10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2009

COMMISSION FILE NUMBER: 0-29302

TLC VISION CORPORATION

(Exact name of registrant as specified in its charter)

(Debtor-In-Possession as of December 21, 2009)

NEW BRUNSWICK, CANADA	980151150
(State or jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

16305 SWINGLEY RIDGE ROAD, SUITE 300	63017
CHESTERFIELD, MO	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone, including area code: (636)-534-2300

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     Common Shares, No Par Value, with common share purchase rights

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

     None

NAME OF EACH EXCHANGE ON WHICH REGISTERED:

     None

     Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

     Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
o Yes þ No

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b(2) of the Exchange Act.

o Large accelerated filer o Accelerated filer o Non-accelerated filer
(Do not check if a smaller reporting company) þ Smaller Reporting Company

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b(2) of the Exchange Act). o Yes þ No

     As of June 30, 2009, the aggregate market value of the registrant’s Common Shares held by non-affiliates of the registrant was approximately $12.6 million.

     As of March 30, 2010, there were 50,565,219 shares of the registrant’s Common Shares outstanding.

     DOCUMENTS INCORPORATED BY REFERENCE:

     Definitive Proxy Statement for the Company’s 2010 Annual Shareholders Meeting (incorporated in Part III to the extent provided in Items 10, 11, 12, 13 and 14).

TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS	3
ITEM 1A. RISK FACTORS	20
ITEM 1B. UNRESOLVED STAFF COMMENTS	30
ITEM 2. PROPERTIES	30
ITEM 3. LEGAL PROCEEDINGS	30
ITEM 4. [REMOVED AND RESERVED]
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	31
ITEM 6. SELECTED FINANCIAL DATA	31
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	75
ITEM 9A. CONTROLS AND PROCEDURES	75
ITEM 9B. OTHER INFORMATION	76
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	76
ITEM 11. EXECUTIVE COMPENSATION	78
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	78
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	79
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	79
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	79
SIGNATURES	80
EX-10.17
EX-10.20
EX-21
EX-23
EX-31.1
EX-31.2
EX-31.3
EX-32.1
EX-32.2
EX-32.3

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     This Annual Report on Form 10-K (herein, together with all amendments, exhibits and schedules hereto, referred to as the “Form 10-K”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act), which statements may be identified by the use of forward looking terminology, such as “may”, “will”, “expect”, “anticipate”, “estimate”, “plans” or “continue” or the negative thereof or other variations thereon or comparable terminology referring to future events or results. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Form 10-K. See Part I, Item 1A, Risk Factors, for cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from results referred to in forward-looking statements. The Company operates in a continually changing business environment and new factors emerge from time to time. The Company cannot predict such factors nor can it assess the impact, if any, of such factors on its financial position or results of operations. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results. The Company disclaims any responsibility to update any forward-looking statement provided in the Form 10-K except as required by law. Unless the context indicates or requires otherwise, references in this Form 10-K to “we,” “our,” “us,” the “Company” or “TLCVision” shall mean TLC Vision Corporation and its subsidiaries. References to “$” or “dollars” shall mean U.S. dollars unless otherwise indicated. References to “Cdn$” shall mean Canadian dollars. References to the “Commission” shall mean the U.S. Securities and Exchange Commission (SEC).

PART I

ITEM 1. BUSINESS

General

     TLC Vision Corporation is an eye care services company dedicated to improving lives through improving vision by providing high-quality care directly to patients and as a partner with their doctors and facilities. A significant portion of the Company’s revenues come from owning and operating refractive centers that employ laser technologies to treat common refractive vision disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. Refractive centers, which is a reportable segment, includes the Company’s 71 centers that provide corrective laser surgery, of which 63 are majority owned and 8 centers are minority owned. In its doctor services business, the Company furnishes doctors and medical facilities with mobile or fixed site access to refractive and cataract surgery equipment, supplies, technicians and diagnostic products, as well as owns and manages single-specialty ambulatory surgery centers. In its eye care business, the Company currently provides franchise opportunities to independent optometrists under its Vision Source^® brand.

Bankruptcy Proceedings

Chapter 11 Bankruptcy Filings

     On December 21, 2009 (Petitions Date), the Company and two of its wholly owned subsidiaries, TLC Vision (USA) Corporation and TLC Management Services, Inc., (Debtor Entities) filed voluntary petitions (Chapter 11 Petitions) under Chapter 11 of Title 11 of the U.S. Code (Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (U.S. Court). The Chapter 11 cases are being jointly administered under the caption In re TLC Vision (USA) Corporation, et al., Case No. 09-14473. On the same day, the Company also filed ancillary proceedings in Canada (Canadian Petition) under the Canadian Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice (the Canadian Court). On December 23, 2009, the Canadian Court recognized the Company’s Chapter 11 case as a “foreign main proceeding” and granted the Company certain other relief. No other operations of the Company, its affiliates or subsidiaries were involved in the filings.

     The filing of the Chapter 11 Petitions constituted an event of default under certain of the Company’s debt obligations, and those debt obligations became automatically and immediately due and payable, although any actions to enforce such payment obligations were stayed as a result of the filing of the Chapter 11 Petitions and the Canadian Petition.

     The December 21, 2009 petitions were submitted to expedite the Company’s financial restructuring through a pre-arranged plan of reorganization. On January 6, 2010, the Debtor Entities filed a joint plan of reorganization (Plan of Reorganization) with the U.S. Court. The Plan of Reorganization provided for, among other things, a conversion of certain indebtedness to 100% of the new equity of TLC Vision (USA) Corporation, which would emerge as a privately held Company owned by certain pre-petition senior secured creditors. There was no assurance of any distribution of funds to the stockholders of the Company under the Plan of Reorganization.

     On February 3, 2010, the Debtor Entities filed the first amended joint plan of reorganization (First Amended Plan). The First Amended Plan was backed by affiliates of a fund managed by Charlesbank Capital Partners LLC (Charlesbank). In connection with

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the First Amended Plan, Charlesbank provided a written commitment to fund up to $134.4 million to or for the benefit of the Company and its subsidiaries subject to the Chapter 11 proceedings. The written funding commitment was subject to the satisfaction of all conditions to the plan sponsor’s obligations set out in the plan sponsor agreement. The First Amended Plan provided for, among other things, the following: the payment in full of all amounts owed to the Company’s senior secured lenders; the acquisition by Charlesbank of substantially all of the assets of the Company, including 100% of the equity of TLC Vision (USA) Corporation and the Company’s six refractive centers in Canada; payments to employees and critical vendors in the ordinary course of business; and distributions to certain secured and unsecured creditors. There was no assurance of any distribution of funds to the stockholders of the Company under the First Amended Plan.

     On February 12, 2010, the Debtor Entities filed the second amended joint plan of reorganization (Second Amended Plan). The Second Amended Plan was backed by affiliates of Charlesbank and H.I.G. Capital, LLC (H.I.G.), which joined as a co-investor in the acquisition of the Company’s assets. In addition to the previously announced terms under the First Amended Plan, the Second Amended Plan also provided for consideration in the amount of up to $9.0 million in cash and a new promissory note of up to $3.0 million to be paid to the Company’s unsecured creditors.

     The Debtor Entities filed the third and fourth amendments to the Plan of Reorganization on March 17, 2010 and March 24, 2010, respectively. The third and fourth amendments did not significantly alter the Second Amended Plan other than for the inclusion of an additional impaired class consisting of pending medical malpractice litigation claims.

     There is no assurance of any distribution of funds to the stockholders of the Company under the Plan of Reorganization, as amended, and completion of this plan is subject to customary closing conditions, including final confirmation by the U.S. Court, Canadian Court and regulatory approvals.

     The Debtor Entities are currently operating as “debtors-in-possession” under the jurisdiction of the U.S. Court and Canadian Court (collectively, the Bankruptcy Courts) and in accordance with applicable provisions of the Bankruptcy Code and the CCAA. In general, the Company and its subsidiaries are authorized to continue to operate as ongoing businesses, but may not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Courts.

Debtor-In-Possession (DIP) Financing

     In connection with filing the Chapter 11 Petitions and the Canadian Petition, on December 21, 2009, the Debtor Entities filed motions with the Bankruptcy Courts seeking approval to enter into a post-petition credit agreement. On December 22, 2009, the U.S. Court issued an interim order approving the Company’s motion to obtain a senior secured super priority debtor-in-possession credit agreement (Senior DIP Credit Agreement). On December 23, 2009, the Canadian Court granted a recognition order relating to the orders received by the Company from the U.S. Court. The Senior DIP Credit Agreement, dated December 23, 2009, was among the Debtors, various lenders and Cantor Fitzgerald Securities as collateral and administrative agent.

     The Senior DIP Credit Agreement provided for financing of a senior secured super priority term loan facility in a principal amount up to $15.0 million. On December 24, 2009, the Company borrowed $7.5 million under the Senior DIP Credit Agreement, all of which remained outstanding as of December 31, 2009. For additional information regarding the terms of the Senior DIP Credit Agreement refer to Note 14, Debt, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

     In connection with the First Amended Plan, the Company filed motions seeking approval from the Bankruptcy Courts for a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement). The Junior DIP Credit Agreement, approved by the U.S. Court via an interim order on February 12, 2010, which was recognized by the Canadian Court on February 18, 2010, dated February 3, 2010, is among the Debtors, various lenders and Charlesbank Equity Fund VII, Limited Partnership as collateral and administrative agent. The U.S. Court made a final order on March 9, 2010 approving the Junior DIP Credit Agreement and that order was recognized by the Canadian Court on March 16, 2010.

     The Junior DIP Credit Agreement provides for financing of a junior secured super priority term loan facility in a principal amount of up to $25 million. On February 25, 2010, the Company borrowed $10.0 million under the Junior DIP Credit Agreement and used the funds, among other things, to pay in full the outstanding principal balance of $7.5 million under the Senior DIP Credit Agreement. For additional information regarding the terms of the Junior DIP Credit Agreement refer to Note 27, Subsequent Events, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

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Reorganization Process

     The Company is operating its business as a debtor-in-possession under the Bankruptcy Courts’ protection from creditors and claimants. The Bankruptcy Courts have approved payment of certain pre-petition obligations, including employee wages, salaries and benefits, and the payment of vendors and other providers in the ordinary course for goods and services received after the filing of the Chapter 11 Petitions and Canadian Petition and other business-related payments necessary to maintain the operation of the Company’s business. The Company has retained legal and financial professionals to advise on the bankruptcy proceedings. From time to time, the Company may seek the U.S. Court’s approval for the retention of additional professionals.

     Immediately after filing the Chapter 11 Petition and Canadian Petition, the Company notified all known current or potential creditors of the bankruptcy filings. Subject to certain exceptions under the Bankruptcy Code and the CCAA, the bankruptcy filings stayed the continuation of any judicial or administrative proceedings or other actions against the Company or its property to recover, collect or secure a claim arising prior to the filing of the Chapter 11 Petition and Canadian Petition.

     As required by the Bankruptcy Code, the United States Trustee for the District of Delaware appointed an official committee of unsecured creditors (the Creditors’ Committee). The Creditors’ Committee and its legal representatives have a right to be heard on all matters that come before the U.S. Court with respect to the Company. An information officer has been appointed by the Canadian Court with respect to the proceedings before the Canadian Court.

     Under Section 365 and other relevant sections of the Bankruptcy Code, the Company may assume, assume and assign, or reject certain executory contracts and unexpired leases, including leases of real property and equipment, subject to the approval of the U.S. Court and certain other conditions. Any description of an executory contract or unexpired lease in this report, including, where applicable, the Company’s express termination rights or a quantification of obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights the Company has under Section 365 of the Bankruptcy Code.

     The Company is reviewing all of its executory contracts and unexpired leases to determine which contracts and leases it may attempt to reject under Section 365 and other relevant sections of the Bankruptcy Code. The Company expects that additional liabilities subject to compromise will arise due to rejection of executory contracts, including leases, and from the determination of the U.S. Court (or agreement by parties in interest) of allowed claims for contingencies and other disputed amounts. The Company also expects that the assumption of additional executory contracts and unexpired leases will convert certain of the liabilities shown on the accompanying consolidated balance sheet as liabilities subject to compromise to liabilities not subject to compromise. Due to the uncertain nature of many of the potential claims, the Company cannot project the magnitude of such claims with certainty.

     The U.S. Court entered an order establishing March 22, 2010, as the general bar date for potential creditors to file claims. The general bar date is the date by which certain claims against the Company must be filed if the claimants wish to receive any distribution in the bankruptcy cases. Proof of claim forms received after the bar date are typically not eligible for consideration of recovery as part of the Company’s bankruptcy cases. Creditors were notified of the bar date and the requirement to file a proof of claim. Differences between liability amounts estimated by the Company and claims filed by creditors are being investigated and, if necessary, the U.S. Court will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated cannot be made until the U.S. Court approves a plan of reorganization, and such confirmation is recognized by the Canadian Court. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

     In order to successfully exit Chapter 11, the Company will need to obtain confirmation by the U.S. Court of the Plan of Reorganization, as amended, as well as recognition by the Canadian Court of the U.S. Court’s plan confirmation. A confirmed plan of reorganization would resolve the Company’s pre-petition obligations, set forth the revised capital structure of the newly reorganized entity, provide for corporate governance subsequent to the Company’s exit from bankruptcy and potentially convert the Company to a privately held entity.

     The confirmation hearing on the Plan of Reorganization, as amended, is scheduled for May 5, 2010. The confirmation hearing may be adjourned from time to time by the U.S. Court without further notice except for an announcement of the adjourned date made at the confirmation hearing or any subsequent adjourned confirmation hearing. There can be no assurance at this time that the Plan of Reorganization, as amended, will be confirmed by the U.S. Court, and such confirmation recognized by the Canadian Court, or that any such plan will be implemented successfully.

     The Company has the exclusive right for 120 days after the filing of the Chapter 11 Petitions to file a plan of reorganization. The Company may file one or more motions to request extensions of this exclusivity period. If the exclusivity period expires, any party in interest would be able to file a plan of reorganization. In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and must be approved, or confirmed, by the U.S.

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Court, and such confirmation recognized by the Canadian Court, in order to become effective. There can be no assurance at this time that a plan of reorganization submitted by the Company will be confirmed by the U.S. Court, or such confirmation recognized by the Canadian Court, or that any such plan will be implemented successfully.

     Under the priority scheme established by the Bankruptcy Code and the CCAA, unless creditors agree otherwise, pre-petition liabilities and post-petition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or stockholders, if any, will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed to each of these constituencies or what types or amounts of distributions, if any, they would receive. A plan of reorganization could result in holders of our liabilities and/or securities, including our common shares, receiving no distribution on account of their interests and cancellation of their holdings. Because of such possibilities, the value of our liabilities and securities, including our common shares, is highly speculative. Appropriate caution should be exercised with respect to existing and future investments in any of our liabilities and/or securities. At this time there is no assurance the Company will be able to restructure as a going concern or successfully implement a plan of reorganization.

     For periods subsequent to the Chapter 11 bankruptcy filings, the Company will apply Accounting Standards Codification (ASC) 852, Reorganizations, in preparing the consolidated financial statements. ASC 852 requires that the financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain revenues, expenses (including professional fees), realized gains and losses and provision for losses that are realized or incurred in the bankruptcy proceedings will be recorded in reorganization items, net, on the consolidated statements of operations. In addition, pre-petition obligations that may be impacted by the bankruptcy reorganization process will be classified on the consolidated balance sheet in liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Courts, even if they may be settled for lesser amounts.

     Upon the filing of the Chapter 11 petitions, certain of the Company’s debt obligations became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law. As a result of the bankruptcy petitions and due to various debt obligations being undersecured or unsecured, $106.7 million of the Company’s pre-petition net debt is included in liabilities subject to compromise on the consolidated balance sheet at December 31, 2009. The Company classifies pre-petition liabilities subject to compromise as a long-term liability because management does not believe the Company will use existing current assets or create additional current liabilities to fund these obligations.

     On March 1, 2010, certain equity holders filed a motion with the Bankruptcy Courts for the appointment of an equity committee. On March 23, 2010, the Bankruptcy Courts entered an order denying the motion for an order appointing an official committee of equity security holders.

Going Concern Matters

     The consolidated financial statements and related notes have been prepared assuming that the Company will continue as a going concern although the Chapter 11 bankruptcy filings raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on restructuring its obligations in a manner that allows it to obtain confirmation of a plan of reorganization by the Bankruptcy Courts. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or to the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

Stock Market Compliance

     As of December 31, 2009, the Company’s common shares were suspended from trading on both the NASDAQ Stock Market (NASDAQ) and the Toronto Stock Exchange (TSX). The Company’s common shares were delisted from the NASDAQ and the TSX effective January 18, 2010 and January 21, 2010, respectively. The Company’s common shares currently trade on the Over-The-Counter Bulletin Board under the ticker symbol “TLCVQ”.

Refractive Disorders

     The eye is a complex organ composed of many parts, and normal vision requires these parts to work well together. When a person looks at an object, light rays are reflected from the object to the cornea. In response, the cornea and lens refract and focus the light rays directly on the retina. At the retina, the light rays are converted to electrical impulses that are transmitted through the optic nerve to the brain, where the image is translated and perceived.

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     Any deviation from normal vision is called a refractive error. Myopia, hyperopia, astigmatism and presbyopia are different types of refractive errors.

• Myopia (nearsightedness) means the eye is longer than normal resulting in difficulty seeing distant objects as clearly as near objects.

• Hyperopia (farsightedness) means the eye is shorter than normal resulting in difficulty seeing near objects as clearly as distant objects.

• Astigmatism means the cornea is oval-shaped resulting in blurred vision.

• Presbyopia is the loss of lens and eye muscle flexibility due to the natural aging process, causing difficulty in focusing on near objects and usually corrected by reading glasses. Because vision correction surgery cannot reverse the aging process, presbyopia cannot be corrected surgically. However, there are surgical and non-surgical techniques available that can effectively manage presbyopia.

Treatment for Refractive Disorders

     Eyeglasses. Eyeglasses remain the most common method of correcting refractive errors because they are safe and relatively inexpensive. Eyeglasses correct nearsightedness and farsightedness by using appropriate lenses to diverge or converge light rays and focus them directly on the retina. The drawbacks of eyeglasses are possible dissatisfaction with personal appearance, inability to participate in certain sports or work activities and possible distortion in visual images when eyeglasses are used to correct large refractive errors.

     Contact Lenses. Contact lenses correct nearsightedness, farsightedness and astigmatism similarly to eyeglasses. If fitted and used as directed, contact lenses are an effective and safe way to correct refractive errors. However, daily use of contact lenses can result in the increased risk of corneal infections, hypersensitivity reactions and other problems.

     Surgical Procedures. Vision correction surgery is an elective procedure available that alters the way light rays are focused directly on the retina, thus eliminating or dramatically reducing the need for eyeglasses or contact lenses. Several types of vision correction surgery are available, and prospective patients are encouraged to carefully consider the alternatives, the associated benefits and risks of each procedure, and seek the advice of their eye care professional. Vision correction surgeries available at TLCVision include:

• LASIK (Laser In Situ Keratomileusis). LASIK corrects nearsightedness, farsightedness and astigmatism by using an excimer laser to reshape the cornea. Because LASIK creates a corneal flap to reshape the cornea and does not disrupt the front surface of the cornea, it generally is less painful, has a quicker recovery period and shorter post-operative need for steroid eye drops than other surgical procedures. LASIK is currently the most common laser refractive procedure and may be the treatment of choice for patients desiring a more rapid visual recovery.

• CustomLASIK. Widely introduced in 2003, CustomLASIK is a technologically supported advancement to LASIK. CustomLASIK involves increased pre-operative diagnostic capabilities that measure the eye from front to back using “wavefront” technology to create a three dimensional corneal map. The information from that map guides the laser in customizing the laser ablation to an individual’s visual irregularities, beyond myopia and hyperopia. CustomLASIK using wavefront technology has the potential to improve not only how much a person can see, in terms of visual acuity measured by the standard 20/20 eye chart, but also how well an individual can see in terms of contrast sensitivity and fine detail. This translates to a reduced occurrence of night vision disturbances post-LASIK.

• PRK (Photorefractive Keratectomy). PRK corrects nearsightedness, farsightedness and astigmatism by using an excimer laser to reshape the cornea without making a flap. During PRK, the protective surface layer of the cornea (the epithelium) is removed prior to the laser refractive treatment to reshape the cornea. This protective layer regenerates during the first week after surgery. The risk of pain, infection and corneal scarring is higher with PRK than with LASIK; however, the intra-operative risks are lessened with PRK because no corneal flap is created.

• LASEK (Laser Assisted Sub-Epithelial Keratectomy). LASEK corrects nearsightedness, farsightedness and astigmatism by using an excimer laser to reshape the cornea. Unlike LASIK that creates a corneal flap, LASEK loosens and folds the protective outer layer of the cornea (the epithelium) to the side prior to the laser refractive treatment. At the completion of the laser refractive treatment the epithelium is put back in its original position. This combines the advantages of LASIK with the safety of PRK. The risk of pain, infection and corneal scarring is higher with LASEK than with LASIK; however, the intra-operative risks are lessened with LASEK because the flap which is created is only in the epithelium. The United States Food and Drug Administration (FDA) has not yet approved use of the excimer laser for LASEK.

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• AK (Astigmatic Keratotomy). AK corrects astigmatism by making microscopic incisions in the cornea to relax and change the shape of the cornea.

• INTACS. INTACS corrects very low levels of nearsightedness (–1.00 diopters to –3.00 diopters) by implanting rings in the cornea to reshape it rather than surgically altering the cornea. INTACS may also be used to correct irregularities in the shape of the cornea caused by some corneal dystrophies.

• CK (Conductive Keratoplasty). For patients age 40 and older, CK is designed for the temporary reduction of farsightedness (+.75 to +3.25 diopters) or to treat presbyopia. CK uses radio frequency instead of a laser to reshape the cornea.

• PTK (Phototherapeutic Keratectomy). PTK treats abrasions, scars or other abnormalities of the cornea caused by injury, disease or previous surgery. PTK uses an excimer laser to remove superficial opacities and irregularities of the cornea to improve vision or reduce symptoms of pain or discomfort due to an underlying eye condition.

• Refractive IOL Procedures. Intraocular lenses (IOLs) are permanent or semi-permanent artificial lenses that are implanted to replace or supplement the eye’s natural crystalline lens. While not a common procedure for correcting refractive errors, the placement of a refractive IOL can help patients who are not candidates for laser refractive surgery. IOLs have been used in the United States since the late 1960s to restore visual function to cataract patients, and more recently are being used in refractive surgery procedures. There are several types of refractive IOLs: phakic IOLs, multi-focal IOLs and accommodating IOLs. Patient suitability and quality of visual outcome for each of these lens options varies.

Laser Correction Procedures

     Excimer laser technology was developed by International Business Machines Corporation in 1976 and has been used in the computer industry for many years to etch sophisticated computer chips. Excimer lasers have the desirable qualities of producing very precise ablation (removal of tissue) without affecting the area outside of the target zone. In 1981, it was shown that the excimer laser could ablate corneal tissue. Each pulse of the excimer laser can remove 0.25 microns of tissue in 12 billionths of a second. The first laser experiment on human eyes was performed in 1985 and the first human eye was treated with the excimer laser in the United States in 1988.

     Excimer laser procedures are designed to reshape the outer layers of the cornea to treat vision disorders by changing the curvature of the cornea. Prior to the procedure being performed, the doctor develops a treatment plan taking into consideration the exact correction required utilizing the results of each individual patient’s eye examination and diagnostic tests performed, such as topography and wavefront analysis. The treatment plan is entered into the laser and the software of the excimer laser then calculates the optimal number of pulses needed to achieve the intended corneal correction using a specially developed algorithm. These procedures are performed on an outpatient basis using only topical anesthetic eye drops that promote patient comfort during the procedure. Patients are reclined in a chair, an eyelid holder is inserted to prevent blinking, and the surgeon positions the patient in direct alignment with the fixation target of the excimer laser. The stromal layer of the cornea is exposed either by removing the epithelium (PRK or LASEK) or creating a thin flap of the outermost layer of the cornea using either a femtosecond laser or a microkeratome blade. The surgeon uses a foot switch to apply the excimer beam that emits a rapid succession of excimer laser pulses, and once complete, the flap is returned to its original position. The typical procedure takes 10 to 15 minutes from set-up to completion, with the length of time of the actual excimer laser treatment lasting between 15 to 90 seconds, depending on the amount of correction required.

     In order to market an excimer laser for commercial sale in the United States, the manufacturer must obtain pre-market approval from the FDA. An FDA pre-market approval is specific for each laser manufacturer and model and sets out a range of approved indications. However, the FDA is not authorized to regulate the practice of medicine. Therefore, in the same way that doctors often prescribe drugs for “off-label” uses (i.e., uses for which the FDA did not originally approve the drug), a doctor may use a device such as the excimer laser for a procedure or an indication not specifically approved by the FDA, if that doctor determines that it is in the best interest of the patient. The initial FDA pre-market approval for the sale of an excimer laser for refractive procedures was granted in 1995 for the laser of Summit Technologies, Inc. (now Alcon Laboratories, Inc., a division of Nestle, S.A.). That first approval was for the treatment of myopia. To date, the FDA has approved for sale excimer lasers from approximately seven different manufacturers for LASIK and from approximately eight different manufacturers for PRK, including VISX, Inc., a subsidiary of Abbott Medical Optics (formerly Advanced Medical Optics), which is the market leader and the provider of most of the Company’s excimer lasers. In Canada and Europe, the use of excimer lasers to perform refractive surgery is not currently subject to regulatory approval, and excimer lasers have been used to treat myopia since 1990 and to treat hyperopia since 1996. The Therapeutic Products Directorate of Health Canada regulates the sale of devices, including excimer lasers used to perform procedures at the Company’s Canadian eye care centers.

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The Refractive Market

     While estimates of market size should not be taken as projections of revenues or of the Company’s ability to penetrate that market, Market Scope’s November 2009 Comprehensive Report on the Refractive Market estimates that the 2010 U.S. refractive market potential is 128 million eyes. To date, based on Market Scope’s estimate of the number of people who have had procedures, only an estimated 11% of this target population has had laser vision correction.

     Estimates by Market Scope indicate that 1.4 million laser vision correction procedures were performed in the United States in each of 2005, 2006 and 2007, 1.0 million were performed in 2008 and 0.8 million in 2009. As of February 2010, Market Scope estimates that 0.9 million laser vision correction procedures will be performed in 2010.

     Laser vision correction procedures are not covered by traditional health care plans and therefore procedure growth remains more a function of consumer discretionary spending. LASIK industry analysts rely on consumer spending patterns, which correlate directly to consumer sentiment, in order to predict industry growth trends. The U.S. Consumer Confidence Index (CCI) is an indicator designed to measure consumer confidence, which is defined as the degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. The CCI fell to an all-time low in December 2008 and remained at levels well below historical average during 2009.

     There can be no assurance that laser vision correction will be more widely accepted by eye care doctors or the general population as an alternative to existing methods of treating refractive disorders. The acceptance of laser vision correction may be affected adversely by its cost (particularly since laser vision correction is typically not covered fully or at all by government insurers or other third party payors and, therefore, must be paid for primarily by the individual receiving treatment), concerns relating to its safety and effectiveness, general resistance to surgery, the effectiveness of alternative methods of correcting refractive vision disorders, the lack of long-term follow-up data and the possibility of unknown side effects. There can be no assurance that long-term follow-up data will not reveal complications that may have a material adverse effect on the acceptance of laser vision correction. Many consumers may choose not to have laser vision correction due to the availability and promotion of effective and less expensive non-surgical methods for vision correction. Any future reported adverse events or other unfavorable publicity involving patient outcomes from laser vision correction procedures also could adversely affect its acceptance whether or not the procedures are performed at TLCVision eye care centers. Market acceptance also could be affected by regulatory developments. The failure of laser vision correction to achieve continued increased market acceptance would have a material adverse effect on the Company’s business, financial condition and results of operations.

Market for Cataract Surgery

     According to Prevent Blindness America, cataracts are a leading cause of blindness among older adults in the United States. More than 20 million Americans age 40 and older have cataracts. The National Eye Institute (NEI) states that cataracts are the leading cause of low vision among all Americans, responsible for about 50 percent of all cases. The NEI estimates that the number of adults 40 years and older in the U.S. with cataracts will increase by approximately 47 percent to 30 million in 2020. Cataract surgery is the most frequently performed surgery in the United States, with more than 3 million Americans undergoing cataract surgery each year. By age 80, more than half of all Americans either have a cataract or have had cataract surgery.

TLC Vision Corporation

     TLCVision was originally incorporated by articles of incorporation under the Business Corporations Act (Ontario) on May 28, 1993. By articles of amendment dated October 1, 1993, the name of the Company was changed to TLC The Laser Center Inc., and by articles of amendment dated March 22, 1995, certain changes were effected in the issued and authorized capital of the Company with the effect that the authorized capital of the Company became an unlimited number of common shares. On September 1, 1998, TLC The Laser Center Inc. amalgamated under the laws of Ontario with certain wholly owned subsidiaries. By articles of amendment filed November 5, 1999, the Company changed its name to TLC Laser Eye Centers Inc. On May 13, 2002, the Company filed articles of continuance with the province of New Brunswick and changed its name to TLC Vision Corporation. On May 15, 2002, the Company completed its business combination with Laser Vision Centers, Inc., a leading U.S. provider of access to excimer lasers, microkeratomes, cataract equipment and related support services.

Business Strategy

     The Company operates with three distinct businesses as a diversified eye care services organization. In its refractive centers business, TLCVision has managed significant cost reductions to maintain profitability in the face of declining volumes due to the economic recession. The focus as the Company transitions to possible emergence from bankruptcy will be:

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• continued cost containment as LASIK volumes rebound under better economic conditions;

• additional emphasis on our optometric co-management model, proven to be a sustainable competitive advantage for TLCVision; and

• exploration of additional eye care service offerings through our national footprint of 63 majority-owned and 8 minority-owned centers.

     In the doctor services business, we have refined our strategy through divestiture of a majority of the Company’s free-standing ambulatory surgery centers and the divestiture of the Foresee PHP^® distribution agreement. The Company will focus on its three core business lines within doctor services: refractive access, mobile cataract and integrated practice partnerships.

     Vision Source^®, operating within the Company’s eye care business, intends to continue growing its business through increasing the number of optometric practice franchises, increasing revenue per franchise by offering a broader array of products at attractive prices and by exploring other medical specialties that apply the same successful franchise model.

Description of Refractive Centers Business

     The Company currently owns and manages refractive laser centers in the United States and Canada. Each center typically has one excimer laser with a select portion of the centers having two or more lasers. The majority of the Company’s excimer lasers are manufactured by VISX, a division of Abbott Medical Optics. The Company does not have an exclusive manufacturing agreement with VISX as the VISX laser technologies are available on a non-exclusive basis to all LASIK providers.

     The Company’s centers currently draw upon a variety of patient acquisition strategies that include its co-management referral relationships, health plan programs and direct-to-consumer advertising. Pricing within the centers is generally standardized, with some variation based upon geography, and includes an attractive entry-level price point with logical increases based on technology upgrades. Pricing for most procedures includes pre- and post-operative care and the TLC Lifetime Commitment^®.

     A typical TLCVision refractive center has between 3,000 and 5,000 square feet of space and is located in a high-end retail, medical or general office building. Although the legal and payment structures can vary from state to state depending upon state and provincial law and market conditions, the Company generally receives revenues in the form of (1) amounts charged to patients for procedures performed at laser centers, (2) management and facility fees paid by doctors who use the TLCVision center to perform laser vision correction procedures and (3) administrative fees for billing and collection services from doctors who co-manage patients treated at the centers. Most TLCVision centers have a clinical director who is an optometrist and oversees the clinical aspects of the center and builds and supports the network of affiliated eye care doctors. Most centers also have a center manager and one or more surgical consultants and patient assistants. The number of staff depends on the activity level of the center. One senior staff person, who is designated as the center manager, assists in the preparation of the center’s annual business plan and supervises the day-to-day operations of the center.

     TLCVision has developed proprietary management and administrative software designed to assist eye care professionals in providing high levels of patient care. The software permits TLCVision centers to provide a potential candidate with current information on affiliated doctors throughout North America, to help them locate the closest TLCVision center, to permit tracking of calls and procedures, to coordinate patient and doctor scheduling, and to produce financial and surgical outcome reporting and analysis. The software has been installed in substantially all TLCVision centers. TLCVision also has an online consumer consultation site on its websites (www.tlcvision.com and www.lasik.com). This consumer consultation site allows consumers to book their consultation with the Company online. TLCVision also maintains a customer contact management center (1-888-TLC-2020), which is staffed six days a week.

     The TLC Lifetime Commitment^® program, established in 1997 and offered through TLCVision centers, entitles patients within a certain range of vision correction to have certain enhancement procedures for further correction at no cost at any time during their lifetime, if necessary. To remain eligible for the program patients must have an annual eye exam, at the patient’s expense, with a TLCVision affiliated doctor. The purpose of the program is to respond to the infrequent occasion where the patient’s sight might regress over time, requiring an enhancement procedure. In addition, the program responds to the doctors’ concern that patients may not return for their annual eye examination once their eyes are treated. The Company believes that this program has been well received by both patients and doctors.

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Pricing

     In TLCVision centers, the Company typically charges a per-eye fee that starts as low as $895 for conventional LASIK using a microkeratome and then escalates to as much as $2,695 for custom ablation using the IntraLase femtosecond laser for flap creation (bladeless LASIK). Most patients typically pay an average of approximately $1,900 per eye, but this can vary significantly by geographic location or the type of procedure selected. If the patient receives pre- and post-operative care from a primary care eye doctor, that doctor will typically charge approximately 15% to 20% of the patient fee ($200 to $400 depending on the procedure selected and level of services performed); in most cases, the total procedure costs to the patients are often included in a single invoice. Although competitors in certain markets may charge less for these procedures, the Company believes that important factors affecting competition in the laser vision correction market, other than price, are quality of service, reputation and skill of surgeon, customer service reputation, and relationships with affiliated doctors.

     The cost of laser vision correction procedures is not covered by provincial health care plans in Canada or reimbursable under Medicare or Medicaid in the United States. However, the Company believes it has positioned itself well in the private insurance and employer market through its “Corporate Advantage” program and its TruVision™ offering, which offers discounts to selected corporations or health plan members and is now available to more than 100 million individuals.

Co-management Model

     The Company has developed and implemented a medical co-management model under which it not only establishes, manages and operates TLCVision centers and provides an array of related support services, but also coordinates the activities of primary care doctors (usually optometrists), who co-manage refractive surgery patients, and refractive surgeons (ophthalmologists), who perform laser vision correction procedures in affiliation with the local center. The primary care doctors assess whether patients are candidates for laser vision correction and provide pre- and post-operative care, including an initial eye examination and follow-up visits. The co-management model permits the surgeon to focus on providing superior laser vision correction surgery while allowing the patient’s primary eye care doctor to continue providing care after the patient’s surgery is completed. In addition, most TLCVision centers have a Clinical Director on site who works to support and expand the local network of affiliated doctors. The Clinical Director provides a range of clinical training and consultation services to affiliated primary care doctors to support these doctors’ individual practices and to assist them in providing quality patient care. See Part I, Item 1, Business — Government Regulation — Regulation of Optometrists and Ophthalmologists.

     TLCVision believes that its strong relationships with its affiliated eye care doctors, though non-exclusive, represent an important competitive advantage for its centers.

     The Company believes that primary care doctors’ relationships with TLCVision and the doctors’ acceptance of laser vision correction enhances the doctors’ practices. The affiliated eye doctors (usually optometrists) charge fees to assess candidates for laser vision correction and provide pre- and post-operative care, including an initial eye examination and follow-up visits. The primary care doctor’s potential revenue loss from sales of contact lenses and eyeglasses may be offset by professional fees earned from both laser vision correction pre- and post-operative care and examinations required under the TLC Lifetime Commitment^® program.

Sales and Marketing

     While TLCVision believes that many individuals with myopia or hyperopia are potential candidates for laser vision correction, these procedures must compete with corrective eyewear as well as other surgical and non-surgical treatments for these conditions. The decision to have laser vision correction largely represents a choice dictated by an individual’s desire to reduce or eliminate their reliance on eyeglasses or contact lenses. The Company therefore seeks to increase its refractive procedure volume and its market penetration through other innovative marketing programs targeted to doctors, to the public directly, and to corporations and health plans.

     In support of its strong relationships with its affiliated eye care doctors, a portion of the Company’s marketing resources are devoted to joint marketing programs. The Company provides doctors with brochures, videos, posters and other materials that help them educate their patients about laser vision correction. Those doctors who wish to market directly to their patients or the public may receive support from the Company in the development of marketing programs. The Company believes the most effective way to market to doctors is to be perceived as a leader in the eye care industry. To this end, the Company strives to be affiliated with clinical leaders, educate doctors on laser vision and refractive correction, and remain current with new procedures, technology and techniques. The Company also promotes its services to doctors in Canada and the United States through conferences, advertisements in journals, direct marketing, its web sites, newsletters and its support of ophthalmologic and optometric professional associations.

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     In addition, the Company markets directly to potential patients through a variety of methods including radio, television, print advertising, internet sites, direct mail, alumni and local market sponsorships. Tiger Woods, world-class golfer, and Elaine Larsen, jet car driver are both TLCVision patients and are featured in the Company’s marketing efforts. The Company uses a variety of traditionally accepted advertising, direct marketing and digital marketing efforts to reach potential patients. The Company utilizes a comprehensive internet strategy with the goal of having a leading refractive presence through TLCVision owned websites and partnerships.

Contracts with Eye Doctors

     The Company works with a network of eye care doctors (mostly optometrists) in each market in which it operates who perform the pre-operative screening and post-operative care for patients who have had laser vision correction. Those doctors then co-manage their patients with affiliated surgeons, who perform the laser vision correction procedure themselves. In most states and provinces, co-management doctors have the option of charging the patient directly for their services or having the Company collect the fees on their behalf.

     Most surgeons performing laser vision correction procedures through a TLCVision center owned, managed or operated by the Company do so under one of three types of standard agreements (as modified for use in the various U.S. states as required by state law). Each agreement typically prohibits surgeons from disclosing confidential information relating to the center, soliciting patients or employees of the center, or participating in any other eye care center within a specified area. However, there can be no assurance that such agreements will be enforceable.

     Surgeons must meet the credential requirements of the state or province in which they practice and must receive training approved by the manufacturer of the equipment on which they perform procedures. Surgeons are responsible for maintaining appropriate malpractice insurance and most agree to indemnify the Company and its affiliates for any losses incurred as a result of the surgeon’s negligence or malpractice.

     Most states prohibit the Company from practicing medicine, employing physicians to practice medicine on the Company’s behalf or employing optometrists to render optometric services on the Company’s behalf. Because the Company does not practice medicine or optometry, its activities are limited to owning and managing eye care centers and affiliating with other health care providers. Affiliated doctors provide a significant source of patients for laser vision correction at the Company’s centers. Accordingly, the success of the Company’s operations depends upon its ability to enter into agreements on acceptable terms with a sufficient number of health care providers, including institutions and eye care doctors, to render surgical and other professional services at facilities owned or managed by the Company. There can be no assurance that the Company will be able to enter into or maintain agreements with doctors or other health care providers on satisfactory terms or that such agreements will be profitable to the Company. Failure to enter into or maintain such agreements with a sufficient number of qualified doctors will have a material adverse effect on the Company’s business, financial condition and results of operations.

Description of Doctor Services Business

     TLCVision’s doctor services business provides doctors and medical facilities with mobile or fixed-site access to refractive and cataract surgery equipment, supplies, technicians and diagnostic products, as well as owns and manages single-specialty ambulatory surgery centers.

Description of Mobile Cataract Segment

     Through its Sightpath Medical (Sightpath) subsidiary, formerly known as Midwest Surgical Services (MSS), TLCVision provides mobile and fixed site cataract equipment and related services in approximately 41 states. As of December 31, 2009, Sightpath employed 53 mobile cataract equipment technicians and operated 53 mobile cataract systems. A Sightpath certified surgical technician transports the mobile equipment from one surgery location to the next and prepares the equipment at each stop so that the operating room is ready for cataract surgery. Technicians are also certified to scrub for cataract cases as requested by the surgeon and facility. A typical service offering will include cataract equipment, IOLs, surgical instruments and supplies. Related services including yttrium-aluminum-garnet (YAG) capsulotomy and selective laser trabeculoplasty (SLT) laser treatment are also available.

     Cataract patients, the majority of whom are elderly, typically prefer to receive treatment near their homes. Sightpath focuses on developing relationships among local hospitals, referring optometrists and eye surgeons in small to medium-sized markets where Sightpath’s shared-access approach and mobile systems make it economically feasible for optometrists and surgeons to provide cataract surgical services that are “close to home.”

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     The Sightpath sales staff focuses on identifying small to medium-sized markets, which usually do not have convenient access to the services of a cataract eye surgeon. After identifying such a market, Sightpath’s sales staff will contact the local hospital and local optometrists to develop interest in “close to home” cataract surgery services. When there is sufficient interest, the sales staff brings the hospital and optometrists in contact with an eye surgeon who is willing to provide services to that local market. By bringing these various parties into contact, Sightpath seeks to increase demand for its mobile cataract services and increase convenience for cataract patients.

     Sightpath was the exclusive United States distributor of the Foresee PHP^®, a preferential hyperacuity perimeter that monitors the progression of Age-Related Macular Degeneration (AMD), the leading cause of vision loss for people over age 50 in the United States. According to the Macular Degeneration Partnership, there are as many as 15 million Americans affected with the disease. The Foresee PHP^® is an FDA cleared, clinically validated device that detects conversion from intermediate dry AMD to the vision-threatening wet form known as Choroidal Neovascularization. Sightpath distributed the Foresee PHP^® out of its Minneapolis, Minnesota location.

     Effective December 10, 2009, the Company terminated its exclusive distribution agreement of the Foresee PHP^® with the device’s developer and manufacturer Notal Vision^®. For additional information regarding the agreement termination refer to Note 9, Investments and Other Long-Term Assets, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

Description of Refractive Access Segment

     TLCVision’s refractive access (or mobile refractive) business provides eye surgeons access to excimer femtosecond laser platforms, microkeratomes, other equipment and value-added support services such as training, technical support and equipment maintenance. TLCVision’s access delivery system, located primarily in the United States, utilizes both mobile equipment and fixed-site locations. The Company believes that this flexible delivery system enlarges the pool of potential locations, eye surgeons and patients that it can serve, and allows it to effectively respond to changing market demands.

     TLCVision’s mobile access systems are typically used by eye surgeons who perform fewer than 30 procedures per month or are in markets where they are able to offer consolidated surgery days to patients. A certified laser technician accompanies each excimer laser from location to location. If an eye surgeon uses the microkeratome service, the Company generally supplies one microkeratome, one accessory kit and a second Company employee, who is certified by the microkeratome manufacturer and acts as a surgical technician.

     Mobile laser equipment is provided by means of a proprietary Roll-On/Roll-Off laser system. The Roll-On/Roll-Off laser system, elements of which have been patented, consists of an excimer laser mounted on a motorized air suspension platform. The Roll-On/Roll-Off laser system is transported between locations in a specifically modified truck and allows an excimer laser to be easily moved upon reaching its destination. Due to the design of the Roll-On/Roll-Off system, the laser usually requires only minor adjustments and minimal set-up time at each destination. As of December 31, 2009, TLCVision had 24 Roll-On/Roll-Off systems in operation, all of which were located in the United States. In addition to the standard excimer laser, the Company also offers 11 mobile Intralase units in the United States.

     TLCVision’s fixed site lasers are dedicated to single locations where eye surgeons typically perform more than 40 cases per month over several surgery days to maintain a competitive offering for patients. As of December 31, 2009, the Company had approximately 35 U.S. fixed sites. Some fixed sites exclusively serve single practice groups and others are located in ambulatory surgery centers where they can be used by a qualified eye surgeon.

     The Company also provides a broad range of support services to the eye surgeons who use its equipment, including arranging for training of physicians and staff, technical support and equipment maintenance, industry updates and marketing advice, clinical advisory support, patient financing and partnership opportunities.

     Eye surgeons pay TLCVision a fee for each procedure the surgeon performs using the Company’s equipment and services. The Company typically provides each piece of equipment to many different eye surgeons, which allows it to more efficiently use the equipment and to offer it at an affordable price. TLCVision refers to its practice of providing equipment to multiple eye surgeons as shared access. This service is generally governed under one of three types of agreements:

• Under standard refractive mobile access agreements with surgeons, TLCVision provides some or all of the following: laser platform and microkeratome equipment, certain related supplies for the equipment (such as laser gases, per procedure cards and microkeratome blades), laser operator, microkeratome technicians, maintenance and certain technology upgrades. In addition, the Company may provide marketing assistance, coordination of surgeon training and other support services. This

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access is provided on agreed upon dates at either the surgeons’ offices or a third party’s facility. In return, the surgeons pay a per procedure fee for access services and generally agree to exclusively use TLCVision’s equipment for refractive surgery. The Company does not provide medical services to the patients or any administrative services to the access surgeon customer.

• Under standard refractive fixed access agreements with surgeons, TLCVision generally provides the following: a fixed-base laser platform and microkeratome equipment, certain related supplies for the equipment (such as laser gases, per procedure cards and microkeratome blades), periodic maintenance and certain technology upgrades. In return, the surgeons pay either a per procedure fee and guarantee a minimum number of procedures per month, or a flat monthly fee plus the cost of per procedure cards and blades. In addition, the surgeons generally agree to use exclusively TLCVision’s equipment for refractive surgery. The Company does not provide a laser operator, microkeratome technician, medical services or any administrative services to the access surgeon customer.

• Under joint venture arrangements, TLCVision directly or indirectly provides either mobile or fixed-base laser access and the following: microkeratome equipment, certain related supplies for the equipment (such as laser gases, per procedure cards and microkeratome blades), laser operator, microkeratome technician, maintenance and certain technology upgrades, the laser facility, management services which include administrative services such as billing and collections, staffing for the refractive practice, marketing assistance and funds and other support services. TLCVision receives an access fee and management services fees in addition to being reimbursed for the direct costs paid by the Company for the laser facility operations. In return, the surgeons generally agree to exclusively use the Company’s equipment for refractive surgery and/or not to compete with the Company within a certain area. Neither TLCVision nor the joint ventures provide medical services to the patients.

Description of Surgical and Secondary Care Center Segment

     The Company’s “other” segment in the doctor services business primarily consists of both integrated and free-standing ambulatory surgical centers. As of December 31, 2009, TLCVision had a majority ownership in two integrated surgical operations in the state of Michigan and the Philadelphia/western New Jersey metropolitan areas that include ambulatory surgical centers. The Company has ownership interests in an additional two free-standing, actively-operating ambulatory surgical centers. Ambulatory surgery centers provide outpatient surgery services in a less institutional, more productive and cost-efficient setting than traditional hospitals. The two primary procedures performed are cataract extraction with IOL implantation and YAG capsulotomies. However, the ambulatory surgical centers have the capability to accommodate additional ophthalmic surgical procedures as well as additional procedures such as podiatry and pain control, in certain instances.

     During the year ended December 31, 2009, the Company divested one majority-owned and two minority-owned free-standing ambulatory surgical centers for a combined net sale price of approximately $2.2 million, resulting in a net loss on divestiture of $1.6 million. The Company continues to review potential opportunities to sell the remaining free-standing ambulatory surgical center investments during 2010.

Description of Eye Care Business

     The Company’s eye care business is currently comprised of one reportable segment, which is the optometric franchising segment. The Company’s optometric franchising segment primarily consists of Vision Source^®, a majority-owned subsidiary that provides marketing, practice development and purchasing power to independently-owned and operated optometric practices in the United States and Canada. As of December 31, 2009 and 2008, Vision Source^® had approximately 2,100 and 1,900 franchisees, respectively, under franchise agreements across North America. In exchange for providing services to its franchisees, Vision Source^® received franchise fees equal to a predetermined percentage of gross practice billings. This segment supports the development of independent practices and complements the Company’s co-management model.

Website and Available Information

     TLCVision has linked its branded eye care centers, network doctors and potential patients through its websites, www.tlcvision.com and www.lasik.com, which provide a directory of affiliated eye care providers and contain questions and answers about laser vision correction. TLCVision’s corporate website www.tlcv.com contains information for stockholders and investors.

     TLCVision makes available free of charge on or through its website (www.tlcv.com) its Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The material is made available through the Company’s

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website as soon as reasonably practicable after the material is electronically filed with or furnished to the Commission. All of TLCVision’s filings may be read or copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website (www.sec.gov) that contains reports, proxy and information statements regarding issuers that file electronically.

     The Company has adopted a Code of Conduct that applies to its principal executive officer, principal financial officer and principal accounting officer, as well as all other employees and Board of Directors. This Code of Conduct and the Company’s corporate governance policies are posted on the Company’s website www.tlcv.com/about/ethics/. The Company intends to satisfy its disclosure requirements regarding amendments to or waivers from its Code of Conduct by posting such information on this website. The charters of the committees of the Company’s Board of Directors are available on the Company’s website and are also available in print free of charge.

Equipment and Capital Financing

     The Company primarily utilizes VISX excimer lasers for refractive surgery. See Part I, Item 1, Business — Laser Correction Procedures, for further details regarding VISX. The Company does not have an exclusive manufacturing agreement with VISX as the VISX laser technologies are available on a non-exclusive basis to all LASIK providers. Based on the availability of cash and financing, the Company expects to upgrade the capabilities of its lasers as technology improves. Although there can be no assurance, the Company believes that, based on the number of existing excimer laser manufacturers, the current inventory levels of those manufacturers is more than adequate for the Company’s future operations.

Competition

Consumer Market for Vision Correction

     Within the consumer market, excimer laser procedures performed at the Company’s refractive center and access locations compete with other surgical and non-surgical treatments for refractive disorders, including eyeglasses, contact lenses and other types of refractive surgery and technologies currently available and under development such as corneal rings, intraocular lenses and surgery with different types of lasers. Although the Company believes that eyeglasses and contact lens use will continue to be the most popular form of vision correction in the foreseeable future, as market acceptance for laser vision correction continues to increase, competition within this market will grow. There can be no assurance that the Company’s management, operations and marketing plans are or will be successful in meeting this competition. Further, there can be no assurance that the Company’s competitors’ access to capital, financing or other resources or their market presence will not give these competitors an advantage against the Company. In addition, other surgical and non-surgical techniques to treat vision disorders are currently in use and under development and may prove to be more attractive to consumers than laser vision correction.

     Within the consumer market for laser vision correction, the Company continues to face increasing competition from other service providers. As market acceptance for laser vision correction continues to increase, competition within this market may grow. Laser vision correction providers are divided into three major segments: corporate-owned centers; independent surgeon-owned centers; and institution-owned centers. According to Market Scope information for 2009, independent surgeon-owned centers accounted for the largest percentage of total procedure volume in the industry with an approximate 61% market share. Corporate-owned centers accounted for 32% of total procedures performed, which is a decrease over the prior year of 1 percentage point. The remaining 7% of laser vision correction procedures were performed at institution-owned centers, such as hospitals or universities.

     The Company believes the important factors affecting competition in the laser vision correction market are quality of service, surgeon skill and reputation, awareness through advertising, price and available managed care or corporate discount offerings. The Company believes that its competitiveness is enhanced by a strong network of affiliated doctors. Suppliers of conventional vision correction (eyeglasses and contact lenses), such as optometric chains, also compete with the Company either by marketing alternatives to laser vision correction or by purchasing excimer lasers and offering refractive surgery to their customers. These service providers may have greater marketing and financial resources and experience than the Company and may be able to offer laser vision correction at lower rates. Competition has also increased in part due to the greater availability and lower costs of excimer lasers.

     As an elective procedure, overall laser vision correction surgery volumes are constrained by economic conditions in North America, which impact consumer confidence and may leave potential consumers with less disposable income. In addition, it is evident that the market has segmented into two distinct groups of patients who have laser vision correction: (1) value-priced segment and (2) premium-priced segment. Industry trends and research indicate that the value-priced segment (under reasonable economic conditions) is larger and growing faster than the premium-priced segment. However, in a period of economic weakness, these potential customers

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can be more adversely impacted by unemployment, restricted access to financing and available discretionary funds. The Company’s approach to patient acquisition balances its appeal to both the premium and the value-priced segment through its combined consumer-focused approach and optometric co-management philosophy.

     TLCVision competes in fragmented geographic markets. The Company’s principal corporate competitors include LCA-Vision, Inc. and Lasik Vision Institute, Inc.

Government Regulation

Excimer Laser Regulation

     United States

     Medical devices, such as the excimer lasers used in the Company’s U.S. centers, are subject to stringent regulation by the FDA and cannot be marketed for commercial use in the United States until the FDA grants pre-market approval for the device. To obtain a pre-market approval for a medical device, excimer laser manufacturers must file a pre-market approval application that includes clinical data and the results of pre-clinical and other testing sufficient to show that there is a reasonable assurance of safety and effectiveness of their excimer lasers. Human clinical trials must be conducted pursuant to Investigational Device Exemptions issued by the FDA in order to generate data necessary to support a pre-market approval. See Part I, Item 1, Business – Laser Correction Procedures.

     The FDA is not authorized to regulate the practice of medicine, and ophthalmologists, including those affiliated with TLCVision eye care centers, may perform the LASIK procedure using lasers with a pre-market approval for PRK only (off-label use) in an exercise of professional judgment in connection with the practice of medicine.

     The use of an excimer laser to treat both eyes on the same day (bilateral treatment) has been neither approved nor prohibited by the FDA. The FDA has stated that it considers the use of the excimer laser for bilateral treatment to be a practice of medicine decision, which the FDA is not authorized to regulate. Ophthalmologists, including those affiliated with the Company’s branded eye care centers, widely perform bilateral treatment in an exercise of professional judgment in connection with the practice of medicine. The FDA could seek to challenge this practice in the future.

     Any excimer laser manufacturer that obtains pre-market approval for use of its excimer lasers will continue to be subject to regulation by the FDA. Although the FDA does not specifically regulate surgeons’ use of excimer lasers, the FDA actively enforces regulations prohibiting marketing of products for non-approved uses and conducts periodic inspections of manufacturers. During 2009, the FDA performed on-site inspections of a number of LASIK centers and issued 17 warning letters, including letters to several TLC locations, regarding inadequate adverse event reporting systems. TLC has responded to all warning letters any of its managed centers received. The inspections did not identify problems with the use of the LASIK devices at any of these facilities.

     Failure to comply with applicable FDA requirements could subject the Company, its affiliated doctors or laser manufacturers to enforcement action, including product seizure, recalls, withdrawal of approvals and civil and criminal penalties, any one or more of which could have a material adverse effect on the Company’s business, financial condition and operations. Further, failure to comply with regulatory requirements or any adverse regulatory action, including a reversal of the FDA’s current position that the “off-label” use of excimer lasers by doctors outside the FDA-approved guidelines is a practice of medicine decision (which the FDA is not authorized to regulate), could result in a limitation on or prohibition of the Company’s use of excimer lasers, which in turn could have a material adverse effect on the Company’s business, financial condition and operations.

     The marketing and promotion of laser vision correction in the United States are subject to regulation by the FDA and the Federal Trade Commission (FTC). The FDA and FTC have released a joint communiqué on the requirements for marketing laser vision correction in compliance with the laws administered by both agencies. The FTC staff also issued more detailed staff guidance on the marketing and promotion of laser vision correction and has been monitoring marketing activities in this area through a non-public inquiry to identify areas that may require further FTC attention. During 2009, the FDA issued a letter to eye care professionals providing them with information about the advertising and promotion of FDA-approved lasers for LASIK. On October 15, 2009, the FDA announced a collaborative study with the National Eye Institute and the Department of Defense to examine the potential impact on quality of life from LASIK.

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     Canada

     The use of excimer lasers in Canada to perform refractive surgery is not subject to regulatory approval, and excimer lasers have been used to treat myopia since 1990 and hyperopia since 1996. The Therapeutic Products Directorate of Health Canada (TPD) regulates the sale of devices, including excimer lasers used to perform procedures at the Company’s Canadian eye care centers. Pursuant to the regulations prescribed under the Canadian Food and Drugs Act, the TPD may permit manufacturers or importers to sell a certain number of devices to perform procedures provided the devices are used in compliance with specified requirements for investigational testing. Permission to sell the device may be suspended or cancelled where the TPD determines its use endangers the health of patients or users or where the regulations have been violated. Devices may also be sold for use on a non-investigational basis where evidence available in Canada to the manufacturer or importer substantiates the benefits and performance characteristics claimed for the device. The Company believes that the sale of the excimer lasers to its eye care centers, as well as their use at the centers, complies with TPD requirements. Canadian regulatory authorities could impose restrictions on the sale or use of excimer lasers, which could have a material adverse effect on the Company’s business, financial condition and operations.

Regulation of Optometrists and Ophthalmologists

     United States

     The health care industry in the United States is highly regulated. The Company and its operations are subject to extensive federal, state and local laws, rules and regulations, including those prohibiting corporations from practicing medicine and optometry, prohibiting unlawful rebates and division of fees, anti-kickback laws, fee-splitting laws, self-referral laws, laws limiting the manner in which prospective patients may be solicited and professional licensing rules. Approximately 42 states in which the Company currently does business limit or prohibit corporations from practicing medicine and employing or engaging physicians to practice medicine.

     The Company has reviewed these laws and regulations with its health care counsel, and although there can be no assurance, the Company believes that its operations currently comply with applicable laws in all material respects. Also, the Company expects that doctors affiliated with TLCVision will comply with such laws in all material respects, although it cannot ensure such compliance by its affiliated doctors.

     Federal Law. A federal law known as the “anti-kickback statute” prohibits the offer, solicitation, payment or receipt of any remuneration that directly or indirectly is intended to induce or is in return for the referral of patients for or the ordering of items or services reimbursable by Medicare or any other federally financed health care program. This statute also prohibits remuneration intended to induce the purchasing of or arranging for or recommending the purchase or order of any item, good, facility or service for which payment may be made under federal health care programs. This statute has been applied to otherwise legitimate investment interests if even one purpose of the offer to invest is to induce referrals from the investor. Safe harbor regulations provide absolute protection from prosecution for certain categories of relationships that meet all elements of an applicable safe harbor. However, relationships that do not meet all elements of a safe harbor are not illegal per se, but must be reviewed on an individual basis to determine the risk of fraud and abuse to any federal or state funded health care system.

     Subject to certain exceptions, federal law also prohibits referrals for the provision of Medicare or Medicaid-covered “designated health services” from a doctor to another entity with which the doctor (or an immediate family member) has a financial relationship (which includes ownership and compensation arrangements). This law, known as the “Stark Law,” applies only to referrals made by a doctor and does not apply outside of the Medicare and Medicaid programs or to items or services that are not one of the 11 designated health services.

     Laser vision correction is not reimbursable by Medicare, Medicaid or other federal programs. As a result, neither the anti-kickback statute nor the Stark Law applies to the Company’s laser vision correction business. However, the Company may be subject to similar state laws that apply regardless of the type of service or the manner of payment.

     Doctors affiliated with the Company’s cataract access and surgical and secondary care center segments provide services that are reimbursable under Medicare and Medicaid. Further, ophthalmologists and optometrists co-manage Medicare and Medicaid patients who receive services at the Company’s secondary care centers. The co-management model is based, in part, upon the referral by an optometrist for surgical services performed by an ophthalmologist and the provision of pre- and post-operative services by the referring optometrist. The Office of the Inspector General (OIG) for the Department of Health and Human Services, the government agency responsible for enforcing the anti-kickback statute, has stated publicly that to the extent there is an agreement between optometrists and ophthalmologists to refer back to each other, such an agreement could constitute a violation of the anti-kickback statute. The Company believes, however, that its co-management program does not violate the anti-kickback statute, as patients are given the choice whether to return to the referring optometrist or to stay with the ophthalmologist for post-operative care.

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Nevertheless, there can be no guarantee that the OIG will agree with the Company’s analysis of the law. If the Company’s co-management program were challenged as violating the anti-kickback statute and the Company were unsuccessful in defending against such a challenge, then civil or criminal fines and penalties, including exclusion of the Company, the ophthalmologists and the optometrists from the Medicare and Medicaid programs, may be imposed on the Company. The Company could also be required to revise the structure of its co-management program or curtail its activities, any of which could have a material adverse effect upon the Company’s business, financial condition and results of operations.

     The provision of services covered by the Medicare and Medicaid programs in the Company’s ambulatory surgery business, mobile cataract business and secondary care centers also triggers potential application of the Stark Law. The co-management model could establish a financial relationship, as defined in the Stark Law, between the ophthalmologist and the optometrist. Similarly, to the extent that the Company provides any designated health services as defined in the statute, the Stark Law could be triggered as a result of any of the several financial relationships between the Company and ophthalmologists. Based on its current interpretation of the Stark Law as set forth in the interim final rule published in 2004, the Company believes that the referrals from ophthalmologists and optometrists either will be for services that are not designated health care services as defined in the statute or will be covered by an exception to the Stark Law. The government may disagree with the Company’s position and there may be changes in the government’s interpretation of the Stark Law, including an expansion of the services that constitute “designated health services.” In such case, the Company may be subject to civil penalties as well as administrative exclusion and would likely be required to revise the structure of its legal arrangements or curtail its activities, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

     The Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) were enacted to (a) improve the efficiency and effectiveness of the healthcare system by standardizing the exchange of electronic information for certain administrative and financial transactions and (b) protect the confidentiality and security of health information. HIPAA directed the Department of Health and Human Services to promulgate a set of interlocking regulations to implement the goals of HIPAA. The regulations apply to “covered entities” that include health plans, healthcare clearinghouses and healthcare providers who transmit protected health information (PHI) in electronic form in connection with certain administrative and billing transactions. These regulations can be divided into the following:

• Privacy Regulations designed to protect and enhance the rights of patients by providing patient access to their PHI and controlling the use of their PHI;

• Security Regulations designed to protect electronic health information by mandating certain physical, technical and administrative safeguards;

• Electronic Transactions and Code Sets Regulations designed to standardize electronic data interchange in the health care industry;

• Standard Unique Employer Identifier Regulations designed to standardize employer identification numbers used in certain electronic transactions; and

• Standard Unique Health Identifier for Health Care Providers Regulations designed to standardize the identification of health care providers used in electronic transactions.

     The Company has instituted policies and procedures throughout the Company designed to comply with the Privacy Regulations and other HIPAA regulations. Further, the Company is self-insured and meets the definition of “small” health plan and the Company’s plan sponsor has taken steps to institute policies and procedures to comply with the Privacy Regulations. The Company has implemented employee training programs explaining how the regulations apply to their job role.

