordinary Course of Business charged to applicable reserves, (iii)
conducted its business in such a manner so as to increase its accounts payable
or so as to decrease its Accounts Receivable, other than in the Ordinary Course
of Business, (iv) granted any increase in the rate of wages, salaries, bonuses,
or other remunerations of any employee, except in the Ordinary Course of
Business, (v) canceled or waived any claims or rights of substantial value, (vi)
made any change in any method of accounting, (vii) except as provided on
Schedule 3(i), otherwise conducted its business or entered into any transaction,
except in the usual and ordinary manner and in the Ordinary Course of Business,
(viii) except as provided on Schedule 3(i), agreed, whether or not in writing,
to do any of the foregoing, or (ix) disposed of its assets other than in the
Ordinary Course of Business.
Other Contracts. Schedule 3(j) lists all contracts and other
agreements, whether written or oral, to which EOF is a party, except that
agreements described in subsections (i) and (ii) may be omitted if, and only if,
such agreements involve a commitment on an annual basis in amount less than
Fifteen Thousand Dollars ($15,000), including but not limited to:
any agreement for the lease of real or personal property to or
from any Person;
any agreement for the purchase or sale of supplies, products, or
other personal property or for the furnishing or receipt of services;
any agreement concerning a partnership, limited liability company
or joint venture;
any agreement with an ophthalmologist, optometrist or any other
health care provider;
34
any agreement under which EOF has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation pursuant to which it has imposed a Security Interest in respect
of any of its assets, tangible or intangible;
any agreement concerning confidentiality or noncompetition;
any profit sharing, option, deferred compensation, severance, or other
plan or arrangement for the benefit of EOF's current or former owners,
directors, partners, managers, officers, and/or employees;
any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing severance benefits;
any agreement pursuant to which EOF has advanced or loaned any amount
to any of its directors, officers, and employees;
any agreement pursuant to which the consequences of a default or
termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of EOF;
or
any agreements with third party payors or other health plans for the
provision of health care services.
EOF has delivered to TLC a correct and complete copy of each written
agreement listed on Schedule 3(j) (as amended through the Closing Date) and a
written summary setting forth the terms and conditions of each oral agreement
referred to on Schedule 3(j). With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect
with respect to EOF and to the Knowledge of EOF is legal, valid, binding,
enforceable; and in full force and effect with respect to the other parties
thereto; (B) except as set forth on Schedule 3(j), no notice of this Agreement
or consent of any third party is required in order for EOF to execute and
deliver this Agreement or to consummate the transactions contemplated hereby;
(C) Except for the failure to obtain any third party consents necessary to
assign the Assumed Contracts or as otherwise described on Schedule 3(j), EOF is
not in breach or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default, modification, or acceleration
under the agreement and to the Knowledge of EOF and Kremer no other party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (D) to the Knowledge of EOF and Kremer no
party has repudiated any provision of the agreement. EOF acknowledges and agrees
that neither TLC nor any of its Affiliates shall have an obligation to assume
and neither TLC nor any of its Affiliates shall not assume EOF's obligations
under any agreement listed on Schedule 3(j) unless such obligation is also
listed on Schedules 1(a), (b) or (c).
Undisclosed Liabilities. Except as set forth on Schedule 3(k), EOF has no
uninsured liability (whether known or unknown, asserted or unasserted, absolute
or contingent, accrued or unaccrued, liquidated, or unliquidated, and whether
due or to become due), including any liability, for taxes, except for (i)
liabilities set forth on the face of the Interim Balance Sheet (ii) liabilities
which have arisen after the date of the Interim Balance Sheet in the Ordinary
Course of Business (none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law) and (iii) liabilities under certain
contracts and agreements (except for liabilities which related to a breach of
such contracts or agreements) which either are disclosed on Schedule 3(j) or are
not otherwise required to be disclosed.
Insurance; Malpractice. Schedule 3(l) contains a list of all policies or
binders of fire, liability, product liability, workers compensation, health and
other forms of insurance policies or binders currently in force insuring against
risks which will remain in full force and effect at least through the Closing
Date. Schedule 3(l) contains a description of all current malpractice liability
insurance policies of the Physician Owners, EOF and EOF's professional
employees. Neither EOF, the Physician Owners, nor EOF's professional employees
have, in the last three (3) years, filed a written application for any insurance
coverage relating to EOF's business or property which has been denied by an
insurance agency or carrier. EOF and EOF's professional employees have been
continuously
35
insured for professional malpractice claims during the last three (3) years.
Schedule 3(l) also sets forth a list of all claims for any loss in excess of
Twenty-Five Thousand and no/100 Dollars ($25,000.00) per occurrence filed by or
against EOF or EOF's professional employees during the three (3) year period
immediately preceding the date hereof, including workers compensation, general
liability, environmental liability and professional malpractice liability
claims. Neither EOF, nor to the Knowledge of EOF, any of EOF's professional
employees, is in default with respect to any provision contained in any such
policy and none of them has failed to give any notice or present any claim under
any such policy in a due and timely fashion.
Litigation. Except as set forth on Schedule 3(m), there is no suit, action,
proceeding at law or in equity, arbitration, administrative proceeding or other
proceeding or investigation by any Governmental Body pending, or to the
Knowledge of Kremer and EOF threatened against, or affecting EOF or any of the
Purchased Assets or Assumed Contracts, or to the Knowledge of Kremer and EOF
against any physician or other health care professional engaged or employed by
EOF in his or her capacity as a physician or health care professional or
resulting or arising from his or her employment with EOF, and to the Knowledge
of Kremer and EOF there is no basis for any of the foregoing. None of the
actions, suits, proceedings, hearings, and investigations set forth on Schedule
3(m) will result in a Material Adverse Change.
Tax Matters. All federal, state and other tax returns of EOF required by
law to be filed have been timely filed, and EOF has paid or adequately provided
for all taxes (including taxes on properties, income, franchises, licenses,
sales and payrolls) which have become due pursuant to such returns or pursuant
to any assessment, except for any taxes and assessments, the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which EOF has set aside on its books
adequate reserves. There are no tax liens on any of EOF's assets except those
with respect to taxes not yet due and payable. There are no pending tax
examinations of EOF's tax returns nor has EOF received a revenue agent's report
asserting a tax deficiency in the last twelve (12) months. There are not now and
will not be on the Closing Date, any claims pending or asserted against EOF for
unpaid taxes by any federal, state or other governmental body. EOF has withheld
from each payment made to employees of EOF the amount of all taxes (including,
but not limited to, federal, state and local income taxes and Federal Insurance
Contribution Act taxes) required to be withheld therefrom and all amounts
customarily withheld therefrom, and has set aside all other employee
contributions or payments customarily set aside with respect to such wages and
has paid or will pay the same to, or has deposited or will deposit such payment
with, the proper tax receiving officers or other appropriate authorities.
Third-Party Relations. EOF has not received any written notice that any
material, supplier, employee or associated physician, optometrist or other
provider intends to cease doing business with EOF.
Employee Benefit Plans.
List of Plans. Schedule 3(p) contains an accurate and complete list of
all employee benefit plans ("Employee Benefit Plans") within the meaning of
Section 3(3) of ERISA, whether or not any Employee Benefit Plans are
otherwise exempt from the provisions of ERISA, established, maintained or
contributed to by EOF (including all employers (whether or not
incorporated) which by reason of common control are treated together with
EOF and/or the Physician Owners as a single employer within the meaning of
Section 414 of the Code) since September 2, 1974.
