ASSET PURCHASE AGREEMENT

 

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                                                                     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

 

 

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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;

 

 

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           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

 

 

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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 su