     State Law. In addition to the requirements described above, the regulatory requirements that the Company must satisfy to conduct its business will vary from state to state, and accordingly, the manner of operation by the Company and the degree of control over the delivery of refractive surgery by the Company may differ among the states.

     A number of states have enacted laws that prohibit what is known as the corporate practice of medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician. Many states have similar restrictions in connection with the practice of optometry. Application of the corporate practice of medicine prohibition varies from state to state. Therefore, while some states may allow a business corporation to exercise significant management responsibilities over the day-to-day operation of a medical or optometric practice, other states may restrict or prohibit such activities. The Company

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believes that it has structured its relationship with eye care doctors in connection with the operation of eye care centers as well as in connection with its secondary care centers so that they conform to applicable corporate practice of medicine restrictions in all material respects. Nevertheless, if challenged, those relationships may be found to violate a particular state corporate practice of medicine prohibition. Such a finding may require the Company to revise the structure of its legal arrangements or curtail its activities, and this could have a material adverse effect on the Company’s business, financial condition and operations.

     Many states prohibit a physician from sharing or “splitting” fees with persons or entities not authorized to practice medicine. The Company’s co-management model for refractive procedures presumes that a patient will make a single global payment to the laser center, which is a management entity acting on behalf of the ophthalmologist and optometrist to collect fees on their behalf. In turn, the ophthalmologist and optometrist pay facility and management fees to the laser center out of the patient fees collected. While the Company believes that these arrangements do not violate any of the prohibitions in any material respects, one or more states may interpret this structure as non-compliant with the state fee-splitting prohibition, thereby requiring the Company to change its procedures in connection with billing and collecting for services. Violation of state fee-splitting prohibitions may subject the ophthalmologists and optometrists to sanctions, and may result in the Company incurring legal fees, as well as being subjected to fines or other costs, and this could have a material adverse effect on the Company’s business, financial condition and operations.

     Just as in the case of the federal anti-kickback statute, while the Company believes that it is conforming to applicable state anti-kickback statutes in all material respects, there can be no assurance that each state will agree with the Company’s position and not challenge the Company. If the Company were unsuccessful in defending against such a challenge, the result may be civil or criminal fines or penalties for the Company as well as the ophthalmologists and optometrists. Such a result would require the Company to revise the structure of its legal arrangements or curtail its activities, and this could have a material adverse effect on the Company’s business, financial condition and operations.

     Similarly, just as in the case of the federal Stark Law, while the Company believes that it is operating in compliance with applicable state anti-self-referral laws in all material respects, each state may not agree with the Company’s position and there may be a change in the state’s interpretation or enforcement of its own law. In such case, the Company may be subject to fines and penalties as well as other administrative sanctions and would likely be required to revise the structure of its legal arrangements or curtail its activities. This could have a material adverse effect on the Company’s business, financial condition and operations.

     Canada

     Conflict of interest regulations in certain Canadian provinces prohibit optometrists, ophthalmologists or corporations owned or controlled by them from receiving benefits from suppliers of medical goods or services to whom the optometrist or ophthalmologist refers his or her patients. In certain circumstances, these regulations deem it a conflict of interest for an ophthalmologist to order a diagnostic or therapeutic service to be performed by a facility in which the ophthalmologist has any proprietary interest. This does not include a proprietary interest in a publicly traded company not owned or controlled by the ophthalmologist or a member of his/her family. Certain of the Company’s eye care centers in Canada are owned and managed by a subsidiary in which affiliated doctors own a minority interest. The Company expects that ophthalmologists and optometrists affiliated with TLCVision will comply with the applicable regulations, although it cannot ensure such compliance by doctors.

     The laws of certain Canadian provinces prohibit health care professionals from splitting fees with non-health care professionals and prohibit non-licensed entities (such as the Company) from practicing medicine or optometry and, in certain circumstances, from employing physicians or optometrists directly. The Company believes that its operations comply with such laws in all material respects, and expects that doctors affiliated with TLCVision centers will comply with such laws, although it cannot ensure such compliance by doctors.

     Optometrists and ophthalmologists are subject to varying degrees and types of provincial regulation governing professional misconduct, including restrictions relating to advertising, and in the case of optometrists, a prohibition against exceeding the lawful scope of practice. In Canada, laser vision correction is not within the permitted scope of practice of optometrists. Accordingly, TLCVision does not allow optometrists to perform the procedure at TLCVision centers in Canada.

Facility Licensure and Certificate of Need

     The Company believes that it has all licenses necessary to operate its business. The Company may be required to obtain licenses from a department of health, or a division thereof, in the various states in which it opens eye care centers. There can be no assurance that the Company will be able to obtain facility licenses in all states that may require facility licensure.

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     Some states require the permission of their department of health, or a division thereof, such as a health planning commission, in the form of a Certificate of Need (CON) prior to the construction or modification of an ambulatory care facility, such as a laser center, or the purchase of certain medical equipment in excess of an amount set by the state. There can be no assurance that the Company will be able to acquire a CON in all states where a CON is required.

     The Company is not aware of any Canadian health regulations that impose facility-licensing requirements on the operation of eye care centers.

Risk of Non-Compliance

     Many of these laws and regulations governing the health care industry are ambiguous in nature and have not been definitively interpreted by courts and regulatory authorities. Moreover, state and local laws vary from jurisdiction to jurisdiction. Accordingly, the Company may not always be able to predict clearly how such laws and regulations will be interpreted or applied by courts and regulatory authorities and some of the Company’s activities could be challenged. In addition, the regulatory environment in which the Company operates could change significantly in the future. The Company has reviewed existing laws and regulations with its health care counsel, and although there can be no assurance, the Company believes that its operations currently comply with applicable laws in all material respects. Also, TLCVision expects that affiliated doctors will comply with such laws in all material respects, although it cannot assure such compliance by doctors. The Company could be required to revise the structure of its legal arrangements or the structure of its fees, incur substantial legal fees, fines or other costs, or curtail certain of its business activities, reducing the potential profit to the Company of some of its legal arrangements, any of which may have a material adverse effect on the Company’s business, financial condition and operations.

Intellectual Property

     The Company and its subsidiaries own over 30 trademarks and service marks that are subjects of U.S. federal and/or Canadian registrations or pending applications for registration. In addition, the Company owns a U.S. patent directed to certain aspects of the Laser Vision Centers Roll-On/Roll-Off system, which will expire in November 2016. The Company’s service marks, patents and other intellectual property may offer the Company a competitive advantage in the marketplace and could be important to the success of the Company. One or all of the patents, trademarks, service marks or registrations therefore may be challenged, invalidated or circumvented in the future. The Company’s pending patent applications are subject to examination by the U.S. Patent and Trademark Office and may not result in an issued patent.

     The medical device industry, including the ophthalmic laser sector, has been characterized by substantial litigation in the United States and Canada regarding patents and proprietary rights. There are a number of patents concerning methods and apparatus for performing corneal procedures with excimer lasers. Although the Company currently leases or purchases excimer lasers and other technology from the manufacturers, in the event that the use of an excimer laser or other procedure performed at any of the Company’s refractive or secondary care centers is deemed to infringe a patent or other proprietary right, the Company may be prohibited from using the equipment or performing the procedure that is the subject of the patent dispute or may be required to obtain a royalty-bearing license, which may not be available on favorable terms, if at all. The costs associated with any such licensing arrangements may be substantial and could include ongoing royalty payments. In the event that a license is not available, the Company may be required to seek the use of products that do not infringe the patent.

Employees

     Including part-time employees, the Company had approximately 800 and 1,000 employees as of December 31, 2009 and 2008, respectively. The Company’s future growth will be highly dependent upon the skills of its key technical and management personnel both in its corporate offices and in its eye care centers, some of whom would be difficult to replace. There can be no assurance that the Company can retain such personnel or that it can attract or retain other highly qualified personnel in the future. No employee of the Company is represented by a collective bargaining agreement, nor has the Company experienced a work stoppage. The Company considers its relations with its employees to be good. See Part I, Item 1A, Risk Factors – The Company depends on key personnel whose loss could adversely affect its business.

ITEM 1A. RISK FACTORS

     The following are certain risk factors that could affect the Company’s business, financial results and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. The risks that are highlighted here are not the only ones that the Company faces. If any of the risks actually occur,

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the Company’s business, financial condition or results of operations could be negatively affected. In that case, the trading price of the Company’s securities could decline, and TLCVision’s securityholders may lose all or part of their investment.

Bankruptcy Related Risk Factors

The Company filed for protection under Chapter 11 of the Bankruptcy Code and the CCAA on December 21, 2009.

     During the Company’s bankruptcy proceedings, TLCVision’s operations and ability to execute a business plan are subject to the risks and uncertainties associated with bankruptcy. Risks and uncertainties associated with the Company’s bankruptcy proceedings include the Company’s ability to:

• obtain court approval with respect to motions filed in the bankruptcy proceedings;

• obtain confirmation of and consummate a plan of reorganization with respect to the bankruptcy proceedings;

• obtain and maintain commercially reasonable terms with vendors and service providers;

• renew contracts that are critical to our operations; and

• retain management and other key individuals.

     These risks and uncertainties could affect the Company’s business and operations in various ways. Negative events or publicity associated with the bankruptcy proceedings could adversely affect the Company’s sales and relationships with customers, physicians, vendors and employees, which in turn could adversely affect the Company’s operations and financial condition. In addition, transactions outside the ordinary course of business are subject to the prior approval of the Bankruptcy Courts, which may limit the Company’s ability to respond in a timely manner to certain events or take advantage of certain opportunities.

     As a result of the bankruptcy proceedings, the Company’s outstanding common shares are expected to have no value and would be canceled under the existing amended Plan of Reorganization and, therefore, the Company believes that the value of its various pre-petition liabilities and other securities is highly speculative. Accordingly, caution should be exercised with respect to existing and future investments in any of these liabilities or securities.

Our ability to independently manage our business is restricted during the bankruptcy proceedings, and steps or actions in connection therewith may require the approval of the U.S. Court, the Canadian Court and our creditors.

     Pursuant to the various U.S. Court orders, and ancillary proceedings in Canada, during the bankruptcy proceedings, some or all of the decisions with respect to our business may require consultation with, review by or ultimate approval of the U.S Court, the Canadian Court, our general unsecured creditors’ committee and our secured creditors. We can not assure that these third parties will support our positions on matters presented during the bankruptcy proceedings, including the Plan of Reorganization, as amended. Disagreements between us and these various third parties could protract the Chapter 11 cases, negatively impact our ability to operate and delay our emergence from the Chapter 11 proceedings.

Inability to obtain confirmation of the Company’s Plan of Reorganization, as amended, in a timely manner may significantly disrupt operations.

     The impact a continuation of the bankruptcy proceedings may have on our operations and businesses cannot be accurately predicted or quantified. The continuation of the bankruptcy proceedings, particularly if the Plan of Reorganization, as amended, is not approved or confirmed in a timely manner, could adversely affect our operations and relationships with our customers, vendors, suppliers and employees. If confirmation of the Plan of Reorganization, as amended, does not occur expeditiously, the bankruptcy proceedings could result in, among other things, increases in costs, professional fees and similar expenses. In addition, prolonged bankruptcy proceedings may make it more difficult to retain and attract management and other key personnel, and would require senior management to spend a significant amount of time and effort dealing with our financial reorganization instead of focusing on the operations of our business.

While the bankruptcy cases are pending, our financial results may be volatile and may not reflect historical trends.

     While the bankruptcy proceedings are pending, we expect our financial results to continue to be volatile as asset impairments, asset dispositions, restructuring activities, contract termination and rejections and claims assessments may significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance following the filling of the Chapter 11 Petitions. Further, we may sell or otherwise dispose of assets and liquidate or settle liabilities, with court approval, for amounts other than those reflected in our historical financial statements. Any such sale or

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disposition and the Plan of Reorganization, as amended, could materially change the amounts and classifications reported in our historical consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of the Plan of Reorganization, as amended.

Failure to obtain confirmation of the Company’s Plan of Reorganization, as amended, may result in liquidation or an alternative plan on less favorable terms.

     Although the Company believes that the proposed Plan of Reorganization, as amended, will satisfy requirements for confirmation under the Bankruptcy Code and recognition under the CCAA, there can be no assurance that the Bankruptcy Courts will reach the same conclusion. In addition, confirmation of the Plan of Reorganization, as amended, is subject to certain conditions. Failure to meet any of these conditions could result in the propose amended Plan of Reorganization not being confirmed. If the plan is not confirmed there can be no assurance that the Chapter 11 Petitions will continue rather than be converted into Chapter 7 liquidation cases or that any alternative plan or plans of reorganization would be on terms as favorable to the holders of claims. If a liquidation or protracted reorganization of the Company’s business or operations were to occur, there is a substantial risk that the Company’s going concern value would be substantially eroded to the detriment of all stakeholders.

The Company’s common shares are no longer listed on the NASDAQ or TSX.

     As of December 31, 2009, the Company’s common shares were suspended from trading on both the NASDAQ and the TSX. The Company’s common shares were delisted from the NASDAQ and the TSX effective January 18, 2010 and January 21, 2010, respectively. The Company’s common shares currently trade on the Over-The-Counter Bulletin Board under the ticker symbol “TLCVQ”.

     As a result of the Company’s common shares no longer being listed on the NASDAQ or TSX, it will likely be more difficult for stockholders and investors to sell our common shares or to obtain accurate quotations of the price of our common shares. In connection with the delisting of the Company’s common shares, there may also be other negative implications, including the potential loss of confidence in our Company by suppliers, customers, physicians and employees and the loss of institutional investor interest in our common shares.

Transfers or issuance of our equity, or a debt restructuring, may impair or reduce our ability to utilize our net operating loss carry-forwards and certain other tax attributes in the future.

     Pursuant to U.S. tax rules, a corporation is generally permitted to deduct from taxable income in any year net operating losses (NOLs) carried forward from prior years. We have NOL carryforwards in the United States of approximately $100.8 million as of December 31, 2009. Our ability to utilize these NOL carryforwards could be subject to a significant limitation if we were to undergo an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended, during or as a result of the bankruptcy proceedings.

     A restructuring of our debt pursuant to the bankruptcy proceedings may give rise to cancellation of indebtedness or debt forgiveness (COD), which if it occurs would generally be non-taxable. If the COD is non-taxable, we will be required to reduce our NOL carryforwards and other attributes such as capital loss carryforwards and tax basis in assets, by an amount equal to the non-recognized COD. Therefore, it is possible that, as a result of the successful completion of a plan of reorganization, we will have a reduction of NOL carryforwards and/or other tax attributes in an amount that cannot be determined at this time and that could have a material adverse effect on our financial future.

The Company may be unable to continue as a going concern.

     The consolidated financial statements and related notes have been prepared assuming that the Company will continue as a going concern although the Chapter 11 bankruptcy filings raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on restructuring its obligations in a manner that allows it to obtain confirmation of a plan of reorganization by the Bankruptcy Courts. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or to the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

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Other Risk Factors

Economic conditions cause fluctuations in the Company’s revenues and profitability.

     During 2009 and 2008, the United States experienced sharp declines in key economic indicators, including the CCI. The CCI, as reported by the Conference Board, a non-profit business group that is highly regarded by investors and the Federal Reserve, fell from 87.3 at January 2008 to 38.6 at December 2008. The CCI fell to a record low of 25.3 at February 2009 and gradually improved to 53.6 at December 2009, well below an index that was at or above 100 for a significant portion of the decade.

     Laser vision correction is generally not reimbursed by health care insurance companies or other third-party payors and is therefore impacted by consumer discretionary spending patterns. As a result, overall U.S. industry-wide demand for laser vision correction declined by approximately 27% and 26% in 2009 and 2008, respectively, and may continue to decline into 2010. Accordingly, the Company’s future operating results may vary based upon the impact of changes in economic conditions and the resulting impact on discretionary spending habits of consumers interested in laser vision correction. If consumer discretionary spend does not rebound, further declines in procedure levels and revenue may result.

     Weakened economic conditions, including the distressed credit market, may also result in an increase in the number of our customers who experience financial distress and therefore do not qualify for patient financing or declare bankruptcy. A renewed decline in the economy could have a material impact on the Company’s financial condition and operating results.

The Company has reported accumulated deficits; its profitability is uncertain.

     For the year ended December 31, 2009, TLCVision reported an annual net loss attributable to TLC Vision Corporation of $36.7 million and an accumulated deficit balance of $410.4 million. Management is uncertain as to the profitability level of the Company going forward. The Company’s profitability will depend on a number of factors, including:

• the outcome of the current bankruptcy proceedings;

• macroeconomic conditions in the United States and Canada, including the availability of discretionary income;

• general demand for eye-care services;

• the Company’s public image in the marketplace;

• market acceptance of TLCVision’s value-oriented pricing strategy;

• the Company’s ability to control costs;

• the Company’s ability to execute its business strategy;

• the Company’s ability to obtain adequate insurance against malpractice claims and reduce the number of claims;

• concerns about the safety and effectiveness of laser vision correction;

• competitive factors;

• regulatory developments;

• the Company’s ability to retain and attract qualified personnel; and

• doctors’ ability to obtain adequate insurance against malpractice claims at reasonable rates.

The market for laser vision correction is intensely competitive and competition may increase.

     Some of the Company’s current or future competitors may have greater financial, technical, managerial, marketing and/or other resources and experience than TLCVision. The availability of such resources may allow current and future competitors to operate and compete more effectively than the Company. TLCVision competes with hospitals, individual ophthalmologists, other corporate laser centers and manufacturers of excimer laser equipment in offering laser vision correction services and/or access to excimer lasers. The Company’s principal corporate competitors include LCA-Vision, Inc. and Lasik Vision Institute, Inc.

     Competition in the market for laser vision correction could increase as excimer laser surgery becomes more commonplace. In addition, competition would increase if state or provincial laws were amended to permit optometrists, in addition to ophthalmologists, to perform laser vision correction. The Company will compete on the basis of quality of service, surgeon skill, reputation and price. If more providers offer laser vision correction in a given geographic market, the price charged for such procedures may decrease. Competitors have offered laser vision correction at prices considerably lower than TLCVision’s prices. The laser vision correction industry has been significantly affected by reductions in the price for laser vision correction. Market conditions may compel the Company to lower prices in its centers to remain competitive and any reduction in its prices may not be offset by an increase in the Company’s procedure volume or decreases in costs. A decrease in either the fees or procedures performed at TLCVision’s eye care centers or in the number of procedures performed at centers could cause revenues to decline, and business and financial condition to weaken.

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     Laser vision correction competes with other surgical and non-surgical means of correcting refractive disorders, including eyeglasses, contact lenses, other types of refractive surgery and other technologies currently available and under development, such as intraocular lenses and surgery with different types of lasers. The Company’s management, operations and marketing plans may not be successful in meeting this competition. Certain competitive optometry chains and other suppliers of eyeglasses and contact lenses may have substantially greater financial, technical, managerial, marketing and other resources and experience than TLCVision and may promote alternatives to laser vision correction or purchase laser systems and offer laser vision correction to their customers.

     If the price of excimer laser systems decreases, additional competition could develop. The price for excimer laser systems could decrease for a number of reasons, including technological innovation and increased competition among laser manufacturers. Further reductions in the price of excimer lasers could reduce demand for the Company’s laser access services by making it economically more attractive for eye surgeons to buy excimer lasers rather than utilize our services.

     Most affiliated surgeons performing laser vision correction at the Company’s centers and significant employees have agreed to restrictions on competing with TLCVision, or soliciting patients or employees associated with their facilities; however, these non-competition agreements may not be enforceable.

The market acceptance of laser vision correction is uncertain.

     The Company believes that the profitability and growth of TLCVision will depend upon broad acceptance of laser vision correction in the United States and, to a lesser extent, Canada. The Company may have difficulty generating revenue and growing its business if laser vision correction does not become more widely accepted by the general population as an alternative to existing methods of treating refractive vision disorders. Laser vision correction may not become more widely accepted due to a number of factors, including:

• its cost, particularly since laser vision correction typically is not covered by government or private insurers;

• general resistance to surgery;

• the fact that effective and less expensive alternative methods of correcting refractive vision disorders are widely available;

• the lack of long-term follow-up data;

• the possibility of unknown side effects; and

• reported adverse events or other unfavorable publicity involving patient outcomes from laser vision correction.

Concerns about potential side effects and long-term results of laser vision correction may negatively impact market acceptance of laser vision correction and prevent the Company from growing its business.

     Concerns have been raised with respect to the predictability and stability of results and potential complications or side effects of laser vision correction. Any complications or side effects of laser vision correction may call into question the safety and effectiveness of laser vision correction, which in turn may damage the likelihood of market acceptance of laser vision correction. Complications or side effects of laser vision correction could lead to product liability, malpractice or other claims against the Company. Also, complications or side effects could jeopardize the approval by the FDA of the excimer laser for sale for laser vision correction. Although results of studies show that the majority of patients experienced no serious side effects numerous years after laser vision correction using PRK, complications may be identified in further long-term follow-up studies of PRK. There are no long-term studies on the side effects of LASIK, the procedure more often performed in recent years. However, studies of patients multiple years after LASIK reported the majority of patients had a high overall satisfaction with the procedure.

     There is no independent industry source for data on side effects or complications from laser vision correction. In addition, the Company does not track side effects. Some of the possible side effects of laser vision correction are:

• foreign body sensation;

• pain or discomfort;

• sensitivity to bright lights;

• blurred vision;

• dryness or tearing;

• fluctuation in vision;

• night glare;

• poor or reduced visual quality;

• overcorrection or under-correction;

24

• regression; and

• corneal flap or corneal healing complications.

     The Company believes that the percentage of patients who experience serious side effects as a result of laser vision correction at its centers is likely less than 1%. However, there is no study to support this belief.

     Laser vision correction may also involve the removal of “Bowman’s membrane,” an intermediate layer between the outer corneal layer and the middle corneal layer of the eye. Although several studies have demonstrated no significant adverse reactions to excimer laser removal of Bowman’s membrane, the long-term effect of the removal of Bowman’s membrane on patients is unclear.

The Company may be unable to enter into or maintain agreements with doctors or other health care providers on satisfactory terms.

     TLCVision will have difficulty generating revenue if the Company is unable to enter into or maintain agreements on satisfactory terms with doctors or other health care providers. Most states prohibit the Company from practicing medicine, employing doctors to practice medicine on the Company’s behalf, or employing optometrists to render optometric services on the Company’s behalf. In most states TLCVision may only own and manage centers and enter into affiliations with doctors and other health care providers. Also, affiliated doctors have provided a significant source of patients for the Company’s refractive centers and that is expected to continue. Accordingly, the success of the Company’s business depends upon its ability to enter into agreements on acceptable terms with a sufficient number of health care providers, including institutions and eye care doctors to render or arrange surgical and other professional services at facilities TLCVision owns or manages.

Quarterly fluctuations in operating results make financial forecasting difficult.

     The Company experienced significant fluctuations in quarterly loss during 2009, ranging from a first quarter net loss attributable to TLC Vision Corporation of $1.3 million to a fourth quarter net loss attributable to TLC Vision Corporation of $18.5 million. TLCVision may experience future quarterly losses, which may exceed prior quarterly losses. The Company’s expense levels will be based, in part, on our expectations as to future revenues. Historically, quarterly results of operations have varied, and future results may continue to fluctuate significantly from quarter to quarter. Accordingly, quarter-to-quarter comparisons of our operating results may not be meaningful and should not be relied upon as indications of our future performance or annual operating results. Quarterly results will depend on numerous factors, including the Company’s bankruptcy proceedings, economic conditions in our geographic markets, market acceptance of our services, seasonal factors, availability of capital under our credit and DIP facilities, and other factors described in this Annual Report on Form 10-K.

The Company may make investments that may not be profitable.

     The Company makes investments that are intended to support its business strategy, generally targeted to companies in the laser vision correction or doctor services businesses. In addition, the Company evaluates the strategic fit of current operations and investments, and has sought to divest those that we do not believe fit our strategy or enhance stockholder value. If the Company is unable to successfully manage its current and future investments, if those investments are not profitable or do not generate the expected returns, or if TLCVision is not successful in completing divestitures or achieving its targeted exit valuation, then future operating results may be adversely impacted.

Technological changes could occur rendering our equipment or services obsolete, requiring the Company to make significant capital expenditures or modify its business model, which could cause revenues or profitability to decline.

     Industry, competitive or clinical factors, among others, may require the Company to introduce alternate ophthalmic laser technology or other surgical or non-surgical methods for correcting refractive vision disorders than those that we currently use in our laser vision correction centers. Such alternative technologies could include various intraocular lens technologies or other new technologies. Introducing such technology could require significant capital investment or force us to modify our business model in such a way as to make our revenues or profits decline. An increase in costs could reduce our ability to maintain our profit margin. An increase in prices could adversely affect our ability to attract new patients.

25

The Company’s refractive centers strategy partially depends on the Company’s ability to successfully execute direct to consumer advertising programs.

     The success of TLCVision’s refractive centers strategy is partially dependent on increasing the number of procedures at TLC Laser Eye Centers through the Company’s consumer advertising programs. The success of this direct to consumer advertising is dependent upon several factors, including the Company’s ability to:

• cost-effectively generate procedures through advertising programs;

• allocate the funds necessary to support consumer advertising programs;

• develop consumer advertising as a competency in the Company; and

• maintain a reliable contact management center, including call center operations and lead follow-up programs.

     The Company also features athletes who are TLCVision patients in its marketing efforts. Actions taken by athletes who are featured in our marketing efforts that harm the reputation of those athletes could also harm our brand image with prospective patients and, as a result, could have an adverse effect on our revenues and financial condition.

The Company’s long-term success will depend, in part, on its ability to open new centers, make acquisitions, or enter into affiliate arrangements.

     To an extent, the general growth of the Company will be dependent on increasing the number of eye care centers through internal development or acquisitions and entering into affiliate arrangements with local eye care professionals.

     Opening new centers involves many challenges, including:

• the integration of operations and technologies into existing platforms;

• hiring and training personnel to staff the center;

• developing and implementing effective marketing programs to attract potential patients to the center; and

• managing the losses incurred during the development and ramp-up period.

     Acquiring an existing center presents these same operational challenges, and additional special risks, including:

• identifying unanticipated liabilities and contingencies;

• diversion of management attention; and

• possible adverse effects on operating results resulting from:

• possible future goodwill impairment;

• increased interest costs;

• the issuance of additional securities; and

• increased costs resulting from difficulties related to the integration of the acquired businesses.

     The Company’s ability to achieve growth through acquisitions will depend on a number of factors, including:

• the availability of attractive acquisition opportunities;

• the availability of capital to complete acquisitions;

• the availability of working capital to fund the operations of acquired businesses; and

• the effect of existing and emerging competition on operations.

     TLCVision may not be able to successfully identify suitable acquisition candidates, complete acquisitions on acceptable terms, if at all, or successfully integrate acquired businesses into its operations. The Company’s past and possible future acquisitions may not achieve adequate levels of revenue, profitability or productivity, or may not otherwise perform as expected.

The Company must successfully balance demand for refractive surgery with its operating costs, particularly in its refractive centers and refractive access segments.

     The demand for refractive surgery declined approximately 27% and 26% in 2009 and 2008, respectively. Both the Company’s refractive centers and refractive access segments have been adversely impacted by this slowing of demand. In response, the Company has reduced costs through a variety of initiatives including reductions in headcount, freezing or reducing salaries and benefits, decreases in discretionary spending including direct to consumer marketing, reductions in overhead costs, and the closure of

26

underperforming refractive centers/mobile refractive routes. There is no guarantee that these cost reduction initiatives will achieve their intended savings targets or that these reductions will be sufficient to maintain earnings or positive cash flow. Additionally, reductions in direct to consumer marketing may impact the level of demand in our refractive centers segment.

The Company depends on key personnel whose loss could adversely affect its business.

     TLCVision’s success and growth depends in part on the active participation of key medical and management personnel. The Company maintains key person insurance for several key ophthalmologists. Despite having this insurance in place, the loss of any one of these key individuals could adversely affect the quality, profitability and growth prospects of business operations.

     The Company has employment or similar agreements with the key personnel. The terms of these agreements include, in some cases, entitlements to severance payments in the event of termination of employment by either TLCVision or the employee.

The Company may be subject to malpractice and other similar claims and may be unable to obtain or maintain adequate insurance against these claims.

     The provision of medical services at the Company’s centers entails an inherent risk of potential malpractice and other similar claims. All of the Company’s U.S. professional malpractice insurance has a $250,000 deductible per claim for claims filed prior to May 1, 2009 and $50,000 per claim for those filed subsequent to May 1, 2009. Patients at the Company’s centers execute informed consent statements prior to any procedure performed by doctors, but these consents may not provide adequate liability protection. Although TLCVision does not engage in the practice of medicine or have responsibility for compliance with regulatory and other requirements directly applicable to doctors and doctor groups, claims, suits or complaints relating to services provided at the Company’s centers may be asserted against TLCVision in the future, and the assertion or outcome of these claims could result in higher administrative and legal expenses, including settlement costs or litigation damages.

     The Company currently maintains malpractice insurance coverage and accruals that it believes are adequate both as to risks and amounts covered. In addition, TLCVision requires the doctors who provide medical services to maintain comprehensive professional liability insurance. Further, most of these doctors have agreed to indemnify the Company against certain malpractice and other claims. TLCVision’s insurance coverage, however, may not be adequate to satisfy claims, insurance maintained by the doctors may not protect the Company, and such indemnification may not be enforceable or, if enforced, may not be sufficient. The Company’s inability to obtain adequate insurance or an increase in the future cost of insurance to TLCVision and the doctors who provide medical services at the centers may have a material adverse effect on the Company’s business and financial results.

     The excimer laser system uses hazardous gases which if not properly contained could result in injury. The Company may not have adequate insurance for liabilities arising from injuries caused by the excimer laser system or hazardous gases. While the Company believes that any claims alleging defects in its excimer laser systems would usually be covered by the manufacturers’ product liability insurance, the manufacturers of the Company’s excimer laser systems may not continue to carry adequate product liability insurance.

The Company may face claims for federal, state and local taxes.

     TLCVision operates in 48 states and three Canadian provinces and is subject to various federal, state, provincial and local income, payroll, unemployment, property, franchise, capital, sales and use tax on operations, payroll, assets and services. The Company endeavors to comply with all such applicable tax regulations, many of which are subject to different interpretations, and has hired outside tax advisors who assist in the process. Many states and other taxing authorities have been interpreting laws and regulations more aggressively to the detriment of taxpayers. The Company believes that it has adequate provisions and accruals in the financial statements for tax liabilities, although TLCVision cannot predict the outcome of future tax assessments.

Compliance with industry regulations in the U.S. is costly and burdensome.

     TLCVision’s operations are subject to extensive federal, state and local laws, rules and regulations. The Company’s efforts to comply with these laws, rules and regulations may impose significant costs, and failure to comply with these laws, rules and regulations may result in fines or other charges being imposed. The Company has incurred significant costs, and expects to incur future costs in connection with compliance with the provisions of the Sarbanes-Oxley Act of 2002. The Company’s failure to comply with the provisions of the Sarbanes-Oxley Act, including provisions relating to internal financial controls, could have a material adverse effect on TLCVision.

     Many state laws limit or prohibit corporations from practicing medicine and optometry, and many federal and state laws extensively regulate the solicitation of prospective patients, the structure of fees and contractual arrangements with hospitals, surgery

27

centers, ophthalmologists and optometrists, among others. Some states also impose licensing requirements. Although the Company attempts to structure its business and contractual relationships in compliance with these laws in all material respects, if any aspect of its operations was found to violate applicable laws, the Company could be subject to significant fines or other penalties, be required to cease operations in a particular jurisdiction, be prevented from commencing operations in a particular state or otherwise be required to revise the structure of its business or legal arrangements. Many of these laws and regulations are ambiguous, have not been definitively interpreted by courts or regulatory authorities, and vary from jurisdiction to jurisdiction. Accordingly, the Company may not be able to predict how these laws and regulations will be interpreted or applied by courts and regulatory authorities, and some of the Company’s activities could be challenged.

     Reform to the U.S. health care system has been enacted in various federal and state legislatures over the past several years and may continue to change in the future. To respond to any such changes, the Company could be required to revise the structure of its legal arrangements or its fee structure, incur substantial legal fees, fines or other costs, or curtail some of the Company’s business activities, reducing the potential profit of some of its arrangements.

     State medical boards and state boards of optometry generally set limits on the activities of ophthalmologists and optometrists. In some instances, issues have been raised as to whether participation in a co-management program violates some of these limits. If a state authority were to find that the Company’s co-management program did not comply with state licensing laws, TLCVision would be required to revise the structure of its legal arrangements or curtail operations, and affiliated doctors might terminate their relationships with the Company.

     Federal and state civil and criminal statutes impose penalties, including substantial civil and criminal fines and imprisonment, on health care providers and persons who provide services to health care providers, including management businesses such as TLCVision, for fraudulently or wrongfully billing government or other insurers. In addition, the federal law prohibiting false Medicare/Medicaid billings allows a private person to bring a civil action in the name of the U.S. government for violations of its provisions and obtain a portion of the damages if the action is successful. The Company believes that it is in material compliance with these billing laws, but the business could be adversely affected if governmental authorities were to scrutinize or challenge the Company’s activities or private parties were to assert a false claim or action against TLCVision in the name of the U.S. government.

     Although the Company believes that it has obtained the necessary licenses or certificates of need in states where such licenses are required and that the Company is not required to obtain any licenses in other states, some of the state regulations governing the need for such licenses are unclear, and there is no applicable precedent or regulatory guidance to help resolve these issues. A state regulatory authority could determine that TLCVision is operating a center inappropriately without a required license or certificate of need, which could subject the Company to significant fines or other penalties, result in TLCVision being required to cease operations in a state or otherwise jeopardize business and financial results. If the Company expands to a new geographic market, it may be unable to obtain any new license required in that jurisdiction.

Compliance with additional health care regulations in Canada is costly and burdensome.

     Some Canadian provinces have adopted conflict of interest regulations that prohibit optometrists, ophthalmologists or corporations they own or control from receiving benefits from suppliers of medical goods or services to whom they refer patients. The laws of some Canadian provinces also prohibit health care professionals from splitting fees with non-health care professionals and prohibit non-licensed entities such as TLCVision from practicing medicine or optometry and from directly employing physicians or optometrists. The Company believes that it is in material compliance with these requirements, but a review of the Company’s operations by Canadian regulators or changes in the interpretation or enforcement of existing Canadian legal requirements or the adoption of new requirements could require significant costs to comply with laws and regulations in the future or require the Company to change the structure of our arrangements with doctors.

Compliance with U.S. Food and Drug Administration regulations regarding the use of excimer laser systems for laser correction is costly and burdensome.

     To date, the FDA has approved excimer laser systems manufactured by some manufacturers for sale for the treatment of nearsightedness, farsightedness and astigmatism up to stated levels of correction. Failure to comply with applicable FDA requirements with respect to the use of the excimer laser could subject the Company, its affiliated doctors or laser manufacturers to enforcement action, including product seizure, recalls, withdrawal of approvals and civil and criminal penalties.

     The FDA has adopted guidelines in connection with the approval of excimer laser systems for laser vision correction. The FDA, however, has also stated that decisions by doctors and patients to proceed outside the FDA-approved guidelines are a practice of medicine decision, which the FDA is not authorized to regulate. Failure to comply with FDA requirements or any adverse FDA action,

28

including a reversal of its interpretation with respect to the practice of medicine, could result in a limitation on or prohibition of the Company’s use of excimer lasers.

     Discovery of problems, violations of current laws or future legislative or administrative action in the United States or elsewhere may adversely affect the laser manufacturers’ ability to obtain regulatory approval of laser equipment. Furthermore, the failure of other excimer laser manufacturers to comply with applicable federal, state or foreign regulatory requirements, or any adverse action against or involving such manufacturers, could limit the supply of excimer lasers, substantially increase the cost of excimer lasers, limit the number of patients that can be treated at the Company’s centers and limit TLCVision’s ability to use excimer lasers.

     Most of the Company’s eye care centers and access sites in the United States use VISX excimer lasers. If VISX, or other excimer laser manufacturers, fail to comply with applicable federal, state or foreign regulatory requirements, or if any adverse regulatory action is taken against or involves such manufacturers, the supply of lasers could be limited and the cost of excimer lasers could increase.

     The Roll-On/Roll-Off laser system consists of an excimer laser mounted on a motorized, air suspension platform and transported in a specially modified truck. The Company believes that use of this transport system does not require FDA approval; the FDA has taken no position in regard to such approval. The FDA could, however, take the position that excimer lasers are not approved for use in this transport system. Such a view by the FDA could lead to an enforcement action against the Company, which could impede TLCVision’s ability to maintain or increase its volume of excimer laser surgeries. This could have a material adverse effect on the Company’s business and financial results. Similarly, the Company believes that FDA approval is not required for TLCVision’s mobile use of microkeratomes or the cataract equipment transported by the Company’s mobile cataract operations. The FDA, however, could take a contrary position that could result in an enforcement action.

Healthcare reform may impact the Company’s business.

     Healthcare reform enacted in the United States may bring significant changes in the financing and regulation of the healthcare industry. Depending on the nature of such changes, they could have a material adverse effect on TLCVision’s business, financial condition and results of operations.

Disputes with respect to intellectual property could adversely affect TLCVision’s business.

     There has been substantial litigation in the United States and Canada regarding the patents on ophthalmic lasers. Although TLCVision currently leases or purchases excimer lasers and other technology from the manufacturers, if the use of an excimer laser or other procedure performed at any of the Company’s centers is deemed to infringe a patent or other proprietary right, the Company may be prohibited from using the equipment or performing the procedure that is the subject of the patent dispute or may be required to obtain a royalty-bearing license, which may involve substantial costs, including ongoing royalty payments. If a license is not available on acceptable terms, the Company may be required to seek the use of products which do not infringe the patent.

     TLCVision has also secured patents for portions of the equipment it uses to transport mobile lasers. TLCVision patents and other proprietary technology are important to the Company’s success. These patents could be challenged, invalidated or circumvented in the future. Litigation regarding intellectual property is common and the Company’s patents may not adequately protect its intellectual property. Defending and prosecuting intellectual property proceedings is costly and involves substantial commitments of management time. Failure to successfully defend the Company’s rights with respect to TLCVision’s intellectual property may require the payment of damages and/or ceasing the use of equipment to transport mobile lasers, which may have a material adverse effect on business.

The ability of our shareholders to effect changes in control of the Company is limited.

     TLCVision has a shareholder rights plan enabling the Board of Directors to delay a change in control of the Company, which could discourage a third party from attempting to acquire control of the Company, even if an attempt would be beneficial to the interests of the shareholders. In addition, since TLCVision is a Canadian corporation, investments in the Company may be subject to the provisions of the Investment Canada Act. In general, this act provides a system for the notification to the Investment Canada agency of acquisitions of Canadian businesses by non-Canadian investors and for the review by the Investment Canada agency of acquisitions that meet thresholds specified in the act. To the extent that a non-Canadian person or company attempted to acquire 33% or more of TLCVision’s outstanding common shares, the threshold for a presumption of control, the transaction could be reviewable by the Investment Canada agency. The Investment Canada Act also applies to a change of control effected by a sale of all or substantially all of the assets of the Company.

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     The Company has entered into a plan sponsor agreement dated February 3, 2010, as amended (the Plan Sponsor Agreement), backed by affiliates of Charlesbank and H.I.G. Pursuant to the Plan Sponsor Agreement, the Company and its directors, officers and other representatives are prohibited from soliciting other proposals to acquire 50% or more of the outstanding equity of the Company or other acquisition or capital restructuring transactions involving the Company or its subsidiaries. In addition, the Company’s Board of Directors may only accept or recommend unsolicited proposals that meet the definition of “Superior Proposal” contained in the Plan Sponsor Agreement. In such a circumstance, as well as other circumstances set forth in the Plan Sponsor Agreement, the Company would be obligated to pay a $5.0 million termination fee and Charlesbank’s expenses up to a maximum of $2.0 million.

     These factors and others could have the effect of delaying, deferring or preventing a change of control of the Company supported by shareholders but opposed by our Board of Directors.

We have significant tax net operating loss carryovers that may not be utilized.

     As of December 31, 2009, the Company has net operating losses available for carry forward for income tax purposes of approximately $100.8 million, which may be available to reduce taxable income in future years. There is no guarantee that all, if any, of the Company’s net operating losses will be utilized in future periods. See Note 17, Income Taxes, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     None.

ITEM 2. PROPERTIES

     The Company’s refractive centers are located in leased premises throughout the United States and Canada. The leases are negotiated on market terms and typically have terms of five to ten years. TLCVision’s U.S. Corporate Office is located in approximately 29,000 square feet of leased office space in St. Louis, Missouri under a lease that will expire in 2016. TLCVision also maintains approximately 19,000 square feet of office/warehouse space in Bloomington, Minnesota primarily for its doctor services operations. The Bloomington facility lease expires in 2016.

     TLCVision’s International Corporate Office was located in leased office space at 5280 Solar Drive, Mississauga, Ontario, Canada under a lease with Canada Mortgage and Housing Corporation expiring in 2016. Effective December 21, 2009, the Company was no longer utilizing the International Corporate Office and is temporarily leasing alternate space in Mississauga, Canada.

     On December 21, 2009, in conjunction with the Company’s bankruptcy proceedings, a first day motion was filed in the U.S. Court requesting entry of an order authorizing the Company to reject the unexpired lease with Canada Mortgage and Housing Corporation under authority of sections 105(a) and 365(a) of the Bankruptcy Code. On January 21, 2010, an order was entered authorizing the Company to reject the lease as of the Petitions Date. For additional information regarding this lease rejection, refer to Note 14, Debt, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

     The terms of the Company’s leases provide for total aggregate monthly lease obligations of approximately $0.7 million in 2010. However, such obligations may be impacted by the ongoing bankruptcy proceedings.

ITEM 3. LEGAL PROCEEDINGS

     On December 21, 2009, the Company and two of its wholly owned subsidiaries, TLC Vision (USA) Corporation and TLC Management Services, Inc., filed the Chapter 11 Petitions in the U.S. Court. The Chapter 11 cases are being jointly administered under the caption In re TLC Vision (USA) Corporation, et al., Case No. 09-14473. On the same day, the Company also filed the Canadian Petition under the CCAA in the Canadian Court. On December 23, 2009, the Canadian Court recognized the Company’s Chapter 11 case as a “foreign main proceeding” and granted the Company certain other relief. No other operations of the Company, its affiliates or subsidiaries were involved in the filings. See Part I, Item 1, Business – Bankruptcy Proceedings, for additional information.

     Except for bankruptcy proceedings noted above, at December 31, 2009 there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

     The Company is subject to various claims and legal actions in the ordinary course of its business, which may or may not be covered by insurance. These matters include, without limitation, professional liability, employee-related matters and inquiries and

30

investigations by governmental agencies. While the ultimate results of such matters cannot be predicted with certainty, the Company believes that the resolution of these matters will not have a material adverse effect, individually or in the aggregate, on its consolidated financial position or results of operations.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

     As of December 31, 2009, the Company’s common shares were suspended from trading on both the NASDAQ and TSX. The Company’s common shares were delisted from the NASDAQ and the TSX effective January 18, 2010 and January 21, 2010, respectively. The Company’s common shares currently trade on the Over-The-Counter Bulletin Board under the ticker symbol “TLCVQ”.

     The following table sets forth, for the periods indicated, the high and low closing prices per share of our common shares on the NASDAQ Global Market:

	NASDAQ
	GLOBAL
	MARKET
	HIGH		LOW
2008
First Quarter March 31, 2008	$	3.17	$	0.96
Second Quarter June 30, 2008		1.58		0.99
Third Quarter September 30, 2008		1.37		0.74
Fourth Quarter December 31, 2008		0.74		0.14
2009
First Quarter March 31, 2009	$	0.20	$	0.09
Second Quarter June 30, 2009		0.43		0.11
Third Quarter September 30, 2009		0.40		0.18
Fourth Quarter December 31, 2009		0.30		0.04

     As of March 9, 2010, there were approximately 700 shareholders of record of the common shares.

     The Company has never declared or paid cash dividends on the common shares. The Company’s ability to pay dividends is currently restricted, among other reasons, pursuant to the Company’s bankruptcy proceedings.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the related notes thereto, which are included in Item 8 of this Form 10-K. The following discussion is based upon the Company’s results under U.S. generally accepted accounting principles. Unless otherwise specified, all dollar amounts are U.S. dollars.

Overview

     TLC Vision Corporation is an eye care services company dedicated to improving lives through improving vision by providing high-quality care directly to patients and as a partner with their doctors and facilities. The majority of the Company’s revenues come from owning and operating refractive centers that employ laser technologies to treat common refractive vision disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. In its doctor services business, the Company furnishes doctors

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and medical facilities with mobile or fixed site access to refractive and cataract surgery equipment, supplies, technicians and diagnostic products, as well as owns and manages single-specialty ambulatory surgery centers. In its eye care business, the Company currently provides franchise opportunities to independent optometrists under its Vision Source^® brand.

     Except as described in the following paragraphs, the Company recognizes revenues at the time procedures are performed or services are rendered. Revenues primarily include amounts charged to patients for procedures performed at laser centers, amounts charged to physicians for laser access and service fees, and management fees from managing refractive and secondary care practices. Follow-up consultations, which help ensure general patient satisfaction and safety, are free of separate charge to patients, very short in nature and are therefore considered inconsequential for revenue deferral, though the Company does accrue at the point of procedure for the minimal anticipated costs of the follow-up consultations.

     The Company offers a portion of its patients extended lifetime warranties, i.e., the TLC Lifetime Commitment^®. Participation in the TLC Lifetime Commitment^® program is included in the surgical price for a specific type of procedure selected by a portion of its patients. Under this pricing model, the Company accounts for the TLC Lifetime Commitment^® program as a warranty obligation under the provisions of ASC 450, Contingencies. Accordingly, the costs expected to be incurred to satisfy the obligation are accrued as a liability at the point of sale given the Company’s ability to reasonably estimate such costs based on historical trends and the satisfaction of all other revenue recognition criteria.

     The Company offers an extended TLC Lifetime Commitment^® warranty at a separately-priced fee to customers selecting a lower level base surgical procedure. Under applicable accounting rules, 100% of revenues and related costs from the sale of the separately priced lifetime warranty are to be deferred and recognized over the life of the contract on a straight-line basis unless sufficient experience exists to indicate that the costs to provide the service will be incurred other than on a straight-line basis. Revenues generated under this program are initially deferred and recognized over a period of five years based on management’s future estimates of re-treatment volume, which are based on historical warranty claim activity. The Company believes it has sufficient experience to support recognition on other than a straight-line basis. Accordingly, the Company has deferred these revenues and are recognizing them over the period in which the future costs of performing the enhancement procedure are expected to be incurred.

     In addition to the deferral of revenues related to the separately-priced TLC Lifetime Commitment^®, the Company has deferred a portion of its costs of service related to professional fees paid to the attending surgeon when an initial procedure is performed. The physician receives no incremental fee for an enhancement procedure under the TLC Lifetime Commitment^®. Accordingly, a portion of the professional fee paid at the time of the initial procedure to the attending surgeon relates to the future enhancement procedures to be performed under the separately-priced TLC Lifetime Commitment^® and qualifies for deferral as a direct and incremental cost. The Company uses the same historical experience to amortize deferred professional fees that it uses to amortize deferred revenue. Other costs expected to be incurred if a complication were to occur are accrued at the point of procedure as part of the Company’s general enhancement accrual based on historical trend estimates.

     Under the terms of management service agreements, the Company provides non-clinical services, which include facilities, staffing, equipment lease and maintenance, marketing and administrative services to refractive and secondary care practices in return for management fees. For third-party payor programs and corporations with arrangements with TLCVision, the Company’s management fee and the fee charged by the surgeon are both discounted in proportion to the discount afforded to these organizations. While the Company does not direct the manner in which the surgeons practice medicine, the Company does direct the day-to-day non-clinical operations of the centers. The management service agreements typically are for an extended period of time, ranging from five to 15 years. Management fees are equal to the net revenue of the physician practice, less amounts retained by the physician groups.

     Included in costs of revenue are the laser fees payable to laser manufacturers for royalties, doctors’ compensation, use and maintenance of the lasers, variable expenses for consumables and facility fees, as well as center costs associated with personnel, facilities and depreciation of center assets.

     Marketing and sales and general and administrative expenses include expenses that are not directly related to the provision of laser correction services or cataract services.

     The Company serves surgeons who performed approximately 193,300 procedures, including refractive and cataract procedures, at the Company’s centers or using the Company’s equipment during the year ended December 31, 2009. During the year ended December 31, 2009, the Company’s refractive center and access procedure volume, including minority owned centers, decreased to 112,600 from 149,200 in the year ended December 31, 2008, a decrease of 36,600 procedures (25%). Being an elective procedure, laser vision correction volumes fluctuate due to changes in economic and stock market conditions, unemployment rates, consumer confidence and political uncertainty, which management believes were the primary causes for the significant year over year decline. Demand for laser vision correction also is affected by perceived safety and effectiveness concerns given the lack of long-term follow-up data.

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     Below is a summary of selected operating data, including center locations and procedure volume, over the trailing five year period:

	YEAR ENDED
	DECEMBER 31,
	2005		2006		2007		2008		2009
OPERATING DATA (unaudited)
Number of majority owned eye care centers at end of period		64		67		66		66		63
Number of minority owned eye care centers at end of period		9		9		14		9		8
Number of TLCVision branded eye care centers at end of period		73		76		80		75		71
Number of service sites
Refractive access		318		327		327		320		293
Mobile cataract		563		689		444		367		367
Number of laser vision correction procedures:
Majority owned centers		101,000		101,000		105,700		88,300		63,600
Minority owned centers		20,000		20,300		21,400		16,800		13,800
Total TLCVision branded center procedures		121,000		121,300		127,100		105,100		77,400
Refractive access procedures		69,900		65,900		59,500		44,100		35,200
Total TLCVision branded refractive Procedures		190,900		187,200		186,600		149,200		112,600
Mobile cataract procedures (including cataract and YAG)		49,000		55,700		56,900		59,500		61,900

Developments During 2009

Bankruptcy and Reorganization

     On December 21, 2009, the Company and two of its wholly owned subsidiaries, TLC Vision (USA) Corporation and TLC Management Services, Inc., filed the Chapter 11 Petitions in the U.S. Court. The Chapter 11 cases are being jointly administered under the caption In re TLC Vision (USA) Corporation, et al., Case No. 09-14473. On the same day, the Company also filed the Canadian Petition under the CCAA in the Canadian Court. On December 23, 2009, the Canadian Court recognized the Company’s Chapter 11 case as a “foreign main proceeding” and granted the Company certain other relief. No other operations of the Company, its affiliates or subsidiaries were involved in the filings. See Part I, Item 1, Business – Bankruptcy Proceedings, for additional information.

Restructuring Activities

     During 2009, the Company accelerated its cost savings initiatives that focused on employee reductions, closures of refractive centers and the reduction in refractive access routes. The restructuring efforts during the year ended December 31, 2009 resulted in the closure of three majority-owned refractive centers and an approximate 15% reduction of the Company’s workforce through involuntary employee separations. In addition to the cost savings initiatives, the restructuring efforts also included pre-petition financial and legal advisor fees associated with Credit Facility negotiations.

     As a result, the Company incurred pre-petition restructuring charges included in other expenses totaling $25.9 million for the year ended December 31, 2009, which primarily included $15.6 million of financial and legal advisor costs, $2.6 million for employee severance and benefits, $4.5 million for the write-off of investments in and a receivable due from Notal Vision^®, $0.8 million of center restructuring and closing costs, and $1.6 million of losses on the divestitures of various ambulatory surgical center investments. See Note 4, Restructuring, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

     All restructuring costs incurred subsequent to the December 21, 2009 bankruptcy filings that are specifically associated with the Company’s post-petition bankruptcy proceedings have been separately classified as reorganization items, net, on the consolidated statement of operations.

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Stock Market Compliance

     As of December 31, 2009, the Company’s common shares were suspended from trading on both the NASDAQ and the TSX. The Company’s common shares were delisted from the NASDAQ and the TSX effective January 18, 2010 and January 21, 2010, respectively. The Company’s common shares currently trade on the Over-The-Counter Bulletin Board under the ticker symbol “TLCVQ”.

Notal Vision^® Settlement Agreement

     During the year ended December 31, 2009, management explored terminating the Foresee PHP^® system distribution rights between the Company and Notal Vision^®, an entity in which the Company held a minority investment. The distribution rights allowed the Company to sell the Foresee PHP^®, manufactured by Notal Vision^®, as a component of the Company’s cataract access reporting segment.

     Effective December 10, 2009, the Company reached a Settlement Agreement with Notal Vision^®. The Settlement Agreement terminated the exclusive Foresee PHP^® distribution agreement in exchange for the Company surrendering a $2.3 million note receivable due from Notal Vision^® and the forfeiture by the Company of all remaining investments in Notal Vision^®. The Settlement Agreement also eliminated the Company’s future contractual purchase obligations of the Foresee PHP^®.

     As a result of the Settlement Agreement, the Company recorded a $4.5 million charge included in other expense in the Company’s consolidated statement of operations. The charge includes the $2.3 million note receivable write-down, the elimination of $0.4 million of unpaid interest included in other long-term assets and the write-down of $1.7 million of Notal Vision^® cost method investments.

Interest Rate Swap Agreements

     Effective July 9, 2009, Citibank and the Company agreed to the early termination of the interest rate swap agreements entered August and December 2007. In consideration for Citibank’s agreement to terminate the interest rate swaps, the Company agreed that the amount due to Citibank as of July 9, 2009 (Settlement Date) was $1.6 million (Settlement Amount). The Company further agreed that interest on the Settlement Amount will accrue at a default rate from and including the Settlement Date until such date that the Settlement Amount is paid in full. As of December 31, 2009, the Company had not paid the $1.6 million Settlement Amount; as such the amount is included in liabilities subject to compromise in the consolidated balance sheet. See Note 15, Interest Rate Swap Agreements, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data, for additional information.

TruVision™ Acquisition Liability

     On August 10, 2009, the Company entered into Amendment No. 2 (Amendment) to the 2005 TruVision™ Agreement and Plan of Merger. The Amendment restructured the Company’s final $4.0 million purchase installment, which was due to the former TruVision™ owners during August 2009. The Amendment resulted in the final purchase installment being increased to an unsecured $5.4 million payable, inclusive of interest and penalties, which was to be made through quarterly payments of approximately $0.3 million beginning on August 10, 2009 and extending through April 5, 2014. The amount owed is not represented by a promissory note, is not secured and will not accrue interest on a going forward basis. As of December 31, 2009, liabilities subject to compromise include $4.4 million, representing the balance owed net of imputed interest, under the restructured TruVision™ Agreement and Plan of Merger. As of March 31, 2010, the Company was unable to make a $0.3 million scheduled payment due October 5, 2009 and a $0.3 million scheduled payment due January 5, 2010 as part of the restructured TruVision™ Agreement and Plan of Merger. The remaining liability is subject to the Company’s bankruptcy proceedings further described in Part I, Item 1, Business – Bankruptcy Proceedings.

Acquisitions and Investments

     The Company’s strategy has historically included acquisitions of, or investments in, entities that operate within its chosen markets. During the year ended December 31, 2009, the Company made payments of $5.2 million to invest in multiple entities, none of which was individually material. Included in acquisition and equity investments are cash payments of approximately $4.0 million related to the Company’s 2005 TruVision™ acquisition, which were included in the purchase price allocation.

     During 2005, the Company acquired a substantial portion of the assets of Kremer Laser Eye (Kremer). As of December 31, 2009, Kremer operates three refractive centers, which the Company has an approximate 84% ownership interest, and one ambulatory surgery center, which the Company has a 70% ownership interest. As part of a transfer rights agreement entered on the acquisition

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date between the Company and the minority holders of Kremer, the minority holders retain options that could require the Company to purchase the remaining noncontrolling interest. The first option was exercisable during July 2009 with all remaining options being exercisable during July 2010 and 2012.

     During July 2009, the Company received formal notification from the minority holders of Kremer of their intent to exercise the first option. The option, if exercised, would transfer a portion of the remaining noncontrolling interest of Kremer to TLCVision in exchange for approximately $1.9 million payable August 2009. If the Company failed to make such payment all remaining options could become exercisable on an accelerated basis.

     During August 2009, the Company and the minority holders of Kremer executed a limited forbearance and third amendment to the transfer rights agreement (Amendment and Forbearance). The Amendment and Forbearance, among other things, granted the Company temporary forbearance of the $1.9 million payable, waived the minority holders’ ability during the forbearance period to force acceleration of the remaining options, required the Company to make an immediate payment to the minority holders of $0.3 million and accelerated the third option date from July 2012 to July 2011. The payment of $0.3 million was recorded as other expense during the year ended December 31, 2009.

     Effective October 13, 2009, the forbearance period expired allowing the minority holders of Kremer the right to exercise all options under the amended transfer rights agreement. As of March 31, 2010, such right has not been exercised and is subject to the Company’s bankruptcy proceedings. The $1.9 million has been classified as a liability subject to compromise as of December 31, 2009.

Divestitures

     During the year ended December 31, 2009, the Company divested one majority-owned and two minority-owned ambulatory surgical centers for a combined net sale price of $2.2 million, resulting in a net loss on divestiture of $1.6 million included in other expenses on the Company’s Consolidated Statements of Operations. The historical results of operations for these ambulatory surgical centers are included in the “other” segment of the Company’s doctor services business. The net loss on divestiture includes a $1.8 million non-cash write-off of goodwill existing at the time of disposal.

Critical Accounting Policies

Going Concern

     The consolidated financial statements and related notes have been prepared assuming the Company will continue as a going concern, although the bankruptcy filings raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on restructuring its obligations in a manner that allows it to obtain confirmation of a plan of reorganization by the Bankruptcy Courts. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or to the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

Impairment of Goodwill

     The Company accounts for its goodwill in accordance with ASC 350, Intangibles – Goodwill and Other, which requires the Company to test goodwill for impairment annually and whenever events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. ASC 350 requires the Company to determine the fair value of its reporting units. Because quoted market prices do not exist for the Company’s reporting units, the Company uses a combination of present values of expected future cash flows (i.e. the income approach) and multiples of earnings (i.e. the market approach) to estimate fair value. Management must make significant estimates and assumptions about future conditions to estimate future cash flows and appropriate multiples. If these estimates or related assumptions change in the future, including general economic and competitive conditions, the Company may be required to record additional impairment charges related to these assets. During the year ended December 31, 2009, the Company recorded no goodwill impairment charges. During the year ended December 31, 2008, the Company recorded a $73.4 million impairment charge against goodwill, which is further discussed in Note 3, Impairment, to the consolidated financial statements in Part II, Item 8, Financial Statements and Supplementary Data.

Impairment of Long-Lived Assets

     The Company accounts for its long-lived assets in accordance with ASC 360, Property, Plant and Equipment, which requires the Company to assess the recoverability of these assets when events or changes in circumstances indicate that the carrying amount of the long-lived asset (group) might not be recoverable. If impairment indicators exist, the Company determines whether the projected

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undiscounted cash flows will be sufficient to cover the carrying value of such assets. This requires the Company to make significant judgments about the expected future cash flows of the asset group. The future cash flows are dependent on many factors including general and economic conditions and are subject to change. A change in these assumptions could result in material charges to income.

Recoverability of Deferred Tax Assets

     The Company has generated deferred tax assets and liabilities due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the income tax bases of such assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets to the amount expected to be realized. In assessing the adequacy of the valuation allowances, the Company considers the scheduled reversal of deferred tax liabilities, future taxable income and prudent and feasible tax planning strategies. At December 31, 2009, the Company had valuation allowances of $147.2 million to fully offset deferred tax assets of $147.2 million. The valuation allowance was based on the uncertainty of the realizability of certain deferred tax assets. In the event the Company determines it is more likely than not it will be able to use a deferred tax asset in the future in excess of its net carrying value, the valuation allowance would be reduced, thereby increasing net income, reducing goodwill or increasing equity in the period such determination is made.

Accrual of Medical Malpractice Claims

     The nature of the Company’s business is such that it is subject to medical malpractice lawsuits. To mitigate a portion of this risk, the Company maintains insurance in the United States for individual malpractice claims with a deductible of $250,000 per claim for claims filed prior to May 1, 2009 and $50,000 per claim for those filed subsequent to May 1, 2009. Management and the Company’s insurance carrier review malpractice lawsuits for purposes of establishing ultimate loss estimates. The Company has recorded reserves to cover the estimated costs of the deductible for both reported and unreported medical malpractice claims incurred. The estimates are based on the average monthly claims expense and the estimated average time lag between the performance of a procedure and notification of a claim. If the number of claims or the cost of settled claims is higher than the Company’s historical experience or if the actual time lag varies from the estimated time lag, the Company may need to record significant additional expense.

     The Company’s medical malpractice liability, which is immaterial for quantitative disclosure at December 31, 2009 and 2008, is included in liabilities subject to compromise, accrued liabilities and other long-term liabilities.

Accrued Enhancement

     The Company offers a portion of its patients extended lifetime warranties, i.e., the TLC Lifetime Commitment^®. Participation in the TLC Lifetime Commitment^® program is included in the surgical price for a specific type of procedure selected by a portion of the Company’s patients. Under this pricing model, the Company accounts for the TLC Lifetime Commitment^® program as a warranty obligation under the provisions of ASC 450, Contingencies. Accordingly, the costs expected to be incurred to satisfy the obligation are accrued as a liability at the point of sale given our ability to reasonably estimate such costs based on historical trends and the satisfaction of all other revenue recognition criteria.

Deferred Revenues

     The Company offers an extended TLC Lifetime Commitment^® warranty at a separately-priced fee to customers selecting a lower level base surgical procedure. Under applicable accounting rules, 100% of revenues and related costs from the sale of the separately priced lifetime warranty are to be deferred and recognized over the life of the contract on a straight-line basis unless sufficient experience exists to indicate that the costs to provide the service will be incurred other than on a straight-line basis. Revenues generated under this program are initially deferred and recognized over a period of five years based on management’s future estimates of re-treatment volume, which are based on historical warranty claim activity. The Company believes it has sufficient experience to support recognition on other than a straight-line basis. Accordingly, the Company has deferred these revenues and is recognizing them over the period in which the future costs of performing the enhancement procedure are expected to be incurred.