Status of Plans. EOF has never maintained and does not now maintain or
contribute to any Employee Benefit Plan subject to ERISA, which is not in
substantial compliance with ERISA or which has incurred any accumulated
funding deficiency within the meaning of Section 412 or 418B of the Code,
or which has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code or
which is subject to Title IV of ERISA. EOF has not incurred any liability
to the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of EOF or ceased operations at
any facility or withdrawn from any such Plan in a manner which could
subject it to liability under Section 4062(f), 4063 or 4064 of ERISA, and
knows of no facts or circumstances which might give rise to any liability
of EOF to the PBGC under Title IV of ERISA which could reasonably be
anticipated to result in any claims being made against EOF by the PBGC. EOF
has not incurred any withdrawal liability (including any contingent or
secondary withdrawal liability) within the meaning of Sections 4201 and
4202 of ERISA, to any Employee Benefit
36
Plan which is a Multiemployer Plan (as defined in Section 4001 of ERISA),
and no event has occurred, and there exists no condition or set of
circumstances, which represent a risk of the occurrence of any withdrawal
from or the partition, termination, reorganization or insolvency of any
Multiemployer Plan which would result in any liability of EOF.
Contributions. Full payment has been made of all amounts which EOF is
required, under applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which EOF is a party, to
have paid as contributions thereto as of the last day of the most recent
plan year of such Employee Benefit Plan ended prior to the date hereof. EOF
has made adequate provision for reserves to meet contributions that have
not been made because they are not yet due under the terms of any Employee
Benefit Plan or related agreements. Benefits under all Employee Benefit
Plans are as represented and have not been increased subsequent to the date
as of which documents have been provided.
Tax Qualification. Each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code has been determined to be so qualified by
the Internal Revenue Service and, nothing has occurred since the date of
the last such determination which resulted or is likely to result in the
revocation of such determination.
Transactions. EOF has not engaged in any transaction with respect to
the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor have any
of its directors, officers or employees to the extent they or any of them
are fiduciaries with respect to such plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of
ERISA which would result in any claim being made under or by or on behalf
of any such plans by any party with standing to make such claim.
Other Plans. EOF presently does not maintain any Employee Benefit
Plans or any other foreign pension, welfare or retirement benefit plans
other than those listed on Schedule 3(p).
Documents. EOF has delivered or caused to be delivered to TLC true and
complete copies of (i) all Employee Benefit Plans as in effect, together
with all amendments thereto which will become effective at a later date, as
well as the latest IRS determination letter obtained with respect to any
such Employee Benefit Plan qualified under Section 401 or 501 of the Code,
and (ii) the most recently filed Form 5500 for each Employee Benefit Plan
required to file such form.
Employee Compensation. EOF has paid or discharged or will pay or discharge
or assume all liabilities for compensation and benefits to which all its
employees, including physician employees, are entitled through the Closing Date,
including but not limited to all salaries, wages, bonuses, incentive
compensation, payroll taxes, hospitalization and medical expenses, deferred
compensation, and vacation and sick pay, as well as any severance pay becoming
due as a result of the termination of certain of EOF's employees.
Compliance with Applicable Laws. EOF and its physician employees (while
employed by EOF) have operated in compliance with all federal, state, county and
municipal laws, constitutions, ordinances, statutes, rules, regulations,
including Health Care Law, and orders applicable thereto ("Applicable Laws").
Neither EOF, Kremer nor any physician employed by EOF has received or made any
payment or any remuneration whatsoever to induce or encourage the referral of
patients or the purchase of goods and/or services as prohibited under any state
law or Health Care Law, nor has any governmental authority or third-party payor
formally alleged in writing any violation of Health Care Law by EOF or the
Physician Owners within the last seven (7) years. Without limiting the
generality of the foregoing:
Permits and Licenses. Except as disclosed on Schedule 3(r)(i), (EOF
and all physicians and other health care professionals engaged or employed
by EOF have all permits and licenses and other Necessary Authorizations
required by all Applicable Laws to provide services in the manner
historically provided by EOF; have made all regulatory filings necessary
for the conduct of EOF's business; and are not in violation of any of said
permitting or licensing requirements, except where failure to secure such
licenses, permits and other Necessary Authorizations does not have an
adverse effect on the business of EOF or the physicians associated with EOF
taken as a whole.
37
Health Care Compliance. EOF is participating in or otherwise
authorized to receive reimbursement from Medicare and Medicaid and is a
party to other third-party payor agreements, if any, set forth in Schedule
3(j). All necessary certifications and contracts required for participation
in such programs are in full force and effect and have not been amended or
otherwise modified, rescinded, revoked or assigned, and to the Knowledge of
EOF and Kremer, no condition exists or event has occurred which in itself
or with the giving of notice or the lapse of time or both would result in
the suspension, revocation, impairment, forfeiture or non-renewal of any
such third-party payor program, except where such event does not have an
adverse effect on the business of EOF or the physicians associated with EOF
taken as a whole. EOF is in compliance with the requirements of all such
third-party payors. EOF, the Physician Owner, and EOF's physician employees
do not have any financial relationship (whether investment interest,
compensation interest, or otherwise) with any entity to which any of the
foregoing refer patients, except for such financial relationships that
qualify for exceptions to state and federal laws restricting physician
referrals to entities in which they have a financial interest.
Fraud and Abuse. Neither EOF, Kremer, nor any other physicians or
other health care professionals while employed by EOF, have engaged in any
activities which are prohibited under any Health Care Law, or the
regulations promulgated thereunder pursuant to such statutes, or related
state or local statutes or regulations, or which are prohibited by rules of
professional conduct, including the following: (a) knowingly and willfully
making or causing to be made a false statement or representation in any
application for any benefit or payment; (b) knowingly and willfully making
or causing to be made any false statement or representation of a fact for
use in determining rights to any benefit or payment; (c) knowingly and
willingly concealing any event affecting the initial or continued right to
receive any benefit or payment with intent to fraudulently secure such
benefit or payment either in an amount or quantity greater than that which
is due or authorized; or (d) knowingly and willfully soliciting or
receiving any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind or offering
to pay or receive such remuneration (1) in return for referring an
individual to a person for the furnishing or arranging for the furnishing
or any item or service for which payment may be made in whole or in part by
Medicare or Medicaid or (2) in return for purchasing, leasing, or ordering
or arranging for or recommending purchasing, leasing or ordering any good,
facility, service or item for which payment may be made in whole or in part
by Medicare or Medicaid.
Practice Compliance. EOF has all licenses and permits necessary to
operate at the locations where it practices medicine in accordance with the
requirements of all Applicable Laws and has all Necessary Authorizations
for the use and operation of a medical practice, all of which are in full
force and effect. Schedule 3(r)(iv) lists all licenses and permits held by
EOF. There are no outstanding notices relating to EOF issued by any
Governmental Body or authority or third-party payor requiring conformity or
compliance with any Applicable Law or condition for participation with such
governmental authority or third-party payor, and after reasonable and
independent inquiry and due diligence and investigation, EOF has neither
received notice nor has any Knowledge or reason to believe that such
Necessary Authorizations may be revoked or not renewed in the Ordinary
Course of Business.
Environmental Matters.
To the Knowledge of EOF and Kremer, EOF is in compliance with all
applicable Environmental Laws.
EOF has not, in violation of applicable Environmental Laws, authorized
or conducted the disposal or release, or other handling of any Medical
Waste, hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls ("PCBs"), petroleum product or waste (including
crude oil or any fraction thereof), natural gas, liquefied gas, synthetic
gas, biohazardous or biomedical material, or other material defined,
regulated controlled or potentially subject to any remediation requirement
under any Environmental Law (collectively "Hazardous Materials"), on, in,
under or affecting any property owned or leased by EOF.