     In addition to the deferral of revenues related to the separately-priced TLC Lifetime Commitment^®, the Company has deferred a portion of its costs of service related to professional fees paid to the attending surgeon when an initial procedure is performed. The physician receives no incremental fee for an enhancement procedure under the TLC Lifetime Commitment^®. Accordingly, a portion of the professional fee paid at the time of the initial procedure to the attending surgeon relates to the future enhancement procedures to be performed under the separately-priced TLC Lifetime Commitment^® and qualifies for deferral as a direct and incremental cost. The Company uses the same historical experience to amortize deferred professional fees that it uses to amortize deferred revenue. Other

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costs expected to be incurred if a complication were to occur are accrued at the point of procedure as part of the Company’s general enhancement accrual based on historical trend estimates.

     The deferred revenue balances related to the TLC Lifetime Commitment^® at December 31, 2009 and 2008 totaled $0.8 million and $1.1 million, respectively.

Liabilities Subject to Compromise

     Liabilities subject to compromise represent unsecured obligations that will be accounted for under a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-Chapter 11 or CCAA liabilities are stayed. Pre-petition liabilities that are subject to compromise are reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. These liabilities represent the amounts expected to be allowed on known or potential claims to be resolved through the Chapter 11 and CCAA process, and remain subject to future adjustments arising from negotiated settlements, actions of the Bankruptcy Courts, rejection of executory contracts and unexpired leases, the determination as to the value of collateral securing the claims, proofs of claim, or other events. Liabilities subject to compromise also include certain items that may be assumed under the current proposed plan of reorganization, and as such, may be subsequently reclassified to liabilities not subject to compromise. Differences between liability amounts estimated and claims filed by creditors are being investigated and, if necessary, the Bankruptcy Courts will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated cannot be made until the Bankruptcy Courts approve a plan of reorganization. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008

     Total revenues for the year ended December 31, 2009 were $230.2 million, a decrease of $45.5 million (17%) from revenues of $275.7 million for the year ended December 31, 2008. The decrease in revenue was primarily attributable to the decline in refractive centers and refractive access procedures, partially offset by higher cataract volume and growth in eye care.

     Revenues from refractive centers for the year ended December 31, 2009 were $107.3 million, a decrease of $44.1 million (29%) from revenues of $151.4 million for the year ended December 31, 2008. The decrease in revenues from refractive centers resulted primarily from lower center procedure volume, which accounted for a decrease in revenues of approximately $39.9 million. The remaining revenue decline of $4.2 million was the result of decreased revenue per procedure. For the year ended December 31, 2009, majority-owned center procedures were approximately 63,600, a decrease of 24,700 (28%) from 88,300 procedures for the year ended December 31, 2008. The procedure decline was attributable to the weakened U.S. economy, which has negatively impacted consumer discretionary spending.

     Revenues from doctor services for the year ended December 31, 2009 were $91.9 million, a decrease of $3.7 million (4%) from revenues of $95.6 million for the year ended December 31, 2008. The revenue decrease from doctor services was due principally to procedure shortfalls in refractive access, partially offset by increases in the Company’s mobile cataract and other segments.

• Revenues from the refractive access services segment for the year ended December 31, 2009 were $24.0 million, a decrease of $5.2 million (18%) from revenues of $29.2 million for the year ended December 31, 2008. For the year ended December 31, 2009, excimer procedures declined by 9,000 (20%) from the prior year period on lower customer demand, which accounted for a decrease in revenues of approximately $5.9 million. This decrease was partially offset by higher average pricing and mobile Intralase revenues, which together increased revenues by approximately $0.7 million.

• Revenues from the Company’s mobile cataract segment for the year ended December 31, 2009 were $41.8 million, an increase of $0.9 million (2%) from revenues of $40.9 million for the year ended December 31, 2008. The increase in mobile cataract revenue was due to increased surgical procedure volume of 4% and higher surgical average sales price of 3%, partially offset by a $1.4 million (50%) decline in Foresee PHP^® revenue on a 49% unit volume reduction on weakened consumer spending and the 4^th quarter 2009 termination of the Foresee PHP^® distribution agreement.

• Revenues from the Company’s businesses that manage cataract and secondary care centers for the year ended December 31, 2009 were $26.1 million, an increase of $0.6 million (2%) from revenues of $25.5 million for the year ended December 31, 2008. The revenue increase was primarily due to an increase in procedure volume and higher priced

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product mix at the Company’s remaining ambulatory surgical centers, partially offset by the early third quarter 2009 disposal of a majority-owned ambulatory surgical center, which contributed 1,900 procedures during the year ended December 31, 2009 compared to 3,200 procedures during the year ended December 31, 2008.

     Revenues from eye care for the year ended December 31, 2009 were $31.0 million, an increase of $2.4 million (8%) from revenues of $28.6 million for the year ended December 31, 2008. This increase was primarily due to a 10% increase in the total number of franchisees.

     Total cost of revenues (excluding amortization expense for all segments) for the year ended December 31, 2009 was $167.0 million, a decrease of $27.9 million (14%) from the cost of revenues of $194.9 million for the year ended December 31, 2008.

     The cost of revenues from refractive centers for the year ended December 31, 2009 was $83.8 million, a decrease of $27.0 million (24%) from cost of revenues of $110.8 million for the year ended December 31, 2008. This decrease was attributable to a $13.7 million cost of revenue decline related to lower procedure volume, $12.7 million in fixed cost reductions and $0.6 million in decreased variable costs per procedure. Gross margin for centers was 21.9% during the year ended December 31, 2009, down from prior year gross margin of 26.8% as the Company’s cost saving initiatives could not outweigh the revenue decline caused by the refractive center procedure decline.

     The cost of revenues from doctor services for the year ended December 31, 2009 was $68.3 million, a decrease of $2.8 million (4%) from cost of revenues of $71.1 million for the year ended December 31, 2008. Gross margins increased to 25.7% during the year ended December 31, 2009 from 25.6% in the prior year period. The decrease in cost of revenues was due to the following:

• The cost of revenues from refractive access segment for the year ended December 31, 2009 was $19.2 million, a decrease of $4.4 million (19%) from cost of revenues of $23.6 million for the year ended December 31, 2008. This decrease was primarily attributable to $4.8 million of lower costs associated with decreased excimer procedures, partially offset by an increase in cost of revenues of $0.4 million primarily associated with higher cost procedures and the mobile Intralase offering.

• The cost of revenues from the Company’s mobile cataract segment for the year ended December 31, 2009 was $31.3 million, an increase of $1.0 million (3%) from cost of revenues of $30.3 million for the year ended December 31, 2008. This increase was primarily due to higher surgical procedure volume of 4%, higher lens supply costs and a $0.8 million PHP Foresee^® inventory write-down, partially offset by lower costs associated with a 49% decline in PHP Foresee^® unit volume.

• The cost of revenues from the Company’s businesses that manage cataract and secondary care centers for the year ended December 31, 2009 was $17.8 million, an increase of $0.6 million (4%) from cost of revenues of $17.2 million for the year ended December 31, 2008. The increase in cost of revenues was caused primarily by an increase in procedure volume and higher per procedure cataract lens cost at the Company’s remaining ambulatory surgical centers, partially offset by a cost of revenues decline on lower procedure volume associated with the majority-owned ambulatory surgical center sold during 2009.

     The cost of revenues from eye care for the year ended December 31, 2009 was $14.9 million, an increase of $1.9 million (15%) from cost of revenues of $13.0 million for the year ended December 31, 2008. The increase was due to a 10% increase in franchisee locations and increased professional fees of $0.7 million. Gross margins fell to 51.8% during the year ended December 31, 2009 from 54.5% in the prior year period, primarily due to the increase in professional fees.

     General and administrative expenses of $24.1 million for the year ended December 31, 2009 decreased $3.9 million from $28.0 million for the year ended December 31, 2008. The decrease was primarily related to a decrease of $2.8 million (19%) in employee related expenses, a $1.1 million (21%) decline in non-restructuring professional fees and lower overall discretionary spending, partially offset by an unfavorable change of $2.3 million in foreign exchange expense related to the Company’s Canadian operations.

     Marketing expenses decreased to $21.9 million for the year ended December 31, 2009 from $42.7 million for the year ended December 31, 2008. The $20.8 million (49%) decrease was primarily due to a reduction in refractive center marketing spend, down $18.9 million (61%) in order to reduce costs during the economic downturn. Also contributing to the marketing decline was mobile cataract marketing spend, down $1.4 million (21%) on lower advertising and marketing costs related to the Foresee PHP^®.

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     Amortization of intangibles decreased to $2.3 million for the year ended December 31, 2009 from $3.2 million for the year ended December 31, 2008. The $0.9 million decrease was due to a lower average intangible balance during 2009 compared to 2008 due to the impairment of multiple intangible assets during the quarter ended December 31, 2008.

     During the year ended December 31, 2009, the Company recorded $1.0 million in impairment charges primarily comprised of a $0.5 million impairment of a trade name intangible, a $0.3 million impairment of a cost method investment, and a $0.2 million write-off of a leasehold improvement at a refractive center.

     During the year ended December 31, 2008, the Company recorded an impairment loss of $85.0 million. The impairment loss was primarily the result of the Company’s annual impairment analysis required under ASC 350, Intangibles – Goodwill and Other, which resulted in an impairment loss reducing the carrying amounts of goodwill by $73.4 million, primarily in the refractive centers segment. In addition, the Company recorded impairment charges for definite-lived intangible assets, other long-term assets and fixed assets within various segments. The impairment loss was generally the result of the overall refractive market decline experienced by the Company, which led to an overall decline in fair value of various reporting units of the Company.

     Other operating expenses increased to $25.8 million for the year ended December 31, 2009 from other operating income of $0.3 million for the year ended December 31, 2008. The $26.1 million unfavorable change was primarily related to center restructuring and closing costs of $0.8 million, employee severance expense of $2.6 million, $15.6 million of pre-petition financial and legal advisor expenses, a $4.5 million loss on the write-off of receivables due from and investments in Notal Vision^®, and a $1.6 million loss incurred on the divestiture of three ambulatory surgical center investments.

     Interest income decreased to $0.2 million for the year ended December 31, 2009 from $0.7 million for the year ended December 31, 2008. This $0.5 million decrease was primarily due to lower interest earnings related to lower average cash and short-term investment balances over the prior year.

     Interest expense increased to $12.6 million for the year ended December 31, 2009 from $10.1 million for the year ended December 31, 2008. This $2.5 million increase was primarily due the termination of the Company’s interest rate swap, which was reclassified to interest expense from other comprehensive loss during 2009. Also contributing to the higher interest expense was higher average borrowings under the Credit Facility and the additional default interest rate of 2%. The average interest rate for the year ended December 31, 2009 and 2008 was approximately 9.8% and 9.4%, respectively, which includes the impact of deferred loan costs, the Company’s interest rate swap and other fees.

     Earnings from equity investments were $1.3 million for the year ended December 31, 2009 compared to losses of $0.6 million for the year ended December 31, 2008. The $1.9 million favorable change primarily resulted from the Company no longer recognizing losses generated by the Company’s investment in Laser Eye Centers of California (LECC) as the investment balance in LECC was reduced to zero during 2008 due to the cumulative effect of historical losses incurred.

     Reorganization items, net, of $3.2 million for the year ended December 31, 2009 include a $2.6 million loss on the post-petition rejection of an unexpired lease and $0.6 million in professional fees directly related to post-petition fees associated with advisors to the Debtor and certain secured creditors.

     Net loss attributable to TLC Vision Corporation for the year ended December 31, 2009 was ($36.7) million, or ($0.73) per basic and diluted share, compared to ($98.3) million, or ($1.95) per basic and diluted share, for the year ended December 31, 2008.

Liquidity and Capital Resources

     Since the bankruptcy Petitions Date, as further described in Part I, Item 1, Business - Bankruptcy Proceedings, our liquidity position has improved. At December 31, 2009, we had unrestricted cash and cash equivalents of $14.6 million compared to $4.5 million at December 31, 2008. The improvement in liquidity primarily resulted from $17.4 million of additional net borrowings under the revolving portion of the Company’s pre-petition Credit Facility, advances of $7.5 million under the Senior DIP Credit Agreement and general savings on various cost reduction initiatives implemented during 2009, partially offset by restructuring and reorganization costs.

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     The following table presents a summary of our cash flows for the years ended December 31:

	2009			2008
Net cash provided by (used in):
Operating activities	$	4,768		$	15,823
Investing activities		(2,306	)		(8,076	)
Financing activities		7,669			(16,180	)
Net increase (decrease) in cash	$	10,131		$	(8,433	)

Cash Provided By Operating Activities

     Net cash provided by operating activities was $4.8 million for the year ended December 31, 2009. The cash flows provided by operating activities during the year ended December 31, 2009 were primarily comprised of the ($27.3) million net loss plus non-cash items including depreciation and amortization of $15.9 million, a $2.6 million loss on a post-petition rejection of an unexpired lease, a write-off of Notal Vision^® related assets of $4.5 million, intangible impairment charges of $1.0 million, loss on business divestitures of $1.6 million, non-cash compensation charges of $0.9 million, an inventory write-down of $0.8 million and a $5.5 million change in working capital, partially offset by earnings from equity investments of $1.3 million. Our 2009 cash flow from operating activities was favorably impacted by the say of payment of liabilities subject to compromise, including accounts payable and interest payable, resulting from the bankruptcy filings.

Cash Used In Investing Activities

     Net cash used in investing activities was $2.3 million for the year ended December 31, 2009. The cash used in investing activities included capital expenditures of $2.0 million and acquisitions and investments of $5.2 million. These cash outflows were partially offset by $1.8 million of distributions and loan payments received from equity investments, proceeds from the sales of fixed assets of $0.9 million and $2.2 million received on the divestiture of businesses and other investments.

Cash Provided By Financing Activities

     Net cash provided by financing activities was $7.7 million for the year ended December 31, 2009. Net cash provided during this period was primarily related to proceeds from debtor-in-possession financing of $7.5 million and other debt, primarily Credit Facility related, financing of $18.4 million. Partially offsetting the cash provided by financing activities were cash outflows due to principal payments of debt of $6.1 million, distributions to noncontrolling interests of $10.3 million and an increase to the Company’s restricted cash balance of $1.0 million.

Debtor-in-Possession Financing

     In connection with filing the Chapter 11 Petitions and the Canadian Petition, on December 21, 2009, the Debtor Entities filed motions with the Bankruptcy Courts seeking approval to enter into a post-petition credit agreement. On December 22, 2009, the U.S. Court issued an interim order approving the Company’s motion to obtain a Senior DIP Credit Agreement. On December 23, 2009, the Canadian Court granted a recognition order relating to the orders received by the Company from the U.S. Court. The Senior DIP Credit Agreement, dated December 23, 2009 was among the Company, various lenders and Cantor Fitzgerald Securities as collateral and administrative agent.

     The Senior DIP Credit Agreement provided for financing of a senior secured super priority term loan facility in a principal amount up to $15.0 million among the Company and various prepetition lenders of the Company’s Credit Facility. The Company may withdraw a maximum of two term loan advances and only if the amount of the Company’s controlled cash, as defined in the Senior DIP Credit Agreement, is less than $3.0 million.

     The maximum maturity date of the borrowings under the Senior DIP Credit Agreement is the earlier of (a) 150 days after December 21, 2009, (b) the effective date of a plan of reorganization, (c) the date on which a sale or sales of all or substantially all of the Company’s assets is consummated under Section 363 of the Bankruptcy Code, (d) the date of conversion of any of the bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code or any equivalent proceeding in the Canadian Case, (e) a proposal or liquidation of any or all of the assets of the Company under the Bankruptcy and Insolvency Act (Canada), (f) the dismissal of any of the bankruptcy cases, or (g) approval by the Bankruptcy Courts of any other debtor-in-possession financing for the Company.

     Borrowings under the term loans accrue interest at a rate per annum equal to the sum of the London Interbank Offered Rate (LIBOR) plus 10.0% per annum, payable in cash in arrears on the last day of any interest period and the date any term loan is paid in

40

full. In the event of default, as defined under the Senior DIP Credit Agreement, the principal amount of all term loans and all other due and unpaid obligations bear interest at an additional default rate of 2.00%.

     Prepayments are permitted provided that each partial prepayment is in an aggregate principal amount of $0.5 million or integral multiples thereof. Upon payment in full of the Senior DIP Credit Agreement, an exit fee equal to 2.00% of the aggregate principal amount outstanding under the Senior DIP Credit Agreement is due to the lenders.

     On December 24, 2009, the Company borrowed $7.5 million under the Senior DIP Credit Agreement, accruing interest at a rate of 13.0%. As of December 31, 2009, all advances remained outstanding and are classified as liabilities not subject to compromise in the consolidated financial statements.

     In conjunction with the borrowings, the Company capitalized in other current assets $0.7 million of DIP financing costs, which are being amortized over a period of 150 days.

     The Senior DIP Credit Agreement contained various affirmative, negative, reporting and financial covenants. The covenants, among other things, placed restrictions on the Company’s ability to acquire and sell assets, incur additional debt and required the Company to maintain minimum liquidity levels. A breach of any covenant would constitute an event of default as further defined in the Senior DIP Credit Agreement.

     Subsequent to December 31, 2009, the Company entered into a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement). The Junior DIP Credit Agreement provides for financing of a junior secured super priority term loan facility in a principal amount of up to $25 million. On February 25, 2010, the Company borrowed $10.0 million under the Junior DIP Credit Agreement and used the funds, among other things, to pay in full the outstanding principal balance of $7.5 million under the Senior DIP Credit Agreement. The payment resulted in the termination of the Senior DIP Credit Agreement and triggered an exit fee of $0.2 million paid on February 25, 2010. For additional information regarding the terms of the Junior DIP Credit Agreement refer to Note 27, Subsequent Events, of the consolidated financial statements for additional information.

Credit Facility

     The Company obtained a $110.0 million credit facility (Credit Facility) during June 2007, which is secured by substantially all of the assets of the Company and consisting of both senior term debt and a revolver as follows:

• Senior term debt, totaling $85.0 million, with a six-year term and required amortization payments of 1% per annum plus a percentage of excess cash flow (as defined in the agreement) and sales of assets or borrowings outside of the normal course of business. As of December 31, 2009, $76.7 million was outstanding on this portion of the facility which is classified as liabilities subject to compromise as the liability is undersecured.

• A revolving credit facility, totaling $25.0 million with a five-year term. As of December 31, 2009, the Company had $23.4 million outstanding under this portion of the facility which is classified as liabilities subject to compromise as the liability is undersecured.

     Upon the filing of the Chapter 11 petitions, certain of the Company’s Credit Facility obligations became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law. As a result of the bankruptcy petitions and due to the Credit Facility obligations being undersecured by the net assets of the Company, $100.1 million of the Company’s pre-petition Credit Facility debt is included in liabilities subject to compromise on the consolidated balance sheet at December 31, 2009. The Company classifies pre-petition liabilities subject to compromise as a long-term liability because management does not believe the Company will use existing current assets or create additional current liabilities to fund these obligations.

     Interest on the facility is calculated based on either prime rate or the LIBOR plus a margin. As a result of certain events of default and the June 30, 2009 expiration of the Limited Waiver, Consent and Amendment No. 3 to Credit Agreement, the LIBOR advances with interest periods ending on or after June 30, 2009 automatically converted to prime rate advances at the end of such interest period. Effective June 30, 2009, the Company began incurring 2% default interest resulting from the provisions of the Limited Waiver and Amendment No. 4 to Credit Agreement.

     As of December 31, 2009, the borrowing rate was 3.25% for prime rate borrowings, plus an applicable margin of 4.00% and default interest of 2.00%. In addition, the Company pays an annual commitment fee equal to 0.35% on the undrawn portion of the revolving credit facility.

41

     The Credit Facility also requires the Company to maintain various financial and non-financial covenants as defined in the Credit Agreement. As of December 31, 2008 and into 2009, the Company was unable to satisfy various financial covenants. As a result, the Company received from its lenders numerous waivers, consents and amendments to the Credit Agreement during the year ended December 31, 2009. All waivers, consents and amendments to the Credit Agreement are filed with the SEC. The filing of the bankruptcy petitions also constituted an event of default under the Credit Facility. As of December 31, 2009, the Company was operating without a waiver of default resulting in all obligations under the Credit Facility being automatically and immediately due and payable, subject to the automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law.

     Immediately prior to the time of filing the Chapter 11 Petitions, the Company had failed to make various mandatory contractual payments under its Credit Facility, as amended. Such payments included interest on the term and revolving credit advances of $5.0 million, principal payments on term advances of $0.4 million and $1.4 million of other mandatory payments.

New Accounting Pronouncements

     For a discussion on prospective accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, in the accompanying audited consolidated financial statements and notes thereto set forth in Part II, Item 8 of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Responsibility for Financial Statements

     The accompanying consolidated financial statements of TLC Vision Corporation have been prepared by management in conformity with accounting principles generally accepted in the United States. The significant accounting policies have been set out in the consolidated financial statements. These statements are presented on the accrual basis of accounting. Accordingly, a precise determination of many assets and liabilities is dependent upon future events. Therefore, estimates and approximations have been made using careful judgment. Recognizing that the Company is responsible for both the integrity and objectivity of the financial statements, management is satisfied that these financial statements have been prepared within reasonable limits of materiality under United States generally accepted accounting principles.

     During the year ended December 31, 2009, the Board of Directors had an Audit Committee consisting of four non-management directors. The committee met with management and the auditors to review any significant accounting, internal control and auditing matters and to review and finalize the annual financial statements of the Company along with the report of independent registered public accounting firm prior to the submission of the financial statements to the Board of Directors for final approval.

     The financial information throughout the text of this Annual Report is consistent with the information presented in the financial statements.

     The Company’s accounting procedures and related systems of internal control are designed to provide reasonable assurance that its assets are safeguarded and its financial records are reliable.

42

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of
TLC Vision Corporation

     We have audited the accompanying consolidated balance sheets of TLC Vision Corporation (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TLC Vision Corporation at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

     The accompanying consolidated financial statements have been prepared assuming that TLC Vision Corporation will continue as a going concern. As more fully described in Note 1, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code and Companies’ Creditors Arrangement Act in Canada on December 21, 2009, which raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 1. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

     As discussed in Note 2 to the consolidated financial statements, on January 1, 2009, the Company changed its method for accounting for noncontrolling interests.

/s/ Ernst & Young LLP

St. Louis, Missouri
March 31, 2010

43

TLC VISION CORPORATION
(DEBTOR-IN-POSSESION)

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	YEAR ENDED
	DECEMBER 31,
	2009			2008
Revenues:
Refractive centers	$	107,326		$	151,442
Doctor services		91,895			95,615
Eye care		30,969			28,611
Total revenues		230,190			275,668
Cost of revenues (excluding amortization expense shown below):
Refractive centers		83,812			110,824
Doctor services		68,278			71,104
Eye care		14,916			13,010
Total cost of revenues (excluding amortization expense shown below)		167,006			194,938
Gross profit		63,184			80,730
General and administrative		24,052			28,016
Marketing and sales		21,935			42,725
Amortization of intangibles		2,321			3,233
Impairment of goodwill, intangibles and other assets		1,018			85,047
Other expense (income), net (See Note 18)		25,826			(339	)
		75,152			158,682
Operating loss		(11,968	)		(77,952	)
Interest income		167			734
Interest expense		(12,585	)		(10,072	)
Earnings (losses) from equity investments		1,307			(560	)
Loss before reorganization items and income taxes		(23,079	)		(87,850	)
Reorganization items, net		(3,229	)		—
Loss before income tax expense		(26,308	)		(87,850	)
Income tax expense		(948	)		(874	)
Net loss		(27,256	)		(88,724	)
Less: Net income attributable to noncontrolling interest		9,468			9,530
Net loss attributable to TLC Vision Corporation	$	(36,724	)	$	(98,254	)
Net loss per share attributable to TLC Vision Corporation:
Basic	$	(0.73	)	$	(1.95	)
Diluted	$	(0.73	)	$	(1.95	)
Weighted average number of common shares outstanding:
Basic		50,554			50,319
Diluted		50,554			50,319

See notes to consolidated financial statements.

44

TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS

(In thousands)

	DECEMBER 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	14,623		$	4,492
Accounts receivable, net		16,824			16,870
Prepaid expenses, inventory and other		10,829			14,214
Total current assets		42,276			35,576
Restricted cash		1,033			—
Investments and other assets, net		2,875			11,694
Goodwill		26,755			28,570
Other intangible assets, net		7,680			10,628
Fixed assets, net		34,297			50,514
Total assets	$	114,916		$	136,982
LIABILITIES
Liabilities not subject to compromise
Current liabilities:
Accounts payable	$	8,636		$	17,897
Accrued liabilities		12,175			28,076
Current maturities of long-term debt		10,049			89,081
Total current liabilities		30,860			135,054
Other long-term liabilities		2,208			5,444
Long-term debt, less current maturities		4,800			16,500
Total liabilities not subject to compromise		37,868			156,998
Liabilities subject to compromise		134,444			—
Total liabilities		172,312			156,998
STOCKHOLDERS’ DEFICIT
Common stock, no par value; unlimited number authorized		340,059			339,112
Option and warrant equity		745			745
Accumulated other comprehensive loss		—			(1,545	)
Accumulated deficit		(410,382	)		(373,658	)
Total TLC Vision Corporation stockholders’ deficit		(69,578	)		(35,346	)
Noncontrolling interest		12,182			15,330
Total stockholders’ deficit		(57,396	)		(20,016	)
Total liabilities and stockholders’ deficit	$	114,916		$	136,982

See notes to consolidated financial statements.

Approved on behalf of the Board:

/s/ WARREN S. RUSTAND 

Warren S. Rustand, Chairman of the Board

45

TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	YEAR ENDED DECEMBER 31,
	2009			2008
OPERATING ACTIVITIES
Net loss	$	(27,256	)	$	(88,724	)
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation and amortization		15,908			19,670
Impairment of goodwill, intangibles and other assets		1,018			85,047
(Earnings) loss from equity investments		(1,307	)		560
Gain on sales and disposals of fixed assets		(338	)		(269	)
Loss (gain) on business divestitures		1,594			(139	)
Non-cash compensation expense		925			1,391
Write-down of Foresee PHP® inventory		803			—
Write-off of receivables due from and investments in Notal Vision®		4,458			—
Loss on building abandonment, net		2,588			—
Other		838			561
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(423	)		(626	)
Prepaid expenses, inventory and other current assets		2,706			704
Accounts payable and accrued liabilities		3,254			(2,352	)
Cash provided by operating activities		4,768			15,823
INVESTING ACTIVITIES
Purchases of fixed assets		(1,967	)		(3,534	)
Proceeds from sales of fixed assets		889			1,259
Distributions and loan payments received from equity investments		1,838			2,107
Acquisitions and equity investments		(5,183	)		(8,862	)
Proceeds from divestitures of businesses and other investments		2,181			1,281
Other		(64	)		(327	)
Cash used in investing activities		(2,306	)		(8,076	)
FINANCING ACTIVITIES
(Increase) decrease in restricted cash		(1,033	)		1,101
Proceeds from debtor-in-possession financing		7,500			—
Proceeds from Credit Facility and other debt financing		18,417			25,392
Principal payments of debt financing and capital leases		(6,088	)		(33,070	)
Deferred Credit Facility debt issuance costs		(78	)		(534	)
Debtor-in-possession debt issuance costs		(750	)		—
Distributions to noncontrolling interests		(10,321	)		(9,424	)
Proceeds from issuances of common stock		22			355
Cash provided by (used in) financing activities		7,669			(16,180	)
Net increase (decrease) in cash and cash equivalents during the period		10,131			(8,433	)
Cash and cash equivalents, beginning of period		4,492			12,925
Cash and cash equivalents, end of period	$	14,623		$	4,492

See notes to consolidated financial statements.

46

TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

						OPTION									TOTAL TLC VISION
						AND`									CORPORATION
	COMMON STOCK					WARRANT			ACCUMULATED OTHER						STOCKHOLDERS’			NONCONTROLLING
	SHARES		AMOUNT			EQUITY			COMPREHENSIVE LOSS			ACCUMULATED DEFICIT			EQUITY (DEFICIT)			INTEREST			TOTAL
Balance December 31, 2007		50,140	$	337,473		$	837		$	(784	)	$	(275,404	)	$	62,122		$	15,224		$	77,346
Shares issued as part of the employee share purchase plan and 401(k) plan		180		185												185						185
Exercise of stock options		86		259			(89	)								170						170
Options expired or forfeited				3			(3	)								—						—
Stock based compensation				1,391												1,391						1,391
Changes in subsidiaries’ stockholders’ equity				(199	)											(199	)					(199	)
Distributions to noncontrolling interests																—			(9,424	)		(9,424	)
Comprehensive loss Deferred hedge activity										(761	)					(761	)					(761	)
Net (loss) income													(98,254	)		(98,254	)		9,530			(88,724	)
Balance December 31, 2008		50,406	$	339,112		$	745		$	(1,545	)	$	(373,658	)	$	(35,346	)	$	15,330		$	(20,016	)
Shares issued as part of the employee share purchase plan and 401(k) plan		159		22												22						22
Stock based compensation				925												925						925
Distributions to noncontrolling interests																—			(10,321	)		(10,321	)
Divestitures and other noncontrolling interest activity																—			(2,295	)		(2,295	)
Comprehensive loss Deferred hedge activity										1,545						1,545						1,545
Net (loss) income													(36,724	)		(36,724	)		9,468			(27,256	)
Balance December 31, 2009		50,565	$	340,059		$	745		$	—		$	(410,382	)	$	(69,578	)	$	12,182		$	(57,396	)

See notes to consolidated financial statements.

47

TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands, except per share amounts)

1. Bankruptcy Proceedings

Chapter 11 Bankruptcy Filings

     On December 21, 2009 (the Petitions Date), the Company and two of its wholly owned subsidiaries, TLC Vision (USA) Corporation and TLC Management Services, Inc., (Debtor Entities) filed voluntary petitions (Chapter 11 Petitions) under Chapter 11 of Title 11 of the U.S. Code (Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (U.S. Court). The Chapter 11 cases are being jointly administered under the caption In re TLC Vision (USA) Corporation, et al., Case No. 09-14473. On the same day, the Company also filed ancillary proceedings in Canada (Canadian Petition) under the Canadian Companies’ Creditors Arrangement Act (CCAA) in the Ontario Superior Court of Justice (the Canadian Court). On December 23, 2009, the Canadian Court recognized the Company’s Chapter 11 case as a “foreign main proceeding” and granted the Company certain other relief. No other operations of the Company, its affiliates or subsidiaries were involved in the filings.

     The filing of the Chapter 11 Petitions constituted an event of default under certain of the Company’s debt obligations, and those debt obligations became automatically and immediately due and payable, although any actions to enforce such payment obligations were stayed as a result of the filing of the Chapter 11 Petitions and the Canadian Petition.

     The December 21, 2009 petitions were submitted to expedite the Company’s financial restructuring through a pre-arranged plan of reorganization. On January 6, 2010, the Debtor Entities filed a joint plan of reorganization (Plan of Reorganization) with the U.S. Court. The Plan of Reorganization provided for, among other things, a conversion of certain indebtedness to 100% of the new equity of TLC Vision (USA) Corporation, which would emerge as a privately held Company owned by certain pre-petition senior secured creditors. There was no assurance of any distribution of funds to the stockholders of the Company under the Plan of Reorganization.

     On February 3, 2010, the Debtor Entities filed the first amended joint plan of reorganization (First Amended Plan). The First Amended Plan was backed by affiliates of a fund managed by Charlesbank Capital Partners LLC (Charlesbank). In connection with the First Amended Plan, Charlesbank provided a written commitment to fund up to $134.4 million to or for the benefit of the Company and its subsidiaries subject to the Chapter 11 proceedings. The written funding commitment was subject to the satisfaction of all conditions to the plan sponsor’s obligations set out in the plan sponsor agreement. The First Amended Plan provided for, among other things, the following: the payment in full of all amounts owed to the Company’s senior secured lenders; the acquisition by Charlesbank of substantially all of the assets of the Company (Debtor and non-debtor entities), including 100% of the equity of TLC Vision (USA) Corporation and the Company’s six refractive centers in Canada; payments to employees and critical vendors in the ordinary course of business; and distributions to certain secured and unsecured creditors. There was no assurance of any distribution of funds to the stockholders of the Company under the First Amended Plan.

     On February 12, 2010, the Debtor Entities filed the second amended joint plan of reorganization (Second Amended Plan). The Second Amended Plan was backed by affiliates of Charlesbank and H.I.G. Capital, LLC (H.I.G.), which joined as a co-investor in the acquisition of the Company’s assets. In addition to the previously announced terms under the First Amended Plan, the Second Amended Plan also provided for consideration in the amount of up to $9.0 million in cash and a new promissory note of up to $3.0 million to be paid to the Company’s unsecured creditors.

     The Debtor Entities filed the third and fourth amendments to the joint plan of reorganization on March 17, 2010 and March 24, 2010, respectively. The third and fourth amendments did not significantly alter the Second Amended Plan other than for the inclusion of an additional impaired class consisting of pending medical malpractice litigation claims.

     There is no assurance of any distribution of funds to the stockholders of the Company under the Plan of Reorganization, as amended, and completion of this plan is subject to customary closing conditions, including final confirmation by the U.S. Court, Canadian Court and regulatory approvals.

     The Debtor Entities are currently operating as “debtors-in-possession” under the jurisdiction of the U.S. Court and Canadian Court (collectively, the Bankruptcy Courts) and in accordance with applicable provisions of the Bankruptcy Code and the CCAA. In general, the Company and its subsidiaries are authorized to continue to operate as ongoing businesses, but may not engage in transactions outside the ordinary course of business without the approval of the Bankruptcy Courts.

48

Debtor-In-Possession (DIP) Financing

     In connection with filing the Chapter 11 Petitions and the Canadian Petition, on December 21, 2009, the Debtor Entities filed motions with the Bankruptcy Courts seeking approval to enter into a post-petition credit agreement. On December 22, 2009, the U.S. Court issued an interim order approving the Company’s motion to obtain a senior secured super priority debtor-in-possession credit agreement (Senior DIP Credit Agreement). On December 23, 2009, the Canadian Court granted a recognition order relating to the orders received by the Company from the U.S. Court. The Senior DIP Credit Agreement, dated December 23, 2009, was among the Debtors, various lenders and Cantor Fitzgerald Securities as collateral and administrative agent.

     The Senior DIP Credit Agreement provided for financing of a senior secured super priority term loan facility in a principal amount up to $15.0 million. On December 24, 2009, the Company borrowed $7.5 million under the Senior DIP Credit Agreement, all of which remained outstanding as of December 31, 2009. For additional information regarding the terms of the Senior DIP Credit Agreement refer to Note 14, Debt.

     In connection with the First Amended Plan, the Company filed motions seeking approval from the Bankruptcy Courts for a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement). The Junior DIP Credit Agreement, approved by the U.S. Court via an interim order on February 12, 2010, which was recognized by the Canadian Court on February 18, 2010, dated February 3, 2010 is among the Debtors, various lenders and Charlesbank Equity Fund VII, Limited Partnership as collateral and administrative agent. The U.S. Court made a final order on March 9, 2010 approving the Junior DIP Credit Agreement and that order was recognized by the Canadian Court on March 16, 2010.

     The Junior DIP Credit Agreement provides for financing of a junior secured super priority term loan facility in a principal amount of up to $25 million. On February 25, 2010, the Company borrowed $10.0 million under the Junior DIP Credit Agreement and used the funds, among other things, to pay in full the outstanding principal balance of $7.5 million under the Senior DIP Credit Agreement. For additional information regarding the terms of the Junior DIP Credit Agreement refer Note 27, Subsequent Events.

Reorganization Process

     The Company is operating its business as a debtor-in-possession under the Bankruptcy Courts’ protection from creditors and claimants. The Bankruptcy Courts have approved payment of certain pre-petition obligations, including employee wages, salaries and benefits, and the payment of vendors and other providers in the ordinary course for goods and services received after the filing of the Chapter 11 Petitions and Canadian Petition and other business-related payments necessary to maintain the operation of the Company’s business. The Company has retained legal and financial professionals to advise on the bankruptcy proceedings. From time to time, the Company may seek the U.S. Court’s approval for the retention of additional professionals.

     Immediately after filing the Chapter 11 Petition and Canadian Petition, the Company notified all known current or potential creditors of the bankruptcy filings. Subject to certain exceptions under the Bankruptcy Code and the CCAA, the bankruptcy filings stayed the continuation of any judicial or administrative proceedings or other actions against the Company or its property to recover, collect or secure a claim arising prior to the filing of the Chapter 11 Petition and Canadian Petition.

     As required by the Bankruptcy Code, the United States Trustee for the District of Delaware appointed an official committee of unsecured creditors (the Creditors’ Committee). The Creditors’ Committee and its legal representatives have a right to be heard on all matters that come before the U.S. Court with respect to the Company. An information officer has been appointed by the Canadian Court with respect to proceedings before the Canadian Court.

     Under Section 365 and other relevant sections of the Bankruptcy Code, the Company may assume, assume and assign, or reject certain executory contracts and unexpired leases, including leases of real property and equipment, subject to the approval of the U.S. Court and certain other conditions. Any description of an executory contract or unexpired lease in this report, including, where applicable, the Company’s express termination rights or a quantification of obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights the Company has under Section 365 of the Bankruptcy Code.

     The Company is reviewing all of its executory contracts and unexpired leases to determine which contracts and leases it may attempt to reject under Section 365 and other relevant sections of the Bankruptcy Code. The Company expects that additional liabilities subject to compromise will arise due to rejection of executory contracts, including leases, and from the determination of the U.S. Court (or agreement by parties in interest) of allowed claims for contingencies and other disputed amounts. The Company also expects that the assumption of additional executory contracts and unexpired leases will convert certain of the liabilities shown on the accompanying consolidated balance sheet as liabilities subject to compromise to liabilities not subject to compromise. Due to the uncertain nature of many of the potential claims, the Company cannot project the magnitude of such claims with certainty.

49

     The U.S. Court entered an order establishing March 22, 2010, as the general bar date for potential creditors to file claims. The general bar date is the date by which certain claims against the Company must be filed if the claimants wish to receive any distribution in the bankruptcy cases. Proof of claim forms received after the bar date are typically not eligible for consideration of recovery as part of the Company’s bankruptcy cases. Creditors were notified of the bar date and the requirement to file a proof of claim with the U.S. Court. Differences between liability amounts estimated by the Company and claims filed by creditors are being investigated and, if necessary, the U.S. Court will make a final determination of the allowable claim. The determination of how liabilities will ultimately be treated cannot be made until the U.S. Court approves a plan of reorganization, and such confirmation is recognized by the Canadian Court. Accordingly, the ultimate amount or treatment of such liabilities is not determinable at this time.

     In order to successfully exit Chapter 11, the Company will need to obtain confirmation by the U.S. Court of the Plan of Reorganization, as amended, as well as recognition by the Canadian Court of the U.S. Court’s plan confirmation. A confirmed plan of reorganization would resolve the Company’s pre-petition obligations, set forth the revised capital structure of the newly reorganized entity, provide for corporate governance subsequent to the Company’s exit from bankruptcy and potentially convert the Company to a privately held entity.

     The confirmation hearing on the Plan of Reorganization, as amended, is scheduled for May 5, 2010. The confirmation hearing may be adjourned from time to time by the U.S. Court without further notice except for an announcement of the adjourned date made at the confirmation hearing or any subsequent adjourned confirmation hearing. There can be no assurance at this time that the Plan of Reorganization, as amended, will be confirmed by the U.S. Court, and such confirmation is recognized by the Canadian Court, or that any such plan will be implemented successfully.

     The Company has the exclusive right for 120 days after the filing of the Chapter 11 Petitions and the Canadian Petition to file a plan of reorganization. The Company may file one or more motions to request extensions of this exclusivity period. If the exclusivity period expires, any party in interest would be able to file a plan of reorganization. In addition to being voted on by holders of impaired claims and equity interests, a plan of reorganization must satisfy certain requirements of the Bankruptcy Code and the CCAA and must be approved, or confirmed, by the U.S. Court, and such confirmation is recognized by the Canadian Court, in order to become effective. There can be no assurance at this time that a plan of reorganization submitted by the Company will be confirmed by the U.S. Court, or such confirmation is recognized by the Canadian Court, or that any such plan will be implemented successfully.

     Under the priority scheme established by the Bankruptcy Code and the CCAA, unless creditors agree otherwise, pre-petition liabilities and post-petition liabilities must be satisfied in full before stockholders are entitled to receive any distribution or retain any property under a plan of reorganization. The ultimate recovery to creditors and/or stockholders, if any, will not be determined until confirmation of a plan or plans of reorganization. No assurance can be given as to what values, if any, will be ascribed to each of these constituencies or what types or amounts of distributions, if any, they would receive. A plan of reorganization could result in holders of our liabilities and/or securities, including our common shares, receiving no distribution on account of their interests and cancellation of their holdings. Because of such possibilities, the value of our liabilities and securities, including our common shares, is highly speculative. Appropriate caution should be exercised with respect to existing and future investments in any of our liabilities and/or securities. At this time there is no assurance the Company will be able to restructure as a going concern or successfully implement a plan of reorganization.

     On March 1, 2010, certain equity holders filed a motion with the Bankruptcy Courts for the appointment of an equity committee. On March 23, 2010, the Bankruptcy Courts entered an order denying the motion for an order appointing an official committee of equity security holders.

Going Concern Matters

     The consolidated financial statements and related notes have been prepared assuming that the Company will continue as a going concern although the Chapter 11 bankruptcy filings raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on restructuring its obligations in a manner that allows it to obtain confirmation of a plan of reorganization by the Bankruptcy Courts. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded assets or to the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.

Financial Reporting Considerations

     For periods subsequent to the Chapter 11 bankruptcy filings, the Company will apply Accounting Standards Codification (ASC) 852, Reorganizations, in preparing the consolidated financial statements. ASC 852 requires that the financial statements, for periods

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subsequent to the Chapter 11 filings, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expense (including professional fees), realized gains and losses and provisions for losses that are realized or incurred in the bankruptcy proceedings are recorded in reorganization items, net, on the accompanying consolidated statements of operations. In addition, pre-petition obligations that may be impacted by the bankruptcy reorganization process have been classified on the consolidated balance sheet at December 31, 2009, in liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Courts, even if they may be settled for lesser amounts.

     The Debtors’ reorganization items directly related to the process of reorganizing the Company under Chapter 11 and the CCAA for 2009 consisted of the following:

	2009
Professional fees directly related to reorganization (a)	$	606
Senior DIP Credit Agreement related fees (b)		35
Net loss on Sale-Leaseback Transaction (c)		2,588
Reorganization items, net		3,229

(a)	Professional fees directly related to reorganization include post-petition fees associated with advisors to the Debtors and certain secured creditors. Professional fees are estimated by the Debtors and will be reconciled to actual invoices when received.
(b)	DIP Credit Agreement related fees includes the amortization of certain capitalized costs include closing, facility, backstop and agency fees.
(c)	Net loss on Sale-Leaseback Transaction relates to the Bankruptcy Courts’ rejection, effective December 21, 2009, of the Company’s unexpired lease with Canada Mortgage and Housing Association further described in Note 14, Debt — Sale-Leaseback Transaction.

     Reorganization items exclude employee severance and other restructuring charges recorded during 2009.

     Liabilities subject to compromise consist of the following:

	DECEMBER 31,
	2009
Accounts payable	$	8,554
Accrued expenses		13,132
Secured debt		100,060
Unsecured debt		8,075
Capitalized Credit Facility debt issuance costs		(1,403	)
Other long-term liabilities		4,135
Kremer option (see Note 5)		1,891
Liabilities subject to compromise		134,444

     Liabilities subject to compromise refers to both secured and unsecured obligations that will be accounted for under a plan of reorganization. Generally, actions to enforce or otherwise effect payment of pre-petition liabilities are stayed. ASC 852 requires pre-petition liabilities that are subject to compromise to be reported at the amounts expected to be allowed, even if they may be settled for lesser or greater amounts. These liabilities represent the estimated amount expected to be allowed on known or potential claims to be resolved through the Chapter 11 and CCAA process, and remain subject to future adjustments arising from negotiated settlements, actions of the Bankruptcy Court, rejection of executory contracts and unexpired leases, the determination as to the value of collateral securing the claims, proofs of claim, or other events. Liabilities subject to compromise also include certain items that may be assumed under the Plan of Reorganization, as amended, and as such, may be subsequently reclassified to liabilities not subject to compromise. As some uncertainty will continue to exist until the Bankruptcy Courts confirm a plan of reorganization, the Company has included its secured and unsecured debt in liabilities subject to compromise. At hearings held in January 2010, final approval was granted of many of the Debtors “first day” motions covering, among other things, human capital obligations, supplier relations, cash management, utilities, case management and retention of professionals. Obligations associated with these matters are not classified as liabilities subject to compromise.

     Upon the filing of the Chapter 11 petitions, certain of the Company’s debt obligations became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law. As a result of the bankruptcy petitions and due to various debt obligations being undersecured or unsecured, $106.7 million of the Company’s pre-petition net debt is included in liabilities subject to compromise on the consolidated balance sheet at December 31, 2009. The Company classifies pre-petition liabilities subject to compromise as a long-term liability

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because management does not believe the Company will use existing current assets or create additional current liabilities to fund these obligations.

     Prior to December 21, 2009, the Company’s fixed asset balance included the Company’s International Corporate Office located in Mississauga, Ontario, Canada. The Company accounted for this fixed asset under the sale-leaseback provision of ASC 840, Leases. Effective December 21, 2009, in conjunction with the Company’s bankruptcy proceedings, the Company abandoned the property and received an order from the U.S. Court rejecting the capital lease associated with the International Headquarters. As a result, the Company recorded a $2.6 million loss included in reorganization items, net, related to the abandonment of the International Headquarters as the abandonment was prompted by the Company’s ability to exit the existing building and reject the lease under bankruptcy protection. As of December 31, 2009, a $1.3 million liability is included in liabilities subject to compromise as an estimate of the probable allowed claim against the Company for the unexpired lease. Refer to Note 14, Debt — Sale Leaseback Transaction, for additional information regarding this transaction.

     On August 10, 2009, the Company entered into Amendment No. 2 (2^nd Amendment) to the 2005 TruVision™ Agreement and Plan of Merger. The 2^nd Amendment restructured the Company’s final $4.0 million purchase installment, which was due to the former TruVision™ owners during August 2009. The 2^nd Amendment resulted in the final purchase installment being increased to an unsecured $5.4 million payable, inclusive of interest and penalties, which was to be made through quarterly payments of approximately $0.3 million beginning on August 10, 2009 and extending through April 5, 2014. The amount owed is not represented by a promissory note, is not secured and will not accrue interest on a going forward basis. As of December 31, 2009, liabilities subject to compromise includes $4.4 million, representing the balance owed, net of imputed interest, under the restructured TruVision™ Agreement and Plan of Merger. As of March 31, 2010, the Company was unable to make a $0.3 million scheduled payment due October 5, 2009 and a $0.3 million scheduled payment due January 5, 2010 as part of the restructured TruVision™ Agreement and Plan of Merger. The remaining liability is subject to the Company’s bankruptcy proceedings.

     While operating as debtors-in-possession under Chapter 11 of the Bankruptcy Code, the Debtors may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Courts or otherwise as permitted in the ordinary course of business, in amounts other than those reflected in the consolidated financial statements. Moreover, a plan of reorganization could materially change the amounts and classifications in the historical consolidated financial statements.

Condensed Combined Financial Information of Debtors

     The following unaudited condensed combined financial information is presented for the Debtors as of December 31, 2009 or for the year then ended:

Balance Sheet Information :
Cash and cash equivalents	$	7,851
Accounts receivable, net		601
Prepaid expenses, inventory and other short-term assets		2,162
Restricted cash		1,033
Investments and other long-term assets, net		61
Fixed assets, net		2,506
Total assets	$	14,214
Current liabilities	$	13,858
Long-term liabilities		302
Liabilities not subject to compromise		14,160
Liabilities subject to compromise		134,444
Total liabilities		148,604
Stockholders’ deficit		(134,390	)
Total liabilities and stockholders’ deficit	$	14,214
Statement of Operations Information
Net sales	$	8,976
Gross profit		2,703
Operating loss		(48,136	)
Reorganization items, net		(3,229	)
Net loss attributable to TLC Vision Corporation		(55,265	)
Statement of Cash Flows Information
Cash used in operating activities		(41,864	)
Cash used in investing activities		(3,269	)
Cash provided by financing activities		51,470

     The unaudited condensed combined financial information of Debtors does not separately disclose intercompany and investment balances as those balances represent components of the Debtors’ equity in the non-debtor entities, and have therefore been included within Stockholders’ deficit. The Debtor financial statements include the assets, liabilities, revenues and expenses that are directly and contractually related to such Debtor entities. However, certain liabilities at the debtor entities relate to assets and operations that contractually relate to non-debtor entities, and thus such assets and related operations are not included in the condensed unaudited combined financial information above.

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Stock Market Compliance

     As of December 31, 2009, the Company’s common shares were suspended from trading on both the NASDAQ and the TSX. The Company’s common shares were delisted from the NASDAQ and the TSX effective January 18, 2010 and January 21, 2010, respectively. The Company’s common shares currently trade on the Over-The-Counter Bulletin Board under the ticker symbol “TLCVQ”.

2. Summary of Significant Accounting Policies

Nature of Operations

     TLC Vision Corporation is an eye care services company dedicated to improving lives through improving vision by providing high-quality care directly to patients and as a partner with their doctors and facilities. A significant portion of the Company’s revenues come from owning and operating refractive centers that employ laser technologies to treat common refractive vision disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. In its doctor services business, the Company furnishes doctors and medical facilities with mobile or fixed site access to refractive and cataract surgery equipment, supplies, technicians and diagnostic products, as well as owns and manages single-specialty ambulatory surgery centers. In its eye care business, the Company’s primary business provides franchise opportunities to independent optometrists under its Vision Source^® brand.

Basis of Presentation and Principles of Consolidation

     The consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and all variable interest entities that the Company is the primary beneficiary. All significant intercompany transactions and balances have been eliminated in consolidation.

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)

     During the year ended December 31, 2009, the Company adopted Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification™ and The Hierarchy of Generally Accepted Accounting Principles. The Codification became the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification is non-authoritative. GAAP is not intended to be changed as a result of this statement, but will change the way the guidance is organized and presented. The Company has implemented the Codification in the consolidated financial statements by providing references to ASC topics.

Variable Interest Entities

     The Company consolidates physician practices that are managed but not owned by the Company because the Company is the primary beneficiary. The consolidation of the physician practices results in an increase in revenues and cost of revenues for refractive centers, however it has no material impact on total assets, gross profit or operating income and no impact on net income.

Cash and Cash Equivalents

     Cash and cash equivalents include highly liquid short-term investments with original maturities of 90 days or less.

Inventories

     Inventories are stated at the lower of cost or market with cost determined on a first-in, first-out basis. The Company’s inventory balances primarily consist of supplies used in its various eye treatments.

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Investments

     The Company has certain investments in equity securities. Investments are accounted for using the equity method if the Company has significant influence, but not control, over an investee. All other equity investments in which the Company does not have the ability to exercise significant influence are accounted for under the cost method. Under the cost method of accounting, investments that do not have a quoted market price (non-marketable equity securities) are carried at cost and are adjusted only for other than temporary declines in fair value and additional investment activity.

Fixed Assets

     Fixed assets are recorded at cost or the present value of future minimum lease payments for assets accounted for as a capital lease. The costs of additions, improvements and major replacements are capitalized, while maintenance and repairs are expensed as incurred. Depreciation is provided on the straight-line basis and at rates intended to represent the assets’ productive lives as follows:

Buildings	- 40 years
Computer equipment and software	- three to four years
Furniture, fixtures and equipment	- seven years
Laser and medical equipment	- five to seven years
Leasehold improvements	- shorter of useful life or initial term of the lease
Vehicles and other	- five years

Goodwill and Other Intangible Assets

     The Company tests for impairment at least annually, on November 30, and more frequently if changes in circumstances or events indicate that it is more likely than not that impairment has occurred. The Company recorded a goodwill impairment charge of $73.4 million during the year ended December 31, 2008. No goodwill impairment charge was recorded during the year ended December 31, 2009. See Note 3, Impairment, for additional details.

     Other intangible assets consist primarily of practice management agreements (PMAs), deferred contract rights, and trade names. PMAs represent the cost of obtaining the exclusive right to manage eye care centers and secondary care centers in affiliation with the related physician group during the term of the respective agreements. Deferred contract rights represent the value of contracts with affiliated doctors to provide basic access and service. Trade names represent the value associated with the name of an entity that was acquired by the Company. All identifiable intangibles with a finite life are amortized using the straight-line method over the respective estimated useful lives.

     Goodwill and indefinite-lived intangible assets are tested for impairment annually and whenever events or circumstances (such as a significant adverse change in business climate or the decision to sell a business) indicate that more likely than not an impairment may have occurred. If the carrying value of goodwill or an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized. The evaluation of impairment involves comparing the current fair value of each of the Company’s reporting units to their recorded value, including goodwill. The Company uses a combination of the income and market approaches to determine the current fair value of each of its reporting units. A number of significant assumptions and estimates are involved in the application of the income and market approaches, including forecasted operating cash flows, discount rates, market multiples, bona fide third party offers, etc. The Company considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, fair values that could be realized in an actual transaction may differ from those used to evaluate the impairment of intangible assets.

Long-Lived Assets

     The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the asset group may not be recoverable.

Medical Malpractice Accruals

     To mitigate a portion of the risk associated with medical malpractice lawsuits, the Company maintains insurance for individual malpractice claims with a deductible of $250,000 per claim for claims filed prior to May 1, 2009 and $50,000 per claim for those filed subsequent to May 1, 2009. The Company and its insurance carrier review malpractice lawsuits for purposes of establishing ultimate loss estimates. The Company records reserves to cover the estimated costs of the deductible for both reported and unreported medical malpractice claims incurred. The estimates are based on the average monthly claims expense and the estimated average time lag

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between the performance of a procedure and notification of a claim. If the number of claims or the cost of settled claims is higher than the Company’s historical experience or if the actual time lag varies from the estimated time lag, the Company may need to record significant additional expense.

     The Company’s medical malpractice liability, which is immaterial for quantitative disclosure as of December 31, 2009 and 2008, is included in liabilities subject to compromise, accrued liabilities and other long-term liabilities.

Revenue Recognition

     The Company’s refractive centers currently employ different pricing and patient acquisition strategies depending upon the market. All are based upon the same pricing methodology, which begins with an entry level price and has logical, technology based upgrades. Pricing is generally inclusive of all follow-up visits.

     Except as described in the following paragraphs, the Company recognizes revenues at the time procedures are performed or services are rendered. Revenues primarily include amounts charged to patients for procedures performed at laser centers, net of discounts, contractual adjustments in certain regions and amounts collected as an agent of co-managing doctors. Follow-up consultations, which help ensure general patient satisfaction and safety, are free of separate charge to patients, very short in nature and are therefore considered inconsequential for revenue deferral, though the Company does accrue at the point of procedure for the minimal anticipated costs of the follow-up consultations.

     The Company offers a portion of its patients extended lifetime warranties, i.e., the TLC Lifetime Commitment^®. Participation in the TLC Lifetime Commitment^® program is included in the surgical price for a specific type of procedure selected by a portion of its patients. Under this pricing model, the Company accounts for the TLC Lifetime Commitment^® program as a warranty obligation under the provisions of ASC 450, Contingencies. Accordingly, the costs expected to be incurred to satisfy the obligation are accrued as a liability at the point of sale given the Company’s ability to reasonably estimate such costs based on historical trends and the satisfaction of all other revenue recognition criteria.

     The Company offers an extended TLC Lifetime Commitment^® warranty at a separately-priced fee to customers selecting a lower level base surgical procedure. Under applicable accounting rules, 100% of revenues and related costs from the sale of the separately priced lifetime warranty are to be deferred and recognized over the life of the contract on a straight-line basis unless sufficient experience exists to indicate that the costs to provide the service will be incurred other than on a straight-line basis. Revenues generated under this program are initially deferred and recognized over a period of five years based on management’s future estimates of re-treatment volume, which are based on historical warranty claim activity. The Company believes it has sufficient experience to support recognition on other than a straight-line basis. Accordingly, the Company has deferred these revenues and is recognizing them over the period in which the future costs of performing the enhancement procedure are expected to be incurred.

     In addition to the deferral of revenues related to the separately-priced TLC Lifetime Commitment^®, the Company has deferred a portion of its costs of service related to professional fees paid to the attending surgeon when an initial procedure is performed. The physician receives no incremental fee for an enhancement procedure under the TLC Lifetime Commitment^®. Accordingly, a portion of the professional fee paid at the time of the initial procedure to the attending surgeon relates to the future enhancement procedures to be performed under the separately-priced TLC Lifetime Commitment^® and qualifies for deferral as a direct and incremental cost. The Company uses the same historical experience to amortize deferred professional fees that it uses to amortize deferred revenue. Other costs expected to be incurred if a complication were to occur are accrued at the point of procedure as part of the Company’s general enhancement accrual based on historical trend estimates.

     The deferred revenue balances related to the TLC Lifetime Commitment^® at December 31, 2009 and 2008 totaled $0.8 million and $1.1 million, respectively.

     Under the terms of management service agreements, the Company provides non-clinical services, which include facilities, staffing, equipment lease and maintenance, marketing and administrative services to refractive and secondary care practices in return for management fees. For third-party payor programs and corporations with arrangements with TLCVision, the Company’s management fee and the fee charged by the surgeon are both discounted in proportion to the discount afforded to these organizations. While the Company does not direct the manner in which the surgeons practice medicine, the Company does direct the day-to-day non-clinical operations of the centers. The management service agreements typically are for an extended period of time, ranging from five to 15 years. Management fees are equal to the net revenue of the physician practice, less amounts retained by the physician groups.

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     Revenue from doctor services represents the amount charged to the customer/surgeon for access to equipment and technical support based on use, as well as management fees from cataract and secondary care practices.

     The Company’s eye care business revenue principally includes optometric franchising services. Revenues from these services are recognized as the service is rendered or when the procedure is performed.

Cost of Revenues

     Included in cost of revenues are the laser fees payable to laser manufacturers for royalties, use and maintenance of the lasers, variable expenses for consumables, financing costs, facility fees as well as center costs associated with personnel and facilities depreciation.

Marketing

     Marketing costs are expensed as incurred. Included in marketing costs are advertising expenses of $10.4 million and $26.7 million for the years ended December 31, 2009 and 2008, respectively.

Income Taxes

     The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recorded based on the difference between the income tax basis of assets and liabilities and their carrying amounts for financial reporting purposes at the applicable enacted statutory tax rates. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Foreign Currency Exchange

     The functional currency of the Company’s Canadian operations is the U.S. dollar. The assets and liabilities of the Company’s Canadian operations are maintained in Canadian dollars and remeasured into U.S. dollars at exchange rates prevailing at the consolidated balance sheet date for monetary items and at exchange rates prevailing at the transaction dates for nonmonetary items. Revenues and expenses are remeasured into U.S. dollars at average exchange rates prevailing during the year with the exception of depreciation and amortization, which are translated at historical exchange rates. Exchange gains and losses are included in net loss/income. Included in other expense is a foreign exchange loss of $0.8 million and a foreign exchange gain of $1.4 million for the years ended December 31, 2009 and 2008, respectively.

Loss Per Share

     Basic loss per share is determined by dividing net loss attributable to TLC Vision Corporation by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if options to purchase common shares were exercised. In periods in which the inclusion of such instruments is anti-dilutive, the effect of such securities is not given consideration.

Use of Estimates

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. These estimates are reviewed periodically, and as adjustments become necessary, they are reported in income in the period in which they become known.

Reclassifications

     Certain reclassifications of prior years’ presentations have been made to conform to the 2009 presentation.

Recently Adopted Accounting Pronouncements

     Effective January 1, 2009, the Company adopted the FASB’s guidance (ASC 810) regarding presentation of noncontrolling interests, previously referred to as minority interest, which has been changed on the consolidated balance sheets to be reflected as a component of total stockholders’ deficit and on the consolidated statements of operations to be a specific allocation of net income

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(loss). Amounts reported or included in prior periods remain unchanged, but have been revised to conform with the current period presentation. Loss per share continues to be based on losses attributable to TLC Vision Corporation.

     During the year ended December 31, 2009, the Company adopted the FASB’s guidance (ASC 855) establishing general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Company has evaluated subsequent events through the issuance of these financial statements, which occurred on March 31, 2010.

Accounting Pronouncements Issued but Not Yet Adopted

     In June 2009, the FASB issued amendments to ASC 860, Transfers and Servicing, effective for fiscal years beginning after November 15, 2009. The amendments remove the concept of a qualifying special-purpose entity and the related impact on consolidation, thereby potentially requiring consolidation of such special-purpose entities previously excluded from the consolidated financial statements. The Company does not expect these amendments to have a material impact on the consolidated financial statements.

     In June 2009, the FASB issued amendments to ASC 810, Consolidations, which requires a company to perform a qualitative analysis to determine whether it has a controlling financial interest in a variable interest entity. In addition, a company is required to assess whether it has the power to direct the activities of the variable interest entity that most significantly impact the entity’s economic performance. This guidance is effective for fiscal years beginning after November 15, 2009. We are currently evaluating the potential impact of this guidance on our operating results, cash flows and financial condition.

3. Impairment

2009 Impairment

     During the year ended December 31, 2009, the Company recorded $1.0 million of impairment, consisting primarily of a $0.5 million intangible impairment in its refractive centers segment to eliminate a trade name. The Company ceased use of the trade name and does not intend to use it in future operations. The Company also recorded a $0.3 million other long-term asset impairment in its corporate overhead segment to eliminate a cost method investment and a $0.2 million fixed asset impairment in its refractive centers segment to write-down the value of certain leasehold improvements.

2008 Impairment

     During 2008, the Company determined that the carrying amounts of goodwill and definite-lived intangible assets within various segments were impaired $79.6 million. Management determined the implied fair value of goodwill associated with the reporting units within these segments by subtracting the estimated fair value of tangible assets and intangible assets subject to amortization associated with each reporting unit from the estimated fair value of each reporting unit. The impairment charges were generally the result of the overall refractive market decline experienced by the Company as well as equity market conditions, which led to an overall decline in fair value of various reporting units of the Company.

     During 2008, the Company recognized a $4.8 million impairment of multiple cost and equity method investments due to the decline in their estimated fair value. The decline in fair values were deemed to be other than temporary based on the investees’ inability to generate or sustain an earnings capacity that would justify the carrying amount of the investment. In addition, the Company recognized a $0.6 million impairment of fixed assets of an ambulatory surgical center given the entity’s inability to generate an earnings capacity that would justify carrying values.

     A summary of impairment charges recorded by reporting segment during the year ended December 31, 2008 follows:

	FISCAL 2008 IMPAIRMENT CHARGES
	Investments and						Definite-Lived
	Other Long-Term Assets		Fixed Assets		Goodwill		Intangible Assets		Total
Refractive centers	$	—	$	—	$	66,843	$	4,658	$	71,501
Refractive access		—		—		4,993		1,500		6,493
Other doctor services		2,478		639		1,555		17		4,689
Corporate		2,364		—		—		—		2,364
Total	$	4,842	$	639	$	73,391	$	6,175	$	85,047

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4. Restructuring

     During 2009, the Company accelerated its cost savings initiatives that focused on employee reductions, closures of refractive centers and the reduction in refractive access routes. The restructuring efforts during the year ended December 31, 2009 resulted in the closure of three majority-owned refractive centers and an approximate 15% reduction of the Company’s workforce through involuntary employee separations. In addition to the cost savings initiatives, the restructuring efforts also included financial and legal advisor fees.

     As a result, the Company incurred pre-petition restructuring charges included in other expenses totaling $25.9 million for the year ended December 31, 2009, which primarily included $15.6 million of financial and legal advisor costs, $2.6 million for employee severance and benefits, $4.5 million for the write-off of investments in and a receivable due from Notal Vision^®, $0.8 million of center restructuring and closing costs, and $1.6 million of losses on the divestitures of various ambulatory surgical center investments.

     The following table summarizes various restructuring efforts:

	EMPLOYEE SEVERANCE			CENTER
	& BENEFITS			RESTRUCTURING COSTS			TOTAL
Restructuring charges		2,624		776			3,400
Non-cash write-downs		(40	)	(346		)	(386		)
Cash payments		(1,370	)	(220		)	(1,590		)
Restructuring reserve balance as of December 31, 2009	$	1,214		$	210		$	1,424

     As of December 31, 2009, restructuring reserves of $0.2 million of center restructuring costs were included in accrued liabilities and $1.2 million of employee severance and benefits were included in liabilities subject to compromise in the consolidated balance sheet.

     As of December 31, 2009, the Company currently estimates that its restructuring efforts will likely continue into the quarter ending June 30, 2010. Such estimate may change and is dependent on the outcome of various cost reduction efforts and the outcome of the Company’s bankruptcy proceedings.

     Charges incurred after December 21, 2009 and specifically associated with the bankruptcy proceedings are recorded as reorganization items, net, on the consolidated statement of operations. For additional information see Note 1, Bankruptcy Proceedings.

5. Acquisitions

2009 Activity

     The Company’s strategy has historically included periodic acquisitions of, or investments in, entities that operate within its chosen markets. During the year ended December 31, 2009, the Company made payments of $5.2 million to invest in multiple entities, none of which was individually material. Included in acquisition and equity investments are cash payments of approximately $4.0 million related to the Company’s 2005 TruVision™ acquisition, which were included in the purchase price allocation.

     During 2005, the Company acquired a substantial portion of the assets of Kremer Laser Eye (Kremer). As of December 31, 2009, Kremer operates three refractive centers, which the Company has an approximate 84% ownership interest, and one ambulatory surgery center, which the Company has a 70% ownership interest. As part of a transfer rights agreement entered on the acquisition date between the Company and the minority holders of Kremer, the minority holders retain options that could require the Company to purchase the remaining noncontrolling interest. The first option was exercisable during July 2009 with all remaining options being exercisable during July 2010 and 2012.

     During July 2009, the Company received formal notification from the minority holders of Kremer of their intent to exercise the first option. The option, if exercised, would transfer a portion of the remaining noncontrolling interest of Kremer to TLCVision in exchange for approximately $1.9 million payable August 2009. Failure to make such payment would cause all remaining options to become immediately exercisable on an accelerated basis.

     During August 2009, the Company and the minority holders of Kremer executed a limited forbearance and third amendment to the transfer rights agreement (Amendment and Forbearance). The Amendment and Forbearance, among other things, granted the

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Company temporary forbearance of the $1.9 million payable, waived the minority holders’ ability during the forbearance period to force acceleration of the remaining options, required the Company to make an immediate payment to the minority holders of $0.3 million and accelerated the third option date from July 2012 to July 2011. The payment of $0.3 million was recorded as other expense during the year ended December 31, 2009.

     Effective October 13, 2009, the forbearance period expired allowing the minority holders of Kremer the right to exercise all options under the amended transfer rights agreement. As of March 31, 2010, such right has not been exercised and is subject to the Company’s bankruptcy proceedings. The $1.9 million has been classified as a liability subject to compromise as of December 31, 2009.

2008 Activity

     During the year ended December 31, 2008, the Company made acquisition and equity investments of $8.9 million to acquire or invest in various entities. Included in acquisition and equity investments are cash payments during 2008 of approximately $6.6 million related to the Company’s 2005 TruVision™ acquisition, which have been included in the purchase price allocation.

6. Divestitures

     During the year ended December 31, 2009, the Company divested one majority-owned and two minority-owned ambulatory surgical centers for a combined net sale price of $2.2 million, resulting in a net loss on divestiture of $1.6 million included in other expenses. The historical results of operations for these ambulatory surgical centers are included in the “other” segment of the Company’s doctor services business. The net loss on divestiture includes a $1.8 million non-cash write-off of goodwill existing at the time of disposal.

     During the year ended December 31, 2008, the Company received approximately $1.3 million in cash proceeds resulting from various immaterial divestitures.

7. Accounts Receivable

     Accounts receivable, net of allowances, consist of the following:

	DECEMBER 31,
	2009		2008
Refractive centers	$	697	$	673
Doctor services
Refractive access		3,184		2,802
Mobile cataract		5,084		4,427
Other		2,048		2,882
Eye care
Optometric franchising		5,262		5,243
		16,275		16,027
Other corporate receivables		549		843
	$	16,824	$	16,870

     The Company is exposed to credit risk on accounts receivable from its various customers:

• Refractive centers accounts receivable are due principally from open-access surgeons who utilize the Company’s facilities and staff on a per-use basis (pursuant to their contractual agreement). While the Company offers consumer financing options for LASIK surgery, the credit risk is borne by the Company’s third-party providers who perform an independent credit evaluation on each potential patient before extending credit.

• Doctor services accounts receivable are generally due from surgeon and medical facility partners who contract with the Company to use its mobile technology platform.

• Eye care accounts receivable represent fees due from franchisees pursuant to their franchise agreements.

     In order to reduce its credit risk, the Company has adopted credit policies, which include the review of credit limits, and maintains an active collections process. As of December 31, 2009 and 2008, the Company had reserves for doubtful accounts and contractual allowances of $3.7 million and $3.5 million, respectively. The Company does not have a significant exposure to any individual customer.

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8. Prepaid Expenses, Inventory and Other Current Assets

     Prepaid expenses, inventory and other current assets consist of the following:

	DECEMBER 31,
	2009		2008
Prepaid expenses	$	2,607	$	3,341
Inventory		6,838		9,371
Other current assets.		1,384		1,502
	$	10,829	$	14,214

     The Company’s inventory decline of $2.5 million (27%) during the year ended December 31, 2009 was due to lower refractive center and access procedure volume resulting in lower inventory requirements. The Company operated under a lower inventory balance during 2009 as it continued to focus on cash preservation activities in response to deteriorated economic conditions. In addition, the Company terminated its Foresee PHP^® distribution activities as discussed further in Note 9, Investments and Other Long-Term Assets. The terminated distribution activities resulted in the write-down of $0.8 million in inventory during 2009.

9. Investments and Other Long-Term Assets

     Investments and other long-term assets, net of allowances, consist of the following:

	DECEMBER 31,
	2009		2008
Equity method investments	$	2,116	$	4,059
Cost method investments		—		2,010
Long-term receivables		192		2,771
Capitalized debt costs		—		1,755
Other		567		1,099
	$	2,875	$	11,694

2009 Activity

     During the year ended December 31, 2009, the Company divested one majority-owned and two minority-owned ambulatory surgical centers for a combined sale price of $2.2 million. The two minority-owned ambulatory surgical centers were accounted for under the equity method of accounting through the disposition date. The divestiture of the two minority-owned ambulatory surgical centers resulted in a write-down of approximately $2.1 million of equity method investments during the year ended December 31, 2009.

     During the year ended December 31, 2009, management explored terminating the Foresee PHP^® system distribution rights between the Company and Notal Vision^®, an entity in which the Company held a minority investment. The distribution rights allowed the Company to sell the Foresee PHP^®, manufactured by Notal Vision^®, as a component of the Company’s mobile cataract reporting segment.

     Effective December 10, 2009, the Company reached a Settlement Agreement with Notal Vision^®. The Settlement Agreement terminated the exclusive Foresee PHP^® distribution agreement in exchange for the Company surrendering a $2.3 million note receivable due from Notal Vision^® and the forfeiture by the Company of all remaining investments in Notal Vision^®. The Settlement Agreement also eliminated the Company’s future contractual purchase obligations of the Foresee PHP^®.

     As a result of the Settlement Agreement, the Company recorded a $4.5 million charge included in other expense in the Company’s consolidated statements of operations. The charge includes the $2.3 million note receivable write-down, the elimination of $0.4 million of unpaid interest included in other long-term assets and the write-down of $1.7 million of Notal Vision^® cost method investments.

     As of December 31, 2009, capitalized debt costs associated with the Company’s pre-petition Credit Facility were included in liabilities subject to compromise to adjust the carrying amount of the outstanding obligation in accordance with ASC 852.

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2008 Activity

     During the year ended December 31, 2008, the Company recorded a $4.8 million impairment charge against its investments and other long-term assets due to the decline in estimated fair values. The impairment charge reduced the carrying value of the Company’s equity method investments by $2.5 million and the Company’s cost method investments by $2.3 million. The impairment charge is discussed in further detail in Note 3, Impairment.

Equity Method Investments

     Equity method investments as of December 31, 2009 and 2008 primarily include the following:

	INVESTMENT % AT
	DECEMBER 31,
	2009			2008
Laser Eye Centers of California		30	%		30	%
Liberty Eye Surgery Center LLC*		—			49	%
Eastern Oregon Regional Surgery Center, LLC		49	%		49	%
Summit Ambulatory Surgical Center LLP*		—			24	%
TLC Oklahoma Doctors LLC		25	%		25	%
TLC Northwest Ohio LLC		25	%		25	%

* Divested during the year ended December 31, 2009.

10. Goodwill

     The Company’s goodwill amount by reporting segment is as follows:

				DOCTOR SERVICES								EYE CARE
	REFRACTIVE			REFRACTIVE			MOBILE					OPTOMETRIC
	CENTERS			ACCESS			CATARACT		OTHER			FRANCHISING		TOTAL
December 31, 2007	$	62,075		$	11,195		$	11,051	$	3,920		$	6,105	$	94,346
Impairment		(66,843	)		(4,993	)		—		(1,555	)		—		(73,391	)
Acquired during the period		7,729			—			—		—			—		7,729
Disposals and other during the period		(114	)		—			—		—			—		(114	)
December 31, 2008	$	2,847		$	6,202		$	11,051	$	2,365		$	6,105	$	28,570
Impairment		—			—			—		—			—		—
Acquired during the period		—			—			—		—			—		—
Disposals and other during the period		—			—			—		(1,815	)		—		(1,815	)
December 31, 2009	$	2,847		$	6,202		$	11,051	$	550		$	6,105	$	26,755

     During the year ended December 31, 2009, the Company wrote-off $1.8 million of goodwill as the result of a majority-owned ambulatory surgical center disposition. During the year ended December 31, 2008, the Company recorded impairment charges of $73.4 million against goodwill. Refer to Note 3, Impairment, for additional information regarding the 2008 charges.

     The $7.7 million of acquired goodwill during the year ended December 31, 2008 primarily related to the 2005 acquisition of TruVision™. As noted above, a significant portion of this acquired goodwill was subsequently impaired during the year ended December 31, 2008. See Note 3, Impairment, and Note 5, Acquisitions, for additional information.

11. Definite-Lived Intangible Assets

     The Company’s definite-lived intangible assets consist of practice management agreements, deferred contract rights, trade names and other intangibles. The Company has no indefinite-lived intangible assets. Amortization expense was $2.3 million and $3.2 million for the years ended December 31, 2009 and 2008, respectively.

     During the year ended December 31, 2009, the Company recorded a $0.5 million impairment charge in its refractive centers segment to eliminate its remaining trade name intangible. The Company ceased use of the trade name and does not intend to use it in future operations.

     During year ended December 31, 2008, the Company recorded a $6.2 million impairment loss against definite-lived intangible assets due to the carrying amounts of such assets exceeding their respective fair values, which were estimated by calculating the

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present value of future cash flows attributable to such assets. Refer to Note 3, Impairment, for additional information regarding the impairment loss.

     The remaining weighted average amortization period for practice management agreements is 3.8 years, for deferred contract rights is 3.0 years and for other intangibles is 6.75 years as of December 31, 2009.

     Intangible assets subject to amortization consist of the following at December 31:

	2009				2008
	GROSS CARRYING		ACCUMULATED		GROSS CARRYING		ACCUMULATED
	AMOUNT		AMORTIZATION		AMOUNT		AMORTIZATION
Practice management agreements	$	25,215	$	21,399	$	25,215	$	19,924
Deferred contract rights		3,870		2,787		3,870		2,422
Trade names		—		—		630		110
Other		4,804		2,023		4,936		1,567
Total	$	33,889	$	26,209	$	34,651	$	24,023

     The estimated amortization expense for the next five years and thereafter as of December 31, 2009 is as follows:

2010	$	2,264
2011		1,616
2012		1,485
2013		769
2014		645
Thereafter		901

12. Fixed Assets

     Fixed assets, including capital leased assets, consist of the following:

	DECEMBER 31,
	2009		2008
Land and buildings	$	4,967	$	12,286
Computer equipment and software		14,558		14,363
Furniture, fixtures and equipment		7,839		7,943
Laser and medical equipment		94,817		93,905
Leasehold improvements		22,882		24,947
Vehicles and other		6,007		5,938
		151,070		159,382
Less accumulated depreciation		116,773		108,868
Net book value	$	34,297	$	50,514

     For the years ended December 31, 2009 and 2008, depreciation expense was $13.6 million and $16.4 million, respectively. Depreciation expense includes depreciation of assets reported under capital leases.

     During the year ended December 31, 2009, the Company recorded a $0.2 million impairment charge against fixed assets to reduce the carrying value of leasehold improvements at a refractive center. During the year ended December 31, 2008, the Company recorded a $0.6 million impairment charge against fixed assets. Refer to Note 3, Impairment, for additional information regarding the 2008 impairment charge.

     Certain fixed assets are pledged as collateral for certain debt and capital lease obligations.

13. Accrued Liabilities and Other Long-Term Liabilities

TruVision™ Liability

     As of December 31, 2008, accrued liabilities included $7.8 million due to the former owners of TruVision under Amendment No. 1 to the 2005 TruVision™ Agreement and Plan of Merger, by which the Company acquired TruVision, Inc. Approximately $4.0 million of this liability was paid during January 2009. The remaining liability is subject to the Company’s bankruptcy proceedings further described in Note 1, Bankruptcy Proceedings.

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Other Accrued Liabilities

     Accrued liabilities include $3.4 million and $3.7 million of accrued wages and related expenses as of December 31, 2009 and 2008, respectively.

14. Debt

     The Company’s debt consists of:

	DECEMBER 31,
	2009		2008
Secured Debt
Debtor-in-possession financing, weighted average interest rate of 13.0%	$	7,500	$	—
Senior term loan; weighted average interest rate of 9.25% and 8.76% at December 31, 2009 and 2008, respectively		76,660		76,667
Revolving credit facility, weighted average interest rate of 8.24% and 6.60% at December 31, 2009 and 2008, respectively		23,400		6,000
		107,560		82,667
Unsecured Debt
Capital lease obligations, payable through 2013, interest at various rates		11,003		14,176
Sale-leaseback debt — interest imputed at 6.25%, due through October 2016		1,284		5,453
Other		3,137		3,285
		15,424		22,914
Less: Capitalized Credit Facility debt issuance costs		1,403		—
Total debt		121,581		105,581
Less liabilities subject to compromise		106,732		—
Less current portion		10,049		89,081
Total long-term debt	$	4,800	$	16,500

     Contractual maturities of the Company’s current and long-term debt balances of $14.8 million are $10.0 million in 2010, $1.6 million in 2011, $1.3 million in 2012, $0.9 million in 2013 and $1.0 million in 2014.

Debtor-in-Possession Financing

     In connection with filing the Chapter 11 Petitions and the Canadian Petition, on December 21, 2009, the Debtor Entities filed motions with the Bankruptcy Courts seeking approval to enter into a post-petition credit agreement. On December 22, 2009, the U.S. Court issued an interim order approving the Company’s motion to obtain a senior secured super priority debtor-in-possession credit agreement (Senior DIP Credit Agreement). On December 23, 2009, the Canadian Court granted a recognition order relating to the orders received by the Company from the U.S. Court. The Senior DIP Credit Agreement, dated December 23, 2009, is among the Company, various lenders and Cantor Fitzgerald Securities as collateral and administrative agent.

     The Senior DIP Credit Agreement provided for financing of a senior secured super priority term loan facility in a principal amount up to $15.0 million among the Company and various prepetition lenders of the Company’s Credit Facility. The Company may withdraw a maximum of two term loan advances and only if the amount of the Company’s controlled cash, as defined in the Senior DIP Credit Agreement, is less than $3.0 million.

     The maximum maturity date of the borrowings under the Senior DIP Credit Agreement is the earlier of (a) 150 days after December 21, 2009, (b) the effective date of a plan of reorganization, (c) the date on which a sale or sales of all or substantially all of the Company’s assets is consummated under Section 363 of the Bankruptcy Code, (d) the date of conversion of any of the bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code or any equivalent proceeding in the Canadian Case, (e) a proposal or liquidation of any or all of the assets of the Company under the Bankruptcy and Insolvency Act (Canada), (f) the dismissal of any of the bankruptcy cases, or (g) approval by the Bankruptcy Courts of any other debtor-in-possession financing for the Company.

     Borrowings under the term loans accrue interest at a rate per annum equal to the sum of the London Interbank Offered Rate (LIBOR) plus 10.0% per annum, payable in cash in arrears on the last day of any interest period and the date any term loan is paid in full. In the event of default, as defined under the Senior DIP Credit Agreement, the principal amount of all term loans and all other due and unpaid obligations bear interest at an additional default rate of 2.00%.

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     Prepayments are permitted provided that each partial prepayment is in an aggregate principal amount of $0.5 million or integral multiples thereof. Upon payment in full of the Senior DIP Credit Agreement, an exit fee equal to 2.00% of the aggregate principal amount outstanding under the Senior DIP Credit Agreement is due to the lenders.

     On December 24, 2009, the Company borrowed $7.5 million under the Senior DIP Credit Agreement, accruing interest at a rate of 13.0%. As of December 31, 2009, all advances remained outstanding and are classified as liabilities not subject to compromise in the consolidated financial statements.

     In conjunction with the borrowings, the Company capitalized in other current assets $0.7 million of DIP financing costs, which are being amortized over a period of 150 days.

     The Senior DIP Credit Agreement contained various affirmative, negative, reporting and financial covenants. The covenants, among other things, placed restrictions on the Company’s ability to acquire and sell assets, incur additional debt and required the Company to maintain minimum liquidity levels. A breach of any covenant would constitute an event of default as further defined in the Senior DIP Credit Agreement.

     Subsequent to December 31, 2009, the Company entered into a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement). The Junior DIP Credit Agreement provides for financing of a junior secured super priority term loan facility in a principal amount of up to $25 million. On February 25, 2010, the Company borrowed $10.0 million under the Junior DIP Credit Agreement and used the funds, among other things, to pay in full the outstanding principal balance of $7.5 million under the Senior DIP Credit Agreement. The payment resulted in the termination of the Senior DIP Credit Agreement and triggered an exit fee of $0.2 million paid on February 25, 2010. For additional information regarding the terms of the Junior DIP Credit Agreement refer to Note 27, Subsequent Events.

Credit Facility

     The Company obtained a $110.0 million credit facility (Credit Facility) during June 2007, which is secured by substantially all of the assets of the Company and consisting of both senior term debt and a revolver as follows:

• Senior term debt, totaling $85.0 million, with a six-year term and required amortization payments of 1% per annum plus a percentage of excess cash flow (as defined in the agreement) and sales of assets or borrowings outside of the normal course of business. As of December 31, 2009, $76.7 million was outstanding on this portion of the facility which is classified as liabilities subject to compromise as the liability is undersecured.

• A revolving credit facility, totaling $25.0 million with a five-year term. As of December 31, 2009, the Company had $23.4 million outstanding under this portion of the facility which is classified as liabilities subject to compromise as the liability is undersecured.

     Upon the filing of the Chapter 11 petitions, certain of the Company’s Credit Facility obligations became automatically and immediately due and payable, subject to an automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law. As a result of the bankruptcy petitions and due to the Credit Facility obligations being undersecured by the net assets of the Company, $100.1 million of the Company’s pre-petition Credit Facility debt is included in liabilities subject to compromise on the consolidated balance sheet at December 31, 2009. The Company classifies pre-petition liabilities subject to compromise as a long-term liability because management does not believe the Company will use existing current assets or create additional current liabilities to fund these obligations.

     Interest on the facility is calculated based on either prime rate or the LIBOR plus a margin. As a result of certain events of default and the June 30, 2009 expiration of the Limited Waiver, Consent and Amendment No. 3 to Credit Agreement, the LIBOR advances with interest periods ending on or after June 30, 2009 automatically converted to prime rate advances at the end of such interest period. Effective June 30, 2009, the Company began incurring 2% default interest resulting from the provisions of the Limited Waiver and Amendment No. 4 to Credit Agreement.

     As of December 31, 2009, the borrowing rate was 3.25% for prime rate borrowings, plus an applicable margin of 4.00% and default interest of 2.00%. In addition, the Company pays an annual commitment fee equal to 0.35% on the undrawn portion of the revolving credit facility.

     The Credit Facility also requires the Company to maintain various financial and non-financial covenants as defined in the Credit Agreement. As of December 31, 2008 and into 2009, the Company was unable to satisfy various financial covenants. As a result, the

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Company received from its lenders numerous waivers, consents and amendments to the Credit Agreement during the year ended December 31, 2009. All waivers, consents and amendments to the Credit Agreement are filed with the SEC. The filing of the bankruptcy petitions also constituted an event of default under the Credit Facility. As of December 31, 2009, the Company was operating without a waiver of default resulting in all obligations under the Credit Facility being automatically and immediately due and payable, subject to the automatic stay of any action to collect, assert, or recover a claim against the Company and the application of applicable bankruptcy law.

     Immediately prior to the time of filing the Chapter 11 Petitions, the Company had failed to make various mandatory contractual payments under its Credit Facility, as amended. Such payments included interest on the term and revolving credit advances of $5.0 million, principal payments on term advances of $0.4 million and $1.4 million of other mandatory payments.

     As of December 31, 2009, capitalized debt costs of $1.4 million associated with the Company’s pre-petition Credit Facility were included in liabilities subject to compromise to adjust the carrying amount of the outstanding obligation in accordance with ASC 852.

Capital Lease Obligations

     The Company has entered into various capital leases, primarily to purchase equipment. As of December 31, 2009, approximately $11.0 million of capital lease debt was outstanding. Approximately $6.7 million of the balance is among the Debtors and is classified as liabilities subject to compromise in the consolidated financial statements at December 31, 2009. Contractual payments, subject to potential future adjustments pursuant to the bankruptcy proceedings, for capital lease obligations for each of the next five years and thereafter as of December 31, 2009 are as follows:

2010	$	4,558
2011		3,687
2012		2,474
2013		1,157
2014		241
Thereafter		—
Total		12,117
Less interest portion		1,114
	$	11,003

Sale-Leaseback Transaction

     During the year ended May 31, 2002, the Company completed a sale-leaseback transaction of the Company’s International Corporate Office located in Mississauga, Ontario, Canada, between the Company and Canada Mortgage and Housing Corporation. Total consideration received for the sale of the building and related land was Cdn$10.1 million, which was comprised of Cdn$8.6 million in cash and a Cdn$1.5 million 8.0% note receivable (Note Receivable). The Note Receivable had a seven-year term with a final payment of Cdn$1.1 million received during the year ended December 31, 2008.

     The Company accounted for this transaction in accordance with ASC 840, Leases. ASC 840 prohibits sale recognition on a sale-leaseback transaction when the sublease is considered to be other than minor and the Company’s only recourse to any future amounts owing from the other party is other than the leased asset. A sublease is considered to be minor when the present value of the sublease rent is less than 10% of the total fair market value. The Company accounted for the transaction as a financing transaction which requires sale proceeds to be recorded as a liability (Sale-Leaseback Liability) and for the Note Receivable to not be recognized. Lease payments, exclusive of an interest portion, decrease the Sale-Leaseback Liability recorded. In addition, since the sale recognition is not accounted for, the carrying value of the asset is not adjusted for and the asset continues to be depreciated over the original depreciation period of 40 years.

     On December 21, 2009, in conjunction with the Company’s bankruptcy proceedings, a first day motion was filed in the U.S. Court requesting entry of an order authorizing the Company to reject the unexpired lease with Canada Mortgage and Housing Corporation under authority of sections 105(a) and 365(a) of the Bankruptcy Code. On January 21, 2010, an order was entered authorizing the Company to reject the lease effective December 21, 2009.

     On December 21, 2009, and in accordance with ASC 852, the Company recorded a $4.5 million gain to reduce the carrying value of the Sale-Leaseback Liability to $1.3 million, which is an estimate of the probable allowed claim against the Company for the unexpired lease and has been classified as liabilities subject to compromise on the consolidated financial statements. As the

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bankruptcy proceeds, the probable amount of the allowed claim may change as more information regarding the ultimate settlement amount of the individual claim becomes available.

     In addition to reducing the carrying value of the Sale-Leaseback Liability, on December 21, 2009, the Company wrote-off the related fixed asset balance of $5.9 million and eliminated $0.1 million of other related capitalized costs as the Company no longer is utilizing the International Corporate Office and does not intend to do so on a going forward basis.

     Below is a summary of the reorganization loss, net, recorded during the year ended December 21, 2009, as a result of the abandonment of the International Corporate Office and the rejection of the related unexpired Sale-Leaseback Liability:

Gain on write-down of Sale-Leaseback Liability	$	4,469
Loss on abandonment of sale-leaseback asset		(5,943	)
Other (a)		(1,114	)
Total reorganization loss, net	$	(2,588	)

(a) Other primarily includes a $1.0 million increase to a restricted cash reserve included in liabilities subject to compromise. As a result of the Company’s abandonment of the International Corporate Office, approximately $1.0 million of the Company’s restricted cash balance was immediately due to a subleasee of the building.

15. Interest Rate Swap Agreements

     The Company does not enter into financial instruments for trading or speculative purposes. As required under the Company’s Credit Facility, during August and December 2007 the Company entered into interest rate swap agreements to eliminate the variability of cash required for interest payments for a majority of the total variable rate debt.

     Effective July 9, 2009, Citibank and the Company agreed to the early termination of the interest rate swap agreements entered August and December 2007. In consideration for Citibank’s agreement to terminate the interest rate swaps, the Company agreed that the amount due to Citibank as of July 9, 2009 (Settlement Date) was $1.6 million (Settlement Amount). The Company further agreed that interest on the Settlement Amount will accrue at a default rate from and including the Settlement Date until such date that the Settlement Amount is paid in full. As of December 31, 2009, the Company had not paid the $1.6 million Settlement Amount; as such the amount is included in liabilities subject to compromise in the consolidated balance sheet.

     Prior to termination, the Company’s interest rate swaps qualified as cash flow hedges. The Company historically recorded the unrealized gain or loss resulting from changes in fair value as a component of other comprehensive income/(loss). Since future cash payments relating to the outstanding Credit Facility were no longer probable, the interest rate swap was no longer deemed an effective hedge, which resulted in the Company reclassifying the entire other comprehensive loss balance to interest expense during the year ended December 31, 2009.

16. Stock-Based Compensation

     As of December 31, 2009, the Company has issued stock options to employees, directors and certain other individuals. Options granted have terms ranging from five to ten years. Vesting provisions on options granted to date primarily include options that vest immediately and options that vest in equal amounts annually, typically over a four-year period.

     Total stock-based compensation for the years ended December 31, 2009 and 2008, was $0.9 million and $1.4 million, respectively. Total stock-based compensation includes expense for TLCVision stock options and its Employee Share Purchase Plan.

     As of December 31, 2009, the issued and outstanding options denominated in U.S. dollars were at the following prices and terms:

OUTSTANDING						EXERCISABLE
			WEIGHTED
			AVERAGE	WEIGHTED				WEIGHTED
			REMAINING	AVERAGE				AVERAGE
PRICE RANGE	NUMBER OF		CONTRACTUAL	EXERCISE		NUMBER OF		EXERCISE
(U.S.$)	OPTIONS *		LIFE	PRICE		OPTIONS *		PRICE
$0.20 — $1.88.		1,392	5.4 years	$	0.48		586	$	0.57
$2.44 — $4.83		1,684	3.8 years		3.61		1,215		3.66
$5.95 — $6.81		666	0.9 years		6.36		566		6.37
$8.19 — $11.47		370	0.3 years		10.39		371		10.39
		4,112	3.5 years	$	3.61		2,738	$	4.47

* Values in thousands.

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     As of December 31, 2009, the issued and outstanding options denominated in Canadian dollars were at the following prices and terms:

OUTSTANDING						EXERCISABLE
			WEIGHTED
			AVERAGE	WEIGHTED				WEIGHTED
			REMAINING	AVERAGE				AVERAGE
PRICE RANGE	NUMBER OF		CONTRACTUAL	EXERCISE		NUMBER OF		EXERCISE
(CDN $)	OPTIONS *		LIFE	PRICE		OPTIONS *		PRICE
$0.25 — $1.82		127	4.9 years	Cdn $0.71			47	Cdn $1.07
$2.98 — $5.31		116	4.6 years		3.80		68		4.03
$7.51 — $7.95		48	0.8 years		7.60		39		7.62
$12.60 — $12.68		23	0.1 years		12.67		23		12.67
		314	3.8 years	Cdn $3.79			177	Cdn$5.15

* Values in thousands.

     Approximately 0.6 million and 0.1 million options were authorized for issuance but were not granted as of December 31, 2009 and 2008, respectively. A summary of option activity during the last two years follows:

				WEIGHTED		WEIGHTED		AGGREGATE		AGGREGATE
				AVERAGE		AVERAGE		INTRINSIC		INTRINSIC
				EXERCISE PRICE		EXERCISE PRICE		VALUE		VALUE
	OPTIONS *			PER SHARE		PER SHARE		US OPTIONS		CDN OPTIONS
December 31, 2007		4,625		US$	5.43	Cdn$6.03
Granted		1,227			0.50		0.64
Exercised		(86	)		1.86		1.82
Forfeited		(189	)		4.50		7.97
Expired		(562	)		6.85		9.02
December 31, 2008		5,015		US$	4.14	Cdn$4.79
Granted		363			0.20		0.25
Exercised		—			—		—
Forfeited		(512	)		2.60		2.37
Expired		(440	)		8.25		10.10
December 31, 2009		4,426		US$	3.61	Cdn$3.79		US$	0	Cdn$0
Exercisable at December 31, 2009		2,915		US$	4.47	Cdn$5.15		US$	0	Cdn$0

* Values in thousands.

     The weighted average remaining contractual lives of U.S. and Canadian exercisable options as of December 31, 2009 were 2.7 years and 2.8 years, respectively.

     During the years ended December 31, 2009 and 2008, the total intrinsic value of options exercised, defined as the excess fair value of the underlying stock over the exercise price of the options, was approximately zero and $0.1 million, respectively.

     The Company granted 0.4 million and 1.2 million options during the years ended December 31, 2009 and 2008, respectively. The options granted had a fair value of $0.1 million and $0.3 million for the years ended December 31, 2009 and 2008, respectively.

     The fair values of TLCVision’s options granted were estimated at the date of grant for employee options and at the measurement date for non-employee options using the Black-Scholes option pricing model. The following table shows the Company’s assumptions used to compute stock based compensation expense:

	2009			2008
Weighted-average risk free rate of interest		2.45	%		2.19	%
Expected volatility		103	%		64	%
Weighted-average expected award life	3.8 years			4.9 years
Dividend yield		0.00	%		0.00	%

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     Expected volatility was based on historical volatility on the Company’s common shares. The risk-free interest rate was based on U.S. Treasury security yields at the time of grant. The dividend yield on the Company’s common shares is assumed to be zero since the Company has not paid dividends and has no current plans to do so in the future due to restrictions contained within the Company’s existing Credit Facility. The expected life was primarily based on historical exercise patterns of option holders, which the Company believes are representative of future behavior.

     As of December 31, 2009, the total unrecognized compensation expense related to TLCVision non-vested employee awards was approximately $1.2 million. The unrecognized compensation expense will be recognized over the remaining vesting period, which expires December 2012 for certain options. The weighted-average expense period for non-vested employee awards is 1.8 years.

17. Income Taxes

     Significant components of the Company’s deferred tax assets and liabilities are as follows:

	DECEMBER 31,
	2009			2008
Deferred tax asset:
Net operating loss carry forwards	$	100,783		$	91,156
Fixed assets		953			243
Intangibles		12,230			14.263
Investments		15,050			15,989
Accruals and other reserves		6,925			5,163
Tax credits		166			166
Other		11,132			13,780
Total deferred tax asset		147,239			140,760
Valuation allowance		(147,239	)		(140,760	)
Total deferred tax asset, net of valuation allowance	$	—		$	—

     The Company determined in both fiscal 2009 and 2008 that sufficient evidence did not exist to support recognition of a deferred tax asset. This determination was based on many factors including the current year loss, the lack of taxable income forecasted in future periods, and other relevant factors.

     As of December 31, 2009, the Company had total net operating losses (NOLs) available for carry forward for income tax purposes of approximately $264.6 million, which may be available to reduce taxable income in future years. The U.S. carry forward losses of $224.7 million expire between 2010 and 2029. Canadian carry forward losses of $40.0 million can only be utilized by the source company and expire between 2009 and 2028. During the year ended December 31, 2009, approximately $8.4 million of U.S. and $6.6 million of Canadian NOLs expired.

     Of the total valuation allowance, separate amounts of approximately $11.0 million will be recorded directly to equity and as a reduction to goodwill, if and when those portions of the deferred tax assets are realized and the associated valuation allowance is reversed.

     Section 382 of the Internal Revenue Code of 1986, as amended, imposes significant annual limitations on the utilization of NOLs. Such NOL limitations result upon the occurrence of certain events, including an “ownership change” as defined by Section 382.

     Under Section 382, when an ownership change occurs, the calculation of the annual NOL limitation is affected by several factors, including the number of shares outstanding and the trading price before the ownership change occurred. As a result of shareholder activity, the Company concluded that an ownership change occurred in early 2008 limiting future utilization of NOLs. The Company currently estimates that this annual limit will result in $67.7 million of NOLs expiring before becoming available.

     Our ability to utilize the remaining NOL carryforwards could be subject to a significant limitation if we were to undergo an “ownership change” for purposes of Section 382, as amended, during or as a result of the bankruptcy proceedings.

     A restructuring of our debt pursuant to the bankruptcy proceedings may give rise to cancellation of indebtedness or debt forgiveness (COD), which if it occurs would generally be non-taxable. If the COD is non-taxable, we will be required to reduce our NOL carryforwards and other attributes such as capital loss carryforwards and the tax basis in assets, by an amount equal to the non-recognized COD. Therefore, it is possible that, as a result of the successful completion of a plan of reorganization, we will have a

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reduction of NOL carryforwards and/or other tax attributes in an amount that cannot be determined at this time and that could have a material adverse effect on our financial future.

     The differences between the provision for income taxes and the amount computed by applying the statutory Canadian income tax rate to income before income taxes were as follows:

	YEAR ENDED DECEMBER 31,
	2009			2008
Income tax (benefit) expense at the Canadian statutory rate of 36.12%	$	(13,265	)	$	(35,174	)
Change in valuation allowance		13,171			23,052
Expenses not deductible for income tax purposes		116			12,136
State taxes		796			605
Canadian income tax		152			269
Rate differential on United States operations		(22	)		(14	)
Income tax expense	$	948		$	874

     The provision for income taxes is as follows:

	YEAR ENDED DECEMBER 31,
	2009		2008
Current:
Canada	$	152	$	269
United States — federal		—		—
United States — state		796		605
Other		—		—
	$	948	$	874
Deferred:
United States — federal	$	—	$	—
United States — state		—		—
	$	—	$	—
Income tax expense	$	948	$	874

     The Company has established accruals for certain tax contingencies for exposures associated with tax deductions and return filing positions which may be challenged. The tax contingency accruals are adjusted quarterly in light of changing facts and circumstances, such as the progress of tax audits, case law and statute of limitations. A number of years may elapse before a particular matter is resolved. The Company believes its tax contingency accruals are adequate to address known tax contingencies. Tax contingency accruals of $0.3 million are recorded in accrued liabilities in the consolidated balance sheets at December 31, 2009 and 2008, respectively.

     The Company, including its domestic and foreign subsidiaries, is subject to U.S. federal income tax as well as income tax of multiple state and other jurisdictions. Tax years 1997 through present are not yet closed for U.S. federal and state income tax purposes due to net operating losses carried forward from that time.

18. Other Expense (Income), Net

     Other expense (income), net includes the following operating items:

	YEAR ENDED DECEMBER 31,
	2009			2008
Other expense (income):
(Gain) loss on sales and disposals of fixed assets	$	(338	)	$	(269	)
Center restructuring and closing costs		776			—
Loss (gain) on business divestitures		1,594			(139	)
Employee severance expense		2,624			—
Financial and legal advisor costs		15,570			—
Write-off of receivables due from and investments in Notal Vision®		4,458			—
Miscellaneous expense (income)		1,142			69
	$	25,826		$	(339	)

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19. Net Loss Per Share

     Basic loss per share was $0.73 and $1.95 for the years ended December 31, 2009 and 2008, respectively. The per share amounts have been computed on the basis of the weighted average number of shares outstanding.

Below is a reconciliation of basic and diluted per share detail to net loss and income:

	YEAR ENDED
	DECEMBER 31,
(in thousands, except per share amounts)	2009			2008
Numerator:
Net loss attributable to TLC Vision Corporation	$	(36,724	)	$	(98,254	)
Denominator:
Weighted-average shares outstanding — basic		50,554			50,319
Effect of dilutive stock options *		—			—
Weighted-average shares outstanding — diluted		50,554			50,319
Net loss attributable to TLC Vision Corporation per common share:
Basic	$	(0.73	)	$	(1.95	)
Diluted	$	(0.73	)	$	(1.95	)

* The effects of including the incremental shares associated with options and warrants are anti-dilutive for years ended December 31, 2009 and 2008 and are not included in weighted-average shares outstanding-diluted. The total weighted-average number of options with exercise prices less than the average closing price of the Company’s common shares was zero and 0.2 million for the years ended December 31, 2009 and 2008, respectively.

20. Commitments and Contingencies

Commitments

     The Company leases certain center facilities under operating leases with terms generally of five to ten years. Certain leases contain rent escalation clauses and rent-free periods that are charged to rent expense on a straight-line basis. The leases usually contain renewal clauses at the Company’s option at fair market value. For the years ended December 31, 2009 and 2008, total rent expense, including minimum and contingent payments, was $9.0 million and $9.2 million, respectively. As of December 31, 2009, the Company has commitments relating to non-cancellable operating leases for rental of office space and equipment requiring future minimum payments aggregating approximately $27.0 million.

     Future minimum payments over the next five years and thereafter are as follows:

2010	$	8,044
2011		6,276
2012		4,915
2013		3,452
2014		1,821
Thereafter		2,515
	$	27,023

     As of December 31, 2009, the Company had commitments related to long-term marketing contracts which require payments totaling $6.0 million through 2011. Future contractual minimum payments over the next two years are as follows:

2010		3,000
2011		3,000
	$	6,000

     Certain of the Company’s lease and marketing commitments are subject to the Company’s bankruptcy proceedings. However, the commitments disclosed above do not adjust for the potential rejection and/or reduction of any lease or marketing commitment in the due course of the bankruptcy proceedings.

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Legal Contingencies

     Except for bankruptcy proceedings described in Note 1, Bankruptcy Proceedings, at December 31, 2009 there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.

     The Company is subject to various claims and legal actions in the ordinary course of its business, which may or may not be covered by insurance. These matters include, without limitation, professional liability, employee-related matters and inquiries and investigations by governmental agencies. While the ultimate results of such matters cannot be predicted with certainty, the Company believes that the resolution of these matters will not have a material adverse effect, individually or in the aggregate, on its consolidated financial position or results of operations.

Regulatory Tax Contingencies

     TLCVision operates in 48 states and three Canadian provinces and is subject to various federal, state, provincial and local income, payroll, unemployment, property, franchise, capital, sales and use tax on its operations, payroll, assets and services. TLCVision endeavors to comply with all such applicable tax regulations, many of which are subject to different interpretations, and has hired outside tax advisors who assist in the process. Many states and other taxing authorities have been interpreting laws and regulations more aggressively to the detriment of taxpayers such as TLCVision and its customers. TLCVision believes that it has adequate provisions and accruals in its financial statements for such liabilities, although it cannot predict the outcome of future tax assessments.

21. Segment Information

     The Company’s reportable segments are strategic business units that offer different products and services. They are managed and evaluated separately by the chief operating decision maker because each business requires different management and marketing strategies. The Company has three lines of business and five reportable segments including “Other” as follows:

• Refractive Centers: The refractive centers business provides a significant portion of the Company’s revenue and is in the business of providing corrective laser surgery (principally LASIK) in fixed sites typically branded under the TLC name.

• Doctor Services: The doctor services business provides a variety of services and products directly to doctors and the facilities in which they perform surgery. It consists of the following segments:

• Mobile Cataract: The mobile cataract segment provides technology and diagnostic equipment and services to doctors and hospitals to support cataract surgery as well as treatment of other eye diseases.

• Refractive Access: The refractive access segment assists surgeons in providing corrective laser surgery in their own practice location by providing refractive technology, technicians, service and practice development support at the surgeon’s office.

• Other: The Company has ownership interests in businesses that manage surgical and secondary care centers. None of these businesses meets the quantitative criteria to be disclosed separately as a reportable segment and they are included in “Other” for segment disclosure purposes.

• Eye Care: The eye care business consists of the optometric franchising business segment. The optometric franchising segment provides marketing, practice development and purchasing power to independently-owned and operated optometric practices in the United States and Canada.

     Corporate depreciation and amortization of $1.4 million and $2.3 million for the year ended December 31, 2009 and 2008, respectively, is included in corporate operating expenses. For purposes of the depreciation and amortization disclosures shown below, these amounts are included in the refractive centers reporting segment.

     Assets of the Company’s corporate operations, including corporate headquarters, have not been allocated among the various segments. The amounts are included in the refractive centers segment.

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     The Company’s reportable segments are as follows:

				DOCTOR SERVICES							EYE CARE
YEAR ENDED DECEMBER 31, 2009	REFRACTIVE			REFRACTIVE		MOBILE					OPTOMETRIC
(IN THOUSANDS)	CENTERS			ACCESS		CATARACT		OTHER			FRANCHISING		TOTAL
Revenues	$	107,326		$	23,966	$	41,799	$	26,130		$	30,969	$	230,190
Cost of revenues (excluding amortization)		83,812			19,221		31,265		17,792			14,916		167,006
Gross profit		23,514			4,745		10,534		8,338			16,053		63,184
Segment expenses:
Marketing and sales		12,318			77		5,181		425			3,934		21,935
G&A, amortization and other		6,086			9		3,521		2,767			15		12,398
Impairment *		1,018			—		—		—			—		1,018
Earnings from equity investments		(334	)		—		—		(973	)		—		(1,307	)
Segment profit	$	4,426		$	4,659	$	1,832	$	6,119		$	12,104	$	29,140
Noncontrolling interest		580			32		—		3,219			5,637		9,468
Segment profit attributable to TLC Vision Corp	$	3,846		$	4,627	$	1,832	$	2,900		$	6,467	$	19,672
Corporate operating expenses														(39,801	)
Reorganization items, net														(3,229	)
Interest expense, net														(12,418	)
Income tax expense														(948	)
Net loss attributable to TLC Vision Corporation														(36,724	)
Depreciation and amortization	$	9,506		$	2,133	$	2,871	$	1,350		$	48	$	15,908
Total assets	$	43,780		$	16,444	$	28,210	$	12,297		$	14,185	$	114,916

* Note: Refractive Centers impairment charge of $1.0 million includes approximately $0.3 million of allocated corporate related impairment charges.

				DOCTOR SERVICES								EYE CARE
YEAR ENDED DECEMBER 31, 2008	REFRACTIVE			REFRACTIVE			MOBILE					OPTOMETRIC
(IN THOUSANDS)	CENTERS			ACCESS			CATARACT		OTHER			FRANCHISING		TOTAL
Revenues	$	151,442		$	29,176		$	40,916	$	25,523		$	28,611	$	275,668
Cost of revenues (excluding amortization)		110,824			23,623			30,294		17,187			13,010		194,938
Gross profit		40,618			5,553			10,622		8,336			15,601		80,730
Segment expenses:
Marketing and sales		31,235			140			6,533		484			4,333		42,725
G&A, amortization and other		7,765			(299	)		3,931		1,591			51		13,039
Impairment **		73,865			6,493			—		4,689			—		85,047
Loss (earnings) from equity investments		1,820			—			—		(1,260	)		—		560
Segment profit	$	(74,067	)	$	(781	)	$	158	$	2,832		$	11,217	$	(60,641	)
Noncontrolling interest		912			56			—		3,383			5,179		9,530
Segment profit attributable to TLC Vision Corp	$	(74,979	)	$	(837	)	$	158	$	(551	)	$	6,038	$	(70,171	)
Corporate operating expenses															(17,871	)
Interest expense, net															(9,338	)
Income tax expense															(874	)
Net loss attributable to TLC Vision Corporation															(98,254	)
Depreciation and amortization	$	12,423		$	2,939		$	2,742	$	1,516		$	50	$	19,670
Total assets	$	61,599		$	16,910		$	25,531	$	17,848		$	15,094	$	136,982

** Note: Refractive Centers impairment charge of $73.9 million includes approximately $2.3 million of allocated corporate related impairment charges.

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The Company’s geographic segments are as follows:

YEAR ENDED DECEMBER 31, 2009	CANADA		UNITED STATES		TOTAL
Revenues	$	11,826	$	218,364	$	230,190
Total fixed assets and intangibles	$	2,311	$	66,421	$	68,732

YEAR ENDED DECEMBER 31, 2008	CANADA		UNITED STATES		TOTAL
Revenues	$	15,199	$	260,469	$	275,668
Total fixed assets and intangibles	$	6,510	$	83,202	$	89,712

22. Fair Value Measurements

     In September 2006, the FASB issued guidance (ASC 820), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of this guidance were effective for the Company as of January 1, 2008. However, the FASB deferred the effective date of the provision until the beginning of the Company’s 2009 fiscal year as it relates to fair value measurement requirements for nonfinancial assets, such as goodwill, and liabilities that are not remeasured at fair value on a recurring basis. The Company uses fair value measurements when it periodically revaluates the recoverability of goodwill and other intangible assets. The Company’s adoption of the additional fair value guidance in fiscal 2009 did not have a material impact on the financial statements.

     The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

• Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

     Cash and cash equivalents of $14.6 million at December 31, 2009 are primarily comprised of either bank deposits or amounts invested in money market funds, the fair value of which is based on unadjusted quoted prices in active markets for identical assets (Level 1).

     As of December 31, 2009, the carrying value and approximate fair value of the Company’s pre-petition Credit Facility advances and debtor-in-possession borrowings was $107.6 million and $105.6 million, respectively. The fair value was estimated by discounting the amount of estimated future cash flows associated with the respective debt instruments using the Company’s current incremental rate of borrowing for similar debt instruments (Level 3). The calculation of fair value assumes no acceleration of payments that may be required under default provisions included in the Company’s Credit Facility.

     The carrying value of the Company’s cost method investments was zero and $2.0 million as of December 31, 2009 and 2008. During the years ended December 31, 2009 and 2008, the Company recorded impairment charges of $0.3 million and $2.3 million, respectively, to reduce the carrying value of its cost method investments to estimated market values (Level 3).

23. Supplemental Cash Flow Information

Significant non-cash transactions:

	YEAR ENDED DECEMBER 31,
	2009			2008
Capital lease obligations relating to equipment purchases	$	2,042		$	3,110
Option and warrant reduction		—			92
Other comprehensive (income) loss on hedge		(1,545	)		761

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     Cash paid for the following:

	YEAR ENDED DECEMBER 31,
	2009		2008
Interest	$	6,938	$	8,637
Income taxes	$	858	$	1,246

24. Executive Officers

     On April 23, 2009, the Company announced that James C. Wachtman resigned as Chief Executive Officer and as a member of the Board of Directors of the Company, effective immediately. The Company also announced that James B. Tiffany was named President and Chief Operating Officer, effective immediately.

     On April 23, 2009, the Company also announced that it created the position of Chief Restructuring Officer and formed an Office of the Chairman. Michael Gries, a principal of Conway, Del Genio, Gries & Co. LLC (CDG), a financial advisory firm based in New York, NY, accepted the position of Chief Restructuring Officer. The new three-person Office of the Chairman reports to the Board of Directors and is comprised of: the Chairman, Warren Rustand; the President and Chief Operating Officer, James B.Tiffany; and the Chief Restructuring Officer, Michael Gries.

     On May 15, 2009, the Company announced that as part of its efforts to reduce costs, it terminated the employment of three executive officers, effective immediately. The three executive officers were: Steven P. Rasche, Chief Financial Officer; Brian L. Andrew, General Counsel and Secretary; and Larry D. Hohl, President of Refractive Centers. The Company also announced that William J. McManus, a managing director of CDG, was appointed to the position of Interim Chief Financial Officer. Mr. Andrew’s non-legal responsibilities as well as Mr. Hohl’s responsibilities have been assumed by James B. Tiffany. Mr. Andrew’s legal responsibilities have been assumed on an interim basis by Company attorneys and external counsel.

25. Related Party Transactions

     As noted in Note 24, Executive Officers, the Company’s Interim Chief Financial Officer and Chief Restructuring Officer are employed by CDG. The Company has retained CDG to provide consulting services relating to the Company’s ongoing bankruptcy proceedings and restructuring efforts, which include cost saving initiatives and Credit Facility negotiations. During the year ended December 31, 2009, the Company incurred approximately $2.2 million in professional fees from CDG.

     The Company has an agreement with Minnesota Eye Consultants to provide laser access. Dr. Richard Lindstrom, a director of TLCVision, is founder, partner and attending surgeon of Minnesota Eye Consultants. The Company received revenue of $0.7 million and $0.8 million as a result of the agreement for the years ended December 31, 2009 and 2008, respectively. Dr. Lindstrom also receives annual compensation from the Company in his capacity as medical director of TLCVision and as a consultant to Sightpath Medical.

26. Defined Contribution and Employee Stock Purchase Plans

Defined Contribution Plan

     The Company sponsors a defined contribution plan, which extends participation eligibility to substantially all U.S. employees. Amounts charged to expenses during the years ended December 31, 2009 and 2008 were $0.1 million and $0.5 million, respectively, under the defined contribution plan. Effective April 2009, the Company suspended its 25% match of participants’ before-tax contributions up to 8% of eligible compensation.

Employee Stock Purchase Plan

     Under our Employee Stock Purchase Plan (ESPP) participants may contribute up to 10% of their annual compensation to purchase common shares of the Company. The purchase price of the shares is equal to 85% of the closing price of TLCVision on the first day or the last day of each quarterly offering period, whichever is less.

     During the year ended December 31, 2009, the number of shares available for issuance under the ESPP reached zero, as a result no additional shares will be issued unless the number of shares available under the ESPP is increased by a vote of common

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shareholders. For the years ended December 31, 2009 and 2008, there were approximately 159,000 and 180,000 shares issued under the Employee Stock Purchase Plan.

27. Subsequent Events

     In connection with the First Amended Plan, further described in Note 1, Bankruptcy Proceedings, the Company filed a motion seeking approval from the Bankruptcy Courts for a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement). The Junior DIP Credit Agreement, approved by the U.S. Court via an interim order on February 12, 2010 and the Canadian Court on February 18, 2010, is dated February 3, 2010 among the Debtors, various lenders and Charlesbank Equity Fund VII, Limited Partnership as collateral and administrative agent.

     The Junior DIP Credit Agreement provided for financing of a junior secured super priority term loan facility in a principal amount up to $25.0 million. On February 25, 2010, the Company borrowed $10.0 million under the Junior DIP Credit Agreement and used the funds, among other things, to pay down the previously existing $7.5 million outstanding principal balance under the Senior DIP Credit Agreement.

     The maximum maturity date of the borrowings under the Junior DIP Credit Agreement is the earlier of (a) May 20, 2010, (b) the effective date of a plan of reorganization, (c) the date on which a sale or sales of all or substantially all of the Company’s assets is consummated under Section 363 of the Bankruptcy Code, (d) the date of conversion of any of the bankruptcy cases to a case under Chapter 7 of the Bankruptcy Code or any equivalent proceeding in the Canadian Case, (e) a proposal or liquidation of any or all of the assets of the Company under the Bankruptcy and Insolvency Act (Canada), (f) the dismissal of any of the bankruptcy cases, or (g) approval by the Bankruptcy Courts of any other debtor-in-possession financing for the Company.

     Borrowings accrue interest at a rate per annum equal to the sum of LIBOR plus 10.0% per annum, payable in cash in arrears on the last day of any interest period and the date any term loan is paid in full. In the event of default, as defined under the Junior DIP Credit Agreement, the principal amount of all term loans and all other due and unpaid obligations bear interest at an additional default rate of 2.00%.

     The Junior DIP Credit Agreement contains various affirmative, negative, reporting and financial covenants. The covenants, among other things, place restrictions on the Company’s ability to acquire and sell assets, incur additional debt and require the Company to maintain minimum liquidity levels. A breach of any covenant constitutes an event of default as further defined in the Junior DIP Credit Agreement.

     Prepayments are permitted provided that each partial prepayment is in an aggregate principal amount of $0.5 million or integral multiples thereof. Upon payment in full of the Junior DIP Credit Agreement, an exit fee equal to 4.00% of the aggregate principal amount outstanding under the Junior DIP Credit Agreement is due to the lenders.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 9A. CONTROLS AND PROCEDURES

     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officers and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

     As of the end of the period covered by this Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Principal Executive Officers and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, the Company’s Principal Executive Officers and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective, in all material respects, to ensure that information

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required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

     There have been no significant changes in the Company’s internal control over financial reporting during the period that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

     Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

     Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on our assessment, we believe that, as of December 31, 2009, the Company’s internal control over financial reporting is effective based on those criteria.

     This Annual Report on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

     Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF AND CORPORATE GOVERNANCE

     The following are brief summaries of the business experience of each of the Company’s executive officers:

• James B. Tiffany, age 53, became the Company’s President and Chief Operating Officer in April 2009. Prior to that, Mr. Tiffany served as President of Sightpath Medical, Inc., a subsidiary of the Company, from August 2003 to April 2009. He served as General Manager of MSS, Inc. from July 2000 to August 2003, and as Vice President of Sales and Marketing of LaserVision from January 1999 to July 2000. Mr. Tiffany received his undergraduate degree from Arizona State University and a Master of Business Administration Degree from Washington University in St. Louis, Missouri.

• Michael Gries, age 55, was appointed Chief Restructuring Officer in April 2009 and is a principal and co-founder of Conway Del Genio Gries & Co., LLC (CDG), a financial advisor firm. Mr. Gries is a nationally recognized leader in the restructuring profession with more than 25 years experience advising companies and creditors on complex corporate reorganizations. Since 1984, Mr. Gries has specialized in providing business and financial advice to Boards of Directors, management, investors and other parties in interest in distressed and turnaround situations. Prior to co-founding CDG, Mr. Gries was a Partner and Director of the Northeast Restructuring and Reorganization practice of Ernst & Young LLP, which was at the time one of the largest restructuring practices in the country. Mr. Gries has a Bachelor of Science in Business Administration degree, with specializations in Accounting and Finance, from Northeastern University. He is a Certified Public Accountant (CPA) and a Certified Restructuring and Reorganization Accountant.

76

• William McManus, age 54, was appointed interim Chief Financial Officer in April 2009 and is a managing director of CDG. Mr. McManus has more than 20 years of senior financial, operational, and consulting experience in turnaround/restructuring environments. He has served in senior management positions in a variety of industries, such as: Automotive, Media & Publishing, Home Furnishing, Consumer Goods, Packaging, Forest Products, Capital Equipment, and Healthcare. Prior to joining CDG in February 2009, Mr. McManus worked at Horizon Management from 2001 to 2009 as a Managing Director specializing in crisis / interim management. Mr. McManus graduated from Notre Dame where he received a Bachelor of Science in Business Administration degree, with a specialization in Finance.

• Charles H. Judy, age 40, was appointed Senior Vice President, Shared Services and Secretary in April 2009. Mr. Judy joined the Company in 2007 as Vice President, Human Resources. Prior to joining TLCVision, Mr. Judy was a National Human Resources Director at Deloitte, one of the world’s largest professional services firms with over 120,000 employees. During his thirteen years with the organization, Mr. Judy provided senior human resources and recruiting leadership to a number of large and diverse practices throughout the world. Mr. Judy was also the Vice President, Human Resources for Maverick Technologies LLC, North America’s largest independent control systems integrator and industrial automation consultancy. He is a graduate of Tulane University’s A.B. Freeman School of Business with a Bachelor of Science in Management degree. Mr. Judy is also a CPA (non-practicing) and a certified Senior Professional of Human Resources.

• James J. Hyland, age 57, joined TLCVision as Vice President, Investor Relations in 2007. Prior to joining TLCVision, Mr. Hyland was VP Investor Relations and Corporate Communications for USF Corp, a $2.4 billion Chicago based transportation holding company. In addition, Mr. Hyland was Senior Vice President Investor Relations for Comdisco, a Rosemont, Illinois based Fortune 500 financial and technology services firm. Mr. Hyland is a graduate of the University of Illinois with a Bachelor of Science in Business Administration degree, with a specialization in Finance.

• Henry Lynn, age 59, became Chief Information Officer (CIO) of TLCVision in March 1998. Mr. Lynn has executive management responsibilities regarding the various information systems utilized throughout the Company. Prior to joining TLCVision, he was employed as the CIO for Beacon Eye, Inc., a laser vision correction company. He holds a Data Processing degree from Glasgow College of Technology, Scotland.

• Ellen-Jo E. Plass, age 40, became the Company’s Senior Vice President, Center Operations in June 2009. Prior to that, Mrs. Plass served as Vice President of Center Support Services for TLC Laser Eye Centers from January 2006 to June 2009. Through her career within TLCVision she’s served in a number of roles within the organization from National Director, Center Support Services, from 2002 to 2006, to International Director, Training and Development, from 1999 to 2002. Her first role within the Company was in 1995 at a flagship TLC center in Windsor, Ontario, Canada where she was that center’s Executive Director. Mrs. Plass received her Bachelor of Arts, Psychology in 1991 from the University of Windsor and her Post Graduate in 1992 specializing in Gerontology from Algonquin College.

• Jim Feinstein, age 39, became TLCVision’s Senior Vice President of Sales in April 2009. Prior to that, Mr. Feinstein served as the Company’s Vice President, Western Zone, from 2008 to 2009 and Vice President, North Central Region, from 2004 to 2007. In 2007, he was recognized by the Midwest Organ and Donor Board as one of 30 influential people in ophthalmology. Mr. Feinstein is a graduate of the University of Iowa with a Bachelor of Arts in English.

• Dan Robins, age 39, joined the Company in December of 1998 first as a Laser Engineer with LaserVision and later holding the positions of Senior Engineer; North East Operations Manager; Manager of Recruitment, Staff Development and Research; Director of Senior Engineering and Research; and National Director of Operations. He moved into his current position as Vice President of Operations in January 2006 where he is responsible for all day-to-day operations of the mobile refractive segment. Mr. Robins began his career in operations and logistics while serving in the United States Army as an Avenger Missile System Technician from 1989 to 1997. He holds an Associate of Applied Science degree in Laser Electro-Optics and is finishing his Bachelor of Arts in Business Management degree at Rasmussen College.

• Patricia S. Larson, age 49, joined the Company in July 2003 as Associate General Counsel. Prior to that, Ms. Larson was the General Counsel and Executive Vice President - General Manager from 1993 to 2002 of Husky Corporation, a privately held company that designs, manufactures and distributes equipment for the petroleum dispensing industry. Prior thereto, Ms. Larson was in the private practice of law in the St. Louis office of Polsinelli Shugart, PC and with Paule, Camazine, Bluementhal, PC. Prior to joining these law firms, Ms. Larson served as a Senior Tax Consultant with Ernst & Young. Ms. Larson received her Juris Doctor from the University of Missouri — Kansas City and a Bachelor of Science in Accountancy degree from the University of Missouri — Columbia.

77

• Jonathan Compton, age 38, joined the Company in July 2002 as Director of Taxation. Mr. Compton was appointed as an officer of the Company in December 2002. Prior to that, Mr. Compton was the Corporate Tax Manager and Assistant Treasurer at BioMaerieux, Inc., from 1998 — 2002. Mr. Compton is a graduate of the University of Missouri with a Bachelor of Science in Business Administration degree, with a specialization in Accounting. Mr. Compton is also a CPA (non-practicing).

     The information required by Item 401 of Regulation S-K regarding directors is hereby incorporated by reference to the Company’s definitive proxy statement to be filed within 120 days after the end of the Company’s fiscal year ended December 31, 2009. The information required by Item 405 of Regulation S-K is hereby incorporated by reference to the Company’s definitive proxy statement to be filed within 120 days after the end of the Company’s fiscal year ended December 31, 2009. The information required by Items 407(c)(3), (d)(4), and (d)(5) of Regulation S-K is hereby incorporated by reference to the Company’s definitive proxy statement to be filed within 120 days after the end of the Company’s fiscal year ended December 31, 2009.