EOF has, and is in compliance with, all licenses, permits,
registrations, and Governmental Body authorizations necessary to operate
under all applicable Environmental Laws. Schedule 3(r)(iv) lists all
38
such licenses, permits, registrations and Governmental Body authorizations
held by EOF and required by any Environmental Law.
EOF has not received any written or oral notice from any Governmental
Body or entity or any other Person and there is no pending or to the
Knowledge of EOF threatened claim, litigation or any administrative agency
proceeding that: (a) alleges a violation of any Environmental Law(s) by EOF
or, with respect to the Purchased Assets or any property owned or leased by
EOF, (b) alleges that EOF is a liable party or potentially responsible
party under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq., or any analogous state law,
(c) has resulted or could result in the attachment of an environmental lien
on any of the Purchased Assets or property owned or leased by EOF or (d)
alleges that EOF is liable for any contamination of the environment,
contamination of any property owned or leased by EOF, damage to natural
resources, property damage, or personal injury based on its activities or
the activities of any predecessor or third parties involving Hazardous
Materials, whether arising under the Environmental Laws, common law
principles, or other legal standards.
With respect to the generation, transportation, treatment, storage and
disposal or other handling of Medical Waste, EOF has complied with all
Applicable Laws.
Rates and Reimbursement Policies. The jurisdictions in which EOF is
operating do not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services of the type presently
provided by EOF. EOF does not have any rate appeal currently pending before any
governmental authority or any administrator of any third-party payor program.
Accounts Receivable. All Accounts Receivable that are reflected on the
Balance Sheet or the Interim Balance Sheet or in the accounting records of EOF
as of the Closing Date represent or will represent valid obligations arising
from sales actually made or services actually performed by EOF or the Physician
Owners on behalf of EOF in the Ordinary Course of Business. Except to the extent
paid prior to the Closing Date, such Accounts Receivable are or will be as of
the Closing Date current and collectable net of the respective reserves shown on
the Balance Sheet or the Interim Balance Sheet (which reserves are adequate and
calculated consistent with past practice). To the Knowledge of EOF and Kremer,
there is no contest, claim, defense or right of setoff against such Accounts
Receivable, except for customary third party payor allowances.
Guaranties. EOF is not a guarantor and otherwise is not liable for any
liability or obligation (including indebtedness) of any other Person.
Powers of Attorney. There are no outstanding powers of attorney executed by
EOF, except as may be contained in financing documents or security agreements
listed on Schedule 3(j) and provided to TLC.
Brokers' Fees. Except as set forth on Schedule 3(x), EOF does not have any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
Survey Results. Attached as Schedule 3(y) are true and correct copies of
the most recent building survey inspection and patient care survey results
conducted by the Pennsylvania Department of Health. EOF and Kremer represent and
warrant that the plan of correction for each deficiency has been properly
implemented and that the operation of the ASC Assets are currently in compliance
with such plan or plans of correction as noted on the attached Schedule 3(y).
Net Names. To the Knowledge of EOF and Kremer, Schedule 3(z) contains a
complete and accurate list of all rights in the internet domain names presently
used by EOF (collectively "Net Names"). All Net Names have been registered in
the name of EOF. No Net Name has been or is now involved in any dispute,
opposition, invalidation or cancellation Proceeding and to the Knowledge of EOF
and Kremer, no such action is threatened with respect to any Net Name. To the
Knowledge of EOF and Kremer, there is no domain name application pending of any
other person which would interfere with or infringe upon any Net Name.
39
Full Disclosure. To the Knowledge of EOF and Kremer, no representation or
warranty made by EOF in this Agreement contains or will contain any untrue
statement of a fact or omits or will omit to state a fact necessary to make the
statements contained herein or therein not misleading.
Representations and Warranties of TLC. TLC represents and warrants to EOF
and Kremer that the statements contained in this Section 4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4).
Organization. TLC is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction in which the character or location
of the properties owned or the business conducted by TLC makes such
qualifications necessary. TLC has the full power and authority to carry on the
business in which it is engaged and to own and use the properties owned, leased
and used by it. TLC is a Delaware corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware.
Authorization of Transaction. TLC has full power and authority to execute
and deliver this Agreement. The execution, delivery and performance by TLC has
been duly authorized by all necessary action on the part of TLC. This Agreement
constitutes the valid and legally binding obligation of TLC, enforceable in
accordance with its terms and conditions.
Noncontravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge or other restriction of any Governmental Body,
professional regulatory organization or court to which TLC is subject or may
become subject as a result of the transaction contemplated by this Agreement, or
any provision of the Articles of Incorporation or the bylaws of TLC or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which TLC is a party or by which it is bound
or to which any of its assets is subject. Other than state and federal filings
required by the Securities Act and similar state statutes, TLC does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any Governmental Body in order for the Parties to consummate the
transactions contemplated by this Agreement.
Certain SEC Filings. The most recent 10-K report of TLC Vision Corporation
("TLC Vision"), the parent corporation of TLC, and all periodic TLC Vision
reports filed with the Securities Exchange Commission thereafter do not contain
any untrue statement of any material fact and do not omit to state any material
fact necessary to make the statements made, in the context in which made, not
false or misleading.
Litigation. TLC is not a party to any litigation which would prevent TLC
from consummating the Contemplated Transactions. To the Knowledge of TLC there
is no threatened litigation which would prevent TLC from consummating the
Contemplated Transactions.
Brokers' Fees. Except as set forth on Schedule 4(f), TLC does not have any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
EOF or Kremer could become liable or obligated.
Full Knowledge. To the Knowledge of TLC, no representation or warranty made
by TLC in this Agreement contains or will contain any untrue statement of a fact
or omits or will omit to state a fact necessary to make the statements contained
herein or therein not misleading.
Covenants. The Parties agree as follows with respect to the period from and
after the execution of this Agreement.
General. Each of the Parties will take all reasonable actions and to do all
reasonable things necessary in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction of
40
the closing conditions set forth in Section 6 below) to be satisfied by him or
it. This Section shall not be construed to obligate any of the Parties to waive
any condition precedent to his or its obligations to perform hereunder.
Notices and Consents. EOF will give any notices to third parties, and will
take all reasonable actions requested by TLC to obtain any third party consents
(other than the payment of cash or other consideration requested by third
parties in connection with the delivery of consents for the assignment of
contracts or agreements under this Agreement), necessary or required to
consummate the transaction or the assignment of contracts or agreements set
forth on Schedules 1(a), (b) and (c) or any permits or licenses of EOF included
in the Purchased Assets.
Regulatory Matters and Approvals. Each of the Parties will give any notices
to, make any filings with, and take all reasonable actions to obtain any
authorizations, consents, and approvals of Governmental Bodies and governmental
agencies in connection with the transactions contemplated by this Agreement.
Operation of Business. From the date of this Agreement through the Closing
Date, EOF shall (and Kremer shall cause EOF to):
conduct its business in the Ordinary Course of Business, except that
it may make extraordinary distributions of cash, settle any lawsuits on
terms acceptable to it provided that such terms do not have an adverse
effect on the Purchased Assets or TLC's ability to operate the Purchased
Assets after Closing, repurchase warrants and pay one-time bonuses to a
limited number of employees in connection with the consummation of the
transaction and enter into a redemption agreement with any one or more of
its Physician Owners;
except as otherwise directed by TLC in writing, and without making any
commitment on TLC's behalf, take all reasonable action to preserve intact
EOF's current business organization, keep available the services of its
officers, employees and independent contractors and maintain its relations
and goodwill with suppliers, customers, landlords, creditors, employees,
agents and others having business relationships with it;
make no changes in management personnel without prior consultation
with TLC; and
maintain the Purchased Assets in a state of repair and condition
consistent with normal conduct of EOF's business.