     Formal, written policies and procedures have been adopted, consistent with legal requirements, including a Code of Ethics applicable to the Company’s principal executive officers, principal financial officer, and principal accounting officer or controller. The Company’s Corporate Governance Guidelines, its charters for each of its Audit, Compensation, Nominating and Corporate Governance Committees and its Code of Ethics covering all employees are available on the Company’s website, www.tlcv.com, and a copy will be mailed upon request to Investor Relations, TLC Vision Corporation, 16305 Swingley Ridge Rd., Ste. 300, Chesterfield, MO 63017.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item 11 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed within 120 days after the end of the Company’s fiscal year ended December 31, 2009.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

     The following table provides information as of December 31, 2009, regarding compensation plans under which equity securities of TLCVision are authorized for issuance (shares in thousands).

						Number of
						securities
						remaining available
	Number of					for future
	securities to be					issuances under
	issued upon		Weighted-average			equity compensation
	exercise of		exercise price of			plans (excluding
	outstanding		outstanding			securities
	options, warrants		options, warrants			reflected in column
	and rights		and rights			(a))
Plan category	(a)		(b)			(c)
Equity compensation plans approved by security holders		4,426	$	3.61	(1)		649
Equity compensation plans not approved by security holders		—		—			—
Total		4,426	$	3.61	(1)		649

(1) Represents the weighted-average exercise price of outstanding options, warrants and rights denominated in U.S. dollars. The weighted-average exercise price of outstanding options, warrants and rights denominated in Canadian dollars was Cdn$3.79.

See Note 16, Stock-Based Compensation, to the audited consolidated financial statements for more information regarding the material features of the Company’s outstanding options, warrants and rights.

78

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

     The information required by this Item 13 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed within 120 days after the end of the Company’s fiscal year ended December 31, 2009.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this Item 14 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed within 120 days after the end of the Company’s fiscal year ended December 31, 2009.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of the report:

     (1) Financial statements:

     Report of Independent Registered Public Accounting Firm.

     Consolidated Statements of Operations — Years Ended December 31, 2009 and 2008.

     Consolidated Balance Sheets as of December 31, 2009 and 2008.

     Consolidated Statements of Cash Flows — Years Ended December 31, 2009 and 2008.

     Consolidated Statements of Stockholders’ (Deficit) Equity — Years Ended December 31, 2009 and 2008.

     Notes to Consolidated Financial Statements

     (2) Exhibits required by Item 601 of Regulation S-K and by Item 14(c).

     See Exhibit Index.

(b) Exhibits required by Item 601 of Regulation S-K.

     See Exhibit Index.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TLC VISION CORPORATION
By	/s/ JAMES B. TIFFANY
	James B. Tiffany, Chief Operating Officer

     March 31, 2010

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

SIGNATURE	TITLE	DATED
/s/ JAMES B. TIFFANY	Chief Operating Officer	March 31, 2010
James. B. Tiffany
/s/ MICHAEL F. GRIES	Chief Restructuring Officer	March 31, 2010
Michael F. Gries
/s/ WILLIAM J. MCMANUS	Interim Chief Financial Officer	March 31, 2010
William J. McManus
/s/ WARREN S. RUSTAND	Chairman of the Board of Directors and Director	March 31, 2010
Warren S. Rustand
/s/ RICHARD L. LINDSTROM, M.D.	Director	March 31, 2010
Richard L. Lindstrom, M.D.
/s/ TOBY S. WILT	Director	March 31, 2010
Toby S. Wilt
/s/ MICHAEL D. DEPAOLIS, O.D.	Director	March 31, 2010
Michael D. DePaolis, O.D.
/s/ JAY T. HOLMES	Director	March 31, 2010
Jay T. Holmes
/s/ OLDEN C. LEE	Director	March 31, 2010
Olden C. Lee
/s/ GARY F. JONAS	Director	March 31, 2010
Gary F. Jonas

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EXHIBIT INDEX

EXHIBIT
NO.		DESCRIPTION
	3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s 10-K filed with the Commission on August 28, 1998)
	3.2	Articles of Amendment (incorporated by reference to Exhibit 3.2 to the Company’s 10-K filed with the Commission on August 29, 2000)
	3.3	Articles of Continuance (incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S-4/A filed with the Commission on March 1, 2002 (file no. 333-71532))
	3.4	Articles of Amendment (incorporated by reference to Exhibit 4.2 to the Company’s Post Effective Amendment No. 1 on Form S-8 to the Company’s Registration Statement on Form S-4 filed with the Commission on May 14, 2002 (file no. 333-71532))
	3.5	By-Laws of the Company (incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S-4/A filed with the Commission on March 1, 2002 (file no. 333-71532))
	4.1	Shareholder Rights Plan Agreement dated March 4, 2005, as amended as of June 16, 2005, between the Company and CIBC Mellon Trust Company (incorporated by reference to Exhibit 99.2 to the Company’s 8-K filed with the Commission on June 20, 2005 (file no. 000-29302))
	10.1*	TLC Vision Corporation Amended and Restated Share Option Plan (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed with the Commission on June 23, 2004 (file no. 333-116769))
	10.2*	TLC Corporation 2004 Employee Share Purchase Plan (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-8 filed with the Commission on June 23, 2004 (file no. 333-116769))
	10.3	Amended and Restated Master Capital Lease Agreement with Advanced Medical Optics (“IntraLase Corp”), portions of which omitted pursuant to a request for confidential treatment filed separately with the Commission, dated December 18, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s 10-Q for the three and nine months ended September 30, 2008)
	10.4*	Consulting Agreement with Richard L. Lindstrom, M.D. dated July 1, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s 10-Q for the three and nine months ended September 30, 2008)
	10.5	Agreement and Plan of Merger By and Among TruVision, Inc. and TLC Wildcard Corp. and TLC Vision Corporation and TLC Vision (USA) Corporation and Lindsay T. Atwood dated as of October 27, 2005 (incorporated by reference to Exhibit 2.3 to the Company’s 10-Q for the three and nine months ended September 30, 2005).
	10.6	Amended and Restated Credit Agreement By and Among TLC Vision Corporation, TLC Vision (USA) Corporation, CIT Capital Securities, LLC, CIT Healthcare, LLC and Lenders dated as of June 21, 2007 (incorporated by reference to Exhibit 12.(B) to the Company’s Schedule TO-I/A filed June 22, 2007)
	10.7	Amendment No. 1 to the Amended and Restated Credit Agreement dated as of June 21, 2007 (incorporated by reference to Exhibit 10.23 to the Company’s 10-K for the year ended December 31, 2007)
	10.8	Limited Waiver and Amendment No. 2 to Credit Agreement dated as of March 31, 2009 (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 3, 2009).
	10.9	Limited Waiver, Consent and Amendment No. 3 to Credit Agreement dated as of June 5, 2009 (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 9, 2009).
	10.10	Limited Waiver, Consent and Amendment No. 4 to Credit Agreement dated as of June 30, 2009 (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2009).
	10.11	Amendment to Limited Waiver and Amendment No. 4 to Credit Agreement and Amendment No. 5 to Credit Agreement dated September 8, 2009 (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 14, 2009.)
	10.12	Limited Waiver dated September 30, 2009 (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2009.)

EXHIBIT
NO.		DESCRIPTION
	10.13	Amendment No. 2, entered August 10, 2009, to Agreement and Plan of Merger, dated as of October 27, 2005, by and among TruVision, Inc., TLC Wildcard Corp., TLC Vision Corporation, TLC Vision (USA) Corporation and Lindsay T. Atwood (incorporated by reference to Exhibit 10.4 to the Company’s 10-Q for the three and six months ended June 30, 2009).
	10.14	Limited Forbearance and Third Amendment to Transfer Rights Agreement, entered August 20, 2009, by and among Michael Aronsky, M.D., Carol Hoffman, M.D., George Pronesti, M.D., and Anthony Zacchei, M.D. (collectively “Kremer Minority Holders”), TLC Vision (USA) Corporation, DelVal ASC, LLC, and TLC Management, LLC (incorporated by reference to Exhibit 10.1 to the Company’s 10-Q for the three and nine months ended September 30, 2009).
	10.15*	Engagement Letter of Conway, Del Genio, Gries & Co., LLC by TLC Vision Corporation, dated as of February 16, 2009 (incorporated by reference to Exhibit 10.2 to the Company’s 10-Q for the three and nine months ended September 30, 2009).
	10.16*	Addendum to the Engagement Letter of Conway, Del Genio, Gries & Co., LLC by TLC Vision Corporation, dated April 23, 2009 (incorporated by reference to Exhibit 10.3 to the Company’s 10-Q for the three and nine months ended September 30, 2009).
	10.17	Senior Secured Super Priority Debtor-In-Possession Credit Agreement dated as of December 23, 2009 among TLC Vision (USA) Corporation, TLC Vision Corporation, TLC Management Services Inc., Cantor Fitzgerald Securities and lenders.
	10.18	Plan Sponsor Agreement dated February 3, 2010 by and among TLC Vision Corporation, TLC Vision (USA) Corporation, TLC Management Services, Inc., Thriller Acquisition Corp. and Thriller Canada Acquisition Corp (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities Exchange Commission on February 2, 2010).
	10.19	Amendment to the Plan Sponsor Agreement dated February 3, 2010 by and among TLC Vision Corporation, TLC Vision (USA) Corporation, TLC Management Services, Inc., Thriller Acquisition Corp. and Thriller Canada Acquisition Corp (incorporated by reference from TLC Vision Corporation’s Current Report on Form 8-K filed with the Securities Exchange Commission on February 12, 2010).
	10.20	Fourth Amended Joint Chapter 11 Plan of Reorganization dated as of March 24, 2010.
	21	List of the Company’s Subsidiaries
	23	Consent of Independent Registered Public Accounting Firm
	31.1	Chief Operating Officer’s Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.
	31.2	Chief Restructuring Officer’s Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.
	31.3	Interim Chief Executive Officer’s Certification required by Rule 13A-14(a) of the Securities Exchange Act of 1934.
	32.1	Chief Operating Officer’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350
	32.2	Chief Restructuring Officer’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350
	32.3	Interim Chief Financial Officer’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350

* Management contract or compensatory plan or arrangement.

EX-10.17

Exhibit 10.17

$15,000,000

SENIOR SECURED SUPER PRIORITY DEBTOR IN POSSESSION CREDIT AGREEMENT

Dated as of December 23, 2009

among

TLC VISION (USA) CORPORATION

TLC VISION CORPORATION

TLC MANAGEMENT SERVICES INC.

each as a debtor and a debtor in possession and as joint and several Borrowers

and

THE GUARANTORS NAMED HEREIN

as Guarantors

and

THE LENDERS NAMED HEREIN

as Lenders

and

CANTOR FITZGERALD SECURITIES

as Collateral Agent and Administrative Agent

TABLE OF CONTENTS

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

Section 1.01. Certain Defined Terms

Section 1.02. Computation of Time Periods; Other Definitional Provisions

Section 1.03. Accounting Terms

ARTICLE II AMOUNT AND TERMS OF THE TERM LOANS

Section 2.01. Term Loan Commitments

Section 2.02. Making the Term Loans

Section 2.03. Repayment of Term Loans

Section 2.04. Prepayments

Section 2.05. Interest

Section 2.06. Fees

Section 2.07. Increased Costs, Etc

Section 2.08. Payments and Computations

Section 2.09. Taxes

Section 2.10. Sharing of Payments, Etc

Section 2.11. Use of Proceeds

Section 2.12. Defaulting Lenders

Section 2.13. Evidence of Debt

Section 2.14. Extension of Maturity Date

Section 2.15. Joint and Several Obligations; Administrative Borrower

ARTICLE III CONDITIONS TO EFFECTIVENESS AND OF LENDING

Section 3.01. Conditions Precedent to Borrowing Interim Order Amount

Section 3.02. Conditions to Borrowings in Excess of the Interim Order Amount

Section 3.03. Conditions Precedent to All Borrowings

Section 3.04. Determinations Under Section 3.01 and 3.02

Section 3.05. Conditions Subsequent to Closing Date

ARTICLE IV REPRESENTATIONS AND WARRANTIES

Section 4.01. Representations and Warranties of Borrowers

ARTICLE V COVENANTS

Section 5.01. Affirmative Covenants

Section 5.02. Negative Covenants

Section 5.03. Reporting Requirements

Section 5.04. Financial Covenants

ARTICLE VI EVENTS OF DEFAULT

Section 6.01. Events of Default

Section 6.02. Remedies upon Default

TABLE OF CONTENTS
(continued)

ARTICLE VII THE AGENTS

Section 7.01. Authorization and Action

Section 7.02. Agents’ Reliance, Etc

Section 7.03. Rights as a Lender

Section 7.04. Lender Credit Decision

Section 7.05. Indemnification

Section 7.06. Successor Agents

Section 7.07. Notice of Default

Section 7.08. No Reliance on Administrative Agent’s Customer Identification Program

ARTICLE VIII PRIORITY AND COLLATERAL SECURITY

Section 8.01. Superpriority Claims and Collateral Security

Section 8.02. Collateral Security Perfection

Section 8.03. Guarantees

Section 8.04. No Discharge; Survival of Claims

ARTICLE IX MISCELLANEOUS

Section 9.01. Amendments, Etc

Section 9.02. Notices, Etc

Section 9.03. No Waiver; Remedies

Section 9.04. Costs and Expenses

Section 9.05. Right of Set-off

Section 9.06. Binding Effect

Section 9.07. Assignments and Participations

Section 9.08. Execution in Counterparts

Section 9.09. Confidentiality

Section 9.10. Public Disclosure

Section 9.11. Release or Subordination of Collateral/Release of Guarantor

Section 9.12. Patriot Act Notice

Section 9.13. Jurisdiction, Etc

Section 9.14. Governing Law

Section 9.15. Waiver of Jury Trial

Section 9.16. Release

SCHEDULES

Schedule I	-	Commitments and Lending Offices
Schedule II	-	Canadian Refractive Centers
Schedule III	-	Guarantors
Schedule 3.05		Conditions Subsequent to Closing Date
Schedule 4.01(b)	-	Loan Parties
Schedule 4.01(f)	-	Disclosed Litigation
Schedule 4.01(n)	-	Environmental Disclosure
Schedule 4.01(p)	-	Liens
Schedule 4.01(q)	-	Investments
Schedule 5.02(b)	-	Debt

EXHIBITS

Exhibit A	-	Form of Note
Exhibit B	-	Form of Notice of Borrowing
Exhibit C	-	Form of Assignment and Acceptance
Exhibit D-1	-	Form of U.S. Security Agreement
Exhibit D-2	-	Form of Canadian Security Agreement
Exhibit E	-	Form of Guaranty
Exhibit F-1	-	Form of Opinion of Canadian Counsel
Exhibit F-2	-	Form of Opinion of U.S. Counsel
Exhibit G	-	Form of Intercreditor Agreement

          This SENIOR SECURED SUPER PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT dated as of December 23, 2009 among TLC VISION (USA) CORPORATION, a Delaware corporation and a debtor and a debtor in possession (“Holdco”), TLC VISION CORPORATION, a New Brunswick corporation and a debtor and debtor in possession (“Parent”), TLC MANAGEMENT SERVICES INC., a Delaware corporation and a debtor and a debtor in possession (“TLC Management”, and together with Holdco and Parent, the “Borrowers”), the Guarantors (as hereinafter defined), the Lenders (as hereinafter defined), Cantor Fitzgerald Securities, as collateral agent (together with any successor collateral agent appointed pursuant to Article VII, the “Collateral Agent”) for the Secured Parties (as hereinafter defined) and administrative agent (together with any successor administrative agent appointed pursuant to Article VII, the “Administrative Agent” and, together with the Collateral Agent, the “Agents”) for the Lenders (as hereinafter defined).

PRELIMINARY STATEMENTS:

          WHEREAS, on December 21, 2009 (the “Petition Date”), the Borrowers commenced voluntary cases under Chapter 11 of the Bankruptcy Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”);

          WHEREAS, subsequent to the Petition Date, Parent filed a petition seeking ancillary relief under Part IV of the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) in the Ontario Superior Court of Justice (Commercial List) (the “Canadian Court”) (the “Canadian Case”, and together with the Chapter 11 Cases, the “Cases”));

          WHEREAS, the Borrowers intend to continue to operate their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code;

          WHEREAS, prior to the Petition Date, Holdco, as borrower (in its capacity as such, the “Prepetition Borrower”), Parent and the other guarantors party thereto, as guarantors (in their capacity as such, collectively, the “Prepetition Guarantors”), the lenders party thereto (the “Prepetition Lenders”), and Wells Fargo Bank, National Association, as administrative agent and collateral agent (in its capacity as such, the “Prepetition Agent”) entered into that certain Amended and Restated Credit Agreement dated as of June 21, 2007 (as amended and in effect from time to time, the “Prepetition Credit Agreement”), pursuant to which the Prepetition Lenders extended credit to Prepetition Borrower on the terms set forth therein;

          WHEREAS, as of the Petition Date, the Prepetition Lenders under the Prepetition Credit Agreement are owed, together with any and all interest, fees, expense reimbursement and indemnification obligations, reimbursement obligations in respect of letters of credit and other obligations under the Prepetition Credit Agreement, an aggregate principal amount equal to $101,715,175.71 and CAD $1,000,000 in obligations incurred directly by the Prepetition Borrower (the “Prepetition Lender Debt”);

          WHEREAS, the Borrowers have requested that the Lenders provide financing to the Borrowers consisting of a senior secured super priority term loan facility in a principal amount of up to $15,000,000 (the “Facility”) pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, the Lenders have indicated their willingness to agree to extend the Facility to the Borrowers, all on terms and conditions set forth herein and in the other Loan Documents and in accordance with Sections 364(c) and 364(d) of the Bankruptcy Code, so long as:

          (a) such postpetition credit obligations are (i) secured by Liens on substantially all of the property, rights and interests, real and personal, tangible and intangible, of the Borrowers, whether now owned or hereafter acquired, subject in priority only to certain Liens and the Carve-Out, as hereinafter provided, and (ii) given superpriority status as provided in the Interim Order and, on and after the entry thereof, the Final Order;

          (b) each Guarantor has jointly and severally guaranteed such postpetition credit obligations and each Guarantor’s obligations are secured by Liens on substantially all of the property and interest, real and personal, tangible and intangible, of such Guarantor, whether now owned or hereafter acquired,

          (c) the Prepetition Lenders shall receive certain adequate protection for use of cash collateral and the priming of their prepetition Liens securing the obligations of the Prepetition Borrower and Prepetition Guarantors in respect of the Prepetition Lender Debt; and

          WHEREAS, the Borrowers have agreed to provide such collateral security, superpriority claims and adequate protection, subject to the approval of the Bankruptcy Court.

          NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

          SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

          “Administrative Agent” has the meaning specified in the preamble to this Agreement.

          “Administrative Agents’ Account” means the account of the Administrative Agent specified by the Administrative Agent in writing to the Lenders from time to time.

          “Administrative Borrower” has the meaning specified in Section 2.15(h).

          “Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to vote 5% or more of the Voting Interests of such

Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise.

          “Agents” has the meaning specified in the preamble to this Agreement.

          “Agent Parties” has the meaning specified in Section 9.02(c).

          “Agreement” shall mean this Senior Secured Super Priority Debtor in Possession Credit Agreement, as amended, supplemented, replaced, or otherwise modified from time to time.

          “Approved Fund” means any Person (other than a natural person) engaged in making, purchasing, holding, or investing in commercial loans and similar extensions of credit and that is advised, administered, or managed by a Lender, a Prepetition Lender, an Affiliate of a Lender or an Affiliate of a Prepetition Lender (or an entity or an Affiliate of an entity that administers, advises or manages a Lender or a Prepetition Lender); and with respect to any Lender or Prepetition Lender that is an investment fund, any other investment fund that invests in loans and that is advised, administered or managed by the same investment advisor as such Lender or a Prepetition Lender or by an Affiliate of such investment advisor.

          “Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 9.07 or by the definition of “Eligible Assignee”), and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit C hereto or any other form approved by the Administrative Agent.

          “Bankruptcy Code” Title 11, United States Code, as now and hereafter in effect, or any applicable successor statute.

          “Bankruptcy Court” has the meaning specified in the recitals to this Agreement.

          “Bankruptcy Law” means the Bankruptcy Code, CCAA, BIA, or any similar foreign, federal or state law for the relief of debtors.

          “BIA” means the Bankruptcy and Insolvency Act (Canada).

          “Borrowers” has the meaning specified in the preamble to this Agreement.

          “Borrowing” means a borrowing hereunder consisting of simultaneous Term Loans made by the Lenders.

          “Budget” means a cash flow forecast for the period from the Petition Date to the date one hundred fifty (150) days after the Petition Date (provided, that to the extent the Maturity Date is extended in accordance with Section 2.14, the Administrative Borrower shall, concurrently with the prior written notice specified in Section 2.14, deliver to the Administrative Agent an updated Budget through the new Maturity Date, in form and substance reasonably satisfactory to the Required Lenders), which sets forth on a weekly basis cash receipts and disbursements (including, without limitation, line item entries for professional fees and expenses

by firm and the anticipated uses of the Facility) in form and substance satisfactory to the Required Lenders and the Borrowers, a summary of which shall be attached as Exhibit A to the Interim Order.

          “Business Day” means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Term Loans, on which dealings are carried on in the London interbank market.

          “Canadian Case” has the meaning specified in the recitals to this Agreement.

          “Canadian Court” has the meaning specified in the recitals to this Agreement.

          “Canadian Loan Parties” means, collectively, Parent and each Subsidiary of Parent organized under the laws of Canada or any province thereof.

          “Canadian Intellectual Property Security Agreement” means the Intellectual Property Security Agreement granted by certain Loan Parties in favor of the Collateral Agent for the Secured Parties substantially in the form of Exhibit A to the Canadian Security Agreement.

          “Canadian Plan” means a pension plan for employees of any Loan Party or Subsidiary or other Affiliate thereof, which plan is or is required to be registered under any Canadian federal or provincial pension benefits legislation and/or under the Income Tax Act (Canada).

          “Canadian Refractive Centers” means (a) the refractive centers owned by Parent and set forth on Schedule II hereto and (b) all of the Equity Interests owned by Parent in TLC The Laser Center (Moncton), Inc., an Ontario corporation.

          “Canadian Security Agreement” has the meaning specified in Section 3.01(a)(iii).

          “Capital Expenditures” means, for any Person for any period, the sum of, without duplication, (a) all expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a balance sheet of such Person or have a useful life of more than one year plus (b) the aggregate principal amount of all Debt (including Obligations under Capitalized Leases) assumed or incurred in connection with any such expenditures. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such proceeds, as the case may be.

          “Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases.

          “Carve Out” means, the following expenses: (a) statutory fees payable to the United States Trustee pursuant to 28 U.S.C. Section 1930(a)(6) and all fees and disbursements payable to the information officer in the Canadian Case as determined by order of the Canadian Court; and (b) subject to the terms and conditions of the Order, all fees and disbursements incurred by (i) legal counsel for the Parent in the Canadian Case, and (ii) the Borrowers and/or the Creditors’ Committee for any attorneys and a single financial advisor for the Borrowers and Creditors’ Committee respectively, retained by final order of the Bankruptcy Court (which order has not been reversed, vacated, or stayed, unless such stay has been vacated) pursuant to Sections 327 or 1103(a) of the Bankruptcy Code to the extent allowed by order of the Bankruptcy Court (which order has not been reversed, vacated, or stayed, unless such stay has been vacated) under Sections 328, 330 and/or 331 of the Bankruptcy Code and any interim compensation procedures order, but solely to the extent such fees and disbursements are within the corresponding amounts set forth in the Budget and were reflected as estimated fees and expenses of such professionals in the most recent Budget delivered by the Borrowers to the Administrative Agent prior to the date that such fees and disbursements were incurred; provided, that, following a notice to the Borrowers from the Administrative Agent of the occurrence of an Event of Default, the amount of the Carve Out shall not exceed $250,000 plus the amount of any compensation or reimbursement of budgeted expenses and fees incurred, awarded or paid prior to the occurrence of an Event of Default in respect of which the Carve Out is invoked.

          “Cases” has the meaning specified in the recitals to this Agreement.

          “Cash Equivalents” means any of the following, to the extent owned by Parent or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents, the Interim Order and the Final Order and having a maturity of not greater than 90 days from the date of issuance thereof: (a) readily marketable direct obligations of the Government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the Government of the United States, and (b) insured certificates of deposit of or time deposits with any commercial bank that (i) is a Lender or a member of the Federal Reserve System, (ii) is organized under the laws of the United States or any State thereof, and (iii) has combined capital and surplus of at least $1 billion.

          “CCAA” has the meaning specified in the recitals to this Agreement.

          “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, 42 U.S.C. § 9601 et seq.

          “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.

          “Change of Control” means the occurrence of any of the following: (a) Parent shall own less than 100% of the Voting Interests in any Borrower; or (b) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of Voting Interests of Parent (or other securities convertible into such Voting Interests) representing 30% or more of the combined voting power of all Voting

Interests of any Borrower; or (c) during any period of up to 24 consecutive months, commencing after the date of this Agreement, Continuing Directors shall cease for any reason to constitute a majority of the board of directors of Parent; or (d) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Parent.

          “Chapter 11 Cases” has the meaning specified in the recitals to this Agreement.

          “CIP Regulations” has the meaning specified in Section 7.08.

          “Closing Date” has the meaning specified in Section 3.01.

          “Collateral” means all “Collateral” referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

          “Collateral Agent” has the meaning specified in the preamble to this Agreement.

          “Collateral Agent’s Office” means, with respect to the Collateral Agent or any successor Collateral Agent, the office of such Agent as such Agent may from time to time specify to the Administrative Borrower and the Administrative Agent.

          “Collateral Documents” means the Security Agreements, the Intellectual Property Security Agreements, each of the collateral documents, instruments and agreements delivered pursuant to Section 5.01(j), and each other agreement that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties.

          “Commitment” means, with respect to any Lender at any time, the amount set forth opposite such Lender’s name on Schedule I hereto under the caption “Commitment” or, if such Lender has entered into one or more Assignment and Acceptances, the amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender’s “Commitment,” as such amount may be reduced at or prior to such time pursuant to Section 2.04.

          “Communications” has the meaning specified in Section 9.02(b).

          “Consenting Lenders” has the meaning set forth in the Plan Support Agreement in effect on the Closing Date.

          “Consolidated” refers to the consolidation of accounts in accordance with GAAP.

          “Continuing Directors” means the directors of Parent on the Closing Date and each other director if, in each case, such other director’s nomination for election to the board of directors of Parent is recommended by at least a majority of the then Continuing Directors.

          “Control Account Agreement” means a control account agreement executed and delivered as required by Section 5.01(l) and 5.02(t) hereof in favor of the Collateral Agent, for the benefit of the Secured Parties.

          “Controlled Cash” means collectively, the Owned Cash and Non-Owned Controlled Cash.

          “Controlled Loan Party” means any Loan Party that is either Parent or a wholly owned Subsidiary of Parent.

          “Creditors’ Committee” means the Official Unsecured Creditors’ Committee to be appointed by the United States Trustee in relation to the Chapter 11 Cases, as applicable.

          “Current Assets” of any Person means all assets of such Person that would, in accordance with GAAP, be classified as current assets of a company conducting a business the same as or similar to that of such Person, after deducting adequate reserves in each case in which a reserve is proper in accordance with GAAP.

          “Current Liabilities” of any Person means (a) all Debt of such Person except Funded Debt, (b) all amounts of Funded Debt of such Person required to be paid or prepaid within one year after such date and (c) all other items (including taxes accrued as estimated) that in accordance with GAAP would be classified as current liabilities of such Person.

          “Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 120 days incurred in the ordinary course of such Person’s business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interests in such Person or any other Person or any warrants, rights or options to acquire such Equity Interests, valued, in the case of Redeemable Preferred Interests, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Guaranteed Debt and Synthetic Debt of such Person and (i) all indebtedness and other payment Obligations referred to in clauses (a) through (h) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations.

          “Debt for Borrowed Money” of any Person means, at any date of determination, the sum of (a) all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person at such date, (b) all Obligations of such Person under

acceptance, letter of credit or similar facilities at such date and (c) all Synthetic Debt of such Person at such date.

          “Default” means any Event of Default or any event that would constitute an Event of Default but for the passage of time or the requirement that notice be given or both.

          “Default Interest” has the meaning set forth in Section 2.05(b).

          “Defaulted Loan” means, with respect to any Lender at any time, the portion of any Term Loan required to be made by such Lender to the Borrowers pursuant to Section 2.01 or Section 2.02 at or prior to such time that has not been made by such Lender or by the Administrative Agent for the account of such Lender pursuant to Section 2.02(d) as of such time. In the event that a portion of a Defaulted Loan shall be deemed made pursuant to Section 2.12(a), the remaining portion of such Defaulted Loan shall be considered a Defaulted Loan originally required to be made pursuant to Section 2.01 on the same date as the Defaulted Loan so deemed made in part.

          “Defaulted Amount” means, with respect to any Lender at any time, any amount required to be paid by such Lender to any Agent or any other Lender hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender to (a) the Administrative Agent pursuant to Section 2.02(d) to reimburse the Administrative Agent for the amount of any Term Loan made by the Administrative Agent for the account of such Lender, (b) any other Lender pursuant to Section 2.10 to purchase any participation in Term Loans owing to such other Lender and (c) any Agent pursuant to Section 7.05 to reimburse such Agent for such Lender’s ratable share of any amount required to be paid by the Lenders to such Agent as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.12(b), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be paid hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part.

          “Defaulting Lender” means, at any time, any Lender that, at such time, owes a Defaulted Loan or a Defaulted Amount.

          “DIP Proceeds Controlled Account” means the account of the Borrowers specified by the Administrative Borrower in writing to the Administrative Agent prior to the Closing Date, which shall be subject to a Control Account Agreement.

          “Disclosed Litigation” has the meaning specified in Section 3.01(c).

          “Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

          “Dollar” and “$” means the lawful money of the United States.

          “Eligible Assignee” means (a) a Lender; (b) a Prepetition Lender; (c) an Affiliate of a Lender; (d) an Affiliate of a Prepetition Lender; (e) an Approved Fund; and (f) any other Person (other than an individual) (i) approved by the Required Lenders or (ii) to whom a contemporaneous assignment of a pro rata portion of the assigning Lender’s Prepetition Lender Debt is made; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition.

          “Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, climate or natural resources, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions, damages or response costs and (b) by any governmental or regulatory authority or third party for damages, response costs, contribution, indemnification, cost recovery, compensation or declaratory or injunctive relief.

          “Environmental Law” means all applicable current and future Federal, state, local and foreign laws (including common laws), statutes, regulations, rules having the force and effect of law, ordinances, codes, orders, writs, judgments, injunctions, decrees or judicial or agency interpretations, policies or guidance, in each case relating to pollution or protection of the environment, climate, health, safety or natural resources, or the presence, release of, discharge of, exposure to, or the generation, manufacture, processing, distribution, use, handling, transportation, treatment, storage, disposal, recycling of or the arrangement for such activities, with respect to Hazardous Materials.

          “Environmental Permit” means any permit, approval, identification number, license, registration, notification, exemption or other authorization required under any Environmental Law.

          “Equity Interests” means, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

          “ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or that is under common control with any Loan Party, within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code.

          “Eurocurrency Liabilities” has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

          “Eurodollar Rate” means the higher of (a) the applicable British Bankers’ Association LIBOR Rate for deposits in Dollars for any Interest Period, as reported on Page 3750 (or such other page as may replace that page) on the Dow Jones Telerate Screen (British Bankers Association) or on any successor or substitute page of such service as of 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period; provided, that, if no such British Bankers’ Association LIBOR Rate is available to the Administrative Agent, the Eurodollar Rate for the relevant Interest Period shall instead be the rate at which deposits in Dollars are offered for such relevant Interest Period to major banks in the London interbank market for the applicable Interest Period as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period and (b) three percent (3%) per annum.

          “Eurodollar Rate Reserve Percentage” for any Interest Period for all Term Loans comprising part of the same Borrowing means the reserve percentage (if any) applicable two (2) Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Term Loans is determined) having a term equal to such Interest Period.

          “Events of Default” has the meaning specified in Section 6.01.

          “Exit Fee” has the meaning specified in Section 2.06.

          “Extension Fee” has the meaning specified in Section 2.06.

          “Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including, without limitation, aggregate amount of tax refunds received, pension plan reversions, proceeds of insurance (including, without limitation, any key man life insurance but excluding proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustment received in connection with any purchase agreement; provided, however, that an Extraordinary Receipt shall not include cash receipts received from proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards or payments are received by any Person in respect of any third party claim against such Person and applied to pay (or to reimburse such Person for its prior payment of) such claim and the costs and expenses of such Person with respect thereto.

          “Facility” has the meaning specified in the recitals to this Agreement.

          “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight

Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

          “Fee Letter” means the Second Amended and Restated Fee Letter dated December 18, 2009 between the Borrowers and the Administrative Agent.

          “Final Order” means a final order of the Bankruptcy Court authorizing and approving this Agreement and the other Loan Documents on a final basis and entered following a final hearing in form and substance satisfactory to the Administrative Agent and the Required Lenders, the Borrowers, and their respective counsel.

          “Final Order Amount” means, at any time, $15,000,000 minus the Interim Order Amount, as such amount may be reduced at or prior to such time pursuant to Section 5.02(e).

          “Final Order Funding Date” means the date on which the Final Order is entered.

          “Financial Advisor” means Gordian Group LLC or such other financial advisor as may be engaged by the Special Counsel from time to time.

          “Fiscal Year” means a fiscal year of Parent and its Consolidated Subsidiaries ending on December 31 in any calendar year.

          “Fund” means any Person (other than an individual) that is or will be engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

          “Funded Debt” of any Person means all Debt of such Person that by its terms matures more than one year after the date of determination or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year after such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year after such date, including, without limitation, all amounts of Funded Debt of such Person required to be paid or prepaid within one year after the date of determination.

          “GAAP” has the meaning specified in Section 1.03.

          “Governmental Authority” means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board, bureau or similar body, whether federal, state, provincial, territorial, local or foreign.

          “Governmental Authorization” means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or

similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority.

          “Guaranteed Debt” means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Guaranteed Debt shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guaranteed Debt is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Guaranteed Debt) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

          “Guarantors” means the Subsidiaries of Parent (other than Borrowers) listed on Schedule III hereto and each other Subsidiary of Parent that shall be required to execute and deliver a Guaranty pursuant to Section 5.01(j).

          “Guaranty” means the Guaranty made by the Guarantors in favor of the Secured Parties, substantially in the form of Exhibit E, together with each other guaranty and guaranty supplement delivered pursuant to Section 5.01(j), in each case as amended, amended and restated, modified or otherwise supplemented.

          “Hazardous Materials” means (a) any petroleum or petroleum products, by-products or breakdown products, and all other hydrocarbons, radioactive or nuclear materials, asbestos or asbestos-containing materials, polychlorinated biphenyls and radon gas, chlorofluorocarbons and all other ozone-depleting substances and (b) any other chemical, material or substance or waste designated, classified, prohibited, limited or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

          “Healthcare Law” means:

     (a) (i) the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b), (ii) the Stark Law (42 U.S.C. §1395nn and §1395(q)), (iii) the civil False Claims Act (31 U.S.C. §3729 et seq.), (iv) Sections 1320a-7a and 1320a-7b of Title 42 of the United States Code, (v)

applicable state statutes similar to any of the foregoing and (vi) the regulations promulgated pursuant to such federal and state statutes;

     (b) the federal Food, Drug & Cosmetic Act (21 U.S.C. §§301 et seq.) and the regulations promulgated pursuant thereto;

     (c) the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191) and the regulations promulgated pursuant thereto;

     (d) laws, rules and regulations governing Medicare and Medicaid;

     (e) the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173) and the regulations promulgated pursuant thereto;

     (f) quality, safety and accreditation standards and requirements of all applicable state laws or regulatory bodies;

     (g) any applicable law relating to the Borrowers’ or any Subsidiary’s ownership, management or operation of a healthcare facility or business, or assets used in connection therewith;

     (h) any applicable law relating to the billing or submission of claims, collection of accounts receivable, underwriting the cost of, or provision of management or administrative services in connection with, any and all of the foregoing, by Parent or any of its Subsidiaries; and

     (i) any and all other applicable healthcare laws, regulations, manual provisions, policies and administrative guidance having the force of law with respect to each of (a) through (h) above, as may be amended from time to time.

          “Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements.

          “Holdco” has the meaning specified in the preamble to this Agreement.

          “Indemnified Party” has the meaning specified in Section 9.04(b).

          “Information” means, all information received from Parent or any of its Subsidiaries relating to Parent or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to or in the possession of the Administrative Agent, any Lender or their Representatives on a non confidential basis prior to disclosure by Parent or any of its Subsidiaries; provided that, such information was or is clearly identified at the time of delivery as confidential or that is subsequently classified in a separate communication as confidential.

          “Initial Pledged Debt” has the meaning specified in the Security Agreements.

          “Initial Pledged Equity” has the meaning specified in the Security Agreements.

          “Intellectual Property Security Agreement” means, collectively, the Canadian Intellectual Property Security Agreement and the U.S. Intellectual Property Security Agreement.

          “Intercreditor Agreement” means an intercreditor agreement among the Agents, the Prepetition Agents and the Loan Parties, in substantially the form of Exhibit G hereto.

          “Interest Period” means, for each Term Loan comprising part of the same Borrowing, the period commencing on the date of such Term Loan, and ending on the last day of the period selected by the Administrative Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Administrative Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one month; provided, however, that:

     (a) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and

     (b) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the next succeeding calendar month, such Interest Period shall end on the last Business Day of such succeeding calendar month.

          “Interim Order” means the Interim Order pursuant to 11 U.S.C. §§ 105, 361, 362, 363, 364 and 507 (a) approving postpetition financing pursuant to the Facility and the making of Term Loans in an aggregate amount not to exceed the Interim Order Amount, (b) authorizing use of cash collateral, (c) granting Liens and providing superpriority administrative expense status, (d) granting adequate protection, (e) modifying the automatic stay, and (f) scheduling a final hearing with respect to the Chapter 11 Cases (including the Budget), to be entered on the docket of the Chapter 11 Cases within three (3) Business Days of the Petition Date.

          “Interim Order Amount” means, at any time, up to $7,500,000, as such amount may be reduced at or prior to such time pursuant to Section 5.02(e).

          “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

          “Investment” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation (or similar transaction)

and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (h) or (i) of the definition of “Debt” in respect of such Person.

          “Kremer Claims” has the meaning specified in Section 3.02(c).

          “Lenders” means the banks, financial institutions and other institutional lenders listed on the signature pages hereof as Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Lender or Person, as the case may be, shall be a party to this Agreement as a Lender.

          “Lending Office” means, with respect to any Lender, the office of such Lender specified as its “Lending Office” opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified), such other office of such Lender as such Lender may from time to time specify in writing to the Administrative Borrower and the Administrative Agent.

          “Lien” means any lien, security interest, hypothecation or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

          “Liquidity” means, as of any date, the aggregate amount of all Controlled Cash as of such date.

          “Liquidity Guidelines” means collectively, the TLC Current System Payment Guidelines and the TLC Current System Receivables Practices.

          “Loan Documents” means (a) this Agreement, (b) the Notes, (c) the Guaranties, (d) the Collateral Documents, and (e) the Fee Letter, each of (a) through (e) as amended.

          “Loan Parties” means the Borrowers and the Guarantors.

          “Margin Stock” has the meaning specified in Regulation U.

          “Material Adverse Change” means any material adverse change in the business, condition (financial or otherwise), operations, performance, assets or liabilities of Parent and its Subsidiaries, taken as a whole.

          “Material Adverse Effect” means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, assets or liabilities of Parent and its Subsidiaries, taken as a whole, (b) the rights and remedies of any Agent or any Lender under any Loan Document or (c) the ability of any Loan Party to perform its Obligations under any Loan Document to which it is or is to be a party.

          “Maturity Date” means the date (subject to extension in accordance with Section 2.14) that is the earliest of (a) (i) forty-five (45) days after the date of the entry of the Interim Order if a Final Order has not been entered by such date, or (ii) one hundred fifty (150) days after the Petition Date, (b) the effective date of the Plan of Reorganization, (c) the date on which

a sale or sales of all or substantially all of the Borrowers’ assets is consummated under Section 363 of the Bankruptcy Code, (d) the date of conversion of any of the Cases to a case under Chapter 7 of the Bankruptcy Code or any equivalent proceeding in the Canadian Case, (e) except as expressly contemplated by the Plan Term Sheet, a proposal or liquidation of any or all or substantially all of the assets of any of the Borrowers or Guarantors under the BIA, (f) the dismissal of any of the Cases, and (g) approval by the Bankruptcy Court of any debtor-in-possession financing for the Borrowers or any of its Affiliates (other than the Facility) unless (i) in the event that the Liens securing such indebtedness are senior to or pari passu with Liens securing the obligations under the Prepetition Credit Agreement but junior to the Liens securing the Facility, entry into such financing is consented to by the Required Prepetition Lenders and (ii) in the event that the Liens securing such indebtedness are senior to or pari passu with the Liens securing the Facility, entry into such financing is consented to by both the Required Lenders and the Required Prepetition Lenders.

          “Measurement Period” means each period of four consecutive fiscal quarters of Parent.

          “Medicaid” means, collectively, the healthcare assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§1396 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders or guidelines pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

          “Medicaid Regulations” means, collectively, (a) all federal statutes (whether set forth in Title XIX of the Social Security Act or elsewhere) affecting the medical assistance program established by Title XIX of the Social Security Act and any statutes succeeding thereto; (b) all applicable provisions of all federal rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (a) above and all federal administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (a) above; (c) all state statutes and plans for medical assistance enacted in connection with the statutes and provisions described in clauses (a) and (b) above; and (d) all applicable provisions of all rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (c) above and all state administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (c) above, in each case as may be amended, supplemented or otherwise modified from time to time.

          “Medical Reimbursement Programs” shall mean a collective reference to the Medicare and Medicaid programs and any other health care program operated by or financed in whole or in part by any foreign or domestic federal, state or local government.

          “Medicare” means, collectively, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§1395 et seq.) and any statutes succeeding thereto, and all laws, rules, regulations, manuals, orders or guidelines

pertaining to such program, in each case as the same may be amended, supplemented or otherwise modified from time to time.

          “Medicare Regulations” means, collectively, all federal statutes (whether set forth in Title XVIII of the Social Security Act or elsewhere) affecting the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act and any statutes succeeding thereto; together with all applicable provisions of all rules, regulations, manuals and orders and administrative, reimbursement and other guidelines having the force of law of all Governmental Authorities promulgated pursuant to or in connection with any of the foregoing, as each may be amended, supplemented or otherwise modified from time to time.

          “Moody’s” means Moody’s Investors Service, Inc.

          “Multiemployer Plan” means a multiemployer plan, as defined in Section 3(37) of ERISA, to which any Loan Party or any ERISA Affiliate is making or has an obligation to make contributions, or has within any of the preceding six plan years made or had an obligation to make contributions.

          “Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could reasonably be expected to have liability under Section 4043, 4064 or 4069 of ERISA in the event of a withdrawal from such plan or if such plan has been or were to be terminated.

          “Net Cash Proceeds” means:

     (c) with respect to any sale, lease, transfer or other disposition of any asset of Parent or any of its Subsidiaries (other than any sale, lease, transfer or other disposition of assets pursuant to clause Section 5.02(e), the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such sale, lease, transfer or other disposition (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Debt (other than Debt under the Loan Documents) that is secured by such asset and that is required to be repaid in connection with such sale, lease, transfer or other disposition thereof, (B) the reasonable and customary out-of-pocket costs, fees, commissions, premiums and expenses incurred by Parent or its Subsidiaries, (C) federal, state, provincial, foreign and local taxes reasonably estimated (on a Consolidated basis) to be actually payable within the current or the immediately succeeding tax year as a result of any gain recognized in connection therewith and (D) a reasonable reserve (which reserve shall be deposited into an escrow account with the Collateral Agent) for any purchase price adjustment or any indemnification payments (fixed and contingent) attributable to the seller’s obligations to the purchaser undertaken by Parent or any of its Subsidiaries in connection with such sale, lease, transfer or other disposition (but excluding any purchase price adjustment or any indemnity that, by its terms, will not under any circumstances be made prior to the final maturity of the Facility); provided, however, that Net Cash Proceeds shall not

include any such amounts to the extent such amounts are reinvested in capital assets used or useful in the business of Parent and its Subsidiaries within 6 months after the date of receipt thereof;

     (b) with respect to the incurrence or issuance of any Debt by Parent or any of its Subsidiaries (other than Debt incurred or issued pursuant to Section 5.02(b)), the excess of (i) the sum of the cash and Cash Equivalents received in connection with such incurrence or issuance over (ii) the underwriting discounts and commissions or other similar payments, and other out-of-pocket costs, fees, commissions, premiums and expenses incurred by Parent or any of its Subsidiaries in connection with such incurrence or issuance to the extent such amounts were not deducted in determining the amount referred to in clause (i);

     (c) with respect to the sale or issuance of any Equity Interests (including, without limitation, the receipt of any capital contribution) by Parent, the excess of (i) the sum of the cash and Cash Equivalents received in connection with such sale or issuance over (ii) the underwriting discounts and commissions or similar payments, and other out-of-pocket costs, fees, commissions, premiums and expenses, incurred by Parent or any of its Subsidiaries in connection with such sale or issuance to the extent such amounts were not deducted in determining the amount referred to in clause (i); provided, however, that Net Cash Proceeds shall not include any funds received in connection with the exercise of stock options granted to employees or directors of Parent or any of its Subsidiaries; and

     (d) with respect to any Extraordinary Receipt that is not otherwise included in clause (a), (b) or (c) above, the sum of the cash and Cash Equivalents received in connection therewith; provided, however, that Net Cash Proceeds shall not include any such amounts to the extent such amounts are reinvested in capital assets used or useful in the business of Parent and its Subsidiaries within 6 months after the date of receipt thereof.

          “Non-Owned Controlled Cash” means, as of any date, all cash (a) which is held in a deposit account over which a Controlled Loan Party has the exclusive contractual right and unrestricted power at any time to withdraw such cash, and in the ordinary course does so no less frequently than weekly, and (b) which, upon such withdrawal and deposit into a deposit account of a Controlled Loan Party subject to a Control Account Agreement, will then be Controlled Loan Parties Controlled Cash.

          “Note” means a promissory note of the Borrowers payable to the order of any Lender (or at a Lender’s request, payable to such Lender and its registered assigns), in substantially the form of Exhibit A hereto, evidencing the indebtedness of the Borrowers to such Lender resulting from the Term Loan(s) made by such Lender, as amended.

          “Notice of Borrowing” has the meaning specified in Section 2.02(a).

          “NPL” means the National Priorities List under CERCLA.

          “Obligation” means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such

Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged or stayed. Without limiting the generality of the foregoing, the Obligations of any Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document, and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party.

          “Orders” means the Interim Order and the Final Order; and “Order” means whichever of the Interim Order or the Final Order is then in effect.

          “Other Taxes” has the meaning specified in Section 2.09(b).

          “Owned Cash” means, as of any date, all cash and Cash Equivalents which are (a) legally, beneficially and exclusively owned by any Controlled Loan Party, (b) held in a deposit account or securities account of such Controlled Loan Party subject to a Control Account Agreement, (c) subject to no obligation to segregate or hold in trust for the benefit of third parties and (d) subject to no Liens other than Liens created under the Loan Documents and the Prepetition Loan Documents and customary Liens in favor of a bank or other depository institution securing obligations owed to such bank or other depository institution in respect of or arising out of such deposit account.

          “Parent” has the meaning specified in the recitals to this Agreement.

          “Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001.

          “PBGC” means the Pension Benefit Guaranty Corporation (or any successor).

          “Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced (except as are being challenged in good faith and by proper proceedings by the applicable Loan Party(ies) and for which adequate reserves in accordance with GAAP have been established on the books of such Loan Party(ies)): (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b); (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that (i) are not overdue for a period of more than 30 days and (ii) individually or together with all other Permitted Liens outstanding on any date of determination do not materially adversely affect the use of the property to which they relate; (c) pledges or deposits in the ordinary course of business to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) deposits to secure the performance of bids, trade contracts and leases (other than Debt), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) Liens securing judgments (or the payment of money) not constituting a

Default under Section 6.01(f) or securing appeal or other surety bonds related to such judgments; and (f) easements, rights of way and other similar encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes.

          “Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

          “Petition Date” has the meaning specified in the recitals hereto.

          “Plan” means a Single Employer Plan, a Multiple Employer Plan or a Canadian Plan.

          “Plan of Reorganization” means the plan of reorganization for the Borrowers, in form and substance satisfactory to the Required Lenders, that is consistent in all material respects with the terms of the Plan Support Agreement and Plan Term Sheet.

          “Plan Support Agreement” means that certain plan support agreement among the Loan Parties and the Consenting Lenders.

          “Plan Term Sheet” means the Plan Term Sheet attached as Exhibit A to the Plan Support Agreement.

          “Platform” has the meaning specified in Section 9.02(b).

          “Pledged Debt” has the meaning specified in the Security Agreements.

          “Pledged Equity” has the meaning specified in the Security Agreements.

          “PPSA” means the Personal Property Security Act (Ontario), the Civil Code of Quebec or any other applicable Canadian federal or provincial statute pertaining to the granting, perfecting, publication, priority or ranking of security interests, liens, hypothecs on property, whether real, personal, mixed, moveable or immoveable, and any successor statutes, together with any regulations thereunder, in each case as in effect from time to time, and any reference to any section of any such statute shall be construed to also refer to any successor section thereof.

          “Preferred Interests” means, with respect to any Person, Equity Interests issued by such Person that are entitled to a preference or priority over any other Equity Interests issued by such Person upon any distribution of such Person’s property and assets, whether by dividend or upon liquidation.

          “Prepetition Agents” has the meaning specified in the recitals to this Agreement.

          “Prepetition Borrower” has the meaning specified in the recitals to this Agreement.

          “Prepetition Credit Agreement” has the meaning specified in the recitals to this Agreement.

          “Prepetition Loan Documents” means the Prepetition Credit Agreement and all security and other documents relating thereto or entered into in connection therewith.

          “Prepetition Guarantors” has the meaning specified in the recitals to this Agreement.

          “Prepetition Lender Debt” has the meaning specified in the recitals to this Agreement.

          “Prepetition Lenders” has the meaning specified in the recitals to this Agreement.

          “Recognition Order” has the meaning specified in Section 3.01(l).

          “Redeemable” means, with respect to any Equity Interest, any such Equity Interest that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder.

          “Register” has the meaning specified in Section 9.07(d).

          “Registrar” has the meaning specified in Section 9.07(d).

          “Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.

          “Representatives” has the meaning specified in Section 9.09.

          “Required Lenders” means, at any time, Lenders owed or holding at least a majority in interest of the sum of (a) the aggregate outstanding principal amount of the Term Loans and (b) prior to the Final Order Funding Date, the aggregate unfunded portion (if any) of the Total Commitments at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (i) the aggregate principal amount of the Term Loans owing to such Lender (in its capacity as a Lender) and outstanding at such time and (ii) prior to the Final Order Funding Date, the aggregate unfunded portion (if any) of the Commitments of such Lender (in its capacity as a Lender) at such time.

          “Required Prepetition Lenders” shall have the same meaning as the term “Required Lenders” in the Prepetition Credit Agreement.

          “Requirement of Law” shall mean, as to any Person, (a) the partnership agreement, charter, certificate of incorporation, articles of incorporation, bylaws, operating agreement or other organizational or governing documents of such Person, (b) any federal, state or local law, treaty, ordinance, rule or regulation, and (c) any order, decree or determination of a

court, arbitrator or other Governmental Authority; in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

          “Responsible Officer” shall mean, as to any Person, either (a) its president, chief executive officer or chief financial officer, or (b) with respect to financial matters, its president, chief executive officer or chief financial officer.

          “Restructuring Monitor” means Mr. Robert Troisio of Morris Anderson & Associates Ltd.

          “S&P” means Standard & Poor’s, a division of the McGraw Hill Companies, Inc.

          “Secured Obligations” has the meaning specified in Section 2 of the Security Agreements.

          “Secured Parties” means the Agents and the Lenders.

          “Securities Account” has the meaning specified in the Security Agreements.

          “Securities Account Control Agreement” has the meaning specified in the Security Agreements.

          “Security Agreements” means, collectively, the Canadian Security Agreement and the U.S. Security Agreement.

          “Securitization” has the meaning specified in Section 9.07(j).

          “Securitization Liabilities” has the meaning specified in Section 9.07(j).

          “Securitization Party” has the meaning specified in Section 9.07(j).

          “Securitizing Party” has the meaning specified in Section 9.07(j).

          “Single Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, (a) that is or was maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) to which any Loan Party or any ERISA Affiliate contributes or has any obligation to contribute, or (c) with respect to which any Loan Party could have reasonably be expected to have any liability, either actual or contingent, under Section 4062 or 4069 of ERISA in the event such plan has been or were to be terminated.

          “Special Counsel” means Bingham McCutchen LLP or such other counsel as may be approved by the Required Lenders.

          “Subordinated Debt” means Debt subordinated to the obligations under this Agreement on terms reasonably satisfactory to the Required Lenders.

          “Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued

and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

          “Superpriority Claim” means a claim against a Borrower or its estate in the Chapter 11 Cases which is an administrative expense claim having priority over (a) any and all allowed administrative expenses, and (b) unsecured claims now existing or hereafter arising, including, without limitation, administrative expenses of the kind specified in Sections 105, 326, 328, 330, 331, 365, 503(a), 503(b), 507(b), 546(c), 546(d), 726 (to the extent permitted by law), 1113 or 1114 of the Bankruptcy Code, and any other provision of the Bankruptcy Code (including, subject to entry of the Final Order, Section 506(c)).

          “Synthetic Debt” means, with respect to any Person, without duplication of any clause within the definition of “Debt,” all (a) Obligations of such Person under any lease that is treated as an operating lease for financial accounting purposes and a financing lease for tax purposes (i.e., a “synthetic lease”), (b) Obligations of such Person in respect of transactions entered into by such Person, the proceeds from which would be reflected on the financial statements of such Person in accordance with GAAP as cash flows from financings at the time such transaction was entered into (other than as a result of the issuance of Equity Interests) and (c) Obligations of such Person in respect of other transactions entered into by such Person that are not otherwise addressed in the definition of “Debt” or in clause (a) or (b) above that are intended to function primarily as a borrowing of funds (including, without limitation, any minority interest transactions that function primarily as a borrowing).

          “Taxes” has the meaning specified in Section 2.09(a).

          “Term Loan” has the meaning specified in Section 2.01.

          “Term Loan Percentage” means as to any Lender (a) at any time before the Closing Date, the percentage which such Lender’s Commitment then constitutes of the Total Commitments, (b) at any time after the Closing Date but before the Final Order Funding Date, the percentage which the sum of (i) the aggregate principal amount of such Lender’s Term Loans then outstanding and (ii) the unfunded portion (if any) of such Lender’s Commitments then constitutes of the sum of (A) the aggregate principal amount of the Term Loans then outstanding and (B) the unfunded portion (if any) of the Total Commitments on such date), and (c) at any time after the Final Order Funding Date, the percentage which the aggregate principal amount of such Lender’s Term Loans then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding.

          “Total Commitments” means the aggregate Commitments of all Lenders.

          “TLC Current System Payment Guidelines” means the payment guidelines maintained by Parent and its Subsidiaries as of the date hereof with respect to the terms and conditions governing payments to be made to trade creditors.

          “TLC Current System Receivables Practices” means the practices maintained by Parent and its Subsidiaries as of the date hereof with respect to the terms on which receivables are settled, compromised and/or paid.

          “U.S. Debtors” means Holdco and TLC Management.

          “U.S. Intellectual Property Security Agreement” means the Intellectual Property Security Agreement granted by certain Loan Parties in favor of the Collateral Agent for the Secured Parties substantially in the form of Exhibit A to the U.S. Security Agreement.

          “U.S. Security Agreement” has the meaning specified in Section 3.01(a)(iii).

          “Voting Interests” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

          “Working Capital” shall mean the remainder of (a) Current Assets less Cash Equivalents minus (b) Current Liabilities less Debt referred to in subclause (a) of the definition thereof due within 12 months of the date of determination.

          SECTION 1.02. Computation of Time Periods; Other Definitional Provisions. In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.” References in the Loan Documents to any agreement or contract “as amended” shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms.

          SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(g) (“GAAP”).

ARTICLE II

AMOUNT AND TERMS OF THE TERM LOANS

          SECTION 2.01. Term Loan Commitments. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make a term loan or loans (each, a “Term Loan”) to the Borrowers in two (2) advances, which shall, in each case, be deposited into the DIP Proceeds Controlled Account. The Borrowers shall only be entitled to withdraw amounts from the DIP Proceeds Controlled Account if (a) the aggregate amount of Controlled Cash in all accounts (other than the DIP Proceeds Controlled Account held by the Borrowers (whether or not subject to a Control Account Agreement) is less than $3,000,000 at such time, (b) no Default or Event of Default has occurred and is continuing (other than with respect to the initial advance, any Default or Event of Default arising solely as a result of a breach of Section 5.04(b) hereof), and (c) the

Administrative Agent shall have received a certificate from the Chief Financial Officer of the Administrative Borrower, in form and substance reasonably satisfactory to the Required Lenders, certifying as to the aggregate amount of Controlled Cash in all accounts (other than the DIP Proceeds Controlled Account) held by the Borrowers (whether or not subject to a Control Account Agreement). The first advance of Term Loans shall be made on the Closing Date in an aggregate amount for each Lender equal to such Lender’s Term Loan Percentage of the Interim Order Amount, but in no event shall such amount exceed such Lender’s Commitment. The second and final advance of Term Loans shall be made on the Final Order Funding Date in an aggregate amount for each Lender equal to such Lender’s Term Loan Percentage of the Final Order Amount; provided, that with respect to each Lender, the aggregate amount of the Term Loans made pursuant to this sentence and the previous sentence shall not exceed such Lender’s Commitment. Each Term Loan may be repaid or prepaid in accordance with the provisions hereof, but once repaid or prepaid may not be reborrowed.

          SECTION 2.02. Making the Term Loans. (a) Each Borrowing shall be made on notice, given not later than 12:00 p.m. (New York City time) on the date of the hearing for approval of the Interim Order or the Final Order, as the case may be, by the Administrative Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof by telecopier or electronic communication. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be by telephone, confirmed immediately in writing, or by telecopier or electronic communication, in substantially the form of Exhibit B hereto, specifying therein the requested Interim Order Amount in the case of the Borrowing on the Closing Date or Final Order Amount in the case of the Borrowing on the Final Order Funding Date. Each Lender shall, before 11:00 a.m. (New York City time) on the date of such Borrowing, make available for the account of its Lending Office to the Administrative Agent at the Administrative Agent’s Account, in same day funds, such Lender’s ratable portion of such Borrowing in accordance with the respective Commitments under the Facility of the Lenders. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Borrowers by transfer of such funds to the DIP Proceeds Controlled Account in like funds as received.

          (b) Each Notice of Borrowing shall be irrevocable and binding on the Borrowers. The Borrowers shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Term Loans to be made by such Lender as part of such Borrowing when such Term Loans, as a result of such failure, is not made on such date.

          (c) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrowers on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable

portion available to the Administrative Agent, such Lender and the Borrowers severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to the Borrowers until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Borrowers, the interest rate applicable at such time under Section 2.05 to Term Loans comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender’s Term Loan as part of such Borrowing for all purposes.

          (d) The failure of any Lender to make the Term Loans to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Term Loans on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Term Loans to be made by such other Lender on the date of any Borrowing.

          SECTION 2.03. Repayment of Term Loans. The Borrowers shall repay to the Administrative Agent for the ratable account of the Lenders the aggregate outstanding principal amount of the Term Loans on the Maturity Date (or on such earlier date on which the Term Loans become due and payable pursuant to Article VI), together with any and all accrued and unpaid interest thereon (which amounts shall be reduced as a result of the application of prepayments in accordance with Section 2.04).

          SECTION 2.04. Prepayments. (a) Optional. Any Borrower may, upon at least one Business Day’s notice to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given, the Borrowers shall prepay the outstanding aggregate principal amount of the Term Loans comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $500,000 or an integral multiple of $500,000 in excess thereof and (y) if any prepayment is made on a date other than the last day of an Interest Period for such Term Loan, the Borrowers shall also pay any amounts owing pursuant to Section 9.04(c).

          (b) Mandatory. (i) If any Loan Party or any of its Subsidiaries Disposes of any property or assets, including, without limitation, any of the Canadian Refractive Centers, whether pursuant to a sale under Section 363 of the Bankruptcy Code or otherwise (other than any Disposition of any property or assets permitted by Section 5.02(e)) and sales or issuances by Parent of its Equity Interests referred to in clause (ii) below), the Borrowers shall prepay an aggregate principal amount of Term Loans equal to 100% of all such Net Cash Proceeds immediately upon receipt thereof by such Loan Party or such Subsidiary. The Interim Order Amount and the Final Order Amount, as applicable, shall be reduced by an amount equal to the amount of Net Cash Proceeds from any sale of property or assets described in this Section 2.04(b)(i) in excess of the amount applied to reduce the aggregate outstanding amount of the Term Loans to zero, unless otherwise agreed by the Required Lenders.

          (ii) Upon the sale or issuance by any Loan Party or any of its Subsidiaries of any of its Equity Interests (other than sales or issuances of Equity

Interests in connection with customary compensation or benefit programs), the Borrowers shall prepay an aggregate principal amount of Term Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof.

          (iii) Upon the incurrence or issuance by any Loan Party or any of its Subsidiaries of any Indebtedness (other than Indebtedness expressly permitted to be incurred or issued pursuant to Section 5.02(b)), the Borrowers shall prepay an aggregate principal amount of Term Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary.

          (iv) Upon the receipt of any proceeds from an Extraordinary Receipt not otherwise included in this Section 2.04(b), the Borrowers shall prepay an aggregate principal amount of Term Loans equal to 100% of all Net Cash Proceeds received therefrom immediately upon receipt thereof by such Loan Party or such Subsidiary.

          (v) All prepayments under this subsection (b) shall be made together with (A) accrued interest to the date of such prepayment on the principal amount prepaid, and (B) any amounts owing pursuant to Section 9.04(c).

          (vi) Notwithstanding anything contained herein to the contrary, Section 2.04(b)(i) – (iv) shall not apply to any of the following transactions:

            (A) incurrence of trade payables;

            (B) vendor or leasehold financing; or

            (C) distributions or dividends paid to minority partners or received from majority owners governed by existing operating agreements or practice,

     in the case of each of (A), (B), and (C), in compliance with the Budget (subject to the proviso in Section 5.04(a)).