From the date of this Agreement through the Closing Date, EOF will not
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Without limiting the generality of the
foregoing:
(i) EOF will not authorize or effect any change in its articles of
incorporation or bylaws;
EOF will not grant any options, warrants, or other rights to purchase
or obtain any of its shares or issue, sell, or otherwise dispose of any of
its shares;
EOF will not issue any note, bond, or other debt security or create,
incur, assume, or guarantee any indebtedness for borrowed money or
capitalized lease obligation outside the Ordinary Course of Business;
EOF will not impose any Security Interest upon any of its assets
outside the Ordinary Course of Business;
EOF will not make any capital investment in, make any loan to, or
acquire the securities or assets of any other Person outside the Ordinary
Course of Business;
EOF will not make any change in employment terms for any of the
Physician Owners or its managers, officers, and employees outside the
Ordinary Course of Business other than to terminate existing employment
agreements with Physician Owners immediately prior to Closing; and
41
EOF will not commit to do any of the foregoing.
Further Acts and Assurances. Following Closing, each Party shall deliver to
the other Parties, without cost or expense to such Party, such further
information and documents and shall execute and deliver to the other Parties
such further instruments and agreements, without cost or expense to that Party,
as any other Party shall reasonably request to consummate or confirm the
transactions provided for herein, to accomplish the purpose herein, including
but not limited to (i) taking any and all reasonable steps necessary to place
TLC in possession and operating control of the Purchased Assets; (ii) for
reducing to possession, any or all of the Purchased Assets; (iii) putting in
place new third party payor agreements substantially similar to the agreements
with third party payors listed on Schedule 3(j); or (iv) executing and
delivering any and all agreements, documents or instruments reasonably necessary
to assign EOF's rights in and to its Medicare provider number in accordance with
the provisions of Section 2(j).
Full Access. Upon three (3) business days prior notice, EOF will permit
representatives of the TLC to have full access to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to EOF during normal business hours. TLC (i) will treat and hold
as such any confidential information it receives from EOF in the course of the
reviews contemplated by this Section 0, and (ii) will not use any of the
confidential information except in connection with this Agreement, except as
required by Applicable Law.
Notice of Developments. Each Party will give prompt written notice to the
other Parties of any adverse development causing a breach of any of its own
representations in Section 3 or Section 4 above within five (5) business days of
becoming aware of such breach (but in any event prior to Closing). The
aforementioned notice shall include an updated Schedule. Unless the party
receiving the updated Schedule has the right to terminate this Agreement under
Section 8(a)(iv) below by reason of the development and exercises that right
within the period of five (5) business days, the written notice pursuant to this
Section 5(g) will be deemed to have amended the applicable Schedule or
Schedules, and to have qualified the representations contained in Section 3 or
Section 4 above, as applicable.
Exclusivity. Until the earlier of (i) July 12, 2005 or (ii) the Closing
Date, EOF will not solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of EOF (including any
acquisition structured as a merger, consolidation, or share exchange). EOF shall
notify TLC immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
Collection of Accounts Receivable. EOF (prior to its dissolution) and
Kremer agree to cooperate with TLC and the Successor Medical Practice in the
collection of Accounts Receivable owned by EOF as of the Closing Date acquired
pursuant to this Agreement but EOF and Kremer shall not be required to bear any
cost or expense in providing such cooperation. TLC, at its option, shall have
the right to require the collection of said Accounts Receivable through a
lockbox or bank account sweep arrangement. In connection therewith, EOF and
Kremer agree to execute the necessary documents and follow the necessary
procedures as described in the Service Agreement to accommodate the collection
of the Accounts Receivable in such manner.
Corporate Authorization. In the absence of a breach of this Agreement by
TLC and the satisfaction of all conditions to the EOF's obligations to
consummate the transactions under Section 0, by execution of this Agreement,
Kremer agrees to take any and all steps, (other than the payment of cash or
other consideration requested by third parties or TLC) necessary and will do,
execute, acknowledge and deliver, or will cause to be done, executed,
acknowledged and delivered, all such acts, deeds and assurances required in
order to consummate the transactions contemplated by this Agreement, including
voting as a director of EOF in favor of the transactions contemplated by this
Agreement and voting as an owner of EOF in favor of the transactions
contemplated by this Agreement at any meeting (or in any action by written
consent) required by the Pennsylvania Professional Corporation Act.
Malpractice Insurance. On or before Closing, EOF shall procure for itself,
until the statute of limitations expires, an extended reporting endorsement
(tail coverage) for any policy of malpractice insurance which was not an
occurrence policy covering EOF and Kremer for acts prior to the Closing Date
(the "Tail Policy"). To the extent it is required, the Tail Policy shall contain
coverage limits of no less than $1,000,000 per incident and $3,000,000 in the
aggregate on a claims made basis..
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Employee Benefit Plans. At or as soon as reasonably practicable after
Closing EOF will take action to terminate all Employee Benefit Plans in
accordance with Applicable Law, except for EOF's health plan and flexible
spending account which may be assumed by TLC or an Affiliate of TLC at Closing.
TLC shall notify EOF prior to Closing as to whether or not it intends to assume
either EOF's health plan or flexible spending account. All nonphysician
employees of EOF which are offered employment with Management LLC shall be
offered employment on terms and conditions comparable to those that are
currently in effect on the Closing Date.
Change of Name. Within (30) days of the Closing Date, EOF shall change its
name from "Eyes of the Future, Inc." to some other name that will not be
confused with such prior name and cease using the tradename "Kremer Laser Eye
Center" or any variation thereof using the name "Kremer". EOF shall provide TLC
with documentation that it has changed its name as soon as reasonably
practicable after such change has been made.
Interim Financial Statements. Until the Closing Date, EOF shall deliver to
TLC within thirty (30) days after the end of each month a copy of EOF's balance
sheet and statement of income as of that date prepared in a manner and
containing information consistent with EOF's current practices.
Access to Books and Records after Closing. TLC shall give EOF and its
accountants or other representatives, reasonable access during normal business
hours to the books and records included in the Purchased Assets which related to
periods prior to Closing and which are necessary for the completion of EOF's tax
returns. EOF shall be allowed to make copies of such information and retain such
copies.
Satisfaction of Warrants. EOF shall cancel, redeem or otherwise satisfy any
outstanding warrants or other rights to purchase an equity interest in EOF at or
prior to Closing.
Assistance With Future Claims. TLC covenants that for a period of two (2)
years following the Closing, employees of TLC or its Affiliates who were once
employees of EOF may provide EOF with reasonable assistance in connection with
the defense of any claims or litigation against EOF without additional cost to
EOF; provided, however, that such assistance shall not materially interfere with
the performance of such employee's employment duties to TLC or its Affiliates.
Retained Liabilities. EOF shall satisfy or cause to be satisfied all of the
Retained Liabilities.
Conditions to Obligation to Close.
Conditions to Obligation of TLC . The obligation of TLC to consummate the
transactions contemplated by this Agreement is subject to satisfaction of the
following conditions:
EOF shall have procured all of the third party consents, and where
indicated lease assignments in a form reasonably satisfactory to TLC, for
all the agreements specified on Schedule 0;
As of the Closing Date the representations and warranties set forth in
Section 3 above shall not contain any misrepresentations which in the
aggregate would likely result in a Material Adverse Effect or Material
Adverse Change;
EOF and Kremer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
No action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, or (C) affect adversely the right
of TLC or its Affiliates to own the Purchased Assets or assume the Assumed
Contracts;
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All actions to be taken by EOF or Kremer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby, have been taken or delivered to TLC and
are reasonably satisfactory in form and substance to TLC;
Simultaneously with the Closing of the Contemplated Transactions, the
Investor Physicians shall purchase an eighteen percent (18%) interest in
the aggregate in each of the ASC LLC and Management LLC as contemplated
under the LLC Purchase Transaction Documents;
Simultaneously with the Closing of the Contemplated Transactions, TLC
or its Affiliates shall have received a Provider Employment Agreement
executed by each of the Providers listed in Schedule 2(i) of this Agreement
in substantially the form of Exhibit 6(a)(vii);
Simultaneously with the Closing of the Contemplated Transactions, TLC
and Frederic B. Kremer, M.D., P.C. shall consummate the transactions
contemplated under the Frederic B. Kremer, M.D., P.C. Transaction
Documents;
Simultaneously with the Closing of the Contemplated Transactions, TLC
or an Affiliate of TLC shall have entered into a new lease agreement with
Kremer Real Estate 5 Limited Partnership for the property used by EOF at
200 Mall Blvd., King of Prussia, PA;
Simultaneously with the Closing of the Contemplated Transaction, TLC
or an Affiliate of TLC shall have entered into a new lease agreement with
Kremer for the property used by EOF at 419 West County Line Road, Hatboro,
PA;
All licenses, permits and approvals necessary and authorizations for
the operation of the Purchased Assets as contemplated by this Agreement
shall have been obtained by TLC and be in full force and effect;
TLC and its Affiliates shall have obtained or have reasonable
assurances that they will obtain (at their own cost and expense) (a)
certification for participation in the Medicaid programs of the
Commonwealth of Pennsylvania, Delaware and New Jersey; and (b)
certification from the appropriate agency of the federal government for
participation in the federal Medicare program;
All material consents, approvals and authorizations necessary for
consummation by TLC of the transactions contemplated by this Agreement
shall have been obtained and be in full force and effect; and
The execution and delivery of all items required to be delivered by
EOF and Kremer under Section 7.
TLC may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
Conditions to Obligation of EOF and Kremer. The obligations of EOF and
Kremer to consummate the transactions contemplated by this Agreement are subject
to satisfaction of the following conditions:
As of the Closing Date the representations and warranties set forth in
Section 4 above shall not contain any misrepresentations which in the
aggregate would likely result in a Material Adverse Effect or Material
Adverse Change;
TLC shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
No action, suit, or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any
44
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect adversely the right of TLC to own the Purchased
Assets or assume the Assumed Contracts;
All actions to be taken by TLC in connection with the consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby, have been taken or delivered to EOF and are reasonably
satisfactory in form and substance to EOF;
Simultaneously with the Closing of the Contemplated Transactions, all
transactions contemplated under the LLC Transaction Documents, and the
Frederic B. Kremer, M.D., P.C. Transaction Documents shall close in
accordance with their respective terms;
All material consents, approvals and authorizations necessary for
consummation by TLC of the transactions contemplated by this Agreement
shall have been obtained and be in full force and effect;
Simultaneously with the Closing of the Contemplated Transactions, TLC
or its Affiliates shall have received a Provider Employment Agreement
executed by each of the Providers listed in Schedule 2(i) of this Agreement
in substantially the form of Exhibit 6(a)(vii);
Simultaneously with the Closing of the Contemplated Transactions, TLC
and Frederic B. Kremer, M.D., P.C. shall consummate the transactions
contemplated under the Frederic B. Kremer, M.D., P.C. Transaction
Documents;
Simultaneously with the Closing of the Contemplated Transactions, TLC
or an Affiliate of TLC shall have entered into a new lease agreement with
Kremer Real Estate 5 Limited Partnership for the property used by EOF at
200 Mall Blvd., King of Prussia, PA;
Simultaneously with the Closing of the Contemplated Transaction, TLC
or an Affiliate of TLC shall have entered into a new lease agreement with
Kremer for the property used by EOF at 419 West County Line Road, Hatboro,
PA;
The execution and delivery by TLC or an Affiliate of TLC of one or
more the Assignment and Assumption Agreements (as defined in Section 7);
and
The execution and delivery by TLC or an Affiliate of TLC of all the
items required to be delivered by TLC or its Affiliates under Section 7.
EOF may waive any condition specified in this Section 6(b) if it executes a
writing so stating at or prior to the Closing.
Items to be Delivered at or Prior to Closing.
By EOF and Kremer. EOF and Kremer, as applicable, shall execute and deliver
to TLC, prior to or at the Closing:
Certified resolutions of EOF authorizing the execution of all
documents and the consummation of all transactions contemplated hereby;
A Bill of Sale in substantially the form attached hereto as Exhibit 0;
One or more Assignment and Assumption Agreements in substantially the
form attached hereto as Exhibit 0 under the terms of which TLC or its
Affiliates shall agree to assume all of the Assumed Liabilities;
45
Intentionally Deleted;
A certificate duly executed by the President of EOF that as of the
Closing Date, all representations and warranties of EOF do not contain any
misrepresentations which in the aggregate would likely result in a Material
Adverse Effect or Material Adverse Change;
An opinion from EOF's counsel in substantially the form attached
hereto as Exhibit 0;
A restrictive covenant agreement executed by Frederic B. Kremer, M.D.
in substantially the form attached hereto as Exhibit 1(a); and
Such other instruments as may be reasonably requested by TLC in order
to effect to or carry out the intent of this Agreement.
By TLC. TLC shall deliver to EOF at or prior to the Closing:
The Purchase Price;
An opinion from TLC's counsel in substantially the form attached
hereto as Exhibit 0;
A certificate, duly executed by an officer of TLC, stating as of the
Closing Date, all representations and warranties of TLC do not contain any
misrepresentations which in the aggregate would likely result in a Material
Adverse Effect or Material Adverse Change;
Such other instruments as may be reasonably requested by EOF or Kremer
in order to effect to or carry out the intent of this Agreement.
Termination.
Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
the Parties may terminate this Agreement by mutual written consent at
any time prior to the Closing Date;
TLC may terminate this Agreement by giving written notice to EOF at
any time prior to the Closing Date (A) in the event the representations and
warranties of EOF or Kremer contain any misrepresentations which in the
aggregate would likely result in a Material Adverse Effect or Material
Adverse Change; or (B) if the Closing shall not have occurred on or before
July 11, 2005, by reason of the failure of any condition precedent under
Section 6(a) hereof (unless the failure results primarily from TLC
breaching any representation, warranty, or covenant contained in this
Agreement); or
EOF may terminate this Agreement by giving written notice to TLC at
any time prior to the Closing Date (A) in the event the representations and
warranties of TLC contain any misrepresentations which in the aggregate
would likely result in a Material Adverse Effect or Material Adverse
Change; or (B) if the Closing shall not have occurred on or before July 11,
2005, by reason of the failure of any condition precedent under Section
6(b) hereof (unless the failure results primarily from EOF or Kremer
breaching any representation, warranty, or covenant contained in this
Agreement).
Any Party may terminate this Agreement by giving written notice to the
other Parties at any time prior to Closing in the event (A) any Party has
within the previous ten (10) business days given such Party any notice
pursuant to Section 5(g) above and (B) the development that is the subject
of the notice (when considered in the aggregate with all prior such
notices) would likely have a Material Adverse Effect.
46
Effect of Termination. If any Party terminates this Agreement pursuant to
Section 8(a) above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach).
Indemnification; Remedies.