          SECTION 2.05. Interest. (a) Scheduled Interest. The Borrowers shall jointly and severally pay interest on the unpaid principal amount of each Term Loan owing to each Lender from the date of such Term Loan until such principal amount shall be paid in full at a rate per annum equal at all times during each Interest Period for such Term Loan to the sum of (A) the Eurodollar Rate for such Interest Period for such Term Loan plus (B) ten percent (10.00%) per annum, payable in cash in arrears on the last day of such Interest Period and the date such Term Loan shall be paid in full.

          (b) Default Interest. Upon the occurrence and during the continuance of an Event of Default, the principal amount of all Term Loans and all other due and unpaid Obligations shall bear interest (“Default Interest”) at a rate per annum equal at all times to 2.00% per annum above the rate per annum described in Section 2.05(a). All such interest shall be payable on demand by the Required Lenders in cash.

          (c) Notice of Interest Period and Interest Rate. Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), or a notice of selection of an Interest Period pursuant to the terms of the definition of “Interest Period,” the Administrative Agent shall give notice to the Administrative Borrower and each Lender of the applicable Interest Period and the interest rate determined by the Administrative Agent for purposes of clause (a) above.

          SECTION 2.06. Fees. The Borrowers jointly and severally agree to pay to the Administrative Agent, for the pro rata accounts of the Lenders, (a) an exit fee (the “Exit Fee”) equal to 2.00% of the aggregate principal amount of the Facility on the Closing Date, payable on the earlier of (i) the Maturity Date, and (ii) the date on which the Facility is paid in full and all Commitments of the Lenders are terminated in full, (b) an extension fee (the “Extension Fee”) equal to 2.00% of the outstanding amount of the Facility, payable on any date the Maturity Date is extended pursuant to Section 2.14 hereof or otherwise, and (c) an unused fee equal to 0.75% of the average daily undrawn amount of the Facility during each calendar quarter, payable in arrears quarterly on the last day of each March, June, September, and December, commencing December 31, 2009, and on the Maturity Date. The Borrowers further agree jointly and severally to pay to the Administrative Agent for its own account or, as the case may be, for the account of the Lenders, the fees in the amounts and on the dates from time to time agreed to in writing by the Administrative Borrower on the one hand and the Administrative Agent and/or any Lenders, on the other.

          SECTION 2.07. Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), in each case after the date of this Agreement or, if later, the date on which the affected Lender became a Lender under this Agreement, there shall be any increase in the cost to any Lender of agreeing to make or of making, funding or maintaining Term Loans (excluding, for purposes of this Section 2.07, any such increased costs resulting from (A) Taxes or Other Taxes (as to which Section 2.09 shall govern) and (B) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender is organized or has its Lending Office or any political subdivision thereof), then the Borrowers shall from time to time, upon written demand by such Lender to the Administrative Borrower (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost; and provided, however, that the Borrowers shall not be responsible for costs under this Section 2.07(a) arising more than 180 days prior to receipt by the Administrative Borrower of the demand from the affected Lender pursuant to this Section 2.07(a); and provided further that a Lender claiming additional amounts under this Section 2.07(a) agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid the need for, or reduce the amount of, such increased cost that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate as to the amount of such increased cost, submitted to the Administrative Borrower by such Lender, shall be conclusive and binding for all purposes, absent manifest error.

          (b) If any Lender determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law), in each case after the date of this Agreement or, if later, the date on which the affected Lender became a Lender under this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Lender or any Person controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender’s commitment to lend hereunder, then, upon written demand by such Lender to the Administrative Borrower (with a copy of such demand to the Administrative Agent), the Borrowers shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender’s commitment to lend hereunder; provided, however, that the Borrowers shall not be responsible for costs under this Section 2.07(b) arising more than 180 days prior to receipt by the Administrative Borrower of the demand from the affected Lender pursuant to this Section 2.07(b). A certificate as to such amounts submitted to the Administrative Borrower by such Lender shall be conclusive and binding for all purposes, absent manifest error.

          (c) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Lending Office to perform its obligations hereunder to make Term Loans as to which the rate of interest is determined by reference to the Eurodollar Rate or to continue to fund or maintain Term Loans hereunder as to which the rate of interest is determined by reference to the Eurodollar Rate, then, on notice thereof and demand therefor by such Lender to the Administrative Borrower through the Administrative Agent, (i) the obligation of such Lender to make Term Loans as to which the rate of interest is determined with reference to the Eurodollar Rate shall forthwith be suspended until the Administrative Agent shall notify the Administrative Borrower that such Lender has determined that the circumstances causing such suspension no longer exist (but such Lender shall make Term Loans in an amount equal to the amount of Term Loans that would have been made by such Lender at such time in the absence of such circumstances and such Term Loans shall bear interest at the rate equal to such Lender’s actual costs of making or maintaining such Term Loans plus ten percent (10.00%) per annum), and (ii) such Lender’s Term Loans then bearing interest at a rate of interest determined with reference to the Eurodollar Rate, if any, shall be converted automatically to Term Loans bearing interest at the rate equal to such Lender’s actual costs of making or maintaining such Term Loans plus ten percent (10.00%) per annum on the last day of each Interest Period applicable to such Term Loans or within such earlier period as may be required by law; provided, however, that, before making any such demand, such Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would allow such Lender or its Lending Office to continue to perform its obligations to make Term Loans or to continue to fund or maintain Term Loans and would not, in the commercially reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

          (d) In the event that any Lender demands payment of costs or additional amounts pursuant to this Section 2.07 or Section 2.09 or asserts, pursuant to Section 2.07(c), that

it is unlawful for such Lender to make Term Loans bearing interest at a rate of interest determined with reference to the Eurodollar Rate or becomes a Defaulting Lender then (subject to such Lender’s right to rescind such demand or assertion within ten (10) days after the notice from the Administrative Borrower referred to below) the Administrative Borrower may, upon twenty (20) days’ prior written notice to such Lender and the Administrative Agent, elect to cause such Lender to assign its Term Loans and Commitments in full to one or more Persons selected by the Administrative Borrower so long as (i) each such Person satisfies the criteria of an Eligible Assignee and is reasonably satisfactory to the Administrative Agent, (ii) such Lender receives payment in full in cash of the outstanding principal amount of all Term Loans made by it and all accrued and unpaid interest thereon and all other amounts due and payable to such Lender as of the date of such assignment (including, without limitation, amounts owing pursuant to this Section 2.07 and Section 2.09) and (iii) each such assignee agrees to accept such assignment and to assume all obligations of such Lender hereunder in accordance with Section 9.07.

          SECTION 2.08. Payments and Computations. (a) The Borrowers shall make each payment hereunder and under the other Loan Documents, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.12), not later than 11:00 a.m. (New York City time) on the day when due in U.S. dollars to the Administrative Agent at the Administrative Agent’s Account in same day funds, with payments being received by the Administrative Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment by the Borrowers is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the other Loan Documents to more than one Lender, to such Lenders for the account of their respective Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lenders and (ii) if such payment by the Borrowers is in respect of any Obligation then payable hereunder to one Lender, to such Lender for the account of its Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the other Loan Documents in respect of the interest assigned thereby to the assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.

          (b) The Borrowers hereby authorize each Lender and each of its Affiliates, if and to the extent payment owed to such Lender is not made when due hereunder or under the other Loan Documents to charge from time to time, to the fullest extent permitted by law, against any or all of the Borrowers’ accounts with such Lender or such Affiliate any amount so due.

          (c) All computations of interest shall be made by the Administrative Agent based on the Eurodollar Rate or the Federal Funds Rate, as applicable, and each computation of interest or of fees, as applicable, shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each

determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

          (d) For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest or any fee to be paid hereunder or in connection herewith is to be calculated on the basis of a 360-day or 365-day year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or 365, as applicable. The rates of interest under this Agreement are nominal rates, and not effective rates or yields. The principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement.

          (e) If any provision of this Agreement would oblige a Canadian Loan Party to make any payment of interest or other amount payable to any Secured Party in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by that Secured Party of “interest” at a “criminal rate” (as such terms are construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, that would not be so prohibited by applicable law or so result in a receipt by that Secured Party of “interest” at a “criminal rate”, such adjustment to be effected, to the extent necessary (but only to the extent necessary), as follows:

          (i) first, by reducing the amount or rate of interest; and

          (ii) thereafter, by reducing any fees, commissions, costs, expenses, premiums and other amounts required to be paid which would constitute interest for purposes of section 347 of the Criminal Code (Canada).

          (f) Whenever any payment hereunder or under the other Loan Documents shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest; provided, however, that, if such extension would cause payment of interest on or principal of Term Loans to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

          (g) Unless the Administrative Agent shall have received notice from the Administrative Borrower prior to the date on which any payment is due to any Lender hereunder that the Borrowers will not make such payment in full, the Administrative Agent may assume that the Borrowers have made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrowers shall not have so made such payment in full to the Administrative Agent, each such Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate.

          (h) If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which, such funds are to be applied, unless otherwise directed by the Lenders, the Administrative Agent, after the payment of all expenses due under the Loan Documents, shall distribute such funds to each of the Lenders in accordance with such Lender’s pro rata share of the aggregate principal amount of all Term Loans outstanding at such time, in payment of such of the outstanding Term Loans or other Obligations then owing to such Lender.

          SECTION 2.09. Taxes. (a) Any and all payments by any Loan Party to or for the account of any Lender or any Agent hereunder or under any other Loan Document shall be made, in accordance with Section 2.08 or the applicable provisions of such other Loan Document, if any, free and clear of and without deduction for any and all present or future taxes, levies, imposts, fees, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and each Agent, taxes that are imposed on its overall net income by the United States, including any branch profit taxes, and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof), including any branch profits taxes, by the state or foreign jurisdiction under the laws of which such Lender or such Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof), including any branch profits taxes by the state or foreign jurisdiction of such Lender’s Lending Office or any political subdivision thereof or where such Lenders are otherwise conducting business (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under any other Loan Document being hereinafter referred to as “Taxes”). If any Loan Party shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender or any Agent, (i) the sum payable by such Loan Party shall be increased as may be necessary so that after such Loan Party and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.09) such Lender or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make all such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

          (b) In addition, each Loan Party shall pay any present or future stamp, documentary, excise, property, intangible, mortgage recording or similar taxes, charges or levies that arise from any payment made by such Loan Party hereunder or under any other Loan Documents or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement or the other Loan Documents (hereinafter referred to as “Other Taxes”).

          (c) The Loan Parties shall indemnify each Lender and each Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 2.09, imposed on or paid by such Lender or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto, whether or not such amounts were correctly or legally imposed by the relevant

Governmental Authority. This indemnification shall be made within 30 days from the date such Lender or such Agent (as the case may be) makes written demand therefor.

          (d) Within 30 days after the date of any payment of Taxes, the appropriate Loan Party shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment, to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Administrative Agent. In the case of any payment hereunder or under the other Loan Documents by or on behalf of a Loan Party through an account or branch outside the United States or by or on behalf of a Loan Party by a payor that is not a United States person, if such Loan Party determines that no Taxes are payable in respect thereof, such Loan Party shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 2.09, the terms “United States” and “United States person” shall have the meanings specified in Section 7701 of the Internal Revenue Code.

          (e) Each Lender entitled to an exemption from, or reduction or, withholding tax shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender party to this Agreement as of the date hereof and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender in the case of each other Lender, and from time to time thereafter as reasonably requested in writing by the Administrative Borrower (but only so long thereafter as such Lender remains lawfully able to do so), provide each of the Administrative Agent and the Administrative Borrower with two original Internal Revenue Service Forms W-8ECI or W-8BEN or (in the case of a Lender that has certified in writing to the Administrative Agent that it is not (i) a “bank” (as defined in Section 881(c)(3)(A) of the Internal Revenue Code), (ii) a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of any Loan Party or (iii) a controlled foreign corporation related to any Loan Party (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), Internal Revenue Service Form W-8BEN, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, or any such form or forms as may be required under the laws of any jurisdiction other than the United States as a condition to exemption from, or reduction of, withholding tax in such jurisdiction, certifying that such Lender is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Agreement or any other Loan Document or, in the case of a Lender that has certified that it is not a “bank” as described above, certifying that such Lender is a foreign corporation, partnership, estate or trust. If the forms provided by a Lender at the time such Lender first becomes a party to this Agreement indicate a United States or other interest withholding tax rate, as applicable, in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender becomes a party to this Agreement, the Lender assignor was entitled to payments under subsection (a) of this Section 2.09 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) withholding tax, if any, applicable with respect to the Lender assignee on such date. If any form or document referred to

in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service Form W-8BEN or W-8ECI or the related certificate described above, or any forms required by any jurisdiction other than the United States that the applicable Lender reasonably considers to be confidential, such Lender shall give notice thereof to the Administrative Borrower and shall not be obligated to include in such form or document such confidential information.

          (f) For any period with respect to which a Lender has failed to provide the Administrative Borrower with the appropriate form, certificate or other document described in subsection (e) above (other than if such failure is due to a change in law, or in the interpretation or application thereof, occurring after the date on which a form, certificate or other document originally was required to be provided or if such form, certificate or other document otherwise is not required under subsection (e) above), such Lender shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.09 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Lender become subject to Taxes because of its failure to deliver a form, certificate or other document required hereunder, the Loan Parties shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

          SECTION 2.10. Sharing of Payments, Etc. If any Lender shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment or participation pursuant to Section 9.07) (a) on account of Obligations due and payable to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender at such time to (ii) the aggregate amount of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time) of payments on account of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time obtained by all the Lenders at such time or (b) on account of Obligations owing (but not due and payable) to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lenders hereunder and under the other Loan Documents at such time) of payments on account of the Obligations owing (but not due and payable) to all Lenders hereunder and under the other Loan Documents at such time obtained by all Lenders at such time, such Lender shall forthwith purchase from the other Lender such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and each such other Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender’s ratable share (according to the proportion of (A) the purchase price paid to such Lender to (B) the aggregate purchase price paid to all Lenders) of such recovery together with an amount equal to such Lender’s ratable share (according to the proportion of (1) the amount of such other Lender’s required repayment to (2) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Loan

Parties agree that any Lender so purchasing an interest or participating interest from another Lender pursuant to this Section 2.10 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such interest or participating interest, as the case may be, as fully as if such Lender were the direct creditor of the Loan Parties in the amount of such interest or participating interest, as the case may be.

          SECTION 2.11. Use of Proceeds. The proceeds of the Term Loans shall be used solely in accordance with the Budget in compliance with Section 5.04(a).

          SECTION 2.12. Defaulting Lenders. (a) In the event that, at any one time, (i) any Lender shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Loan to the Borrowers and (iii) the Borrowers shall be jointly and severally required to make any payment hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then the Borrowers (or any of them) may, so long as no Default shall occur or be continuing at such time and to the fullest extent permitted by applicable law, set off and otherwise apply the Obligation of the Borrowers to make such payment to or for the account of such Defaulting Lender against the obligation of such Defaulting Lender to make such Defaulted Loan. In the event that, on any date, the Borrowers (or any of them) shall so set off and otherwise apply their obligation to make any such payment against the obligation of such Defaulting Lender to make any such Defaulted Loan on or prior to such date, the amount so set off and otherwise applied by the Borrowers shall constitute for all purposes of this Agreement and the other Loan Documents a Term Loan by such Defaulting Lender made on the date of such setoff under the Facility pursuant to which such Defaulted Loan was originally required to have been made pursuant to Section 2.01. Such Term Loans shall be considered, for all purposes of this Agreement, to comprise part of the Borrowing in connection with which such Defaulted Loan was originally required to have been made pursuant to Section 2.01. The Administrative Borrower shall notify the Administrative Agent at any time the Borrowers(or any of them) exercise their right of set-off pursuant to this subsection (a) and shall set forth in such notice (A) the name of the Defaulting Lender and the Defaulted Loan required to be made by such Defaulting Lender and (B) the amount set off and otherwise applied in respect of such Defaulted Loan pursuant to this subsection (a). Any portion of such payment otherwise required to be made by the Borrowers to or for the account of such Defaulting Lender which is paid by the Borrowers, after giving effect to the amount set off and otherwise applied by the Borrowers pursuant to this subsection (a), shall be applied by the Administrative Agent as specified in subsection (b) or (c) of this Section 2.12.

          (b) In the event that, at any one time, (i) any Lender shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to any Agent or any of the other Lenders and (iii) the Borrowers shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf of such other Agents or such other Lenders and to the fullest extent permitted by applicable law, apply at such time the amount so paid by the Borrowers to or for the account of such Defaulting Lender to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such

Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall be retained by the Administrative Agent or distributed by the Administrative Agent to such other Agents or such other Lenders in the following order of priority:

          (i) first, to the Agents for any Defaulted Amounts then owing to them, in their capacities as such, ratably in accordance with such respective Defaulted Amounts then owing to the Agents;

          (ii) second, to the Lenders for any Defaulted Amounts then owing to them, ratably in accordance with such respective Defaulted Amounts then owing to them; and

          (iii) third, to such Defaulting Lender.

Any portion of such amount paid by the Borrowers for the account of such Defaulting Lender remaining after giving effect to the amount applied by the Administrative Agent pursuant to this subsection (b) shall be distributed by the Administrative Agent to such Lender and applied by such Lender to the Obligations owing to such Lender at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time.

          (c) The rights and remedies against a Defaulting Lender under this Section 2.12 are in addition to other rights and remedies that the Borrowers may have against such Defaulting Lender with respect to any Defaulted Loan and that any Agent or any Lender may have against such Defaulting Lender with respect to any Defaulted Amount.

          SECTION 2.13. Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Term Loan owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. The Borrowers agree that upon notice by any Lender to the Administrative Borrower (with a copy of such notice to the Administrative Agent) to the effect that a promissory note or other evidence of indebtedness is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Term Loans owing to, or to be made by, such Lender, the Borrowers shall promptly execute and deliver to such Lender, with a copy to the Administrative Agent, a Note, in substantially the form of Exhibit A hereto payable to the order of such Lender (or, at such Lender’s request, payable to such Lender and its registered assigns), in a principal amount equal to the Term Loans of such Lender. All references to Notes in the Loan Documents shall mean Notes, if any, to the extent issued hereunder.

          (b) The Register maintained by the Administrative Agent pursuant to Section 9.07(d) shall record (i) the date and amount of each Borrowing made hereunder, and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assignment and Acceptance delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iv) the amount of any sum received by the Administrative Agent from the Borrowers hereunder and each Lender’s share thereof.

          (c) Entries made in good faith by the Administrative Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrowers to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or in such account or accounts shall not limit or otherwise affect the obligations of the Borrowers under this Agreement.

          SECTION 2.14. Extension of Maturity Date.

          (a) Requests for Extension. The Administrative Borrower may, upon no less than ten (10) Business Days’ prior written notice from the Administrative Borrower to the Administrative Agent, request that the Maturity Date be extended by up to sixty (60) days. Such request may be made by the Administrative Borrower not more than once.

          (b) Conditions to Extension of Maturity Date. The agreement of the Administrative Agent and each Lender to extend the Maturity Date shall be subject, in each case, to the satisfaction, or waiver by the Required Lenders, of the following conditions precedent:

          (i) the Administrative Borrower shall have delivered to the Administrative Agent, in form and substance reasonably satisfactory to the Required Lenders, a certificate of each Loan Party, executed by a duly authorized officer of such Loan Party (A) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such extension of the Maturity Date and (B) certifying that, before and after giving effect to such extension of the Maturity Date, (I) the representations and warranties contained in Section 4.01 and the other Loan Documents are true and correct in all material respects on and as of the existing Maturity Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date; provided, that any representation or warranty that is qualified by “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects on such respective dates, and (II) no Default or Event of Default exists or is continuing;

          (ii) the Administrative Borrower shall have delivered to the Administrative Agent, in form and substance reasonably satisfactory to the Required Lenders, projections demonstrating compliance, on a pro forma basis, with the financial covenants set forth in Section 5.04, for the period through which the Administrative Borrower has requested such extension of the Maturity Date;

          (iii) the Administrative Borrower shall have delivered to the Administrative Agent, in form and substance reasonably satisfactory to the Required Lenders, an updated Budget for the period through which the Borrower has requested such extension of the Maturity Date;

          (iv) no Default or Event of Default shall exist or be continuing or will occur as a result of or immediately after giving effect to any such extension;

          (v) the Administrative Borrower shall have paid to the Administrative Agent, for the pro rata account of each Lender, the Extension Fee payable pursuant to Section 2.06; and

          (vi) the Administrative Borrower shall have delivered all such instruments, documents and agreements as the Administrative Agent may reasonably request, duly executed and delivered by each party thereto.

          (c) Conflicting Provisions. This Section 2.14 shall supersede any provisions in Section 8.01 to the contrary.

          SECTION 2.15. Joint and Several Obligations; Administrative Borrower.

          (a) Each of the Borrowers is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of each other Borrower to accept joint and several liability for the Obligations.

          (b) Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this Section 2.15), it being the intention of the parties hereto that all of the Obligations shall be the joint and several Obligations of each of the Borrowers without preferences or distinction among them.

          (c) If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation.

          (d) The Obligations of each of the Borrowers under the provisions of this Section 2.15 constitute full recourse Obligations of each of the Borrowers enforceable against each such Person to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstance whatsoever.

          (e) Except as otherwise expressly provided in this Agreement, each of the Borrowers hereby waives notice of acceptance of its joint and several liability, notice of any Term Loans made under this Agreement, notice of any action at any time taken or omitted by the Lenders under or in respect of any of the Obligations, and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement. Each of the Borrowers hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Lenders at any time or times in respect of any

default by any of the Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by the Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any of the Borrowers. Without limiting the generality of the foregoing, to the extent permitted by law, each of the Borrowers assents to any other action or delay in acting or failure to act on the part of the Lenders with respect to the failure by any of the Borrowers to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this Section 2.15, afford grounds for terminating, discharging or relieving any of the Borrowers, in whole or in part, from any of its Obligations under this Section 2.15, it being the intention of each of the Borrowers that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Borrowers under this Section 2.15 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each of the Borrowers under this Section 2.15 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, re-construction or similar proceeding with respect to any of the Borrowers or the Lenders. The joint and several liability of the Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any of the Borrowers or the Lenders.

          (f) The provisions of this Section 2.15 are made for the benefit of the Lenders and their successors and permitted assigns, and may be enforced in good faith by them from time to time against any or all of the Borrowers as often as the occasion therefor may arise and, to the extent permitted by law, without requirement on the part of the Lenders first to marshal any of their claims or to exercise any of their rights against any other Borrower or to exhaust any remedies available to them against any other Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.15 shall remain in effect until all of the Obligations (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Lenders, the provisions of this Section 2.15 will forthwith be reinstated in effect, as though such payment had not been made.

          (g) Any notice, request, waiver, consent or other action made, given or taken by any Borrower in connection with the Loan Documents shall bind all Borrowers.

          (h) Each Borrower hereby authorizes Holdco to act as agent for each Borrower (in such capacity, the “Administrative Borrower”) and to execute and deliver on behalf of each Borrower such notices, requests, waivers, consents, certificates and other documents, and to take any and all actions required or permitted to be delivered or taken by any Borrower hereunder.

ARTICLE III

CONDITIONS TO EFFECTIVENESS AND OF LENDING

          SECTION 3.01. Conditions Precedent to Borrowing Interim Order Amount. Section 2.01 of this Agreement shall become effective on and as of the first date on or before December 23, 2009 (the “Closing Date”) on which the following conditions precedent have been satisfied in a manner satisfactory to the Administrative Agent and the Required Lenders (and the obligation of each Lender to make any Term Loan on the occasion of the initial Borrowing hereunder is subject to the satisfaction or waiver in accordance with Section 9.01 hereof of such conditions precedent before or concurrently with the Closing Date):

          (a) The Administrative Agent shall have received on or before the Closing Date the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent and the Required Lenders (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender:

          (i) Executed counterparts of this Agreement and the Guaranty.

          (ii) The Notes to the extent requested by the Lenders pursuant to the terms of Section 2.13.

          (iii) A security agreement substantially in the form of Exhibit D-1 hereto (the “U.S. Security Agreement”) and a security agreement substantially in the form of Exhibit D-2 hereto (the “Canadian Security Agreement”), each duly executed by each applicable Loan Party, together with:

          (A) certificates representing the Initial Pledged Equity (to the extent certificated) referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Initial Pledged Debt referred to therein, endorsed in blank;

          (B) financing statements in a form appropriate for filing under the Uniform Commercial Code or PPSA, as applicable, for all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement) liens and security interests created under the Security Agreements, covering the Collateral described in the Security Agreements;

          (C) the Intellectual Property Security Agreements duly executed by each applicable Loan Party;

          (D) evidence of the completion of all other recordings and filings of or with respect to the Security Agreements that the Administrative Agent may deem necessary or desirable in order to perfect and protect the security interest created thereunder;

          (E) evidence of the insurance required by the terms of the Security Agreements; and

          (F) evidence that all other actions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement) liens and security interests created under the Security Agreements has been taken (including, without limitation, receipt of duly executed landlords’ and bailees’ waiver and consent agreements to the extent required under the Security Agreements).

          (iv) Certified copies of the resolutions of the Board of Directors (or equivalent entity) of each Loan Party (and to the extent required by the constituent documents of such Loan Party, the written consent of each of the holders of the Equity Interests of such Loan Party required to give written consent by such constituent documents) approving each Loan Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to each Loan Document to which it is or is to be a party.

          (v) A copy of a certificate of the Secretary of State of the jurisdiction of organization of each Loan Party (or certificate of status in respect of Parent and other Canadian Loan Parties), dated reasonably near the Closing Date, certifying (A) as to a true and correct copy of the constituent documents of such Loan Party and each amendment thereto on file in such Secretary’s office and that such amendments are the only amendments to such Loan Party’s constituent documents on file in such Secretary’s office, and (B) that such Loan Party is duly organized and in good standing or presently subsisting under the laws of the State of the jurisdiction of its organization; provided, that subject to Section 3.05, such certificate of status in respect of those Loan Parties listed on Schedule 3.05 shall be delivered in accordance therewith.

          (vi) A certificate of each Loan Party signed on behalf of such Loan Party by its President or a Vice President and its Secretary or any Assistant Secretary, dated the Closing Date (the statements made in which certificate shall be true on and as of the Closing Date), certifying as to (A) the absence of any amendments to the constituent documents of such Loan Party since the date of the Secretary of State’s certificate referred to in Section 3.01(a)(v), (B) a true and correct copy of the organizational documents of such Loan Party as in effect on the Closing Date, (C) the due organization and good standing or valid existence of such Loan Party as an entity organized under the laws of the jurisdiction of its organization, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (D) the truth in all material respects of the representations and warranties contained in the Loan Documents as though made on and as of the Closing Date; provided, that any representation or warranty that is qualified by materiality, “Material Adverse Effect” or similar language shall be true and correct in all respects on and as of the Closing Date and (E) in the case of the certificate from each Borrower, the absence of any event occurring and continuing, or resulting from the initial Borrowing, that constitutes a Default.

          (vii) A certificate of the Secretary or an Assistant Secretary of each Loan Party certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder.

          (viii) A certificate dated the Closing Date signed by the Chief Financial Officer of the Administrative Borrower, to the effect that (A) each of the representations and warranties of the Loan Parties contained in Article IV hereof is true and correct in all material respects as of the Closing Date; provided, that any representation or warranty that is qualified by materiality, “Material Adverse Effect” or similar language shall be true and correct in all respects as of the Closing Date and (B) all conditions to the effectiveness of this Agreement set forth in this Article III other than those which are subject to the discretion, satisfaction, consent or approval of the Agents (or any of them) or any Lender, have been satisfied (or, if applicable, waived) in all respects.

          (ix) Evidence of insurance naming the Collateral Agent as additional insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Required Lenders, including, without limitation, business interruption insurance.

          (x) Favorable opinions of Torys LLP, Canadian counsel to Parent and other Canadian Loan Parties, Stewart, McKelvey, Stikling & Scales, New Brunswick counsel to Parent and other Canadian Loan Parties, and Proskauer Rose, LLP, U.S. counsel for the other Loan Parties, substantially in the forms of Exhibit F-1 and F-2, respectively, hereto.

          (b) Since October 31, 2009 (i) there shall have occurred no Material Adverse Change and no material adverse change in the Collateral taken as a whole and (ii) there has been no material increase in the liabilities, liquidated or contingent, of Parent and its Subsidiaries, taken as a whole (other than the liabilities in respect of the Term Loans under the Loan Documents), or material decrease in the assets of Parent and its Subsidiaries taken as a whole.

          (c) There shall exist no action, suit, investigation, litigation or proceeding affecting Parent or any of its Subsidiaries pending or threatened before any Governmental Authority that (i) would be reasonably likely to have a Material Adverse Effect other than the matters described on Schedule 4.01(f) hereto (the “Disclosed Litigation”) or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, and there shall have been no adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto.

          (d) All Governmental Authorizations and third party consents and approvals necessary in connection with the transactions contemplated by the Loan Documents shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect; all applicable waiting periods in connection with the transactions contemplated by the Loan Documents shall have expired without any action being taken by any competent authority, and no law or regulation shall be applicable in the judgment of the Lenders,

in each case that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Loan Documents or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

          (e) Reserved.

          (f) The Borrowers shall have filed the Chapter 11 Cases in the Bankruptcy Court on or before December 21, 2009.

          (g) The Bankruptcy Court shall have entered the Interim Order, in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders, within three (3) Business Days of the Petition Date, and such order shall be in full force and effect and shall not have been modified or amended (unless otherwise approved by the Required Lenders), reversed, stayed or subject to a motion for reargument or reconsideration. If the Interim Order is the subject of a pending appeal in any respect, none of the Interim Order, the making of the Term Loans, or the performance by the Borrowers of any of the Obligations shall be the subject of a presently effective stay pending appeal. The Loan Parties, the Agents and the Lenders shall be entitled to rely in good faith upon the Interim Order, notwithstanding objection thereto or appeal therefrom by an interested party. The Loan Parties, the Agents and the Lenders shall be permitted and required to perform their respective obligations in compliance with this Agreement notwithstanding any such objections or appeal unless the relevant order has been stayed by a court of competent jurisdiction.

          (h) The Closing Date shall have occurred within two (2) Business Days of the date that the Bankruptcy Court shall have entered the Interim Order.

          (i) The Administrative Agent shall have received a duly executed copy of the Plan Support Agreement, pursuant to which the Consenting Lenders agree to vote in favor of, and to support in all other respects, the Plan of Reorganization, and no party to the Plan Support Agreement shall have withdrawn its support or refused to abide by the terms thereof.

          (j) First day orders with respect to customary first day motions, including motions concerning payment of critical vendors, cash management and payment of wages and other employee benefits shall have been approved and entered by the Bankruptcy Court and shall be in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders.

          (k) All orders (if any) providing for payment of prepetition indebtedness of the Loan Parties or affecting in any way the Obligations or the Collateral submitted for entry in the Cases shall be in form and substance reasonably satisfactory to the Administrative Agent and the Required Lenders and, as entered, shall not deviate from the form thereof approved by the Lenders in any material respect which is adverse to the interests of the Lenders.

          (l) The Canadian Court shall have entered (i) all appropriate orders as are reasonably satisfactory to the Required Lenders, which shall correspond to the orders entered by the Bankruptcy Court in connection with the Cases, and (ii) an order of recognition of the Chapter 11 Cases in respect of Parent under the CCAA (the “Recognition Order”), which

(w) recognizes the Chapter 11 Cases in respect of Parent as “foreign proceedings” (as defined under Part IV of the CCAA), (x) imposes a stay of proceedings in respect of Parent, (y) recognizes the Interim Order with respect to the Facility in respect of Parent and (z) authorizes a superpriority charge and senior priming security interest in favor of the Collateral Agent and the Secured Parties.

          (m) Reserved.

          (n) The Administrative Agent shall have received the Budget prepared in good faith based upon reasonable assumptions which shall be reasonably satisfactory in all respects to the Administrative Agent and the Required Lenders, it being recognized by the Administrative Agent and the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by the Budget may differ from the projected results.

          (o) (i) The Restructuring Monitor shall be in place and operating as of the first day of the Chapter 11 Cases pursuant to an engagement letter, in form and substance reasonably satisfactory to the Required Lenders, and such engagement letter shall be in full force and effect, and (ii) the Borrowers shall have filed a motion with the Bankruptcy Court seeking approval of the engagement of such Restructuring Monitor.

          (p) The Administrative Agent shall have received a true and complete copy of the documents relating to the sale of the Canadian Refractive Centers duly executed by the parties thereto, which shall be in form and substance reasonably satisfactory to the Required Lenders.

          (q) The Borrowers shall have filed a motion to approve an order to permit the sale of certain assets of Parent (including the sale of the Canadian Refractive Centers) on the Petition Date.

          (r) The Security Agreements shall, upon entry of the applicable Order, be effective to create in favor of the applicable Agent a legal, valid and enforceable first priority security interest in and lien upon the Collateral subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to it.

          (s) Reserved.

          (t) The Administrative Agent shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and Anti-Money Laundering rules and regulations, including, without limitation, the Patriot Act, as it shall have reasonably requested.

          SECTION 3.02. Conditions to Borrowings in Excess of the Interim Order Amount. The obligation of each Lender to make any Term Loan in excess of the Interim

Amount shall be subject to the satisfaction or waiver in accordance with Section 9.01 hereof of the following conditions precedent:

          (a) The Bankruptcy Court shall have entered the Final Order, which Final Order shall continue and confirm matters addressed in the Interim Order and shall not have been amended or modified (unless otherwise approved by the Required Lenders), stayed or reversed thereafter or subject to a motion for reargument or consideration. The Final Order shall authorize an extension of credit under the Facility in an amount not greater than the Final Order Amount. If the Final Order is the subject of a pending appeal in any respect, neither the Interim Order nor the making of the Term Loans, or the performance by the Borrowers of any of the Obligations shall be the subject of a presently effective stay pending appeal. The Borrowers, the Agents and the Lenders shall be entitled to rely in good faith upon the Final Order notwithstanding the objection thereto or appeal therefrom by any interested party. The Borrowers, the Agents and the Lenders shall be permitted and required to perform their respective obligations in compliance with this Agreement notwithstanding any such objection or appeal unless the relevant order has been stayed by a court of competent jurisdiction.

          (b) The Administrative Agent shall have received all amendments to the relevant lease agreements between Parent and Intralase Corp., a Delaware corporation, in form and substance reasonably satisfactory to the Required Lenders, duly executed by the parties thereto.

          (c) The Loan Parties shall have used all reasonable efforts to seek a settlement of the claims by Michael Aronsky, M.D., Carol Hoffman, M.D., George Pronesti, M.D., and Anthony Zacchei, M.D. (collectively, the “Kremer Claims”) against Parent and its Subsidiaries, in form and substance satisfactory to the Required Lenders.

          (d) Reserved.

          (e) The Required Lenders shall be satisfied with the amount of fees and other compensation payable on an ongoing basis to the chairman of the board of directors of Parent and Holdco.

          SECTION 3.03. Conditions Precedent to All Borrowings. (a) The obligation of each Lender to make any Term Loan on the occasion of each Borrowing (including the initial Borrowing), shall be subject to the satisfaction or waiver in accordance with Section 9.01 hereof of the further conditions precedent that on the date of such Borrowing:

          (i) the following statements shall be true and the acceptance by the Borrowers of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrowers that both on the date of the applicable Notice of Borrowing and the date of such Borrowing, such statements are true:

          (A) the representations and warranties of each Loan Party contained in each Loan Document are correct in all material respects on and as of such date, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date

other than the date of such Borrowing, in which case such representations and warranties were true and correct in all material respects as of such specific date; provided, that any representation or warranty that is qualified by materiality, “Material Adverse Effect” or similar language shall be true and correct in all respects on such respective dates and

          (B) no Default or Event of Default has occurred and is continuing, or would result from such Borrowing;

          (ii) the Administrative Agent shall have received a Notice of Borrowing, in form and substance reasonably satisfactory to it; and

          (iii) the Borrowers shall have paid (A) to the Administrative Agent, for the benefit of the Secured Parties, all accrued and unpaid fees and expenses due to the Secured Parties in connection with the transactions contemplated by the Loan Documents (including accrued and unpaid fees and expenses described in any fee letters executed by the Borrowers in connection with this Agreement or in connection with any Lender’s commitment to provide financing under the Facility), (B) to legal counsel and financial advisers to the Required Prepetition Lenders (including, without limitation, Special Counsel, the Financial Advisor, Stikeman Elliott LLP, as Canadian counsel and Pachulski Stang Ziehl & Jones LLP, as Delaware counsel), all accrued and unpaid fees and expenses then due and payable to each of them under or in connection with the Prepetition Loan Documents and the refinancing or restructuring of the financing thereunder in the nature of a “work-out” or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto (including, without limitation, the Cases), in the case of each of (A) and (B), regardless of whether any grace period under the agreements pursuant to which the applicable fees and expenses are payable has expired; provided, that all payment in the case of (B) shall be made as provided in the Order as approved by the Bankruptcy Court on the Petition Date; and

          (iv) the Administrative Agent shall have received such other approvals, opinions or documents as the Required Lenders through the Administrative Agent may reasonably request.

          (b) Each Borrowing hereunder shall constitute a representation and warranty by the Borrowers as of the date of such Borrowing that the conditions contained in this Section 3.03 have been satisfied.

          SECTION 3.04. Determinations Under Section 3.01 and 3.02. For purposes of determining compliance with the conditions specified in Section 3.01 or Section 3.02, as applicable,, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received written notice from such Lender prior to the Closing Date specifying its objection thereto and, such Lender shall not have made available to the Administrative Agent such Lender’s ratable portion of such Borrowing.

          SECTION 3.05. Conditions Subsequent to Closing Date. The obligation of the Lenders to continue to make the Term Loans to the Borrowers is subject to the fulfillment, on or before the date applicable thereto, of the conditions subsequent set forth on Schedule 3.05 (the failure by any Borrower to so perform or cause to be performed such conditions subsequent as and when required by the terms thereof, shall constitute an immediate Event of Default (it being understood and agreed that, to the extent that the existence of any such condition subsequent, or the failure to have satisfied such condition prior to the Closing Date, would otherwise cause any representation, warranty or covenant in this Agreement or any Loan Document to be breached, such breach shall not be deemed to have occurred to the extent such condition subsequent is satisfied as and when required pursuant to Schedule 3.05)).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

          SECTION 4.01. Representations and Warranties of Borrowers. Each Borrower represents and warrants as follows:

          (a) Each Loan Party and each of its Subsidiaries (i) is a corporation, limited liability company, limited liability partnership or limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) is duly qualified and in good standing as a foreign corporation or company in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate, limited liability company, limited liability partnership or partnership (as applicable) power and authority (including, without limitation, all Governmental Authorizations) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. All of the outstanding Equity Interests of Holdco, TLC Management, and each other wholly owned Subsidiary of Parent have been validly issued, are fully paid and non-assessable and are owned by Parent free and clear of all Liens, except Permitted Liens and those created under the Collateral Documents, the Prepetition Loan Documents, the Interim Order and the Final Order.

          (b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Loan Parties, showing as of the date hereof (as to each Loan Party) the jurisdiction of its organization, the address of its principal place of business and, as to each Loan Party organized in the United States or a state thereof, its U.S. taxpayer identification number. As of the date hereof, the copy of the charter of each Loan Party and each amendment thereto provided pursuant to Section 3.01(a)(v) is a true and correct copy of each such document, each of which is valid and in full force and effect. All of the outstanding Equity Interests in each Loan Party’s Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except Permitted Liens and those created under the Collateral Documents, the Interim Order, the Final Order or under applicable law or under the charter, bylaws, limited liability company agreement, partnership agreement or other constituent documents of such Loan Party.

          (c) Subject to approval of the Bankruptcy Court and pursuant to the Order, the execution, delivery and performance by each Loan Party of each Loan Document to which it is or is to be a party, and the consummation of the transactions contemplated thereby, are within such Loan Party’s corporate, limited liability company, limited liability partnership or limited partnership (as applicable) powers, have been duly authorized by all necessary corporate, limited liability company, limited liability partnership or limited partnership (as applicable) action, and do not (i) contravene such Loan Party’s charter, bylaws, limited liability company agreement, partnership agreement or other constituent documents, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect.

          (d) Except for the entry of the Order, no Governmental Authorization (other than the approval of the Bankruptcy Court), and no notice to or filing with, any Governmental Authority or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Loan Document to which it is or is to be a party, or for the consummation of the transactions contemplated thereby (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof, subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement) or (iv) the exercise by any Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for the filings required to create, perfect or preserve security interests under the Collateral Documents. All applicable waiting periods in connection with the transactions contemplated by the Loan Documents have expired without any action having been taken by any competent authority restraining, preventing or imposing materially adverse conditions upon the transactions contemplated by the Loan Documents or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them.

          (e) This Agreement has been, and each other Loan Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. Upon entry of the Order, this Agreement is, and each other Loan Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms.

          (f) Except for the Cases, there is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or to the knowledge of Parent, threatened before any Governmental Authority or

arbitrator that (i) would be reasonably likely to have a Material Adverse Effect (other than the Disclosed Litigation) or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby, and there has been no adverse change in the status, or financial effect on any Loan Party or any of its Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(f) hereto.

          (g) The Consolidated and, if otherwise provided, consolidating balance sheets of Parent and its Subsidiaries as at December 31, 2008, and the related Consolidated and, if otherwise provided, consolidating statements of income and Consolidated statement of cash flows of Parent and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Ernst & Young, LLP, independent public accountants, and the Consolidated and, if otherwise provided, consolidating balance sheets of Parent and its Subsidiaries as at September 30, 2009, and the related Consolidated and, if otherwise provided, consolidating statements of income and Consolidated statement of cash flows of Parent and its Subsidiaries for the three months then ended, duly certified by the Chief Financial Officer of the Administrative Borrower, copies of which have been furnished to each Lender, fairly present, subject, in the case of said balance sheet as at September 30, 2009, and said statements of income and cash flows for the three months then ended, to year end audit adjustments and the absence of footnotes, the Consolidated and, if otherwise provided, consolidating financial condition of Parent and its Subsidiaries as at such dates and the Consolidated and, if otherwise provided, consolidating results of operations of Parent and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis (subject to year end audit adjustments and the absence of footnotes).

          (h) The Consolidated and, if otherwise provided, consolidating forecasted balance sheets, statements of income and statements of cash flows of Parent and its Subsidiaries delivered to the Lenders were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Loan Parties’ best estimate of their future financial performance, it being acknowledged and agreed that the Loan Parties do not guaranty the realization or achievement of any forecasts or forward-looking statements delivered to the Administrative Agent and the Lenders pursuant to this Section 4.01(h).

          (i) No written information, exhibit or report furnished by or on behalf of any Loan Party (at such Loan Party’s explicit direction) to any Agent or any Lender in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading, it being acknowledged and agreed that the Loan Parties do not guaranty the realization or achievement of any forecasts or forward-looking statements delivered to the Administrative Agent and the Lenders Parties pursuant to this Section 4.01(i).

          (j) No Loan Party is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Term Loan will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.

          (k) Neither any Loan Party nor any of its Subsidiaries is an “investment company,” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Term Loan, nor the application of the proceeds or repayment thereof by the Borrowers, nor the consummation of the other transactions contemplated by the Loan Documents, will violate any provision of any such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder or equivalent under the applicable securities laws of other jurisdictions.

          (l) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that would be reasonably likely to have a Material Adverse Effect.

          (m) No Loan Party nor any ERISA Affiliate maintains, sponsors, participates in, contributes to or has any obligation to contribute to any Plan or Multiemployer Plan, or has within the last six years, maintained, sponsored, participated in or contributed to, or had any obligation to contribute to, any Plan or Multiemployer Plan; no Loan Party nor any ERISA Affiliate has incurred any material liability under Title I or Title IV of ERISA with respect to any Plan or Multiemployer Plan for which any Loan Party could reasonably be expected to be liable; and no condition exists that would reasonably be expected to subject any Loan Party to any material tax, fine, Lien or other liability imposed by ERISA, the Internal Revenue Code or other applicable law with respect to any Plan or Multiemployer Plan.

          (n) (i) To the knowledge of the executive officers of Parent, except as otherwise set forth on Part I of Schedule 4.01(n) hereto, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances exist that would be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any restrictions on ownership, occupancy, use or transferability under any Environmental Law;

          (ii) To the knowledge of the executive officers of Parent, except as otherwise set forth on Part II of Schedule 4.01(n) hereto, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list; there are no and never have been any underground or aboveground storage tanks or any surface or sub-surface impoundments, septic tanks, pits, wells, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries or on any property formerly owned or operated by any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property

currently or formerly owned or operated by any Loan Party or any of its Subsidiaries; and

          (iii) To the knowledge of the executive officers of Parent, except as otherwise set forth on Part III of Schedule 4.01(n) hereto, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been treated or disposed of in a manner not reasonably expected to result in material liability to any Loan Party or any of its Subsidiaries.

          (o) [Reserved].

          (p) Set forth on Schedule 4.01(p) hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party or any of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of such Loan Party or such Subsidiary subject thereto.

          (q) Set forth on Schedule 4.01(q) hereto is a complete and accurate list of all Investments held by any Loan Party or any of its Subsidiaries (other than Investments in Loan Parties) on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.

          (r) Parent and its Subsidiaries (i) are not in violation of any applicable Requirement of Law, including any building, zoning, occupational safety and health, fair employment, equal opportunity, pension, environmental control, health care, certificate of need, health care facility licensing or similar federal, state or local law, ordinance or regulation, relating to the ownership or operation of their respective businesses or assets, (ii) have not failed to obtain any license, permit, certificate or other governmental authorization necessary for the conduct of their businesses or the ownership and operation of their assets, (iii) have not received any notice from any Governmental Authority, and to their knowledge no such notice is pending or threatened, alleging that Parent or any of its Subsidiaries has violated, or has not complied with, any Requirement of Law, condition or standard applicable with respect to any of the foregoing, and (iv) are not a party to any agreement or instrument, or subject to any judgment, order, writ, rule, regulation, code or ordinance, except to the extent that any violation, noncompliance, failure, agreement, judgment, etc. as described in clauses (i) through (iv) will not have a Material Adverse Effect.

          (s) Parent and its Subsidiaries have all licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, certificates of need, accreditations and other authorizations necessary for the lawful conduct of their respective businesses or operations wherever now conducted and as planned to be conducted, pursuant to all applicable

statutes, laws, ordinances, rules and regulations of all Governmental Authorities having, asserting or claiming jurisdiction over Parent or any of its Subsidiaries or over any part of their respective operations, except to the extent that the cumulative effect of noncompliance with the foregoing will not have a Material Adverse Effect. Copies of all material licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, certificates of need, accreditations and other authorizations shall be provided to the Administrative Agent upon request. Neither Parent nor any of its Subsidiaries is in default under any of such licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, certificates of need, accreditations and other authorizations, and no event has occurred, and no condition exists, that with the giving of notice, the passage of time or both would constitute a default thereunder or would result in the suspension, revocation, impairment, forfeiture or non-renewal of any thereof, except to the extent that the cumulative effect of all such defaults, events, conditions, suspensions, revocations, impairments, forfeitures and non-renewals will not have a Material Adverse Effect. The continuation, validity and effectiveness of all such licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, certificates of need, accreditations and other authorizations will not be adversely affected by the transactions contemplated by this Agreement. Parent and its Subsidiaries know of no reason why they will not be able to maintain after the date hereof all licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, certificates of need, accreditations and other authorizations necessary or appropriate to conduct the businesses of Parent and its Subsidiaries as now conducted and presently planned to be conducted.

          (t) Upon the entry of the applicable Order, such Order shall be effective to establish and perfect the Collateral Agent’s security interest in the Collateral; provided, that the Collateral Agent may take any steps it deems necessary, in its sole discretion, to attach or perfect the Liens, which steps may include the filing of financing statements, mortgages, notices of liens or other similar documents. The Collateral Agent’s rights with respect to the Collateral are not subject to any setoff, claims, withholdings, or other defenses.

          (u) To the knowledge of the Borrowers, no facts exist that (individually or in the aggregate) would result in any material change in the Budget. The Budget is based upon good faith estimates and assumptions believed by the Loan Parties to be reasonable at the time made, has been prepared on the basis of the assumptions stated therein and reflects the reasonable estimates of the Loan Parties of the results of operations and other information projected therein, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by the Budget may differ from the projected results.

          (v) Parent and its Subsidiaries have filed or caused to be filed all U.S. federal, state, local, and all non-U.S. provincial and other material tax returns that are required to be filed by it, all such tax returns were when filed, and continue to be, true, correct and complete in all material respects, and the filer thereof has paid (or caused to be paid) all taxes shown to be due and payable on said returns or on any material assessments made against it or any of its property and all other material taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than the amounts which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of Parent or its Subsidiaries, as the case may be); and no

material tax Lien has been filed with respect to the property of Parent or any of its Subsidiaries and, to the knowledge of each Loan Party, no material claim is being asserted, with respect to any such tax, fee or other charge that could reasonably be expected to result in the filing of a tax Lien with respect to the property of Parent or any of its Subsidiaries.

          (w) Each of the Parent and its Subsidiaries is insured, in accordance with Section 9 of the Security Agreements, by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which it is engaged; and none of Parent or any of its Subsidiaries (i) has received notice from any insurer or agent of such insurer that material expenditures will have to be made in order to continue such insurance or (ii) has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers at a cost that would not reasonably be expected to have a Material Adverse Effect, other than changes to such coverage and costs that may be necessitated by or result from the Borrowers’ status as debtors in possession.

          (x) To the extent applicable, each Loan Party is in compliance, in all material respects, with the Patriot Act.

ARTICLE V

COVENANTS

          SECTION 5.01. Affirmative Covenants. So long as any Term Loan or any other Obligation (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) of any Loan Party under any Loan Document shall remain unpaid, each Loan Party will:

          (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA, the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 and Healthcare Laws.

          (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither Parent nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors.

          (c) Compliance with Environmental Laws. Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew, and cause each of its Subsidiaries to obtain and renew, all Environmental Permits necessary for its operations and properties; and conduct, and cause each of its Subsidiaries to

conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws; provided, however, that neither Parent nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances.

          (d) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance (including, without limitation, business interruption) with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Loan Party or such Subsidiary operates.

          (e) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises; provided that neither Parent nor any of its Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors of Parent or such Subsidiary, after consultation with the Restructuring Monitor, reasonably determines that the preservation thereof is no longer desirable in the conduct of the business of such Loan Party or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to such Loan Party, such Subsidiary or the Lenders.

          (f) Visitation Rights. At any time during normal business hours, permit representatives of the Required Lenders (including legal and financial advisers, auditors, appraisers, and any other consultants engaged from time to time at the direction of the Required Lenders) to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, Parent and any of its Subsidiaries, and to discuss the affairs, finances and accounts of Parent and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants.

          (g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Parent and each such Subsidiary in accordance with generally accepted accounting principles in effect from time to time.

          (h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.

          (i) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to such Loan Party or Subsidiary than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate and in connection therewith shall not, and shall not permit any of its Subsidiaries to, enter into any agreement requiring payments inconsistent with the foregoing, provided that the

foregoing shall not apply to (i) transactions between Loan Parties and (ii) customary fees to, and indemnifications of, non-officer directors of the Loan Parties in compliance with the Budget (subject to the proviso in Section 5.04(a)).

          (j) Covenant to Guarantee Obligations and Give Security. Upon (i) the formation or acquisition of any new direct or indirect Subsidiaries by any Loan Party or any such Subsidiary which on the date hereof is not a Guarantor or (ii) the acquisition of any property by any Loan Party, which, in the judgment of the Collateral Agent, constitutes Collateral and shall not already be subject to a perfected first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement) security interest in favor of the Collateral Agent for the benefit of the Secured Parties, then in each case at the Borrowers’ expense:

          (A) in connection with the formation or acquisition of a Subsidiary within ten (10) days after such formation or acquisition, cause each such Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Collateral Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Collateral Agent and the Required Lenders, guaranteeing the other Loan Parties’ obligations under the Loan Documents;

          (B) within ten (10) days after such formation or acquisition, furnish to the Collateral Agent a description of the real and personal properties of such Subsidiary or the real and personal properties so acquired, in each case in detail satisfactory to the Collateral Agent and the Required Lenders;

          (C) within ten (10) days after (A) such acquisition of property by any Loan Party, duly execute and deliver, and cause each Loan Party to duly execute and deliver, to the Collateral Agent such additional mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and other security agreements as specified by, and in form and substance satisfactory to the Collateral Agent and the Required Lenders, securing payment of all the Obligations of such Loan Party under the Loan Documents and constituting Liens on all such properties and (B) such formation or acquisition of any new Subsidiary, duly execute and deliver and cause such Subsidiary and each Loan Party acquiring Equity Interests in such Subsidiary to duly execute and deliver to the Collateral Agent mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and other security agreements as specified by, and in form and substance satisfactory to the Collateral Agent and the Required Lenders, securing payment of all of the obligations of such Subsidiary or Loan Party, respectively, under the Loan Documents;

          (D) within fifteen (15) days after such formation or acquisition, take, and cause each Loan Party and each newly acquired or newly formed Subsidiary to take, whatever action (including, without limitation, the recording of mortgages, the filing of Uniform Commercial Code financing statements, the

giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements delivered pursuant to this Section 5.01(j), enforceable against all third parties in accordance with their terms;

          (E) within thirty (30) days after such formation or acquisition, deliver to the Collateral Agent, upon the request of the Collateral Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Collateral Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Collateral Agent and the Required Lenders as to (1) the matters contained in clauses (A), (C) and (D) above, (2) such guaranties, guaranty supplements, mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements being legal, valid and binding obligations of each Loan Party party thereto enforceable in accordance with their terms and as to the matters contained in clause (D) above, (3) such recordings, filings, notices, endorsements and other actions being sufficient to create valid perfected Liens on such properties, and (4) such other matters as the Collateral Agent and the Required Lenders may reasonably request;

          (F) as promptly as practicable after such formation or acquisition, deliver, upon the request of the Collateral Agent in its sole discretion, to the Collateral Agent with respect to each parcel of real property owned or held by each Loan Party and each newly acquired or newly formed Subsidiary title reports, surveys and engineering, soils and other reports, and environmental assessment reports, each in scope, form and substance satisfactory to the Collateral Agent and the Required Lenders, provided, however, that to the extent that any Loan Party or any of its Subsidiaries shall have otherwise received any of the foregoing items with respect to such real property, such items shall, promptly after receipt thereof, be delivered to the Collateral Agent; and

          (G) at any time and from time to time, promptly execute and deliver, and cause each Loan Party and each newly acquired or newly formed Subsidiary to execute and deliver, any and all further instruments and documents and take, and cause each Loan Party and each newly acquired or newly formed Subsidiary to take, all such other action as the Collateral Agent may deem necessary or desirable in obtaining the full benefits of, or in perfecting and preserving the Liens of, such guaranties, mortgages, pledges, assignments, security agreement supplements, intellectual property security agreement supplements and security agreements;

provided, that notwithstanding anything to the contrary in this Section 5.01(j), the Loan Parties shall only be required to use commercially reasonable efforts to cause each non-wholly owned Subsidiary of any Loan Party to comply with the provisions of this Section 5.01(j).

          (k) Further Assurances. (i) Promptly upon request by any Agent, or any Lender through the Administrative Agent, correct, and cause each of its Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof,

          (ii) promptly upon request by any Agent, or any Lender through the Administrative Agent, do, execute, acknowledge, deliver any and all acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as any Agent, or any Lender through the Administrative Agent, may reasonably require from time to time (and consent to the Agents recording or filing such instrument) in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party’s or any of its Subsidiaries’ properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so; and

          (iii) no later than 30 days following the Closing Date, provide evidence of receipt of ratings for the Facility from Moody’s and S&P, in each case acceptable to the Required Lenders.

          (l) Control Account Agreements. Deposit all cash held or received by it (other than the proceeds of the Term Loans, which shall be deposited in the DIP Proceeds Controlled Account) into any account held by TLC Management, which is subject to a Control Account Agreement pursuant to which the Agents are granted a first priority security interest in respect of such cash, in form and substance satisfactory to the Administrative Agent and the Required Lenders, duly executed by the financial institution at which such account is maintained. So long as no Default or Event of Default has occurred and is continuing, the Borrowers may withdraw amounts from such account to make payments consistent with the Budget.

          (m) Preparation of Environmental Reports. At the reasonable request of the Administrative Agent or the Collateral Agent from time to time, provide to the Lenders within sixty (60) days after such request, at the expense of the Borrowers, an environmental site assessment report for any of its or its Subsidiaries’ properties described in such request, prepared by an environmental consulting firm acceptable to the Required Lenders, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if any Agent or the Required Lenders determine at any time that a material risk exists that any such report will not be provided within the time referred to above, such Agent or the Required Lenders may retain an environmental consulting firm to prepare such

report at the expense of the Borrowers, and each Loan Party hereby grants and agrees to cause any Subsidiary that owns any property described in such request to grant at the time of such request to the Agents, the Lenders, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment.

          (n) Healthcare Matters. Notify the Administrative Agent of (i)any receipt by any Loan Party of notice of any investigation or audit, or pending or threatened proceedings relating to, any material violation by any Loan Party or any of its Subsidiaries of any Healthcare Law, including, without regard to materiality, (A) any investigation or audit or proceeding involving violation of any of the Medicare and/or Medicaid fraud and abuse provisions and (B) any criminal or civil investigation initiated, claim filed or disclosure required by the Office of the Inspector General, the Department of Justice, Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), or any other governmental authority, and (ii) any receipt by any Loan Party of a written recommendation from any governmental authority or other regulatory body that any Loan Party should have its licensure, provider or supplier number or accreditation suspended, revoked, or limited in any material way, or have its eligibility to participate in Medicare, Medicaid or any other government program to accept assignments or rights to reimbursement under Medicaid, Medicare, or any other government program regulations suspended, revoked, or limited in any material way.

          (o) Maintenance of Ratings. At all times from and after the date 30 days following the Closing Date, maintain ratings for the Facility from Moody’s and S&P, in each case acceptable to the Required Lenders.

          (p) Due Diligence. Use, and cause each of its Subsidiaries to use, its best efforts to provide all due diligence materials reasonably requested by the Administrative Agent or the Required Lenders or their legal and financial advisors (including due diligence materials with respect to any proposed asset sales and any severance obligations of Parent or any of its Subsidiaries to any employees or former employees).

          (q) Use of Proceeds. Use, and cause each of its Subsidiaries to use, the proceeds of the Term Loans only in accordance with the Budget and in compliance with Section 5.04(a).

          (r) Critical Vendors. Cause the Borrowers to file a motion with the Bankruptcy Court seeking approval of payment of critical vendors of the Borrowers acceptable to the Required Lenders no later than three (3) Business Days after the Petition Date.

          (s) Filing of Claims, Schedules, and Statement of Affairs in the Cases. Cause the Borrowers to file the respective schedules and statements of affairs with the Bankruptcy Court no later than fifteen (15) days after the Petition Date.

          (t) Last Day to File Claims. Cause the Borrowers to obtain an order from the Bankruptcy Court setting the bar date for prepetition claims in the Chapter 11 Case no later than twenty (20) days after the Borrowers filed their respective schedules and statements of affairs with the Bankruptcy Court.

          (u) Interim Order. Cause the Borrowers to file a motion with the Bankruptcy Court to approve the Interim Order on the Petition Date.

          (v) Call Center. Cause the Borrowers to file all necessary motions with the Bankruptcy Court seeking approval of (i) the rejection of the lease of Parent’s call center located at 5280 Solar Drive, City of Mississauga, Province of Ontario, and (ii) any settlement with I.T. Weapons Inc. with respect to the lease of the new call center located at 1535 Meyerside Drive, Unit 15 and 16, Mississauga, Ontario, Canada, if requested and approved by the Required Lenders, in the case of each (i) and (ii), no later than ten (10) days after the Petition Date.

          (w) Cash Management System. Cause the Borrowers to file on the Petition Date a motion with the Bankruptcy Court to approve the cash management systems used by the Borrowers, in a form reasonably satisfactory to the Required Lenders.

          (x) Vision Source, L.P. Take reasonable steps at all times to enforce their rights with respect to all distributions and payments owing to it or any of its Subsidiaries by Vision Source, L.P. (including, without limitation, payments due under the promissory note dated as of August 1, 2002, as amended, issued by Vision Source, L.P. in favor of TLC Capital Corporation, a Delaware corporation).

          (y) Canadian Refractive Centers. Cause the Borrowers to use their best efforts to sell the Canadian Refractive Centers on terms and conditions satisfactory to the Required Lenders.

          (z) Parent’s Assets. Cause the Borrowers to file all necessary motions with the Bankruptcy Court and Canadian Court, as soon as practicable, to seek approval to transfer substantially all assets from Parent to Holdco (other than the Canadian Refractive Centers).

          (aa) Canadian Court. Cause the Borrowers to seek all appropriate orders of the Canadian Court, reasonably satisfactory to the Required Lenders, which shall correspond to such court orders entered by the Bankruptcy Court, in each case within seven (7) days of the entry of such order by the Bankruptcy Court.

          (bb) Restructuring Monitor. Cause (i) the Restructuring Monitor to be in place and operating pursuant to an engagement letter, in form and substance reasonably satisfactory to the Required Lenders, and (ii) such engagement letter to remain in full force and effect.

          (cc) Kremer Claims. To the extent that settlement of the Kremer Claims, in form and substance satisfactory to the Required Lenders, is not reached on or before January 15, 2010, file and diligently pursue appropriate contested proceedings seeking to subordinate the Kremer Claims to the obligations owing to general unsecured creditors of Parent and its Subsidiaries.

          SECTION 5.02. Negative Covenants. So long as any Term Loan or any other Obligation (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) of any Loan Party under any Loan Document shall remain unpaid, each Loan Party will not, at any time:

          (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code (or similar law) of any jurisdiction, a financing statement that names any Loan Party or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except:

          (i) Liens created pursuant to the Loan Documents, Interim Order and the Final Order;

          (ii) Permitted Liens;

          (iii) Liens existing on the date hereof and described on Schedule 4.01(p) hereto;

          (iv) purchase money Liens upon or in real property or equipment acquired or held by Parent or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition, construction, improvement or installation of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed, improved or installed (or the proceeds of any of the foregoing), and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt hereafter incurred secured by Liens permitted by this clause (iv) shall not exceed the amount permitted under Section 5.02(b)(iv) at any time outstanding; and

          (v) Liens arising under Capitalized Leases permitted under Section 5.02(b)(iv) provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Leases (or the proceeds thereof).