Survival. All representations, warranties, covenants and obligations in
this Agreement and the FBK Purchase Agreement and any certificate or document
delivered pursuant to this Agreement or the FBK Purchase Agreement shall survive
the Closing and the consummation of the transactions contemplated by this
Agreement, subject to Section 0. It is the intent of the parties to address the
indemnification obligations of TLC and Kremer under both this Agreement and the
FBK Purchase Agreement in this Section 9 of this Agreement. For purposes of this
Section, to the extent a claim is made arising out of or related to the FBK
Purchase Agreement and defined terms in this Section are defined both in this
Agreement and the FBK Purchase Agreement the meaning ascribed to such term shall
have the meaning ascribed to it under the FBK Purchase Agreement.
Indemnification And Reimbursement By Kremer. Kremer will indemnify and hold
harmless TLC, and its representatives, members, managers, officers, agents,
subsidiaries and Affiliates (collectively, the "TLC Indemnified Persons"), and
will reimburse TLC Indemnified Persons for any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable attorneys'
fees and expenses) or diminution of value but not for any special damages or
punitive damages (collectively, "Damages"), whether or not involving a claim by
a third party (a "Third Party Claim"), arising from or in connection with any of
the items below.
any breach of any representation or warranty made by EOF, FBK or
Kremer in (a) this Agreement or the FBK Purchase Agreement; (b) the Bill of
Sale delivered under this Agreement or the FBK Purchase Agreement; (c) the
Assignment and Assumption Agreement(s) delivered under this Agreement or
the FBK Purchase Agreement or (d) any assignment of any lease or sublease,
delivered by EOF, FBK or Kremer pursuant to this Agreement or the FBK
Purchase Agreement;
any breach of any covenant or obligation of EOF, FBK or Kremer in (a)
this Agreement or the FBK Purchase Agreement; (b) the Bill of Sale
delivered under this Agreement or the FBK Purchase Agreement; (c) the
Assignment and Assumption Agreement(s) delivered under this Agreement or
the FBK Purchase Agreement; or (d) any assignment of any lease or sublease,
delivered by EOF, FBK or Kremer pursuant to this Agreement or the FBK
Purchase Agreement;
any Liability arising out of the ownership or operation of EOF or FBK
prior to the Effective Time other than Liabilities expressly assumed by TLC
or its Affiliates pursuant to this Agreement or the FBK Purchase Agreement;
any noncompliance with any bulk transfer laws or fraudulent transfer
law in respect of the transactions contemplated by this Agreement or the
FBK Purchase Agreement;
any Liability relating to any Employee Benefit Plan maintained by EOF
or any Affiliate of EOF, including but not limited to FBK; or
any Liability relating to the rendering of professional services by a
physician employee of EOF or FBK while employed by EOF or FBK, including
but not limited to Liabilities for medical malpractice if such claim
relates to or arises out of an act or omission which occurred prior to the
Effective Time.
Indemnification And Reimbursement By TLC.
TLC will indemnify and hold harmless Kremer, EOF, FBK its officers,
directors, shareholders, managers, Affiliates, successors, heirs and
assigns (the "EOF Indemnified Persons") and will reimburse Kremer, EOF or
FBK, for any Damages arising from or in connection with:
47
any breach of any representation or warranty made by TLC in (a)
this Agreement or the FBK Purchase Agreement; (b) the Bill of Sale
delivered under this Agreement or the FBK Purchase Agreement; (c) the
Assignment and Assumption Agreement(s) delivered under this Agreement
or the FBK Purchase Agreement; or (d) any assignment of any lease or
sublease, delivered by EOF, FBK or Kremer pursuant to this Agreement
or the FBK Purchase Agreement.
any breach of any covenant or obligation of TLC or its Affiliates
in (a) this Agreement or the FBK Purchase Agreement; (b) the Bill of
Sale delivered under this Agreement or the FBK Purchase Agreement; (c)
the Assignment and Assumption Agreement(s) delivered under this
Agreement or the FBK Purchase Agreement; or (d) any assignment of any
lease or sublease, delivered by EOF, FBK or Kremer pursuant to this
Agreement or the FBK Purchase Agreement;
any Assumed Liabilities under this Agreement or the FBK Purchase
Agreement; or
any Liability arising out of the ownership of the Purchased
Assets as defined in this Agreement or the FBK Purchase Agreement and
occurring after the Effective Time or the operation of TLC or any
other subsidiary or Affiliate of TLC.
TLC will indemnify and hold harmless each EOF Indemnified Person
(other than the Physician Investors) and will reimburse each such EOF
Indemnified Person (other than the Physician Investors), for any Liability
arising out of any act or omission in connection with the rendering of
professional services by any of the Physician Investors occurring from and
after Closing.
Limitation on Amount. Neither Kremer nor EOF or FBK shall have any
liability for indemnification with respect to claims under Section 0 until the
aggregate of all Damages (e.g. the sum of the total amount of Damages incurred
under this Agreement and the FBK Purchase Agreement) incurred by TLC Indemnified
Persons for such claims exceeds Five Hundred Thousand and 00/100 Dollars
($500,000) (the "Indemnity Threshold") and then only for the amount by which
such Damages exceeds the Indemnity Threshold. Further, the maximum liability
shall be capped at Fourteen Million Eight Hundred Ten Thousand Five Hundred and
00/100 Dollars ($14,810,500) (the "Indemnification Cap"). However, the
Indemnification Threshold shall not apply to Damages resulting from (i) any
intentional breach of any covenant or obligation described in Section 5 of this
Agreement or the FBK Purchase Agreement (other than with respect to Section 5(r)
of this Agreement or the FBK Purchase Agreement); (ii) any matters arising in
respect of Sections 0, 0, 0, 0, 0, 0, 0, or 0 of this Agreement or the FBK
Purchase Agreement; (iii) the covenants and obligations of EOF and Kremer or FBK
and Kremer to pay or satisfy the items in Section 2(b)(ii)E, F, G, and H of this
Agreement or the FBK Purchase Agreement; or (iv) fraudulent conduct of either
EOF, FBK or Kremer.
Time Limitations.
If the Closing occurs, Kremer will have Liability (for indemnification
or otherwise) with respect to any breach by Kremer, EOF or FBK of (i) a
covenant or obligation to be performed or complied with prior to the
Closing under either this Agreement or the FBK Purchase Agreement, or (ii)
a representation or warranty under this Agreement or the FBK Purchase
Agreement (other than those in Sections 0, 0, 0, 0, 0, 0, 0, or 0, of this
Agreement or the FBK Purchase Agreement as to which a claim may be made at
any time before the expiration of sixty (60) days from and after the
expiration of the applicable statute of limitations relating to the
underlying claim), only if on or before the period ending five hundred
forty (540) days from and after the Closing Date, TLC notifies Kremer of a
claim specifying the factual basis of the claim in reasonable detail to the
extent then known by TLC. If the time for performance of any covenant under
this Agreement or the FBK Purchase Agreement extends beyond the period
extending five hundred forty (540) days from and after the Closing Date, a
claim may be made within one hundred eighty days (180) from the expiration
of the date of performance of such covenant.
If the Closing occurs, TLC will have Liability (for indemnification or
otherwise) with respect to any breach by TLC of (i) a covenant or
obligation to be performed or complied with prior to the Closing under this
Agreement or the FBK Purchase Agreement or (ii) a representation or
warranty under this Agreement or the FBK Purchase Agreement (other than
that set forth in Section 0, 0or 0 of this Agreement
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or the FBK Purchase Agreement as to which a claim may be made at any time
before the expiration of sixty (60) days from and after the expiration of
the applicable statute of limitations relating to the underlying claim),
only if on or before the period ending five hundred forty (540) days from
and after the Closing Date, EOF or Kremer notifies TLC of a claim
specifying the factual basis of the claim in reasonable detail to the
extent then known by EOF or Kremer as applicable. If the time for
performance of any covenant under this Agreement or the FBK Purchase
Agreement extends beyond the period extending five hundred forty (540) days
from and after the Closing Date, a claim may be made within one hundred
eighty days (180) from the expiration of the date of performance.