          (b) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except:

          (i) Debt under the Loan Documents;

          (ii) Debt under the Prepetition Loan Documents;

          (iii) (A) unsecured Debt arising in respect of purchasing card and/or corporate credit card programs not to exceed in the aggregate $1,000,000 at any time

outstanding, and (B) unsecured Debt (not specified in clause (A) above) not to exceed in the aggregate $2,000,000 at any time outstanding, in the case of each of (A) and (B), as reflected in the Budget;

          (iv) (x) Capitalized Leases and Debt secured by purchase money Liens existing on the date hereof and listed on Schedule 5.02(b) hereto; provided that such Capitalized Leases and Debt shall not be refinanced, and Capitalized Leases and Debt secured by purchase money Liens hereafter incurred not to exceed an aggregate principal amount of $1,500,000 at any time outstanding, and (y) in the case of Capitalized Leases and Debt secured by purchase money Liens to which any Subsidiary of Parent is a party, Debt of Parent of the type described in clause (i) of the definition of “Debt” guaranteeing the Obligations of such Subsidiary under such Capitalized Leases and Debt secured by purchase money Liens;

          (v) Debt owed to any Borrower or a wholly owned Subsidiary of Parent, which Debt shall (x) in the case of Debt owed to a Loan Party, constitute Pledged Debt, (y) be on terms acceptable to the Administrative Agent and the Required Lenders and (z) be otherwise permitted under the provisions of Section 5.02(f); and

          (vi) Debt not otherwise specified above and existing on the date hereof and described in Schedule 5.02(b) hereto; provided that such Debt shall not be refinanced.

          (c) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof.

          (d) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so except that any Subsidiary of Parent may merge into or consolidate with any other Subsidiary of Parent; provided that in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be a wholly owned Subsidiary of Parent and provided further that (i) in the case of any such merger or consolidation to which a Guarantor is a party, the Person formed by such merger or consolidation shall be a Guarantor, (ii) notwithstanding the foregoing, no merger or consolidation shall be consummated between a Borrower and a Person that is not a Borrower, (iii) in each case, immediately before and after giving effect thereto, no Default shall have occurred and be continuing and, (iv) in the case of any such merger to which Parent is a party, Parent is the surviving entity.

          (e) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire, or permit any of its Subsidiaries to grant any option or other right to purchase, lease or otherwise acquire, any assets, except

          (i) the sale of the Canadian Refractive Centers on terms and conditions satisfactory to the Required Lenders; provided that the Borrowers shall, on the date of receipt by any of them or any of their respective Subsidiaries of the Net Cash Proceeds from such sale, prepay the Term Loans pursuant to, and in the amount set forth

in, Section 2.04 and apply the remaining Net Cash Proceeds, if any, in accordance with Section 2.04;

          (ii) sales of excess, obsolete or worn out equipment in the ordinary course of its business;

          (iii) sales, transfers or other dispositions of assets among Loan Parties subject to Section 5.01(i) hereof;

          (iv) the sale of any assets constituting a Cash Equivalent and maintained in a Securities Account, subject to the terms and conditions of the applicable Securities Account Control Agreement; and

          (v) mergers and consolidations permitted under Section 5.02(d), Investments permitted under Section 5.02(f) and transactions permitted under Section 5.02(g).

          (f) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person, except:

          (i) Investments by Parent and its Subsidiaries in their Subsidiaries outstanding on the date hereof;

          (ii) loans and advances to employees in the ordinary course of the business of Parent and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $50,000 at any time outstanding;

          (iii) Investments by Parent and its Subsidiaries in Cash Equivalents; and

          (iv) Investments existing on the date hereof and described on Schedule 4.01(q) hereto;

          (g) Restricted Payments. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such, or permit any of its Subsidiaries to do any of the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in Parent, except, so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom: (i) each Subsidiary of the Parent may make dividends or other distributions to each Loan Party and to each other owner of Equity Interests of such Subsidiary based on their relative ownership interests of such Equity Interests and consistent with the constituent documents of such Subsidiary and its course of dealings with the owners of its Equity Interests (including, without limitation, to allow such Loan Party or other owner to pay its franchise fees or similar taxes and fees required to maintain its corporate existence and its income taxes or the incomes taxes of any consolidated or affiliated group of which it is a

member; and (ii) the Borrowers may declare and pay cash dividends to Parent not to exceed $200,000 in the aggregate to permit Parent to pay (A) reasonable and customary corporate and operating expenses (including reasonable out of pocket expenses for legal, administrative and accounting services provided by third parties, and compensation, benefits and other amounts payable to officers and employees in connection with their employment in the ordinary course of business and to board of director observers) and (B) franchise fees or similar taxes and fees required to maintain its organizational existence.

          (h) Amendments of Constitutive Documents. Amend, or permit any of its Subsidiaries to amend, its certificate of incorporation or bylaws or other constitutive documents other than as required by law or as does not have a materially adverse effect on the interests of the Lenders, in each case, as promptly disclosed to the Administrative Agent.

          (i) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required or permitted by generally accepted accounting principles, or (ii) Fiscal Year.

          (j) Prepayments, Etc., of Debt. (i) Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Debt, except the prepayment of the Term Loan in accordance with the terms of this Agreement or (ii) amend, modify or change in any manner any term or condition of any Subordinated Debt, or permit any of its Subsidiaries to do any of the foregoing.

          (k) Negative Pledge. Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the creation or assumption of any Lien upon any of its property or assets except (i) agreements in favor of the Secured Parties or (ii) prohibitions or conditions under (A) any purchase money Debt permitted by Section 5.02(b)(iv) solely to the extent that the agreement or instrument governing such Debt prohibits a Lien on the property acquired with the proceeds of such Debt or (B) any Capitalized Lease permitted by Section 5.02(b)(iv) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto.

          (l) Speculative Transactions. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions.

          (m) Hedge Agreements. Enter or permit any of its Subsidiaries to enter into any Hedge Agreement.

          (n) Restrictions Affecting Subsidiaries. Directly or indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its Equity Interests to the Borrowers or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or make Investments in, the Borrowers or any Subsidiary of the Borrowers (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except the Loan Documents; provided, that this Section shall not limit the ability of any Subsidiary to pay the

Borrowers or another Subsidiary for goods or services provided in the ordinary course of business.

          (o) ERISA. Maintain, sponsor, participate in or contribute to any Plan or Multiemployer Plan; or incur any material liability under Title I or any liability under Title IV of ERISA for which any Loan Party could be reasonably expected to be liable, or permit any of its Subsidiaries or ERISA Affiliates to do any of the foregoing.

          (p) Material Amendments. Make, or permit any of its Subsidiaries to make, any material amendment to any agreements with any employee or independent contractor (including, without limitation, any optometrist or surgeon providing refractive laser or other services) unless the Loan Parties reasonably determine that such amendment results in cash savings or improved liquidity for the Loan Parties after consultation with the Required Lenders.

          (q) Prepetition Indebtedness. Pay or discharge, or permit any of its Subsidiaries to pay or discharge, or cause to be paid or discharged, any Debt of such Loan Party incurred before the Petition Date other than payments:

          (i) approved by the Bankruptcy Court and consented to by the Required Lenders;

          (ii) consistent with the Budget;

          (iii) required to be made to the Prepetition Agents and the Prepetition Lenders pursuant to the Orders (including, without limitation, amounts payable to the Special Counsel, the Financial Adviser, Stikeman Elliott LLP, as Canadian counsel, and Pachulski Stang Ziehl & Jones LLP, as Delaware counsel, each in connection with their representation of certain Prepetition Lenders); and

          (iv) as required in the Plan of Reorganization, on or about the effective date of the Plan of Reorganization (except as otherwise expressly provided for therein).

None of the Loan Parties shall, without the consent of the Required Lenders, file any motion with the Bankruptcy Court in accordance with Section 546(h) of the Bankruptcy Code seeking to return any goods shipped to any of the Loan Parties prior to the Petition Date.

          (r) Bankruptcy Chapter 11 Cases. Seek, consent or suffer to exist or permit any of its Subsidiaries to seek, consent or suffer to exist (i) any modification, stay, vacation or amendment to the Orders; (ii) a priority claim for any administrative expense or unsecured claim against any Borrower or any Guarantor (now existing or hereafter arising of any kind or nature whatsoever, including, without limitation, any administrative expense of any kind specified in Section 503(b) or 507(b) of the Bankruptcy Code or, from and after the entry of the Final Order, Section 506(c) of the Bankruptcy Code) equal to or superior to the priority claim of the applicable Agent and the Lenders in respect to the Obligations other than the Carve Out; and (iii) any Lien on any Collateral having a priority equal or superior to the Liens in favor of the applicable Agent and the Lenders in respect of the Obligations or the Liens in favor of the applicable Prepetition Agent and the Prepetition Lenders in respect of the Prepetition Lender

Debt, in each case other than Liens expressly permitted to be equal or superior in priority pursuant to this Agreement.

          (s) Success and Other Similar Fees. Make, or permit any of its Subsidiaries to make payment of any success, transaction, opinion or similar fee to any financial adviser engaged by Parent or any of its Subsidiaries or Affiliates.

          (t) Control Account Agreements. Permit the aggregate amount of cash maintained by any Loan Party at any financial institution at any time to exceed $5,000 for more than one Business Day unless such Loan Party has (i) executed and delivered to the Agents a Control Account Agreement, in form and substance reasonably satisfactory to the Required Lenders and executed by such financial institution, and (ii) taken all other steps necessary or, in the opinion of the Collateral Agent, desirable to ensure that the Collateral Agent has a perfected first priority security interest in such cash (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement); provided, that if such Loan Party is unable to obtain such agreement from such financial institution, such Loan Party shall promptly transfer all cash maintained at such financial institution to a financial institution from which such Loan Party has obtained such an agreement.

          (u) DIP Proceeds Controlled Account. Deposit any cash held or received by it into the DIP Proceeds Controlled Account other than proceeds of the Term Loans in accordance with the terms hereof.

          SECTION 5.03. Reporting Requirements. So long as any Term Loan or any other Obligation (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) of any Loan Party under any Loan Document shall remain unpaid, or any Lender shall have any Commitment hereunder, each Loan Party will cause to be furnished to the Agents and the Lenders:

          (a) Default Notice. As soon as possible and in any event within two days after any executive officer of any Loan Party is actually aware of the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of the Chief Financial Officer of the Administrative Borrower setting forth details of such Default and the action taken and proposed to be taken with respect thereto.

          (b) Annual Financials. As soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for Parent and its Subsidiaries, including therein Consolidated and, if otherwise provided, consolidating balance sheets of Parent and its Subsidiaries as of the end of such Fiscal Year and Consolidated and, if otherwise provided, consolidating statements of income and a Consolidated statement of cash flows of Parent and its Subsidiaries for such Fiscal Year, in each case accompanied by (i) an opinion as to such audit report of Ernst & Young, LLP or other independent public accountants of recognized standing acceptable to the Required Lenders and (ii) a report of such independent public accountants as to Parent’s internal controls required under Section 404 of the Sarbanes-Oxley Act of 2002, if any, in each case certified in a manner to which the Required Lenders have not objected, together with (A) a certificate of such accounting firm to the Lenders stating that in

the course of the regular audit of the business of Parent and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (B) a schedule in form satisfactory to the Administrative Agent and the Required Lenders of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04 and (C) a certificate of the Chief Financial Officer of the Administrative Borrower stating that (1) no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that has been taken and is proposed with respect thereto and (2) Parent and its Subsidiaries have paid to each appropriate taxing authority the full amount that each is required to pay in respect of income tax for such year.

          (c) Quarterly Financials. As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated and, if otherwise provided, consolidating balance sheets of Parent and its Subsidiaries as of the end of such quarter and Consolidated and, if otherwise provided, consolidating statements of income and Consolidated statement of cash flows of Parent and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and a Consolidated and, if otherwise provided, consolidating statements of income and a Consolidated statement of cash flows of Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments and the absence of footnotes) by the Chief Financial Officer of the Administrative Borrower as having been prepared in accordance with GAAP, together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that has been taken and is proposed with respect thereto and (ii) a schedule in form satisfactory to the Administrative Agent and the Required Lenders of the computations used by Parent and its Subsidiaries in determining compliance with the covenants contained in Section 5.04.

          (d) Cash Flow Forecast. On Thursday of each week (or, if such day is not a Business Day, on the immediately succeeding Business Day), rolling thirteen week Consolidated cash flow forecasts of Parent and its Subsidiaries and an updated comparison to the budgeted amounts from the prior week’s Consolidated cash flow projections in a form satisfactory to the Required Lenders.

          (e) Chief Financial Officer Report and Certificate. On Thursday of each week (or, if such day is not a Business Day, on the immediately succeeding Business Day),

          (i) a report of the Chief Financial Officer of the Administrative Borrower which sets forth:

          (A) a reconciliation of actual results for the prior week to the corresponding amounts reflected in the Budget, with explanations for any variance in any line item in excess of 10%;

          (B) a reconciliation of each of “total operating cash receipts” and “total operating cash disbursements” (as reflected in the Budget and measured weekly on a cumulative basis starting with the period ending three (3) weeks after the Petition Date) to the corresponding amounts reflected in the Budget, with explanations for any variance by line item in excess of 10%;

          (C) information with respect to asset sales, cost savings, facility closures and such other information reasonably requested by the Required Lenders; and

          (ii) a certificate of the Chief Financial Officer of the Administrative Borrower (A) stating that no proceeds of the Term Loans have been used for any item not set forth in the Budget and (B) as to (1) Liquidity as of Friday of the previous week, (2) any changes to or non-compliance with either of the Liquidity Guidelines through Friday of the previous week, together with reasonable supporting detail and calculations, (3) the aggregate amount of severance obligations due and payable to all employees or former employees of Parent or any of its Subsidiaries during the previous week, and (4) the aggregate amount of severance payments made to all employees or former employees of Parent and any of its Subsidiaries during the previous week.

          (f) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any Governmental Authority affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f), and promptly after the occurrence thereof, notice of any adverse change in the status or the financial effect on any Loan Party or any of its Subsidiaries of the Disclosed Litigation from that described on Schedule 4.01(f) hereto. Promptly after receipt thereof, notice of any Governmental Authority or other Person that such Governmental Authority or other Person has rescinded or not renewed, or intends to rescind or not renew, any material license, accreditations and approvals of any Governmental Authorities and all other Persons necessary for any Loan Party or any of its Subsidiaries to own its assets or to carry on its business.

          (g) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any national securities exchange.

          (h) Creditor Reports. Promptly after the furnishing thereof, copies of any statement or report furnished to any holder of Debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lender pursuant to any other clause of this Section 5.03(h).

          (i) Environmental Conditions. Promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Loan Party or any of its Subsidiaries or any of their respective properties, with any Environmental Law or

Environmental Permit that could reasonably be expected to have a Material Adverse Effect, as well as any actual or threatened release, pollution or other environmental condition at or from any of the properties of any Loan Party or any of its Subsidiaries, that could reasonably be expected to constitute a violation of any Environmental Law.

          (j) Real Property. As soon as available and in any event within 30 days after the end of each Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all real property acquired or leased by any Loan Party during such Fiscal Year.

          (k) Insurance. As soon as available and in any event no later than January 15^th of each year, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for Parent and its Subsidiaries as of the last day of the immediately preceding Fiscal Year and containing such additional information as any Agent, or any Lender through the Administrative Agent, may reasonably specify.

          (l) Casualty Losses. Promptly upon learning of any casualty loss or event not insured against in an amount in excess of $100,000, notice of such loss or event.

          (m) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Agent, or any Lender through the Administrative Agent, may from time to time reasonably request, including without limitation updating any information previously provided pursuant to Section 9.12 hereof.

          (n) Monthly Financials. As soon as available and in any event within thirty (30) days after the end of each month, Consolidated balance sheets, statements of income and statements of cash flows of Parent and its Subsidiaries (i) for such month, and (ii) for the portion of the Fiscal Year then ended, setting forth in each case, in comparative form, the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified by the Chief Financial Officer of the Administrative Borrower as having been prepared in accordance with GAAP (subject to normal year-end adjustments and the absence of footnotes, together with a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that has been taken and is proposed with respect thereto and, an updated comparison to the budgeted amounts for such period set forth in the Budget, in a form satisfactory to the Required Lenders.

          (o) Termination of Contracts, Etc. Promptly after the occurrence thereof, written notice of (i) termination of any material contract to which any Loan Party is a party, (ii) failure of any franchisee to make any payment in an aggregate amount in excess of $250,000 more than three months past due to any Subsidiary, and (iii) any tax audit or assessment of taxes on any Loan Party.

          (p) Restructuring Monitor Report. On Thursday of each week (or if such day is not a Business Day, on the immediately succeeding Business Day), a report with respect to the

Budget from the Restructuring Monitor reasonably satisfactory in all respects to the Administrative Agent and the Required Lenders.

          SECTION 5.04. Financial Covenants. So long as any Term Loan or any other Obligation (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) of any Loan Party under any Loan Document shall remain unpaid, or any Lender shall have any Commitment hereunder, each Loan Party will:

          (a) Budget Compliance. Not make or permit any of its Subsidiaries to make payments other than those set forth in the Budget; provided, that:

          (i) “total operating cash receipts” (as reflected in the Budget and measured weekly on a cumulative basis starting with the period ending three (3) weeks after the Petition Date) may be less than the corresponding amounts set forth in the Budget if such “total operating cash receipts” (A) for all cumulative weekly periods ending from the date three (3) weeks after the Petition Date to the date six (6) weeks after the Petition Date, are not less than 88% of the corresponding amounts reflected in the Budget, (B) for all cumulative weekly periods ending from the date seven (7) weeks after the Petition Date to the date twelve (12) weeks after the Petition Date, are not less than 90% of the corresponding amounts reflected in the Budget, and (C) for all cumulative weekly periods ending from and after the date thirteen (13) weeks after the Petition Date, are not less than 92.5% of the corresponding amounts reflected in the Budget;

          (ii) “total operating cash disbursements” (as reflected in the Budget and measured weekly on a cumulative basis starting with the period ending three (3) weeks after the Petition Date) may be more than the corresponding amounts set forth in the Budget if such “total operating cash disbursements” (A) for all cumulative weekly periods ending from the date three (3) weeks after the Petition Date to the date six (6) weeks after the Petition Date, are not more than 112% of the corresponding amounts reflected in the Budget, (B) for all cumulative weekly periods ending from the date seven (7) weeks after the Petition Date to the date twelve (12) weeks after the Petition Date, are not more than 110% of the corresponding amounts reflected in the Budget, and (C) for all cumulative weekly periods ending from and after the date thirteen (13) weeks after the Petition Date, are not more than 107.5% of the corresponding amounts reflected in the Budget;

          (iii) each of the line items for “marketing” and “occupancy” respectively (as reflected in the Budget and measured weekly on a rolling three (3) week basis starting with the period ending three (3) weeks after the Petition Date) may be more than the corresponding amounts set forth in the Budget if each such line item is not more than 115% of the corresponding amounts reflected in the Budget; and

          (iv) the sum of the line items for “refractive center procedures” and “refractive access procedures” (as reflected in the Budget and measured weekly on a rolling three (3) week basis starting with the period ending three (3) weeks after the

Petition Date) may be less than the sum of the corresponding amounts set forth in the Budget if such sum is not less than 85% of the sum of the corresponding amounts reflected in the Budget.

          (b) Minimum Liquidity. Cause minimum Liquidity at all times to be no less than $2,500,000.

          (c) Capital Expenditures. Make, or permit any of its Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all Capital Expenditures made by Parent and its Subsidiaries during any Fiscal Year to exceed the amounts as set forth in the Budget.

ARTICLE VI

EVENTS OF DEFAULT

          SECTION 6.01. Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:

          (a) (i) the Borrowers shall fail to pay any principal of any Term Loan when the same shall become due and payable or (ii) the Borrowers shall fail to pay any interest on any Term Loan, or any Loan Party shall fail to make any other payment under any Loan Document, in each case under this clause (ii) within three (3) calendar days after the same shall become due and payable;

          (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made;

          (c) Parent shall fail to perform or observe any term, covenant or agreement contained in Section 5.01(e) or (i), Section 5.02 or Section 5.04;

          (d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for fifteen (15) days after the earlier of the date on which (i) any executive officer of a Loan Party becomes actually aware of such failure or (ii) written notice thereof shall have been given to the Borrowers by any Agent or any Lender;

          (e) (i) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any postpetition Debt, or any prepetition Debt if, by order of the Bankruptcy Court issued with respect to such prepetition Debt, the default thereunder entitles the holder thereof to relief from the automatic stay of Section 362 of the Bankruptcy Code, in an aggregate amount in excess of $250,000 (excluding Debt outstanding under the Loan Documents), or (ii) if any other event (other than with respect to the filing of the Cases) shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the

holder thereof to cause, such Debt to mature, or (iii) if any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or (iv) an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in the case of each (ii) through (iv), prior to the stated maturity thereof;

          (f) any judgments or orders, either individually or in the aggregate, for the payment of money in excess of $250,000 (after application of any insurance as to which the applicable insurance company has accepted responsibility to cover such judgment or order, but inclusive of any deductible amount) shall be rendered against any Loan Party or any of its Subsidiaries after the Petition Date and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of fifteen (15) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;

          (g) any non monetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries after the Petition Date that is reasonably likely to have a Material Adverse Effect, and there shall be any period of fifteen (15) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;

          (h) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or Section 5.01(j) shall for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against any Loan Party party to it, or any such Loan Party shall so state in writing;

          (i) any Collateral Document or financing statement after delivery thereof pursuant to Section 3.01 or Section 5.01(j) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority (subject to the Carve Out and other Liens permitted to be equal or superior in priority under this Agreement) lien on and security interest in Collateral purported to be covered thereby, except as otherwise provided in such Collateral Document;

          (j) a Change of Control shall occur;

          (k) (i) any Loan Party shall be enjoined from conducting any material part of its business, (ii) there shall occur any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes the cessation or substantial curtailment of a material portion of the revenue producing activities of Parent or any of its Subsidiaries, or (iii) or there shall occur any damage to, or loss, theft or destruction of, any assets of any Loan Party or any of its Subsidiaries, that are used or useful in a material portion of their business (not fully covered by insurance as to which the applicable insurance company has accepted full responsibility to cover such damage, loss, theft or destruction);

          (l) the Bankruptcy Court (or the Canadian Court, as applicable) shall enter any order (i) amending, reversing, revoking, supplementing, altering, staying, vacating, rescinding or otherwise modifying the Interim Order, the Final Order or any other order with respect to the Chapter 11 Cases affecting in any material respect this Agreement or the Loan

Documents, without the Required Lenders’ consent, (ii) appointing a Chapter 11 trustee or an examiner, with enlarged powers relating to the operation of the business pursuant to Section 1104 of the Bankruptcy Code (powers beyond those set forth in Section 1106(a)(3) and (4) and 1106(b) of the Bankruptcy Code) in the Chapter 11 Cases, or a receiver, interim-receiver, receiver and manager, trustee in bankruptcy of any official with similar powers under CCAA or BIA with respect to any of the Borrowers, any of the Guarantors or any of their respective assets, (iii) dismissing any of the Chapter 11 Cases or converting any of the Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code, or (iv) granting relief from the automatic stay to any creditor holding or asserting a Lien or reclamation claim on the assets of any of Borrower to permit such creditor to foreclose upon or to reclaim Collateral with a value in excess of $250,000;

          (m) a motion shall be filed by any of the Borrowers for the approval of any other Superpriority Claim in the Chapter 11 Cases (other than the Carve Out) which is pari passu with or senior to the claims of any of the Agents or the Lenders against any of the Loan Parties unless after giving effect to the transactions contemplated by such motion, all Obligations of any Loan Party under the Loan Documents (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) shall be paid in full in cash;

          (n) [Reserved];

          (o) the failure of the Bankruptcy Court to enter the Interim Order, in form and substance reasonably satisfactory to the Required Lenders, within seven (7) days after the filing of the motion to approve the Interim Order;

          (p) the failure of the Borrowers to have filed with the Bankruptcy Court the Plan of Reorganization and a disclosure statement with respect thereto, each in form and substance reasonably satisfactory to the Required Lenders (including, without limitation, the terms set forth in the Plan Term Sheet), within ten (10) Business Days of the Petition Date;

          (q) the failure of the Bankruptcy Court to enter the Final Order, in form and substance reasonably satisfactory to the Required Lenders (including, without limitation, approval of the Facility) within forty-five (45) days after the date of entry of the Interim Order;

          (r) the failure of the Borrowers to obtain an order from the Bankruptcy Court approving the disclosure statement with respect to the Plan of Reorganization, in form and substance reasonably satisfactory to the Required Lenders, within sixty (60) days of the Petition Date;

          (s) the failure of the Borrowers to obtain an order from the Bankruptcy Court (and in the case of Parent, the Canadian Court) confirming the Plan of Reorganization, in form and substance reasonably satisfactory to the Required Lenders (including, without limitation, the terms set forth in the Plan Term Sheet), within one hundred and twenty (120) days of the Petition Date;

          (t) the failure of the Plan of Reorganization, in form and substance reasonably satisfactory to the Required Lenders, to become effective within one hundred and fifty (150) days of the Petition Date;

          (u) the failure of the Borrowers to comply in all material respects with the Orders or any other order of the Bankruptcy Court applicable to the Borrowers;

          (v) any of the Borrowers shall file a motion in any of the Chapter 11 Cases (i) except as provided in the Orders or in the Plan of Reorganization, to use cash collateral of the Lenders under Section 363(c) of the Bankruptcy Code without the Required Lenders’ consent, (ii) to recover from any portions of the Collateral any costs or expenses of preserving or disposing of such Collateral under Section 506(c) of the Bankruptcy Code, or (iii) to take any other action or actions adverse to the Lenders or their rights and remedies hereunder or under any of the other Loan Documents or any of the documents evidencing or creating the Secured Parties’ interest in any of the Collateral;

          (w) any Material Adverse Effect shall occur;

          (x) the occurrence of (i) any material deterioration in the value of the Collateral of the Loan Parties taken as whole or (ii) any material damage to or loss of assets of the Loan Parties taken as a whole (after application of any insurance as to which the applicable insurance company has accepted responsibility to cover such damage or loss, but inclusive of any deductible amount);

          (y) an order terminating exclusivity has been entered by the Bankruptcy Court or requested of the Bankruptcy Court unless actively contested by the Borrowers;

          (z) (i) any filing with respect to any Borrower, whether voluntary or involuntary, under Chapter 11 or Chapter 7 of the Bankruptcy Code, BIA or CCAA, shall be commenced without the prior consent of the Required Lenders, or (ii) any filing with respect to any direct or indirect Subsidiary of Parent (other than Holdco and TLC Management), whether voluntary or involuntary, under Chapter 11 or Chapter 7 of the Bankruptcy Code, BIA or CCAA shall have been commenced; or

          (aa) the Restructuring Monitor shall cease to be in place and operating pursuant to an engagement letter, in form and substance reasonably satisfactory to the Required Lenders, or such engagement letter shall cease to be in full force and effect,

then, and in any such event, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Administrative Borrower, declare (A) the Commitments of each Lender and the obligation of each Lender to make Term Loans to be terminated, whereupon the same shall forthwith terminate, and (B) the Term Loans, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Term Loans, all such interest and all such amounts shall be forthwith due and payable.

          SECTION 6.02. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, following the giving of three (3) Business Days’ written

notice to the Administrative Borrower, the Creditors Committee and the United States Trustee, unless the Bankruptcy Court determines that an Event of Default has not occurred and/or is not continuing, the automatic stay shall automatically be terminated at the end of such three (3) Business Day period without further notice or order and, subject to the terms and conditions of the Intercreditor Agreement, the Agents and the Lenders, shall be permitted to (a) sweep any or all cash in the DIP Proceeds Controlled Account and any other account of a Loan Party subject to a Control Account Agreement to prepay the Term Loans and to pay all other Obligations of any Loan Party under the Loan Documents to the Secured Parties, (b) foreclose on all or any portion of the Collateral and collect accounts receivable and apply the proceeds thereof to the Obligations of any Loan Party under the Loan Documents, (c) occupy the Loan Parties’ premises, (d) execute going-out-of business sales and (e) otherwise exercise remedies permitted by applicable nonbankruptcy law. During such three (3) Business Day notice period described in the first sentence of this Section 6.02, the Borrowers and any Creditors’ Committee shall be entitled to an emergency hearing with the Bankruptcy Court for the sole purpose of contesting whether an Event of Default has occurred and/or is continuing. Upon the occurrence and during the continuance of an Event of Default upon the direction of the Required Lenders, the Borrowers shall pursue an immediate sale of the Collateral (including, without limitation, the Canadian Refractive Centers) pursuant to the provisions of Section 363 of the Bankruptcy Code, in a manner satisfactory to the Required Lenders, proceeds of which shall be used to pay the Obligations of any Loan Party under the Loan Documents to the Secured Parties.

ARTICLE VII

THE AGENTS

          SECTION 7.01. Authorization and Action. (a) Each Lender hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Obligations of the Loan Parties), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders (or if so required under this Agreement, all Lenders), and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that no Agent shall be required to take any action that, in such Agent’s reasonable opinion, could expose such Agent to personal liability or that is contrary to this Agreement or applicable law.

          (b) In furtherance of the foregoing, each Lender hereby appoints and authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent shall be entitled to the benefits of this Article VII (including, without limitation, Section 7.05) as though the Collateral Agent were an “Agent” under the Loan Documents, as if set forth in full herein with respect thereto.

          (c) Each Lender hereby appoints the Collateral Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral in assets which, in accordance with Article 9 of the Uniform Commercial Code, can be perfected only by possession or control (or where the security interest of a secured party with possession or control has priority over the security interest of another secured party) and the Collateral Agent and each Lender hereby acknowledges that it holds possession of or otherwise controls any such Collateral for the benefit of the Collateral Agent and the Lenders as secured party. Should any Lender obtain possession or control of any such Collateral, such Lender shall notify the Collateral Agent thereof, and, promptly upon the Collateral Agent’s request therefor shall deliver such Collateral to the Collateral Agent or in accordance with the Collateral Agent’s instructions. Each Loan Party by its execution and delivery of this Agreement hereby consents to the foregoing.

          (d) Any Agent may execute any of its duties under this Agreement or any other Loan Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder at the direction of the Administrative Agent) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties.

          (e) With respect to the release of Collateral, the Lenders hereby irrevocably authorize the Collateral Agent, at its option and in its discretion, to release any Lien granted to or held by the Collateral Agent upon any property covered by this Agreement or the other Loan Documents or to release a Subsidiary from its obligations as Guarantor, if applicable, and to execute and deliver all documents referred to in Section 9.11 (i) upon termination or expiration of the Commitments, the payment and satisfaction of all Obligations (other than contingent indemnification and reimbursement Obligations in respect to which no claim for payment has been asserted by the Person entitled thereto) arising with respect to the Term Loans (including, without limitation, all fees and expenses payable hereunder and under the other Loan Documents); or (ii) constituting property being sold or disposed of in compliance with the provisions of the Loan Documents (and the Collateral Agent may rely in good faith conclusively on any certificate stating that the property is being sold or disposed of in compliance with the provisions of the Loan Documents, without further inquiry); provided, however, that (A) the Collateral Agent shall not be required to execute any release on terms which, in the Collateral Agent’s opinion, would expose the Collateral Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (B) such release shall not in any manner discharge, affect or impair any Liens upon all interests retained, all of which shall continue to constitute part of the Collateral covered by the Loan Documents.

          (f) Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agents. The duties of the Agents shall be mechanical and administrative in nature. Without limiting the generality of the foregoing, the use of the term “agent” herein or in the other Loan Documents (or any similar term) with reference to any Agent is not intended to connote any fiduciary or other implied (or express)

obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

          SECTION 7.02. Agents’ Reliance, Etc. Neither any Agent nor any Agent Party shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation (including with regard to the existence, value or collectibility of the Collateral) to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (c) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of any Loan Document on the part of any Loan Party or the existence at any time of any Default under the Loan Documents or to inspect the property (including the books and records) of any Loan Party; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the existence, perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto, or for any failure of any Loan Party to perform its obligations hereunder or thereunder; (e) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or electronic communication) believed by it to be genuine and signed or sent by the proper party or parties; and (f) shall incur no liability for any apportionment or distribution of payments made in good faith pursuant to Section 2.08 without any gross negligence or willful misconduct, and if any such apportionment or distribution is subsequently determined to have been made in error but without any gross negligence or willful misconduct, the sole recourse of any Lender to whom payment was due but not made, shall be to recover from the other Lenders any payment in excess of the amount which they are determined to be entitled to (and such other Lenders hereby covenant and agree to return promptly to such Lender any erroneous payment received by them).

          SECTION 7.03. Rights as a Lender. Each Lender serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include each Lender serving as an Agent hereunder in its individual capacity. Such Lenders and their Affiliates may accept deposits from, lend money to, act as trustee under the indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if such Lenders were not Agents and without any duty to account therefor to the other Lenders No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to any Loan Party or any of its Subsidiaries to the extent such information was obtained or received in any capacity other than as such Agent.

          SECTION 7.04. Lender Credit Decision. Each Lender expressly acknowledges that neither the Agents nor any other Agent Party have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs or property of a Loan Party or any Affiliate of a Loan Party or any acceptance or consent to any such review, shall be deemed to constitute any representation or warranty by any Agent to any Lender as to any matter, including as to whether Agent Parties have disclosed material information in their possession. Each Lender also acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agents hereunder, the Agents shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of an Agent or Agent Party.

          SECTION 7.05. Indemnification. (a) Each Lender severally agrees to indemnify each Agent and each other Agent Party (to the extent not promptly reimbursed by the Borrowers) from and against such Lender’s ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Agent or Agent Party in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent’ under the Loan Documents (collectively, the “Indemnified Costs”); provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s or Agent Party’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction; provided, further, that no action by any Agent or Agent Party taken or refrained from in accordance with the directions or consent of the Required Lenders (or if so required under this Agreement, all Lenders) shall be deemed to constitute gross negligence or willful misconduct of such Agent or Agent Party for purposes of this Section 7.05. Without limitation of the foregoing, each Lender agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrowers under Section 9.04, to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrowers. In the case of any investigation, litigation or proceeding giving rise to any Indemnified Costs, this Section 7.05 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person.

          (b) For purposes of this Section 7.05, each Lender’s ratable share of any amount shall be determined, at any time, according to the sum of (i) the aggregate principal amount of the Term Loans outstanding at such time and owing to such Lender and (ii) the aggregate unused portion of such Lender’s Commitments at any time prior to the Final Order Funding Date. The failure of any Lender to reimburse any Agent, promptly upon demand for its ratable share of any amount required to be paid by the Lender to such Agent as provided herein

shall not relieve any other Lender of its obligation hereunder to reimburse such Agent for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse such Agent, for such other Lender’s ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender hereunder, the agreement and obligations of each Lender contained in this Section 7.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents.

          SECTION 7.06. Successor Agents. Any Agent may resign at any time by giving written notice thereof to the Lenders and the Administrative Borrower and may be removed at any time with or without cause by the Required Lenders upon 3 Business Days notice; provided, however, that any removal of the Administrative Agent will not be effective until it has also been replaced as Collateral Agent and released from all of its obligations in respect thereof; provided, further, that the successor Administrative Agent shall not be required, but shall be permitted, to act as replacement Collateral Agent. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a Lender or a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent and, in the case of a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. If within 45 days after written notice is given of the retiring Agent’s resignation or removal under this Section 7.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (a) the retiring Agent’s resignation or removal shall become effective, (b) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (c) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent’s resignation or removal hereunder as Agent shall have become effective, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

          SECTION 7.07. Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless such Agent has received notice from a Lender or Loan Party referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that any Agent receives such a notice, such Agent shall promptly give notice thereof to the Lenders. Each Agent shall take such action with respect to such Default or Event of Default in accordance with Section 7.01.

          SECTION 7.08. No Reliance on Administrative Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates or assignees, may rely on the Administrative Agent to carry out such Lender’s , Affiliate’s or assignee’s customer identification program, or other obligations required or imposed under or contained in 21 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with the Borrowers, their Affiliates or their agents, the Loan Documents or the transactions hereunder or contemplated hereby: (1) any identity verification procedures, (2) any record-keeping, (3) comparisons with government lists, (4) customer notices or (5) other procedures required under the CIP Regulations or such other laws.

ARTICLE VIII

PRIORITY AND COLLATERAL SECURITY

          SECTION 8.01. Superpriority Claims and Collateral Security.

          (a) The Borrowers jointly and severally warrant and covenant that, except as otherwise expressly provided in this paragraph, upon the entry of the applicable Order, the Obligations of any Loan Party under the Loan Documents:

          (i) shall at all times constitute a Superpriority Claim in the Chapter 11 Case of the Borrowers having priority, pursuant to Section 364(c)(1) and 507(b) of the Bankruptcy Code (subject only to the Carve Out), over the other administrative claims of any entity, including, without limitation any claims under Sections 105, 326, 328, 330, 331, 365, 503(a), 503(b), 507(a), 507(b), 546(c), 546(d), 726 (to the extent permitted by law), 1113 and 1114 of the Bankruptcy Code, and any other provision of the Bankruptcy Code (including, subject to entry of the Final Order, Section 506(c)), and shall at all times be senior to the rights of the Loan Parties, the Loan Parties’ estates, any successor trustee to the extent permitted by law, or any other creditor in the Chapter 11 Cases;

          (ii) pursuant to Sections 361, 362, 364(c)(2), 364(c)(3), and 364(d) of the Bankruptcy Code and the Security Agreements, shall at all times be secured by, and each Loan Party hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a continuing, valid, binding, enforceable, non-avoidable and automatically properly perfected post-petition security interest and first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement) Lien on all existing and after acquired real and personal property and other assets of the Borrowers, tangible and intangible, whether now owned by or owing to, or hereafter acquired by or arising in favor of the Loan Parties, whether owned or consigned by or to, or leased from or to the Loan Parties and regardless of where located, including without limitation, (A) the Collateral (as defined in the Security Agreements), (B) all avoidance power claims and actions arising under Section 549 of the Bankruptcy Code relating to postpetition transfers of Collateral and any proceeds thereof, (C) subject to entry of the Final Order, all avoidance power claims and actions under Chapter 5 of the

Bankruptcy Code and any proceeds thereof, (D) subject to entry of the Final Order, the security interest will not be subject to Section 551 of the Bankruptcy Code nor shall Collateral be surcharged pursuant to Section 506(c) of the Bankruptcy Code, and (E) any unencumbered assets of the Loan Parties.

          (b) The Borrowers jointly and severally warrant and covenant that, except as otherwise expressly provided in this Section 8.01, upon the entry of the Recognition Order, the Obligations of the Parent under the Loan Documents shall at all times be secured by a superpriority charge and senior priming security interest over all of the present and future assets of the Parent with priority over all existing liens and security (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to this Agreement).

          (c) Such Superpriority Claim and Liens referred to in Section 8.01(a) shall be subject to the Carve Out, but shall otherwise be senior in priority to the adequate protection Liens securing the Prepetition Lender Debt and all other Liens on the assets and properties of the Borrowers other than Liens permitted under this Agreement, entitled to priority under applicable nonbankruptcy law.

          SECTION 8.02. Collateral Security Perfection. The Borrowers agree to take all action that any Agent or the Required Lenders may reasonably request as a matter of nonbankruptcy law to perfect and protect the Collateral Agent’s Liens for the benefit of the Secured Parties upon the Collateral and for such Liens to obtain the priority therefor contemplated hereby, including, without limitation, executing and delivering such documents, instruments and financing statements, providing such notices to third parties, obtaining such consents from any Governmental Authority and providing such other instruments and documents in recordable form, as the Collateral Agent or the Required Lenders may reasonably request. Each Loan Party hereby irrevocably authorizes the Collateral Agent at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of such Loan Party or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State of Delaware or such other jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other information required by part 5 of Article 9 of the Uniform Commercial Code of the State of Delaware or such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether any Loan Party is an organization, the type of organization and any organization identification number issued to such Loan Party, and (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of real property to which the Collateral relates. Each Borrower agrees to furnish any such information to the Agents promptly upon request. Notwithstanding the provisions of this Section 8.02, the Agents and the Lenders shall have the benefit of the Interim Order and the Final Order.

          SECTION 8.03. Guarantees. The Obligations shall be guaranteed by the Guarantors pursuant to the terms of the Guaranty.

          SECTION 8.04. No Discharge; Survival of Claims. Pursuant to Section 1141(d)(4) of the Bankruptcy Code, the Borrowers hereby waive any discharge of the

Obligations with respect to any plan of reorganization that shall not provide for the payment in full in cash of the Obligations (other than contingent indemnification and reimbursement Obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) under this Facility.

ARTICLE IX

MISCELLANEOUS

          SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (a) no amendment, waiver or consent shall, unless in writing and signed by all Lenders (other than any Lender that is, at such time, a Defaulting Lender), do any of the following at any time:

          (i) waive any of the conditions specified in Section 3.01 or, in the case of the initial Borrowing, Section 3.03.

          (ii) change the number of Lenders or the percentage of (x) the Commitments or (y) the aggregate unpaid principal amount of the Term Loans, that, in each case, shall be required for the Lenders or any of them to take any action hereunder;

          (iii) release one or more Guarantors (or otherwise limit such Guarantors’ liability with respect to the Obligations owing to the Agents and the Lender under the Guaranties) if such release or limitation is in respect of all or substantially all of the value of the Guaranties to the Lenders;

          (iv) release all or substantially all of the Collateral in any transaction or series of related transactions;

          (v) amend this Section 9.01; or

          (vi) reduce the percentage specified in the definition of “Required Lenders”.

          (b) no amendment, waiver or consent shall, unless in writing and signed by the Required Lenders and each Lender specified below for such amendment, waiver or consent:

          (i) increase the Commitments of a Lender without the consent of such Lender;

          (ii) reduce the principal of, or stated rate of interest on, the Term Loans owed to a Lender or any fees or other amounts stated to be payable hereunder or under the other Loan Documents to such Lender without the consent of such Lender; or

          (iii) postpone any date scheduled for any payment of principal of, or interest on, the Term Loans pursuant to Section 2.03 or Section 2.05 or any date fixed for any payment of fees hereunder in each case payable to a Lender without the consent of such Lender;

provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Lenders required above to take such action, affect the rights or duties of such Agent under this Agreement or the other Loan Documents.

          SECTION 9.02. Notices, Etc. (a) All notices and other communications provided for hereunder shall be either (x) in writing (including telecopy or electronic communication) and mailed, telecopied or delivered or (y) as and to the extent set forth in Section 9.02(b) and in the proviso to this Section 9.02(a), in an electronic medium and delivered as set forth in Section 9.02(b), if to any Loan Party, to the Administrative Borrower at its address at 16305 Swingley Ridge Road, Suite 300, Chesterfield, Missouri 63017, Attention: Patricia Larson and Jane Franzier, Facsimile No. (636) 534-2301, E-mail Address: patricia.larson@tlcvision.com and jane.franzier@tlcvision.com; if to any Lender party to this Agreement, at its Lending Office specified opposite its name on Schedule I hereto, with a copy to Proskauer Rose LLP at Three First National Plaza, 70 West Madison, Suite 3800, Chicago, IL 60602-4342, Attention Mark K. Thomas, Esq. and Paul V. Possinger, Esq., Facsimile No. (312) 962-3551, Email Address: mthomas@proskauer.com and ppossinger@proskauer.com; if to any other Lender, at its Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender; if to the Administrative Agent or the Collateral Agent, at its address at 110 East 59th Street, New York, NY 10022, Attention: Stephen P. Ewald, Facsimile No. (917) 677-8224, E-mail Address: sewald@cantor.com; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties; provided, however, that materials and information described in Section 9.02(b) shall be delivered to the Administrative Agent in accordance with the provisions thereof or as otherwise specified to the Administrative Borrower by the Administrative Agent. All such notices and other communications shall, when mailed, telecopied, or e-mailed, be effective when deposited in the mails, transmitted by telecopier or sent by electronic communication, respectively, except that notices and communications to any Agent pursuant to Article II, III or VII shall not be effective until received by such Agent. Delivery by telecopier or other electronic means of an executed counterpart of a signature page to any amendment or waiver of any provision of this Agreement or the Notes shall be effective as delivery of an original executed counterpart thereof.

          (b) Each Borrower hereby agrees that it will provide to the Agents all information, documents and other materials that it is obligated to furnish to the Agents pursuant to the Loan Documents, including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other information materials, but excluding any such communication that (i) relates to a request for a new Borrowing, (ii) relates to the payment of any principal or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default under this Agreement or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any Borrowing thereunder (all such non-excluded communications being referred to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the applicable Agent to an electronic mail address specified by

the applicable Agent to the Administrative Borrower. In addition, the Administrative Borrower agrees to continue to provide the Communications to each Agent in the manner specified in the Loan Documents but only to the extent requested by the applicable Agent. The Borrower further agrees that the Agents may make the Communications available to the Lenders by posting the Communications on IntraLinks® or a substantially similar electronic transmission system (the “Platform”).

          (c) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NO EVENT SHALL ANY AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, PARTNERS, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT PARTIES”) HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER PARTY OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

          (d) Each Agent agrees that the receipt of the Communications by such Agent at its e-mail address set forth above shall constitute effective delivery of the Communications to such Agent for purposes of the Loan Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Loan Documents. Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such e-mail address. Nothing herein shall prejudice the right of any Agent Lender to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.

          SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender or Agent to exercise, and no delay in exercising, any right hereunder or under any Note or any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

          SECTION 9.04. Costs and Expenses. (a) The Borrowers agree to pay on demand (i) all reasonable costs and expenses of each Agent in connection with the preparation, execution, delivery, administration, modification and amendment of, or any consent or waiver under, the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses, (B) the reasonable fees and expenses of counsel for each Agent with respect thereto, with respect to advising such Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency, refinancing or restructuring of the financing under the Loan Documents in the nature of a “work-out” or other similar proceeding involving creditors’ rights generally and any proceeding ancillary thereto), (ii) all reasonable fees and expenses of counsel for the Required Lenders (including, without limitation, Special Counsel, Stikeman Elliott LLP, as Canadian counsel, and Pachulski Stang Ziehl & Jones LLP, as Delaware counsel) with respect to any matter referred to in clause (a)(i) hereof to the same extent as if it were an Agent thereunder, and (iii) all costs and expenses of each Agent and each Lender in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, or any bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally (including, without limitation, the reasonable fees and expenses of counsel for Agents and each Lender with respect thereto).

          (b) The Borrowers agree to indemnify, defend and save and hold harmless each Agent, each Lender and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, disbursements associated with monitoring of the Cases, all appraisal charges and other liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facility, the actual or proposed use of the proceeds of the Term Loans, the Loan Documents, or any of the transactions contemplated thereby, or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, disbursement, charge, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors, any Indemnified Party or any other Person, and whether or not any Indemnified Party is otherwise a party thereto. The Borrowers also agree not to assert any claim against any Agent, any Lender or any of their Affiliates, or any of their respective officers, directors, employees, agents and advisors, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facility, the actual or proposed use of the

proceeds of the Term Loans, the Loan Documents, or any of the transactions contemplated by the Loan Documents.

          (c) If any payment of principal of any Term Loan is made by the Borrowers to or for the account of a Lender other than on the last day of the Interest Period for such Term Loan, as a result of a payment pursuant to Section 2.04, acceleration of the maturity of the Term Loans pursuant to Section 6.01 or for any other reason, by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Term Loan upon an assignment of rights and obligations under this Agreement pursuant to Section 9.07, as a result of a demand by the Borrowers pursuant to Section 2.07(d), or if the Borrowers fail to make any payment or prepayment of any Term Loans for which a notice of prepayment has been given or that is otherwise required to be made, whether pursuant to Section 2.03, Section 2.04 or Section 6.01 or otherwise, the Borrowers shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or such failure to pay or prepay, as the case may be, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Term Loan.

          (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender, in its sole discretion.

          (e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrowers contained in Section 2.07 and Section 2.09 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents.

          SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default or (b) the acceleration of the Term Loans pursuant to the provisions of Section 6.01, each Agent and each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender or such Affiliate to or for the credit or the account of any Loan Party against any and all of the Obligations of such Loan Party now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender shall have made any demand under this Agreement and although such Obligations may be unmatured. Each Agent and each Lender agrees promptly to notify the Borrowers after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender and their respective Affiliates may have.

          SECTION 9.06. Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrowers, Guarantors and each Agent, and the Administrative Agent shall have been notified by each initial Lender that such initial Lender has executed it, and thereafter shall be binding upon and inure to the benefit of the Borrowers, Guarantors, each Agent and each Lender and their respective successors and assigns, except that none of the Borrowers shall have the right to assign its rights hereunder or any interest herein without the prior written consent of each Lender.

          SECTION 9.07. Assignments and Participations. (a) Each Lender may and, so long as no Default shall have occurred and be continuing, if demanded by the Administrative Borrower pursuant to Section 2.07(d) upon at least five Business Days’ notice to such Lender and the Administrative Agent, will assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Term Loans owing to it and the Note or Notes held by it); provided, however, that (i) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender, an Affiliate of any Lender or an Approved Fund of any Lender or an assignment of all of a Lender’s rights and obligations under this Agreement, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $1,000,000 (or such lesser amount as shall be approved by the Administrative Agent and, except during the initial syndication of the Commitments and the Term Loans, so long as no Default shall have occurred and be continuing at the time of effectiveness of such assignment, the Administrative Borrower), (ii) each such assignment shall be to an Eligible Assignee, (iii) each such assignment made as a result of a demand by the Administrative Borrower pursuant to Section 2.07(d) shall be arranged by the Borrowers after consultation with the Administrative Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (iv) no Lender shall be obligated to make any such assignment as a result of a demand by the Administrative Borrower pursuant to Section 2.07(d) unless and until such Lender shall have received one or more payments from either the Borrowers or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Term Loans owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement, and (v) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, and shall deliver any Note or Notes (if any) subject to such assignment (provided such delivery may occur after an assignment is effective), and shall pay a processing and recordation fee of $3,500; provided, however, that for each such assignment made as a result of a demand by the Administrative Borrower pursuant to Section 2.07(d), the Borrowers shall pay to the Administrative Agent the applicable processing and recordation fee.

          (b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender

hereunder and (ii) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Section 2.07 and Section 2.09 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto).

          (c) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender.

          (d) The Term Loans shall be issued in registered form and shall be transferable only upon a register (the “Register”) maintained by the Administrative Agent as Registrar (the “Registrar”), acting solely for this purpose as an agent of the Borrowers. The Registrar shall maintain the Register at its address referred to in Section 9.02 for the recordation of the names and addresses of the owners of the Term Loans and any related Notes from time to time. The Registrar shall record each transfer of the Term Loans and any related Notes to a transferee on the Register upon written notification by the registered owner of such transfer (with the Registrar being allowed to rely conclusively on any such notification). The entries in the Register shall be conclusive, and the Borrowers, the Agents and Lenders may deem and treat the Person whose name is recorded in the Register pursuant to the terms hereof as the owner of the Term Loans and any related Notes for the purpose of receiving payment of, or on account of, the principal and interest due on the Loans and any related Notes and for all other purposes, notwithstanding notice to the contrary; provided that, failure to make any such recordation, or

any error in such recordation, shall not affect any Lender’s Commitments or Borrower’s Obligations in respect of any Term Loan. The Register shall be available for inspection by the Borrowers and the Lenders, at any reasonable time and from time to time upon reasonable prior notice. Each Borrower hereby designates the Administrative Agent to serve as the Borrowers’ agent solely for purposes of maintaining the Register as provided in this Section 9.07, and each Borrower hereby agrees that, to the extent such entity serves in such capacity, the Administrative Agent and its affiliates, officers, directors, employees and agents shall constitute an “Indemnified Party” under Section 9.04(b).

At the request of the registered owner of any Term Loan and any related Notes, the Registrar shall note a collateral assignment of such Term Loan and any related Notes on the Register and, provided that the Registrar has been given the name and address of such collateral assignee, the Registrar (i) shall not permit any further transfers of such Term Loan and any related Notes on the Register absent receipt of written consent to such transfers from such collateral assignee and (ii) shall record the transfer of such Term Loan and any related Notes on the Register to such collateral assignee (or such collateral assignee’s designee, nominee or assignee) upon written request by such collateral assignee.

          (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Administrative Borrower and each other Agent. In the case of any assignment by a Lender, within five (5) Business Days after its receipt of such notice, the Administrative Borrower, at its own expense, shall execute and deliver to the Administrative Agent, upon receipt of and in exchange for the surrendered Note or Notes (if any) if such Note is requested by the Eligible Assignee, a new Note in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if any assigning Lender that had a Note or Notes prior to such assignment has retained a Commitment hereunder, upon such Lender’s request a new Note in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A.

          (f) Each Lender may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Term Loans owing to it and the Note or Notes (if any) held by it); provided, however, that (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrowers, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Term Loans or any fees or other amounts payable hereunder, in each case to the extent subject to

such participation, postpone any date fixed for any payment of principal of, or interest on, the Term Loans or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral or the value of the Guaranties.

          (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant any information relating to the Borrowers furnished to such Lender by or on behalf of the Borrowers; provided, however, that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing to preserve the confidentiality of any Information received by it from such Lender in accordance with Section 9.09(f).

          (h) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Term Loans owing to it and the Note or Notes (if any) held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System.

          (i) Notwithstanding anything to the contrary contained herein, any Lender that is a Fund may create a security interest in all or any portion of the Term Loans owing to it and any Note or Notes held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that, unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 9.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

          (j) In addition to any other assignment permitted pursuant to this Section 9.07, the Loan Parties hereby acknowledge that (i) the Lenders, their Affiliates and Approved Funds (“Securitizing Parties”) may sell or securitize the Term Loans (a “Securitization”) through the pledge of the Term Loans as collateral security for loans to a Securitizing Party or the assignment or issuance of direct or indirect interests in the Term Loans (such as, for instance, collateralized loan obligations), and (ii) such Securitization may be rated by a rating agency. The Loan Parties shall reasonably cooperate with the Securitizing Parties to effect the Securitization including, without limitation, by (A) amending this Agreement and the other Loan Documents, and executing such additional documents, as reasonably requested by the Lenders in connection with the Securitization; provided that (1) any such amendment or additional documentation does not impose material additional costs on Borrowers and (2) any such amendment or additional documentation does not materially adversely affect the rights, or materially increase the obligations, of the Borrowers under the Loan Documents or change or affect in a manner adverse to the Borrowers the financial terms of the Term Loans, (B) providing such information as may be reasonably requested by the Lenders or rating agencies in connection with the rating of the Term Loans or the Securitization, and (C) providing a certificate (1) agreeing to indemnify the Securitizing Parties, or any party providing credit support or otherwise participating in the Securitization, including any investors in a securitization entity (collectively,

the “Securitization Parties”) for any losses, claims, damages or liabilities (the “Securitization Liabilities”) to which the Securitizing Parties or such Securitization Parties may become subject insofar as the Securitization Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Loan Document or in any writing delivered by or on behalf of any Loan Party to the Securitizing Parties in connection with any Loan Document or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and such indemnity shall survive any transfer by the Lenders or their successors or assigns of the Term Loans, and (2) agreeing to reimburse the Loan Parties and the other Securitization Parties for any legal or other expenses reasonably incurred by such Persons in connection with defending the Securitization Liabilities.

          SECTION 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery by telecopier or other electronic means of an executed counterpart of a signature page to this Agreement shall be effective as delivery of an original executed counterpart of this Agreement.

          SECTION 9.09. Confidentiality. Each Agent and Lender agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, counsel, accountants, advisors, investors, and other representatives (collectively, “Representatives”) (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), or to rating agencies, (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) to any assignee or pledgee of or participant in, or any prospective assignee or pledge of or participant in, any of its rights or obligations under this Agreement, provided that such parties agree to be bound by confidentiality provisions substantially similar to those hereunder, and to the Representatives of the foregoing parties, (g) with the consent of the Borrowers, or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.09 or (ii) becomes available to any Agent, any Lender, or any of their respective Representatives on a non-confidential basis from a source other than the Borrowers. The terms of this provision shall supersede and replace any previous agreement regarding the non-disclosure of confidentiality of the Information. This provision shall terminate upon termination of this Agreement. Any Person required to maintain the confidentiality of Information as provided in this Section 9.09 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

          SECTION 9.10. Public Disclosure. (a) Other than pleadings filed in the Bankruptcy Court in connection with the Chapter 11 Cases, no Loan Party or Affiliate thereof will in the future issue any press releases or other public disclosure using the name of any Agent or its Affiliates or any Lender or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Administrative Agent and without the prior written consent of the relevant party, which shall not be unreasonably withheld, unless (and only to the extent that) such Loan Party or Affiliate is required to do so under law and then, in any event, such Loan Party or Affiliate will consult with the Administrative Agent before issuing such press release or other public disclosure.

          (b) No Lender or Affiliate thereof will in the future issue any press releases or other public disclosure (including, without limitation, the publication of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement) using the name of any Borrower or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Administrative Borrower and without the prior written consent of the Administrative Borrower, which shall not be unreasonably withheld, unless (and only to the extent that) such Lender or Affiliate is required to do so under law and then, in any event, such Lender or Affiliate will consult with the Administrative Borrower before issuing such press release or other public disclosure. The Administrative Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

          SECTION 9.11. Release or Subordination of Collateral/Release of Guarantor. Upon the sale, lease, transfer or other disposition of any item of Collateral or the incurrence of Liens permitted under Section 5.02(a)(iv) or Section 5.02(a)(v) (or the sale of a Loan Party that is a Subsidiary of any Borrower) in accordance with the terms of the Loan Documents, the Collateral Agent will release its Lien on and security interest in such Collateral, or release or subordinate its Lien in case of Liens permitted under Section 5.02(a)(iv) or Section 5.02(a)(v), and, at the Borrowers’ expense, execute and deliver to such Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or subordinate the Lien of the applicable Agent on such item of Collateral to such Lien in accordance with the terms of the Loan Documents.

          SECTION 9.12. Patriot Act Notice. Each Lender and each Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or such Agent, as applicable, to identify such Loan Party in accordance with the Patriot Act. The Borrowers shall, and shall cause each of their Subsidiaries to, provide such information and take such actions as are reasonably requested by any Agent or any Lender in order to assist the Agents and the Lenders in maintaining compliance with the Patriot Act.

          SECTION 9.13. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Bankruptcy Court, and any appellate court therefrom, in any action or

proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in the Bankruptcy Court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction.

          (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in the Bankruptcy Court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

          (c) Each of Holdco, TLC Management and each Guarantor hereby irrevocably appoints the Administrative Borrower as its authorized agent to accept service of process in any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents, and agrees that such service of process may be made upon the Administrative Borrower and that the failure of the Administrative Borrower to give any notice of any such service of process shall not impair or affect the validity of such service or of any judgment rendered in any action or proceeding based thereon. Each of Holdco, TLC Management and each Guarantor hereby further irrevocably consents to the service of process in any such action or proceeding by the mailing thereof by any Lender by registered or certified mail, postage pre-paid, to it at its address specified herein.

          SECTION 9.14. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

          SECTION 9.15. Waiver of Jury Trial. Each of the Borrowers, the Guarantors, the Agents and the Lenders irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Term Loans, or the actions of any Agent or any Lender in the negotiation, administration, performance or enforcement thereof.