EOF, FBK and Kremer shall have no Liability in respect of any claim if
such claim would not have arisen but for a change in legislation or
accounting policies as pronounced by the Financial Accounting Standards
Board or the Accounting Principles Board made after the Closing Date or a
change in the interpretation of the law as determined by any court of
competent jurisdiction or pursuant to an administrative rule making
decision of a Governmental Body after the Closing Date.
EOF, FBK and Kremer shall have no Liability in respect of any of their
representations or warranties set forth in Section 3 of this Agreement to
the extent that any TLC representative specifically referenced in the
definition of Knowledge was provided prior to Closing with written
documentation that contained information which provided such TLC
representative with Knowledge of a breach of a representation or warranty
of EOF, FBK or Kremer.
Nothing in this Section 9 shall limit or restrict TLC's general
obligation under the governing law to mitigate any loss or damage which it
may incur in consequence of any matter giving rise to a potential claim
under this Agreement.
The amount of any Damages otherwise payable to a TLC Indemnified
Person shall be net of any tax benefits for any TLC Indemnified Person as a
result of the Damages and any insurance proceeds paid to any TLC
Indemnified Person under any applicable insurance policy.
Third-Party Claims.
Promptly after receipt by a person entitled to indemnity under this
Section 0 of notice of the assertion of a Third-Party Claim against it,
such Indemnified Person shall give notice to the person obligated to
indemnify pursuant to this Section (an "Indemnifying Person") of the
assertion of such Third-Party Claim, provided that the failure to notify
the Indemnifying Person will not relieve the Indemnifying Person of any
liability that it may have to any Indemnified Person, except to the extent
that the Indemnifying Person demonstrates that the defense of such
Third-Party Claim is prejudiced by the Indemnified Person's failure to give
such notice.
If an Indemnified Person gives notice to the Indemnifying Person
pursuant to Section 0 of the assertion of a Third-Party Claim, the
Indemnifying Person shall be entitled to participate in the defense of such
Third-Party Claim and, to the extent that it wishes (unless (i) the
Indemnifying Person is also a Person against whom the Third-Party Claim is
made and the Indemnified Person determines in good faith that joint
representation would be inappropriate or (ii) the Indemnifying Person fails
to provide reasonable assurance to the Indemnified Person of its financial
capacity to defend such Third-Party Claim and provide indemnification with
respect to such Third-Party Claim), to assume the defense of such
Third-Party Claim with counsel reasonably satisfactory to the Indemnified
Person. After notice from the Indemnifying Person to the Indemnified Person
of its election to assume the defense of such Third-Party Claim, the
Indemnifying Person shall not, so long as it diligently conducts such
defense, be liable to the Indemnified Person under this Section 0 for any
fees of other counsel or any other expenses with respect to the defense of
such Third-Party Claim, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Third-Party
Claim, other than reasonable costs of investigation. If the Indemnifying
Person assumes the defense of a Third-Party Claim, (i) such assumption will
conclusively establish for purposes of this Agreement that the claims made
in that Third-Party Claim are within the scope of and subject to
indemnification unless the Indemnifying Party notifies the Indemnified
Party that it disputes or may dispute its indemnification obligation with
respect to such Third-Party Claim, and (ii) no
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compromise or settlement of such Third-Party Claims may be effected by the
Indemnifying Person without the Indemnified Person's consent unless (A)
there is no finding or admission of any violation of any legal requirement
or any violation of the rights of any person; (B) the sole relief provided
is monetary damages that are paid in full by the Indemnifying Person; and
(C) the Indemnified Person shall have no liability with respect to any
compromise or settlement of such Third-Party Claims effected without its
consent. If notice is given to an Indemnifying Person of the assertion of
any Third-Party Claim and the Indemnifying Person does not, within ten (10)
days after the Indemnified Person's notice is given, give notice to the
Indemnified Person of its election to assume the defense of such
Third-Party Claim, the Indemnifying Person will be bound by any
determination made in such Third-Party Claim or any compromise or
settlement effected by the Indemnified Person to the extent it is finally
determined that such Third-Party Claim is the obligation of the
Indemnifying Person.
Notwithstanding the foregoing, if an Indemnified Person determines in
good faith that there is a reasonable probability that a Third-Party Claim
may materially adversely affect it other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the Indemnified Person may, by notice to the Indemnifying
Person, assume the exclusive right to defend, compromise or settle such
Third-Party Claim, but the Indemnifying Person will not be bound by any
determination of any Third-Party Claim so defended for the purposes of this
Agreement or any compromise or settlement effected without its consent
(which may not be unreasonably withheld).
EOF (prior to its dissolution) and Kremer hereby consent to the
nonexclusive jurisdiction of any court in which a proceeding in respect of
a Third-Party Claim is brought against any TLC Indemnified Person for
purposes of any claim that a TLC Indemnified Person may have under this
Agreement with respect to such proceeding or the matters alleged therein
and agree that process may be served on the EOF with respect to such a
claim anywhere in the world; provided, however, that the Person asserting
such Third-Party Claim and the TLC Indemnified Persons each are subject to
such jurisdiction.
With respect to any Third-Party Claim subject to indemnification under
this Section 0: (i) both the Indemnified Person and the Indemnifying
Person, as the case may be, shall keep the other person fully informed of
the status of such Third-Party Claim and any related proceedings at all
stages thereof where such person is not represented by its own counsel, and
(ii) the parties agree (each at its own expense) to render to each other
such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Third-Party Claim.
With respect to any Third-Party Claim subject to indemnification under
this Section 0, the parties agree to cooperate in such a manner as to
preserve in full (to the extent possible) the confidentiality of all
confidential information and the attorney-client and work-product
privileges. In connection therewith, each Party agrees that: (i) it will
use its best efforts, in respect of any Third-Party Claim in which it has
assumed or participated in the defense, to avoid production of confidential
information (consistent with applicable law and rules of procedure), and
(ii) all communications between any party hereto and counsel responsible
for or participating in the defense of any Third-Party Claim shall, to the
extent possible, be made so as to preserve any applicable attorney-client
or work-product privilege.
Other Claims. A claim for indemnification for any matter not involving a
Third-Party Claim may be asserted by notice to the Party from whom
indemnification is sought and shall be paid promptly after such notice unless a
written notice disputing such claim is sent to the asserting party within twenty
(20) days of receipt of the claim in writing.
Exclusive Remedy. Indemnification for claims made pursuant to, and as
limited by, the provisions of this Section 9, shall be the exclusive remedy of
any Party to this Agreement for any claim against any other Party to this
Agreement for money damages arising out of or in connection with this Agreement.
Miscellaneous.
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Notices. Except as otherwise provided in this Agreement, any notice,
payment, demand, request or communication required or permitted to be given by
any provision of this Agreement shall be in writing and shall be duly given by
the applicable party if given to the applicable party at the following address
or facsimile number:
If to EOF or Copy to:
Frederic B. Kremer, M.D.:
Eyes of the Future, P.C. Blank Rome, LLP
109 S. 13th Street One Logan Square
Longport, NJ 08403 Philadelphia, PA 19103
Attention: Frederic B. Kremer, M.D.: Attention: Steven Dubow
Facsimile: (215) 832-5755
If to TLC: Copy to:
540 Maryville Center Drive, Suite 200 Baker Donelson Bearman
St. Louis, MO 63141 Caldwell & Berkowitz P.C.
Attention: General Counsel 4268 I-55 North
Facsimile: 314-434-7251 Jackson MS 39211
Attention: Charles W. Ferguson
Facsimile: (601) 592-2479
Any such notice shall, for all purposes, be deemed to be given and
received:
if given by facsimile, when the facsimile is transmitted to the
party's facsimile number specified in Section 10(a) and confirmation
of complete receipt is received by the transmitting party during
normal business hours on any business day or on the next business day
if not confirmed during normal business hours; provided, however, that
a hard copy must also be sent via nationally recognized and reputable
overnight delivery service;
if by hand, when delivered;
if given by nationally recognized and reputable overnight
delivery service, the business day on which the notice is actually
received by the party; or
if given by certified mail, return receipt requested, postage
prepaid, two (2) business days after posted with the United States
Postal Service.
Section Captions. Section and other captions contained in this Agreement
are for reference purposes only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.
Parties in Interest. Except as otherwise provided in this Agreement, this
Agreement shall be binding upon the Parties hereto and their successors, heirs,
devisees, assigns, legal representatives, executors and administrators.
Section References. Section and subsection references shall, unless the
context requires otherwise, include all subsections, paragraphs, etc. that
comprise such Section and/or subsection. For example, a reference to Section
5.1, unless the context requires otherwise, shall include 5.1, 5.1.1, 5.1.2,
etc.
Integration. This Agreement, the Frederic B. Kremer, M.D., P.C. Transaction
Documents, the Bill of Sale, the Assignment and Assumption Agreement and the
assignment of leases contemplated under this Agreement embody the entire
agreement and understanding among the Parties and supersedes all prior
agreements and understandings, if any, among and between the Parties relating to
the subject matter hereof.
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Applicable Law. This Agreement and the rights of the Parties shall be
governed by, construed, and enforced in accordance with the laws of the
Commonwealth of Pennsylvania excluding conflicts of law provisions.
Specific Performance. Each Party acknowledges that the breach of the
provisions of this Agreement may cause irreparable injury to the other Party for
which monetary damages are inadequate, difficult to compute, or both and which
will be inadequate to fully remedy the injury. Accordingly, in the event of a
breach or threatened breach of one or more of the provisions of this Agreement,
the Party who may be injured (in addition to any other remedies which may be
available to such Party) shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach, or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
Interpretation. Each Party has had the opportunity to have this Agreement
reviewed by counsel and be advised by counsel as to the rights and obligations
of each Party. This Agreement shall not be construed or interpreted more
strictly against one Party than another on grounds that the Agreement or any
draft thereof was prepared by a Party or his counsel.
Enforcement Costs. If any legal action or other proceeding is brought for
the challenge or enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorney's fees, court costs, and all expenses
even if not taxable as court costs (including without limitation, all such fees,
costs and expenses incident to appeals), incurred in that action or proceeding,
in addition to any other relief to which such party or parties may be entitled.
No Referrals Required. The Parties agree that no part of this Agreement
shall be construed to induce or encourage the referral of patients or the
purchase of health care services or supplies. The Parties acknowledge that there
is no requirement under this Agreement or any other agreement between EOF and
TLC that any party refer any patients to any health care provider or purchase
any health care goods or services from any source. Additionally, no payment
under this Agreement is in return for the referral of patients, if any, or in
return for purchasing, leasing or ordering services from TLC or any of TLC's
Affiliates. The Parties may refer patients to any company or person providing
services and will make such referrals, if any, consistent with professional
medical judgment and the needs and wishes of the relevant patients.
Dispute Resolution. The parties agree that in the event of any controversy,
dispute or disagreement arising out of or relating to this Agreement or any
other document integrated into this Agreement under Section 10(e), or the breach
hereof, they shall work together in good faith first to resolve the matter and
then, if necessary, shall submit the matter to binding arbitration, which shall
be conducted in accordance with the procedures specified in this Section. All
reasonable requests for information made by one party to the other will be
honored. All negotiations pursuant to this Section are confidential and shall be
treated as compromise and settlement negotiations for purposes of applicable
rules of evidence. If the matter has not been resolved by the Parties within
sixty (60) days of the disputing party's notice, the dispute shall be submitted
to a single arbitrator for arbitration pursuant to the Rules and Procedures for
Arbitration (the "Rules") of the American Arbitration Association (the
"Service"). The location of the arbitration shall be in Washington D.C. at such
facility as the Parties may mutually agree or if the Parties are unable to agree
at such location determined by the arbitrator. The arbitrator shall be selected
by mutual agreement of the Parties or, in the absence of such agreement, by the
Service. In the event a dispute is submitted to arbitration, the applicable
Parties desire to engage in limited discovery for an abbreviated time period,
the reasonable parameters of which shall be set by the arbitrator, with input
from the applicable Parties, taking into consideration the nature and complexity
of the matters in dispute. The award of the arbitrator shall be binding and
conclusive upon the Parties, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof. The
successful or prevailing Party or Parties shall be entitled to recover
reasonable attorney and arbitrator fees and expenses incurred in connection with
the arbitration from the other Party to the arbitration.
Third-Party Beneficiaries. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the Parties to this
Agreement and any Affiliate of TLC which may execute an assignment and
assumption agreement or assignment of lease agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement.
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Public Announcement. EOF, Kremer and TLC have mutually agreed upon the text
of a public announcement regarding the Contemplated Transactions. EOF and Kremer
acknowledge and agree that TLC may release such public announcement at any time
after the execution and delivery of this Agreement by EOF and Kremer.
Continuing Obligations of EOF. The Parties acknowledge and agree that all
of the obligations of EOF to TLC or its Affiliates under this Agreement shall
expire upon the dissolution of EOF; provided, however, any obligation of EOF to
TLC or its Affiliates that exists at the time of its dissolution shall be
assumed by Kremer individually.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
TLC VISION (USA) CORPORATION
By: /s/ James C. Wachtman
------------------------------------
Printed Name: James C. Wachtman
Title: President and Chief Executive
Officer
EYES OF THE FUTURE, P.C.
By: /s/ Frederic B. Kremer, M.D.
------------------------------------
Frederic B. Kremer, M.D., President
/s/ Frederic B. Kremer, M.D.
----------------------------------------
Frederic B. Kremer, M.D., Individually
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SCHEDULES AND EXHIBITS
Schedules
- ---------
1(a) Assumed Real Property Leases
1(b) Assumed Equipment Leases
1(c) Assumed Agreements, Contracts, Etc.
1(d) Additional Assumed Contracts
2(b) Assumed Liabilities
2(h) Price Allocation Agreement
2(i) Providers
3(b) EOF Ownership
3(d) Governmental Approvals
3(i) Changes Prior to Closing
3(j) Contracts
3(k) Undisclosed Liabilities
3(l) Insurance
3(m) Litigation
3(p) Employee Benefit Plans
3(r)(iv) EOF Licenses and Permits
3(x) EOF Brokers
3(y) Survey Results
3(z) Net Names
4(f) TLC Brokers
6(a)(i) Third Party Consents
Exhibits
- --------
1(a) Form of Kremer Restrictive Covenant Agreement
1(b) Form of Services Agreement
6(a)(vii) Form Provider Agreement
7(a)(ii) Form of Bill of Sale
7(a)(iii) Form of Assignment and Assumption Agreement
7(a)(vi) Form of Opinion of Counsel to EOF
7(b)(ii) Form of Opinion of Counsel to TLC
* The schedules and exhibits to the agreement have been omitted pursuant to
Rule 601(a)(2) of Regulation S-K. Copies of the omitted material will be
furnished to the Securities and Exchange Commission or its staff upon
request.
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