          SECTION 9.16. Release. Subject to applicable terms of the Interim Order and Final Order, each Loan Party hereby acknowledges effective upon entry of the Final Order, that no Loan Party has a defense, counterclaim, offset, recoupment, cross-complaint, claim or demand of any kind or nature whatsoever that can be asserted to reduce or eliminate all or any part of such Loan Party’s liability to repay the Agents or any Lender as provided in this Agreement or to seek affirmative relief or damages of any kind or nature from the Agents or any Lender. Each Loan Party, in its own right, on behalf of their bankruptcy estates, and on behalf of all their successors, assigns, Subsidiaries and any Affiliates and any Person acting for and on behalf of, or claiming through them, (collectively, the “Releasing Parties”), hereby fully, finally

and forever releases and discharges the Agents and Lenders and all of their respective past and present officers, directors, servants, agents, attorneys, assigns, heirs, parents, subsidiaries, and each Person acting for or on behalf of any of them (collectively, the “Released Parties”) of and from any and all past, present and future actions, causes of action, demands, suits, claims, liabilities, Liens, lawsuits, adverse consequences, amounts paid in settlement, costs, damages, debts, deficiencies, diminution in value, disbursements, expenses, losses and other obligations of any kind or nature whatsoever, whether in law, equity or otherwise (including, without limitation, those arising under Sections 541 through 550 of the Bankruptcy Code and interest or other carrying costs, penalties, legal, accounting and other professional fees and expenses, and incidental, consequential and punitive damages payable to third parties), whether known or unknown, fixed or contingent, direct, indirect, or derivative, asserted or unasserted, foreseen or unforeseen, suspected or unsuspected, now existing, heretofore existing or which may heretofore accrue against any of the Released Parties, whether held in a personal or representative capacity, and which in each case are based on any act, fact, event or omission or other matter, cause or thing occurring at or from any time prior to and including the date hereof in any way, directly or indirectly arising out of, connected with or relating to this Agreement, the Orders, and the transactions contemplated hereby, and all other agreements, certificates, instruments and other documents and statements (whether written or oral) related to any of the foregoing.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

BORROWERS TLC VISION (USA) CORPORATION
By:	/s/ William McManus
	Name:	William McManus
	Title:	Interim Chief Financial Officer
TLC VISION CORPORATION
By:	/s/ William McManus
	Name:	William McManus
	Title:	Interim Chief Financial Officer
TLC MANAGEMENT SERVICES INC.
By:	/s/ William McManus
	Name:	William McManus
	Title:	Interim Chief Financial Officer

GUARANTORS
AMERICAN EYE INSTRUMENTS, INC.
LASER EYE SURGERY, INC.
LASER VISION CENTERS, INC.
LVCI CALIFORNIA, LLC
	By:	Laser Vision Centers, Inc., its Member
SIGHTPATH MEDICAL INC.
OR PARTNERS, INC.
O.R. PROVIDERS, INC.
SOUTHEAST MEDICAL, INC.
SOUTHERN OPHTHALMICS, INC.
TLC CAPITAL CORPORATION
TLC FLORIDA EYE LASER CENTER, LLC
	By:	TLC THE LASER CENTER
		(INSTITUTE) INC., ITS MEMBER
TLC LASER EYE CENTERS (ATAC), LLC
TLC LASER EYE CENTERS (REFRACTIVE I) INC.
TLC MIDWEST EYE LASER CENTER, INC.
TLC THE LASER CENTER (ANNAPOLIS) INC.
TLC THE LASER CENTER (BALTIMORE MANAGEMENT) LLC
TLC THE LASER CENTER (BALTIMORE) INC.
TLC THE LASER CENTER (BOCA RATON) LIMITED PARTNERSHIP
	By:	(NORTHEAST) INC., ITS GENERAL
		PARTNER
TLC THE LASER CENTER (CAROLINA) INC.
TLC THE LASER CENTER (CONNECTICUT) L.L.C.
	By:	TLC THE LASER CENTER
		(NORTHEAST) INC., ITS SOLE
		MEMBER
TLC THE LASER CENTER (INSTITUTE) INC.
TLC THE LASER CENTER (NORTHEAST) INC.
TLC VC, LLC
TLC VISION SOURCE, INC.
TLC WHITTEN LASER EYE ASSOCIATES, LLC
	By:	TLC THE LASER CENTER
		(NORTHEAST) INC., ITS MEMBER
TRUVISION, INC.
TRUVISION CONTACTS, INC.
TRUVISION PROVIDER ONLINE SERVICES, INC.
VALLEY LASER EYE CENTER, LLC
	By:	LASER VISION CENTERS, INC., ITS SOLE
		MEMBER

By:	/s/ William McManus
	Name:	William McManus
	Title:	Interim Chief Financial Officer

TLC THE LASER CENTER (MONCTON) INC. RHEO CLINIC INC. VISION CORPORATION
By:	/s/ William McManus
	Name:	William McManus
	Title:	Interim Chief Financial Officer

AGENTS Cantor Fitzgerald Securities, as Administrative Agent and Collateral Agent
By:	/s/ Shawn Mathews
	Name:	Shawn Mathews
	Title:	Chief Financial Officer
LENDERS Cantor Fitzgerald Securities, as Administrative Agent and Collateral Agent
By:	/s/ Shawn Mathews
	Name:	Shawn Mathews
	Title:	Chief Financial Officer

SCHEDULE D-1 TO SENIOR DIP CREDIT AGREEMENT

U.S. SECURITY AGREEMENT

Dated December 23, 2009

From

The Grantors referred to herein

as Grantors

to

Cantor Fitzgerald Securities

as Collateral Agent

T A B L E O F C O N T E N T S

SECTION 1.	GRANT OF SECURITY
SECTION 2.	SECURITY FOR OBLIGATIONS
SECTION 3.	GRANTORS REMAIN LIABLE
SECTION 4.	DELIVERY AND CONTROL OF SECURITY COLLATERAL
SECTION 5.	MAINTAINING THE ACCOUNT COLLATERAL
SECTION 6.	REPRESENTATIONS AND WARRANTIES
SECTION 7.	FURTHER ASSURANCES
SECTION 8.	AS TO EQUIPMENT AND INVENTORY
SECTION 9.	INSURANCE
SECTION 10.	POST-CLOSING CHANGES; COLLECTIONS ON ASSIGNED AGREEMENTS, RECEIVABLES AND RELATED CONTRACTS
SECTION 11.	AS TO INTELLECTUAL PROPERTY COLLATERAL
SECTION 12.	VOTING RIGHTS; DIVIDENDS; ETC
SECTION 13.	AS TO LETTER-OF-CREDIT RIGHTS
SECTION 14.	COMMERCIAL TORT CLAIMS
SECTION 15.	TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES
SECTION 16.	COLLATERAL AGENT APPOINTED ATTORNEY IN FACT
SECTION 17.	COLLATERAL AGENT MAY PERFORM
SECTION 18.	THE COLLATERAL AGENT’S DUTIES
SECTION 19.	REMEDIES
SECTION 20.	INDEMNITY AND EXPENSES
SECTION 21.	AMENDMENTS; WAIVERS; ADDITIONAL GRANTORS; ETC
SECTION 22.	NOTICES, ETC
SECTION 23.	CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT AGREEMENT
SECTION 24.	RELEASE; TERMINATION
SECTION 25.	EXECUTION IN COUNTERPARTS
SECTION 26.	GOVERNING LAW
SECTION 27.	MATTERS RELATING TO SECURITY

Schedules
Schedule I	-	Investment Property
Schedule II	-	Pledged Deposit Accounts
Schedule III	-	Intellectual Property
Schedule IV	-	Commercial Tort Claims
Schedule V	-	Location, Chief Executive Office, Type of Organization, Jurisdiction of Organization and Organizational Identification Number
Schedule VI	-	Locations of Equipment and Inventory
Schedule VII	-	Letters of Credit
Exhibits
Exhibit A	-	Form of U.S. Intellectual Property Security Agreement
Exhibit B	-	Form of U.S. Intellectual Property Security Agreement Supplement
Exhibit C	-	Form of U.S. Security Agreement Supplement

U.S. SECURITY AGREEMENT

          U.S. SECURITY AGREEMENT dated December 23, 2009 made by TLC VISION (USA) CORPORATION, a Delaware corporation, as a debtor and a debtor in possession (“Holdco”) and TLC Management Services, Inc., a Delaware corporation, as a debtor and a debtor in possession (“TLC Management”) and the other Persons listed on the signature pages hereof (Holdco, TLC Management and the Persons so listed being, collectively, the “Grantors”), to CANTOR FITZGERALD SECURITIES, as collateral agent (in such capacity, together with any successor collateral agent appointed pursuant to Article VII of the Credit Agreement (as hereinafter defined), the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement).

          WHEREAS, Holdco, TLC Management and TLC Vision Corporation, a New Brunswick corporation, as a debtor and a debtor in possession (the “Parent” together with Holdco and TLC Management being referred to herein as the “Borrowers”), have entered into a Senior Secured Super Priority Debtor in Possession Credit Agreement dated as of the date hereof (said Agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the “Credit Agreement”) with the Lenders party thereto and Cantor Fitzgerald Securities, as administrative agent for such Lenders and collateral agent for the Secured Parties;

          WHEREAS, on December 21, 2009 (the “Petition Date”), the Borrowers filed a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware;

          WHEREAS, subsequent to the Petition Date, the Parent filed a petition under Part IV of the Companies’ Creditors Arrangements Act (Canada), as ancillary relief sought in the Ontario Superior Court of Justice (Commercial List);

          WHEREAS, the Borrowers intend to continue to operate their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code;

          WHEREAS, the Borrowers have requested that the Lenders provide financing to the Borrowers consisting of a senior super priority term loan facility in an amount up to $15,000,000 (the “Facility”) pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, the Lenders have indicated their willingness to agree to extend the Facility to the Borrowers, all on terms and conditions set forth in the Credit Agreement and in the Order pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, each Grantor is the owner of the shares of stock or other Equity Interests (the “Initial Pledged Equity”) set forth opposite such Grantor’s name on and as otherwise described in Part I of Schedule I hereto and issued by the Persons named therein and of the indebtedness (the “Initial Pledged Debt”) set forth opposite such Grantor’s name on and as otherwise described in Part II of Schedule I hereto and issued by the obligors named therein;

          WHEREAS, each Grantor is the owner of the deposit accounts (the “Pledged Deposit Accounts”) set forth opposite such Grantor’s name on Schedule II hereto;

          WHEREAS, it is a condition precedent to the making of the term loans otherwise extending credit to the Borrowers under the Credit Agreement that the Grantors shall have granted the security interest contemplated by this Agreement;

          WHEREAS, terms defined in the Credit Agreement and not otherwise defined in this Agreement are used in this Agreement as defined in the Credit Agreement. Further, unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9.

          NOW, THEREFORE, for and in consideration of the foregoing, each Grantor hereby agrees with the Collateral Agent for the ratable benefit of the Secured Parties as follows:

          1. Grant of Security. Each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in and assigns, mortgages, charges, hypothecates, and pledges to the Collateral Agent for the ratable benefit of the Secured Parties, such Grantor’s right, title and interest in and to the following, in each case, as to each type of property described below, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (collectively, the “Collateral”):

          1.1. all equipment in all of its forms, including, without limitation, all machinery, tools, motor vehicles, vessels, furniture and fixtures, and all parts thereof and all accessions thereto, including, without limitation, computer programs and supporting information that constitute equipment within the meaning of the UCC (any and all such property being the “Equipment”);

          1.2. all inventory in all of its forms, including, without limitation, (i) all raw materials, work in process, finished goods and materials used or consumed in the manufacture, production, preparation or shipping thereof, (ii) goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind (including, without limitation, goods in which such Grantor has an interest or right as consignee) and (iii) goods that are returned to or repossessed or stopped in transit by such Grantor), and all accessions thereto and products thereof and documents therefor, including, without limitation, computer programs and supporting information that constitute inventory within the meaning of the UCC (any and all such property being the “Inventory”);

          1.3. all accounts (including, without limitation, health-care-insurance receivables), chattel paper (including, without limitation, tangible chattel paper and electronic chattel paper), instruments (including, without limitation, promissory notes), deposit accounts, letter-of-credit rights, general intangibles (including, without limitation, payment intangibles) and other obligations of any kind, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services and whether or not earned by performance, and all

rights now or hereafter existing in and to all supporting obligations and in and to all security agreements, mortgages, Liens, leases, letters of credit and other contracts securing or otherwise relating to the foregoing property (any and all of such accounts, chattel paper, instruments, deposit accounts, letter-of-credit rights, general intangibles and other obligations, to the extent not referred to in clause (d), (e) or (f) below, being the “Receivables,” and any and all such supporting obligations, security agreements, mortgages, Liens, leases, letters of credit and other contracts being the “Related Contracts”);

          1.4. the following (the “Security Collateral”):

          1.4.1. the Initial Pledged Equity and the certificates, if any, representing the Initial Pledged Equity, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Equity and all warrants, rights or options issued thereon or with respect thereto;

          1.4.2. the Initial Pledged Debt and the instruments, if any, evidencing the Initial Pledged Debt, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Debt;

          1.4.3. all additional shares of stock and other Equity Interests from time to time acquired by such Grantor in any manner (such shares and other Equity Interests, together with the Initial Pledged Equity, being the “Pledged Equity”), and the certificates, if any, representing such additional shares or other Equity Interests, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other Equity Interests and all warrants, rights or options issued thereon or with respect thereto;

          1.4.4. all additional indebtedness from time to time owed to such Grantor (such indebtedness, together with the Initial Pledged Debt, being the “Pledged Debt”) and the instruments, if any, evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness;

          1.4.5. all security entitlements with respect to all financial assets from time to time credited to any and all securities accounts owned by any Grantor, and all financial assets, and all dividends, distributions, return of capital, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such security entitlements or financial assets and all warrants, rights or options issued thereon or with respect thereto; and

          1.4.6. all other investment property (including, without limitation, all (A) securities, whether certificated or uncertificated, (B) security entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity accounts) in which such Grantor has now, or acquires from time to time hereafter, any right, title or interest in any manner, and the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property and all warrants, rights or options issued thereon or with respect thereto;

          1.5. each of the agreements to which such Grantor is now or may hereafter become a party, in each case as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time (collectively, the “Assigned Agreements”), including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii) claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements and (iv) the right of such Grantor to terminate the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder (all such Collateral being the “Agreement Collateral”);

          1.6. the following (collectively, the “Account Collateral”):

          1.6.1. the Pledged Deposit Accounts and all funds and financial assets from time to time credited thereto (including, without limitation, all Cash Equivalents), and all certificates and instruments, if any, from time to time representing or evidencing the Pledged Deposit Accounts;

          1.6.2. all promissory notes, certificates of deposit, checks and other instruments from time to time delivered to or otherwise possessed by the Collateral Agent for or on behalf of such Grantor in substitution for or in addition to any or all of the then existing Account Collateral; and

          1.6.3. all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral; and

          1.7. the following (collectively, the “Intellectual Property Collateral”):

          1.7.1. all patents, patent applications, utility models and statutory invention registrations, all inventions claimed or disclosed therein and all improvements thereto (“Patents”);

          1.7.2. all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source

identifiers, whether registered or unregistered (provided that no security interest shall be granted in United States intent-to-use trademark and service mark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark and service mark applications under applicable federal law), together, in each case, with the goodwill symbolized thereby (“Trademarks”);

          1.7.3. all copyrights, including, without limitation, copyrights in Computer Software (as hereinafter defined), internet web sites and the content thereof, whether registered or unregistered (“Copyrights”);

          1.7.4. all computer software, programs and databases (including, without limitation, source code, object code and all related applications and data files), firmware and documentation and materials relating thereto, together with any and all maintenance rights, service rights, programming rights, hosting rights, test rights, improvement rights, renewal rights and indemnification rights and any substitutions, replacements, improvements, error corrections, updates and new versions of any of the foregoing (“Computer Software”);

          1.7.5. all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, databases and data, including, without limitation, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information (collectively, “Trade Secrets”), and all other intellectual, industrial and intangible property of any type, including, without limitation, industrial designs and mask works;

          1.7.6. all registrations and applications for registration for any of the foregoing, including, without limitation, those registrations and applications for registration set forth in Schedule III hereto, together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof;

          1.7.7. all tangible embodiments of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

          1.7.8. all agreements, permits, consents, orders and franchises relating to the license, development, use or disclosure of any of the foregoing to which such Grantor, now or hereafter, is a party or a beneficiary, including, without limitation, the agreements set forth in Schedule III hereto (“IP Agreements”); and

          1.7.9. any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or

breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages;

          1.8. the commercial tort claims described in Schedule IV hereto (together with any commercial tort claims as to which the Grantors have complied with the requirements of Section 14, the “Commercial Tort Claims Collateral”);

          1.9. all books and records (including, without limitation, customer lists, credit files, printouts and other computer output materials and records) of such Grantor pertaining to any of the Collateral;

          1.10. all avoidance power claims or actions under section 549 of the Bankruptcy Code relating to postpetition transfers of Collateral and proceeds thereof, and subject to the entry of the Final Order, all avoidance power claims or actions under chapter 5 of the Bankruptcy Code and any proceeds thereof; and

          1.11. all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral (including, without limitation, proceeds, proceeds of proceeds, collateral and supporting obligations that constitute property of the types described in clauses (a) through (i) of this Section 1) and, to the extent not otherwise included, all (A) payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, and (B) cash.

          Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in, (a) any Intellectual Property Collateral, if the grant of such security interest shall constitute or result in the abandonment, invalidation or rendering unenforceable any right, title or interest of such Grantor therein; (b) in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder, including, without limitation, with respect to any pledged partnership interests or any pledged limited liability company interests, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement (including, without limitation, any partnership agreements or any limited liability company agreements), or otherwise, be prohibited by or result in a breach or termination of the terms of, or constitute a default under or termination of any such license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406 of the UCC (or any successor provision) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity) or would otherwise constitute a violation of law, regulation or policy; provided, however, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and each Grantor shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect; (c) in any of the outstanding capital stock of a “controlled foreign corporation” as defined in the Internal Revenue Code of 1986, as amended from time to time (each, a “Controlled Foreign Corporation”), in excess of 65% of the voting power of all classes of capital stock of such controlled foreign corporation entitled to vote to the

extent such security interest would result in a material adverse tax event under the United States tax laws; or (d) property owned by any Grantor that is subject to a purchase money Lien or a Capitalized Lease to the extent such purchase money Lien or Capitalized Lease is permitted under the Credit Agreement if the contract or other agreement in which such Lien is granted (or if the documentation providing for such purchase money Lien or Capitalized Lease prohibits or requires the consent of any Person other than the Borrowers and their Affiliates as a condition to the creation of any other Lien on such property); provided, that the respective Grantor uses commercially reasonable efforts to permit the Collateral Agent to obtain a Lien on such property subject to the prior Lien under such purchase money Lien or Capitalized Lease, as the case may be.

          2. Security for Obligations. This Agreement secures, in the case of each Grantor, the payment of all Obligations of such Grantor now or hereafter existing under the Loan Documents, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise (all such Obligations being the “Secured Obligations”). Without limiting the generality of the foregoing, this Agreement secures, as to each Grantor, the payment of all amounts that constitute part of the Secured Obligations and would be owed by such Grantor to any Secured Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Loan Party. Each Grantor acknowledges that (a) value has been given, (b) it has rights in the Collateral of such Grantor or the power to transfer rights in the Collateral of such Grantor to the Collateral Agent (other than after-acquired Collateral), (c) it has not agreed to postpone the time of attachment of any of the security interests created under this Agreement, and (d) it has received a copy of this Agreement.

          3. Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Collateral Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

          4. Delivery and Control of Security Collateral. 4.1. All certificates or instruments representing or evidencing Security Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent. The Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Security Collateral for certificates or instruments of smaller or larger denominations.

          4.2. With respect to any Security Collateral that constitutes an uncertificated security, the relevant Grantor will cause the issuer thereof, at the

reasonable request of the Collateral Agent, either (i) to register the Collateral Agent as the registered owner of such security or (ii) to agree with such Grantor and the Collateral Agent that such issuer will comply with instructions with respect to such security originated by the Collateral Agent without further consent of such Grantor, such agreement to be in form and substance satisfactory to the Collateral Agent (such agreement being an “Uncertificated Security Control Agreement”).

          4.3. With respect to the Securities Account and any Security Collateral that constitutes a security entitlement as to which the financial institution acting as Collateral Agent hereunder is not the securities intermediary, the relevant Grantor, at the reasonable request of the Collateral Agent, will cause the securities intermediary with respect to such Account or security entitlement either (i) to identify in its records the Collateral Agent as the entitlement holder thereof or (ii) to agree with such Grantor and the Collateral Agent that such securities intermediary will comply with entitlement orders originated by the Collateral Agent without further consent of such Grantor, such agreement to be in form and substance satisfactory to the Collateral Agent (a “Securities Account Control Agreement”).

          4.4. The Collateral Agent shall have the right, at any time in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Security Collateral, subject only to the revocable rights specified in Section 12(a).

          4.5. Upon the reasonable request of the Collateral Agent, each Grantor will notify each issuer of Security Collateral granted by it hereunder that such Security Collateral is subject to the security interest granted hereunder.

          5. Maintaining the Account Collateral. So long as any Loan or any other Obligation (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto) of any Loan Party under any Loan Document shall remain unpaid, or any Lender shall have any Commitment, each Grantor will maintain deposit accounts as provided under the Credit Agreement.

          6. Representations and Warranties. Each Grantor represents and warrants as follows:

          6.1. Such Grantor’s exact legal name, location, chief executive office, type of organization, jurisdiction of organization and organizational identification number, as of the date hereof, is set forth in Schedule V hereto.

          6.2. Such Grantor is the legal and beneficial owner of the Collateral granted or purported to be granted by it free and clear of any Lien, claim, option or right of others, except for the security interest created under this Agreement or permitted under the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any part of such Collateral or listing

such Grantor or any trade name of such Grantor as debtor is on file in any recording office, except such as may have been filed in favor of the Collateral Agent relating to the Loan Documents or as otherwise permitted under the Credit Agreement.

          6.3. All of the Equipment and Inventory of such Grantor are located at the places specified therefor in Schedule VI hereto or at another location as to which such Grantor has complied with the requirements of Section 8(a) except for mobile laser equipment, Equipment being repaired and Equipment otherwise maintained at other locations in the ordinary course of business. Such Grantor has exclusive possession and control of its Equipment and Inventory, other than (i) Equipment being repaired, and (ii) Inventory stored at any leased premises or warehouse for which a landlord’s or warehouseman’s agreement, in form and substance satisfactory to the Collateral Agent, is in effect.

          6.4. None of the Receivables or Agreement Collateral is evidenced by a promissory note or other instrument that has not been delivered to the Collateral Agent.

          6.5. If such Grantor is an issuer of Security Collateral, such Grantor confirms that it has received notice of the security interest granted hereunder.

          6.6. The Pledged Equity pledged by such Grantor hereunder has been duly authorized and validly issued and, in the case of any entity, the equity of which is Pledged Equity that is a corporation, is fully paid and non assessable. The Pledged Debt pledged by such Grantor hereunder has been duly authorized, authenticated or issued and delivered, is the legal, valid and binding obligation of the issuers thereof, is evidenced by one or more promissory notes (which promissory notes have been delivered to the Collateral Agent) and, to the knowledge of such Grantor, is not in default.

          6.7. The Initial Pledged Equity pledged by such Grantor constitutes the percentage of the issued and outstanding Equity Interests of the issuers thereof indicated on Schedule I hereto. The Initial Pledged Debt constitutes all of the outstanding indebtedness owed to such Grantor by the issuers thereof and, to the extent evidenced by an instrument and in a principal amount in excess of $150,000, as indicated on Schedule I hereto.

          6.8. Such Grantor has no investment property, other than the investment property listed on Schedule I hereto and additional investment property as to which such Grantor has complied with the requirements of Section 4.

          6.9. Such Grantor has no deposit accounts constituting Collateral, other than the Pledged Deposit Accounts listed on Schedule II hereto and additional Pledged Deposit Accounts as to which such Grantor has complied with the applicable requirements of Section 5.

          6.10. Such Grantor, is not a beneficiary or assignee under any letter of credit, other than the letters of credit described in Schedule VII hereto and additional letters of credit as to which such Grantor has complied with the requirements of Section 13.

          6.11. This Agreement creates in favor of the Collateral Agent for the benefit of the Secured Parties a valid and continuing first priority security interest in the Collateral granted by such Grantor, upon entry of the Order (subject only to the Carve Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement), securing the payment of the Secured Obligations; all filings and other actions (including, without limitation, actions necessary to obtain control of Collateral as provided in Sections 9-104, 9-106 and 9-107 of the UCC but excluding actions necessary to perfect the Collateral Agent’s security interest with respect to Collateral evidenced by a certificate of title) necessary to perfect the security interest in the Collateral granted by such Grantor have been duly made or taken and are in full force and effect with respect to Collateral in which a security interest can be perfected by the filing of a Uniform Commercial Code financing statement, the filing or recordation with the U.S. Patent and Trademark Office or the obtaining of control as provided in Sections 9-104, 9-106 and 9-107 of the UCC, except as otherwise permitted hereunder; and such security interest is first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement).

          6.12. Except for the approval of the Bankruptcy Court pursuant to the Order, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the grant by such Grantor of the security interest granted hereunder or for the execution, delivery or performance of this Agreement by such Grantor, except for the filing of financing and continuation statements under the UCC, (ii) the perfection or maintenance of the security interest created hereunder (including the first priority nature of such security interest subject to Liens permitted to be equal or superior in priority pursuant to the Credit Agreement), except for the filing of financing and continuation statements under the UCC taking possession of cash and money, the recordation of the Intellectual Property Security Agreement referred to in Section 11(f) with the U.S. Patent and Trademark Office and the U.S. Copyright Office, which Agreements will be duly recorded and are in full force and effect, and the actions described in Section 4 with respect to the Security Collateral, which actions have been taken and are in full force and effect, except with respect to Collateral evidenced by a certificate of title or (iii) the exercise by the Collateral Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with the disposition of any portion of the Security Collateral by laws affecting the offering and sale of securities generally.

          6.13. [Intentionally omitted.]

          6.14. As to itself and its Intellectual Property Collateral:

          6.14.1. The operation of such Grantor’s business as currently conducted or as now contemplated to be conducted and the use of the Intellectual Property Collateral in connection therewith do not, to such Grantor’s knowledge, conflict with, infringe, misappropriate, dilute, misuse or otherwise violate the intellectual property rights of any third party.

          6.14.2. Such Grantor is the exclusive owner or licensed owner of all right, title and interest in and to the Intellectual Property Collateral, and is entitled to use all Intellectual Property Collateral subject only to the terms of the IP Agreements.

          6.14.3. The Intellectual Property Collateral set forth on Schedule III hereto includes all of the issued patents, patent applications, domain names, trademark registrations and applications, and copyright registrations and applications owned by such Grantor and all IP Agreements to which such Grantor is a party or beneficiary as of the date hereof.

          6.14.4. The Intellectual Property Collateral material to the business of the Grantors is subsisting and has not been adjudged invalid or unenforceable in whole or part, and to the best of such Grantor’s knowledge, is valid and enforceable. Such Grantor is not aware of any uses of any item of Intellectual Property Collateral that could be expected to lead to such item becoming invalid or unenforceable.

          6.14.5. As to each item of Intellectual Property Collateral material to the business of the Grantors, taken as a whole, such Grantor has made or performed all filings, recordings and other acts and has paid all required fees and taxes to maintain and protect its interest in each such item of Intellectual Property Collateral in full force and effect, including, without limitation, recordations of any of its interests in the Patents and Trademarks with the U.S. Patent and Trademark Office and in corresponding national and international patent offices, and recordation of any of its interests in the Copyrights with the U.S. Copyright Office and in corresponding national and international copyright offices. Such Grantor has used proper statutory notice in connection with its use of each patent, trademark and copyright in the Intellectual Property Collateral material to the business of the Grantors taken as a whole.

          6.14.6. No claim, action, suit, investigation, litigation or proceeding has been asserted or is pending or, to such Grantor’s knowledge, threatened against such Grantor (A) based upon or challenging or seeking to deny or restrict the Grantor’s rights in or use of any of the Intellectual Property Collateral material to the business of the Grantors, (B) to such Grantor’s knowledge, alleging that the Grantor’s rights in or use of the Intellectual Property Collateral or that any services provided by, processes used by, or products manufactured or sold by, such Grantor infringe, misappropriate, dilute, misuse or otherwise violate any

patent, trademark, copyright or any other proprietary right of any third party, or (C) alleging that the Intellectual Property Collateral is being licensed or sublicensed in violation or contravention of the terms of any license or other agreement. To such Grantor’s knowledge, no Person is engaging in any activity that infringes, misappropriates, dilutes, misuses or otherwise violates the Intellectual Property Collateral or the Grantor’s rights in or use thereof. Except as set forth on Schedule III hereto, such Grantor has not granted any license, release, covenant not to sue, non-assertion assurance, or other right to any Person with respect to any part of the Intellectual Property Collateral. The consummation of the transactions contemplated by the Loan Documents will not result in the termination or impairment of any of the Intellectual Property Collateral.

          6.14.7. With respect to each IP Agreement, to such Grantor’s knowledge: (A) such IP Agreement is valid and binding and in full force and effect and represents the entire agreement between the respective parties thereto with respect to the subject matter thereof; (B) such IP Agreement will not cease to be valid and binding and in full force and effect on terms identical to those currently in effect as a result of the rights and interest granted herein, nor will the grant of such rights and interest constitute a breach or default under such IP Agreement or otherwise give any party thereto a right to terminate such IP Agreement; (C) such Grantor has not received any notice of termination or cancellation under such IP Agreement; (D) such Grantor has not received any notice of a breach or default under such IP Agreement, which breach or default has not been cured; (E) such Grantor has not granted to any other third party any rights, adverse or otherwise, under such IP Agreement; and (F) neither such Grantor nor, to the knowledge of such Grantor, any other party to such IP Agreement is in breach or default thereof in any material respect, and no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such IP Agreement.

          6.14.8. To the best of such Grantor’s knowledge, (A) none of the Trade Secrets of such Grantor has been used, divulged, disclosed or appropriated to the detriment of such Grantor for the benefit of any other Person other than such Grantor; (B) no employee, independent contractor or agent of such Grantor has misappropriated any trade secrets of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of such Grantor; and (C) no employee, independent contractor or agent of such Grantor is in default or material breach of any term of any employment agreement, non-disclosure agreement, assignment of inventions agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of such Grantor’s Intellectual Property Collateral.

          6.14.9. No Grantor or Intellectual Property Collateral is subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling restricting the use of any Intellectual Property Collateral that is material to the business of the Grantors, taken as a whole or that would impair the validity or enforceability of such material Intellectual Property Collateral.

          6.15. Such Grantor has no commercial tort claims other than those listed in Schedule IV hereto and additional commercial tort claims as to which such Grantor has complied or will comply with the requirements of Section 14.

          7. Further Assurances. 7.1. Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Grantor hereunder or by the Orders or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Grantor. Without limiting the generality of the foregoing, each Grantor will promptly with respect to Collateral of such Grantor: (i) if any such Collateral shall be evidenced by a promissory note or other instrument or chattel paper, deliver and pledge to the Collateral Agent hereunder such note or instrument or chattel paper duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent; (ii) file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted by such Grantor hereunder; (iii) at the reasonable request of the Collateral Agent, take all action to ensure that the Collateral Agent’s security interest is noted on any certificate of title related to any Collateral evidenced by a certificate of title; and (iv) deliver to the Collateral Agent evidence that all other actions that the Collateral Agent may deem reasonably necessary or desirable in order to perfect and protect the security interest granted or purported to be granted by such Grantor under this Agreement has been taken.

          7.2. Each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, including, without limitation, one or more financing statements indicating that such financing statements cover all assets or all personal property (or words of similar effect) of such Grantor, regardless of whether any particular asset described in such financing statements falls within the scope of the UCC or the granting clause of this Agreement. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law. Each Grantor ratifies its authorization for the Collateral Agent to have filed such financing statements, continuation statements or amendments filed prior to the date hereof.

          7.3. Each Grantor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral of such Grantor and such other reports in connection with such Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

          8. As to Equipment and Inventory. 8.1. Each Grantor will keep its Equipment, Inventory, and other tangible personal property (other than Inventory sold in accordance with the terms of the Credit Agreement and except for mobile laser equipment and Equipment being repaired in the ordinary course of business) at the places therefor specified in

Section 6(c) or, upon 30 days’ prior written notice to the Collateral Agent, at such other places designated by such Grantor in such notice, except as provided in Section 6(c).

          8.2. Each Grantor will cause its Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or damage to any of such Equipment as soon as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Each Grantor will promptly furnish to the Collateral Agent a statement respecting any loss or damage exceeding $10,000 per occurrence to any of its Equipment or Inventory.

          9. Insurance. 9.1. Each Grantor will, at its own expense, maintain insurance with respect to its Equipment and Inventory in such amounts, against such risks, in such form and with such insurers, as shall be satisfactory to the Collateral Agent from time to time. Each policy of each Grantor for liability insurance shall provide for all losses to be paid on behalf of the Collateral Agent and such Grantor as their interests may appear, and each policy for property damage insurance shall provide for all losses to be paid directly to the Collateral Agent. Each such policy shall in addition (i) name such Grantor and the Collateral Agent as insured parties thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as their interests may appear, (ii) contain the agreement by the insurer that any loss thereunder shall be payable to the Collateral Agent, upon its reasonable request, notwithstanding any action, inaction or breach of representation or warranty by such Grantor, (iii) provide that there shall be no recourse against the Collateral Agent for payment of premiums or other amounts with respect thereto and (iv) provide that at least 10 days’ prior written notice of cancellation or of lapse shall be given to the Collateral Agent by the insurer. Each Grantor will, if so reasonably requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate policies of such insurance and, as often as the Collateral Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance. Further, each Grantor will, at the reasonable request of the Collateral Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 8 and cause the insurers to acknowledge notice of such assignment.

          9.2. Reimbursement under any liability insurance maintained by any Grantor pursuant to this Section 9 may be paid directly to the Person who shall have incurred liability covered by such insurance.

          10. Post-Closing Changes; Collections on Assigned Agreements, Receivables and Related Contracts. 10.1. No Grantor will change its name, type of organization, jurisdiction of organization, organizational identification number or location from those set forth in Section 6(a) of this Agreement without first giving at least 30 days’ prior written notice to the Collateral Agent and taking all action required by the Collateral Agent for the purpose of perfecting or protecting the security interest granted by this Agreement. Each Grantor will hold and preserve its records relating to the Collateral, including, without limitation, the Assigned Agreements and Related Contracts, and will permit representatives of the Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and other documents. If

any Grantor does not have an organizational identification number and later obtains one, it will forthwith notify the Collateral Agent of such organizational identification number.

          10.2. Except as otherwise provided in this subsection (b), each Grantor will continue to collect, at its own expense, all amounts due or to become due such Grantor under the Assigned Agreements, Receivables and Related Contracts. In connection with such collections, such Grantor may take such action as such Grantor or the Collateral Agent may deem necessary or advisable to enforce collection of the Assigned Agreements and otherwise exercise all of its rights under the Assigned Agreements as it deems appropriate, Receivables and Related Contracts; provided, however, that the Collateral Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default and upon written notice to such grantor of its intention to do so, to notify the Obligors under any Assigned Agreements, Receivables and Related Contracts of the assignment of such Assigned Agreements, Receivables and Related Contracts to the Collateral Agent and to direct such Obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Assigned Agreements, Receivables and Related Contracts, to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done, and to otherwise exercise all rights with respect to such Assigned Agreements, Receivables and Related Contracts, including, without limitation, those set forth set forth in Section 9-607 of the UCC. After receipt by any Grantor of the notice from the Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including, without limitation, instruments) received by such Grantor in respect of the Assigned Agreements, Receivables and Related Contracts of such Grantor shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement) and either (A) released to such Grantor so long as no Event of Default shall have occurred and be continuing or (B) if any Event of Default shall have occurred and be continuing, applied as provided in Section 19(b) and (ii) such Grantor will not adjust, settle or compromise the amount or payment of any Receivable or amount due on any Assigned Agreement or Related Contract, release wholly or partly any Obligor thereof or allow any credit or discount thereon. Except for the Carve Out, no Grantor will permit or consent to the subordination of its right to payment under any of the Assigned Agreements, Receivables and Related Contracts to any other indebtedness or obligations of the Obligor thereof.

          11. As to Intellectual Property Collateral. 11.1. With respect to each item of its Intellectual Property Collateral material to the business of the Grantors, taken as a whole, each Grantor agrees to take, at its expense, all reasonable steps, and shall not knowingly omit to do any act, including, without limitation, in the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authority, to (i) maintain the validity and enforceability of such Intellectual Property Collateral and maintain such Intellectual Property

Collateral in full force and effect, and (ii) pursue the registration and maintenance of each patent, trademark, or copyright registration or application, now or hereafter included in such Intellectual Property Collateral of such Grantor, including, without limitation, the payment of required fees and taxes, the filing of responses to office actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other governmental authorities, the filing of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings. No Grantor shall, without the written consent of the Collateral Agent, discontinue use of or otherwise abandon any Intellectual Property Collateral material to the business of the Grantors, taken as a whole, or abandon any right to file an application for patent, trademark, or copyright, unless such Grantor shall have previously determined that such use or the pursuit or maintenance of such Intellectual Property Collateral is no longer desirable in the conduct of such Grantor’s business and that the loss thereof would not be reasonably likely to have a Material Adverse Effect.

          11.2. Each Grantor agrees promptly to notify the Collateral Agent if such Grantor becomes aware (i) that any item of the Intellectual Property Collateral material to the business of the Grantors, taken as a whole, may have become abandoned, placed in the public domain, invalid or unenforceable, or of any adverse determination or development regarding such Grantor’s ownership or use of any such Intellectual Property Collateral or its right to register the same or to keep and maintain and enforce the same, or (ii) of any adverse determination or the institution of any proceeding (including, without limitation, the institution of any proceeding in the U.S. Patent and Trademark Office or any court) regarding any item of the Intellectual Property Collateral material to the business of the Grantors.

          11.3. In the event that any Grantor becomes aware that any item of the Intellectual Property Collateral material to the business of the Grantors, taken as a whole, is being infringed or misappropriated by a third party, such Grantor shall promptly notify the Collateral Agent and shall take all reasonable actions, at its expense, to protect or enforce such Intellectual Property Collateral, including, without limitation, suing for infringement or misappropriation and for an injunction against such infringement or misappropriation.

          11.4. Each Grantor shall use proper statutory notice in connection with its use of each item of material Intellectual Property Collateral.

          11.5. Each Grantor shall take all steps which it or the Collateral Agent deems reasonable and appropriate under the circumstances to preserve and protect each item of its Intellectual Property Collateral material to the business of the Grantors, taken as a whole, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the material Trademarks, consistent with the quality of the products and services as of the date hereof, and taking all steps necessary to ensure that all licensed users of any of the material Trademarks use such consistent standards of quality.

          11.6. With respect to its Intellectual Property Collateral, each Grantor agrees to execute or otherwise authenticate an agreement, in substantially the form set forth in Exhibit A hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “Intellectual Property Security Agreement”), for recording the security interest granted hereunder to the Collateral Agent in such Intellectual Property Collateral with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities necessary to perfect the security interest hereunder in such Intellectual Property Collateral.

          11.7. Each Grantor agrees that should it obtain an ownership interest in or license to any item of the type set forth in Section 1(g) that is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral subject to the terms and conditions of this Agreement with respect thereto. Each Grantor shall give prompt written notice to the Collateral Agent identifying the After-Acquired Intellectual Property, and such Grantor shall execute and deliver to the Collateral Agent with such written notice, or otherwise authenticate, an agreement substantially in the form of Exhibit B hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “IP Security Agreement Supplement”) covering such After-Acquired Intellectual Property, which IP Security Agreement Supplement shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities necessary to perfect the security interest hereunder in such After-Acquired Intellectual Property.

          12. Voting Rights; Dividends; Etc. 12.1. So long as no Event of Default shall have occurred and be continuing:

          12.1.1. Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral of such Grantor or any part thereof for any purpose; provided however, that such Grantor will not exercise or refrain from exercising any such right if such action would have a material adverse effect on the value of the Security Collateral or any part thereof.

          12.1.2. Each Grantor shall be entitled to receive and retain any and all dividends, interest and other distributions paid in respect of the Security Collateral of such Grantor if and to the extent that the payment thereof is not otherwise prohibited by the terms of the Loan Documents; provided, however, that any and all

          (a) dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Security Collateral,

          (b) dividends and other distributions paid or payable in cash in respect of any Security Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid in surplus and

          (c) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Security Collateral

shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Security Collateral and shall, if received by such Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to the Collateral Agent as Security Collateral in the same form as so received (with any necessary indorsement).

          12.1.3. The Collateral Agent will execute and deliver (or cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above.

          12.2. Upon the occurrence and during the continuance of an Event of Default:

          12.2.1. All rights of each Grantor (x) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 12(a)(i) shall, upon notice to such Grantor by the Collateral Agent, cease and (y) to receive the dividends, interest and other distributions that it would otherwise be authorized to receive and retain pursuant to Section 12(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends, interest and other distributions.

          12.2.2. All dividends, interest and other distributions that are received by any Grantor contrary to the provisions of paragraph (i) of this Section 12(b) shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent as Security Collateral in the same form as so received (with any necessary indorsement).

          13. As to Letter-of-Credit Rights. 13.1. Each Grantor, by granting a security interest in its Receivables consisting of letter-of-credit rights to the Collateral Agent, intends to (and hereby does) assign to the Collateral Agent its rights (including its contingent rights) to the

proceeds of all Related Contracts consisting of letters of credit of which it is or hereafter becomes a beneficiary or assignee. Each Grantor will promptly use its best efforts to cause the issuer of each letter of credit and each nominated person (if any) with respect thereto to consent to such assignment of the proceeds thereof pursuant to a consent in form and substance satisfactory to the Collateral Agent and deliver written evidence of such consent to the Collateral Agent.

          13.2. Upon the occurrence and during the continuance of an Event of Default, each Grantor will, promptly upon reasonable request by the Collateral Agent, (i) notify (and such Grantor hereby authorizes the Collateral Agent to notify) the issuer and each nominated person with respect to each of the Related Contracts consisting of letters of credit that the proceeds thereof have been assigned to the Collateral Agent hereunder and any payments due or to become due in respect thereof are to be made directly to the Collateral Agent or its designee and (ii) arrange for the Collateral Agent to become the transferee beneficiary of letter of credit.

          14. Commercial Tort Claims. Each Grantor will promptly give notice to the Collateral Agent of any commercial tort claim that may arise after the date hereof and will immediately execute or otherwise authenticate a supplement to this Agreement, and otherwise take all necessary action, to subject such commercial tort claim to the first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement) security interest created under this Agreement.

          15. Transfers and Other Liens; Additional Shares. 15.1. Each Grantor agrees that it will not (i) sell, assign or otherwise dispose of, or grant any option with respect to, any of the Collateral, other than sales, assignments and other dispositions of Collateral, and options relating to Collateral, permitted under the terms of the Credit Agreement, or (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral of such Grantor except for the pledge, assignment and security interest created under this Agreement and Liens permitted under the Credit Agreement.

          15.2. Each Grantor agrees that it will (i) cause each issuer of the Pledged Equity pledged by such Grantor not to issue any Equity Interests or other securities in addition to or in substitution for the Pledged Equity issued by such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional Equity Interests or other securities of each issuer of the Pledged Equity.

          16. Collateral Agent Appointed Attorney in Fact. Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor’s attorney in fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time, upon the occurrence and during the continuation of an Event of Default, in the Collateral Agent’s discretion, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

          16.1. to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section 9,

          16.2. to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,

          16.3. to receive, indorse and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) or (b) above, and

          16.4. to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Collateral Agent with respect to any of the Collateral.

          17. Collateral Agent May Perform. If any Grantor fails to perform any agreement contained herein on or after the date required for performance thereof, the Collateral Agent may, but without any obligation to do so and without notice, itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor under, and to the extent provided in, Section 20.

          18. The Collateral Agent’s Duties. 18.1. The powers conferred on the Collateral Agent hereunder are solely to protect the Secured Parties’ interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property.

          18.2. Anything contained herein to the contrary notwithstanding, the Collateral Agent may from time to time, when the Collateral Agent deems it to be necessary, appoint one or more subagents (each a “Subagent”) for the Collateral Agent hereunder with respect to all or any part of the Collateral. In the event that the Collateral Agent so appoints any Subagent with respect to any Collateral, (i) the assignment and pledge of such Collateral and the security interest granted in such Collateral by each Grantor hereunder shall be deemed for purposes of this Security Agreement to have been made to such Subagent, in addition to the Collateral Agent, for the ratable benefit of the Secured Parties, as security for the Secured Obligations of such Grantor, (ii) such Subagent shall automatically be vested, in addition to the Collateral Agent, with all rights, powers, privileges, interests and remedies of the Collateral Agent hereunder with respect to such Collateral, and (iii) the term “Collateral Agent,” when used herein in relation to

any rights, powers, privileges, interests and remedies of the Collateral Agent with respect to such Collateral, shall include such Subagent; provided, however, that no such Subagent shall be authorized to take any action with respect to any such Collateral unless and except to the extent expressly authorized in writing by the Collateral Agent.

          19. Remedies. If any Event of Default shall have occurred and be continuing:

          19.1. The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Collateral), the Bankruptcy Code, or any other applicable law, and also may: (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon reasonable request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable; (iii) occupy any premises owned or leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; and (iv) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral, including, without limitation, (A) any and all rights of such Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Assigned Agreements, the Receivables, the Related Contracts and the other Collateral, (B) withdraw, or cause or direct the withdrawal, of all funds with respect to the Account Collateral and (C) exercise all other rights and remedies with respect to the Assigned Agreements, the Receivables, the Related Contracts and the other Collateral, including, without limitation, those set forth in Section 9-607 of the UCC. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days’ notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

          19.2. Any cash held by or on behalf of the Collateral Agent and all cash proceeds received by or on behalf of the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral

for, and/or then or at any time thereafter paid (after payment of any amounts payable to the Collateral Agent pursuant to Section 20) in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto), in the following manner:

          19.2.1. first, paid to the Collateral Agent for any amounts then owing to the Collateral Agent pursuant to Section 9.04 of the Credit Agreement or otherwise under the Loan Documents; and

          19.2.2. second, ratably, paid to the Secured Parties for any amounts then owing to them, in their capacities as such, under the Loan Documents and the ratably in accordance with the amounts then owing to the Secured Parties.

          Any surplus of such cash or cash proceeds held by or on the behalf of the Collateral Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantor or to whomsoever may be lawfully entitled to receive such surplus.

          19.3. All payments received by any Grantor under or in connection with any Assigned Agreement or otherwise in respect of the Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary indorsement).

          19.4. The Collateral Agent may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set off and otherwise apply all or any part of the Secured Obligations against any funds held with respect to the Account Collateral or in any other deposit account.

          19.5. The Collateral Agent may send to each bank, securities intermediary or issuer party to any Deposit Account Control Agreement, Securities/Deposit Account Control Agreement, Securities Account Control Agreement or Uncertificated Security Control Agreement a “Notice of Exclusive Control” as defined in and under such Agreement; provided, that the Collateral Agent shall use reasonable commercial efforts to rescind such “Notice of Exclusive Control” within a reasonable period of time following the date on which no Default or Event of Default exists.

          19.6. In the event of any sale or other disposition of any of the Intellectual Property Collateral of any Grantor, the goodwill symbolized by any Trademarks subject to such sale or other disposition shall be included therein, and such Grantor shall supply to the Collateral Agent or its designee such Grantor’s know-how and expertise, and documents and things relating to any Intellectual Property Collateral subject to such sale or other disposition, and such Grantor’s customer lists and other records and documents relating to such Intellectual

Property Collateral and to the manufacture, distribution, advertising and sale of products and services of such Grantor.

          19.7. The Collateral Agent may realize upon the Collateral and enforce the rights of the Collateral Agent and the Secured Parties by (i) appointment by instrument in writing of a receiver (which term as used in this Agreement includes a receiver and manager) or agent of all or any part of the Collateral and the removal or replacement from time to time of any receiver or agent, and (ii) institution of proceedings in any court of competent jurisdiction for the appointment of a receiver of all or any part of the Collateral.

          20. Indemnity and Expenses. 20.1. Each Grantor agrees to indemnify, defend and save and hold harmless each Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct.

          20.2. Each Grantor will upon demand pay to the Collateral Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of its counsel and of any experts and agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral of such Grantor, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or the other Secured Parties hereunder or (iv) the failure by such Grantor to perform or observe any of the provisions hereof.

          21. Amendments; Waivers; Additional Grantors; Etc. 21.1. No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Collateral Agent or any other Secured Party to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.

          21.2. Upon the execution and delivery by any Person of a security agreement supplement in substantially the form of Exhibit C hereto (each a “Security Agreement Supplement”), such Person shall be referred to as an “Additional Grantor” and shall be and become a Grantor hereunder, and each reference in this Agreement and the other Loan Documents to “Grantor” shall also mean and be a reference to such Additional Grantor, each reference in this

Agreement and the other Loan Documents to the “Collateral” shall also mean and be a reference to the Collateral granted by such Additional Grantor and each reference in this Agreement to a Schedule shall also mean and be a reference to the schedules attached to such Security Agreement Supplement.

          22. Notices, Etc. All notices and other communications provided for hereunder shall be either (i) in writing (including facsimile communications) and mailed, sent via facsimile or otherwise delivered or (ii) by electronic mail (if electronic mail addresses are designated as provided below) confirmed immediately in writing, in the case of the Administrative Borrower or the Collateral Agent, addressed to it at its address specified in the Credit Agreement and, in the case of each Grantor other than the Borrowers, addressed to it at its address set forth opposite such Grantor’s name on the signature pages hereto or on the signature page to the Security Agreement Supplement pursuant to which it became a party hereto; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications shall, when mailed, sent by facsimile, electronic mail or otherwise, be effective when deposited in the mails, sent by facsimile, sent by electronic mail and confirmed in writing, or otherwise delivered (or confirmed by a signed receipt), respectively, addressed as aforesaid; except that notices and other communications to the Collateral Agent shall not be effective until received by the Collateral Agent. Delivery by facsimile of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Security Agreement Supplement or Schedule hereto shall be effective as delivery of an original executed counterpart thereof.

          23. Continuing Security Interest; Assignments under the Credit Agreement. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Secured Obligations (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto) and (ii) the Maturity Date (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Loans owing to it and the Note or Notes, if any, held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in the Credit Agreement.

          24. Release; Termination. 24.1. Upon any sale, lease, transfer or other disposition of any item of Collateral of any Grantor in accordance with the terms of the Loan Documents (other than sales of Inventory, equipment and other obsolete or worn-out equipment in the ordinary course of business), the Collateral Agent will, at such Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release no Event of Default shall have occurred and be continuing, (ii) such Grantor shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release

describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Collateral Agent and a certificate of such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Collateral Agent may reasonably request and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied, or any payment to be made in connection therewith, in accordance with Section 2.03 of the Credit Agreement shall, to the extent so required, be paid or made to, or in accordance with the instructions of, the Collateral Agent when and as required under Section 2.03 of the Credit Agreement.

          24.2. Upon the latest of (i) the payment in full in cash of the Secured Obligations, (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto) and (ii) the Maturity Date, the pledge and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantor. Upon any such termination, the Collateral Agent will, at the applicable Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

          25. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means shall be effective as delivery of an original executed counterpart of this Agreement.

          26. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

          27. Matters Relating to Security.

          27.1. As set forth in the Order, each Grantor hereby agrees that upon the effectiveness of the Order, (i) the Secured Obligations shall constitute allowed administrative expenses in such Grantor’s Chapter 11 Case having priority over all administrative expenses of and unsecured claims against such Grantor now existing or hereafter arising, of any kind or nature whatsoever, including without limitation all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject, as to priority, only to the Carve-Out and (B) the security interest shall not be subject to Section 551 of the Bankruptcy Code nor shall the Collateral be charged pursuant to Section 506(c) of the Bankruptcy Code.

          27.2. The security interest and the administrative priority granted by and pursuant to this Agreement hereof may be independently granted by the Loan Documents and by other Loan Documents hereafter entered into. This Agreement, the Interim Order, the Final Order and such other Loan Documents supplement each other, and the grants, priorities, rights and remedies of Collateral Agent hereunder and thereunder are cumulative.

          27.3. The security interest granted hereunder shall be deemed valid, binding, continuing, enforceable and fully-perfected first priority (subject only to the Carve-Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement) Liens on the Collateral by entry of the Interim Order and the Final Order, as the case may be. Collateral Agent shall not be required to file any financing statements, notices of Lien or similar instruments in any jurisdiction or filing office or to take any other action in order to validate or perfect the Liens and security interests granted by or pursuant to this Agreement, the Interim Order, the Final Order or any other Loan Document.

          27.4. The security interest, the priority of the security interest, and the administrative priorities and other rights and remedies granted to Collateral Agent pursuant to this Agreement, the Interim Order, the Final Order and the other Collateral Documents (specifically including but not limited to the existence, validity, enforceability, extent, perfection and priority of the Security Interest) and the administrative priority provided herein and therein shall not be modified, altered or impaired in any manner by any other financing or extension of credit or incurrence of debt by any Grantor (pursuant to Section 364 of the Bankruptcy Code or otherwise), or by any dismissal or conversion of any Bankruptcy Case, or by any other act or omission whatsoever. Without limitation, notwithstanding any such order, financing, extension, incurrence, dismissal, conversion, act or omission:

          27.4.1. except for the Carve-Out, no costs or expenses of administration which have been or may be incurred in the Chapter 11 Case or any conversion of the same or in any other proceedings related thereto, and no priority claims, are or will be prior to or on a parity with any claim of Collateral Agent or any Lender against any Grantor in respect of any Secured Obligation;

          27.4.2. the security interest granted to Collateral Agent pursuant to this Agreement, the Interim Order, the Final Order and the other Collateral Documents shall constitute valid, binding, continuing, enforceable and fully-perfected first priority (subject only to the Carve-Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement) Liens and shall be prior to all other Liens (except the Carve-Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement) and interests, now existing or hereafter arising, in favor of any other creditor or any other Person whatsoever; and

          27.4.3. the security interest granted to Collateral Agent pursuant to this Agreement, the Interim Order, the Final Order and the Collateral Documents shall continue to be valid, binding, continuing, enforceable and fully-perfected without the necessity for Collateral Agent to file any financing statements or to otherwise perfect the security interest under applicable non-bankruptcy law.

          IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

[GRANTOR]
By:
	Name:
	Title:

EXHIBIT D-2 TO SENIOR DIP CREDIT AGREEMENT

CANADIAN SECURITY AGREEMENT

Dated December 23, 2009

From

The Grantors referred to herein

as Grantors

to

Cantor Fitzgerald Securities

as Collateral Agent

TABLE OF CONTENTS

SECTION 1.	GRANT OF SECURITY
SECTION 2.	SECURITY FOR OBLIGATIONS AND ATTACHMENT
SECTION 3.	GRANTORS REMAIN LIABLE
SECTION 4.	DELIVERY AND CONTROL OF SECURITY COLLATERAL
SECTION 5.	MAINTAINING THE ACCOUNT COLLATERAL
SECTION 6.	REPRESENTATIONS AND WARRANTIES
SECTION 7.	FURTHER ASSURANCES
SECTION 8.	AS TO EQUIPMENT AND INVENTORY
SECTION 9.	INSURANCE
SECTION 10.	POST-CLOSING CHANGES; COLLECTIONS ON ASSIGNED AGREEMENTS, RECEIVABLES AND RELATED CONTRACTS
SECTION 11.	AS TO INTELLECTUAL PROPERTY COLLATERAL
SECTION 12.	VOTING RIGHTS; DIVIDENDS; ETC
SECTION 13.	AS TO LETTER-OF-CREDIT RIGHTS
SECTION 14.	TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES
SECTION 15.	COLLATERAL AGENT APPOINTED ATTORNEY IN FACT
SECTION 16.	COLLATERAL AGENT MAY PERFORM
SECTION 17.	THE COLLATERAL AGENT’S DUTIES
SECTION 18.	REMEDIES
SECTION 19.	INDEMNITY AND EXPENSES
SECTION 20.	AMENDMENTS; WAIVERS; ADDITIONAL GRANTORS; ETC
SECTION 21.	NOTICES, ETC
SECTION 22.	CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT AGREEMENT
SECTION 23.	RELEASE; TERMINATION
SECTION 24.	EXECUTION IN COUNTERPARTS
SECTION 25.	GOVERNING LAW
SECTION 26.	MATTERS RELATING TO SECURITY

Schedules
Schedule I	-	Investment Property
Schedule II	-	Pledged Deposit Accounts
Schedule III	-	Intellectual Property
Schedule IV	-	Location, Chief Executive Office, Type of Organization, Jurisdiction of Organization and Organizational Identification Number
Schedule V	-	Locations of Equipment, Inventory and Other Tangible Personal Property
Schedule VI	-	Letters of Credit
Exhibits
Exhibit A	-	Form of Intellectual Property Security Agreement
Exhibit B	-	Form of Intellectual Property Security Agreement Supplement
Exhibit C	-	Form of Security Agreement Supplement

CANADIAN SECURITY AGREEMENT

          CANADIAN SECURITY AGREEMENT dated December 23, 2009 made by TLC VISION CORPORATION, a New Brunswick corporation, as a debtor and a debtor in possession (the “Parent”), and the other Persons listed on the signature pages hereof (the Parent and the Persons so listed being, collectively, the “Grantors”), to CANTOR FITZGERALD SECURITIES, as collateral Agent (in such capacity, together with any successor collateral agent appointed pursuant to Article VII of the Credit Agreement (as hereinafter defined), the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement).

          WHEREAS, TLC Vision (USA) Corporation, as a debtor and a debtor in possession (“Holdco”), and TLC Management Services Inc., as a debtor and a debtor in possession (“TLC Management”) and the Parent (the Parent together with Holdco and TLC Management being referred to herein as the “Borrowers”), have entered into a Senior Secured Super Priority Debtor in Possession Credit Agreement dated as of the date hereof (said Agreement, as it may hereafter be amended, amended and restated, supplemented or otherwise modified from time to time, being the “Credit Agreement”) with the Lenders party thereto and Cantor Fitzgerald Securities, as administrative agent for such Lenders and collateral Agent for the Secured Parties;

          WHEREAS, on December 21, 2009 (the “Petition Date”), the Borrowers filed a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware;

          WHEREAS, subsequent to the Petition Date, the Parent filed a petition under Part IV of the Companies’ Creditors Arrangements Act (Canada), as ancillary relief sought in the Ontario Superior Court of Justice (Commercial List);

          WHEREAS, the Borrowers intend to continue to operate their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code;

          WHEREAS, the Borrowers have requested that the Lenders provide financing to the Borrowers consisting of a senior super priority term loan facility in an amount up to $15,000,000 (the “Facility”) pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, the Lenders have indicated their willingness to agree to extend the Facility to the Borrowers, all on terms and conditions set forth in the Credit Agreement and in the Order pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, each Grantor is the owner of the shares of stock or other Equity Interests (the “Initial Pledged Equity”) set forth opposite such Grantor’s name on and as otherwise described in Part I of Schedule I hereto and issued by the Persons named therein and of the indebtedness (the “Initial Pledged Debt”) set forth opposite such Grantor’s name on and as otherwise described in Part II of Schedule I hereto and issued by the obligors named therein.

          WHEREAS, each Grantor is the owner of the deposit accounts (the “Pledged Deposit Accounts”) set forth opposite such Grantor’s name on Schedule II hereto.

          WHEREAS, it is a condition precedent to the making of the term loans otherwise extending credit to the Borrowers under the Credit Agreement that the Grantors shall have granted the security interest contemplated by this Agreement.

          WHEREAS, terms defined in the Credit Agreement and not otherwise defined in this Agreement are used in this Agreement as defined in the Credit Agreement. Further, unless otherwise defined in this Agreement or in the Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below) are used in this Agreement as such terms are defined in such Article 8 or 9.

          NOW, THEREFORE, for and in consideration of the foregoing, each Grantor hereby agrees with the Collateral Agent for the ratable benefit of the Secured Parties as follows:

          1. Grant of Security.

          Each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in, and assigns, mortgages, charges, hypothecates and pledges to the Collateral Agent for the ratable benefit of the Secured Parties, such Grantor’s right, title and interest in and to the following, in each case, as to each type of property described below, whether now owned or hereafter acquired by such Grantor, wherever located, and whether now or hereafter existing or arising (collectively, the “Collateral”):

          (a) all equipment in all of its forms, including, without limitation, all machinery, tools, motor vehicles, vessels, furniture and fixtures, and all parts thereof and all accessions thereto, including, without limitation, computer programs and supporting information that constitute equipment within the meaning of the PPSA (as such term is defined in the Credit Agreement) (the “PPSA”) and the UCC (any and all such property being the “Equipment”);

          (b) all inventory in all of its forms, including, without limitation, (i) all raw materials, work in process, finished goods and materials used or consumed in the manufacture, production, preparation or shipping thereof, (ii) goods in which such Grantor has an interest in mass or a joint or other interest or right of any kind (including, without limitation, goods in which such Grantor has an interest or right as consignee) and (iii) goods that are returned to or repossessed or stopped in transit by such Grantor), and all accessions thereto and products thereof and documents therefor, including, without limitation, computer programs and supporting information that constitute inventory within the meaning of the UCC and the PPSA (any and all such property being the “Inventory”);

          (c) all accounts (including, without limitation, health-care-insurance receivables), chattel paper (including, without limitation, tangible chattel paper and electronic chattel paper), instruments (including, without limitation, promissory notes), deposit accounts, letter-of-credit rights, general intangibles (including, without limitation, payment intangibles) and other obligations of any kind, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services and whether or not earned by performance, and all rights now or hereafter existing in and to all supporting obligations and in and to all security agreements, mortgages, Liens, leases, letters of credit and other contracts securing or otherwise relating to the foregoing property (any and all of such accounts, chattel paper, instruments,

deposit accounts, letter-of-credit rights, general intangibles and other obligations, to the extent not referred to in clause (d), (e) or (f) below, being the “Receivables,” and any and all such supporting obligations, security agreements, mortgages, Liens, leases, letters of credit and other contracts being the “Related Contracts”);

          (d) the following (the “Security Collateral”):

          (i) the Initial Pledged Equity and the certificates, if any, representing the Initial Pledged Equity, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Equity and all warrants, rights or options issued thereon or with respect thereto;

          (ii) the Initial Pledged Debt and the instruments, if any, evidencing the Initial Pledged Debt, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Initial Pledged Debt;

          (iii) all additional shares of stock and other Equity Interests from time to time acquired by such Grantor in any manner (such shares and other Equity Interests, together with the Initial Pledged Equity, being the “Pledged Equity”), and the certificates, if any, representing such additional shares or other Equity Interests, and all dividends, distributions, return of capital, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares or other Equity Interests and all warrants, rights or options issued thereon or with respect thereto;

          (iv) all additional indebtedness from time to time owed to such Grantor (such indebtedness, together with the Initial Pledged Debt, being the “Pledged Debt”) and the instruments, if any, evidencing such indebtedness, and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such indebtedness;

          (v) all financial assets, and all dividends, distributions, return of capital, interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such security entitlements or financial assets and all warrants, rights or options issued thereon or with respect thereto; and

          (vi) all security entitlements with respect to all financial assets from time to time credited to any and all securities accounts owned by any Grantor, and all other investment property (including, without limitation, all (A) securities, whether certificated or uncertificated, (B) security entitlements, (C) securities accounts, (D) commodity contracts and (E) commodity accounts) in which such Grantor has now, or acquires from time to time hereafter, any right, title or interest in any manner, and the certificates or instruments, if any, representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, cash, instruments and other

property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property and all warrants, rights or options issued thereon or with respect thereto;

          (e) each of the agreements to which such Grantor is now or may hereafter become a party, in each case as such agreements may be amended, amended and restated, supplemented or otherwise modified from time to time (collectively, the “Assigned Agreements”), including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due under or pursuant to the Assigned Agreements, (ii) all rights of such Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii) claims of such Grantor for damages arising out of or for breach of or default under the Assigned Agreements and (iv) the right of such Grantor to terminate the Assigned Agreements, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder (all such Collateral being the “Agreement Collateral”);

          (f) the following (collectively, the “Account Collateral”):

          (i) the Pledged Deposit Accounts and all funds and financial assets from time to time credited thereto (including, without limitation, all Cash Equivalents), and all certificates and instruments, if any, from time to time representing or evidencing the Pledged Deposit Accounts;

          (ii) all promissory notes, certificates of deposit, checks and other instruments from time to time delivered to or otherwise possessed by the Collateral Agent for or on behalf of such Grantor in substitution for or in addition to any or all of the then existing Account Collateral; and

          (iii) all interest, dividends, distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Account Collateral; and

          (g) the following (collectively, the “Intellectual Property Collateral”):

          (i) all patents, patent applications, utility models and statutory invention registrations, all inventions claimed or disclosed therein and all improvements thereto (“Patents”);

          (ii) all trademarks, service marks, domain names, trade dress, logos, designs, slogans, trade names, business names, corporate names and other source identifiers, whether registered or unregistered, together, in each case, with the goodwill symbolized thereby (“Trademarks”);

          (iii) all copyrights, including, without limitation, copyrights in Computer Software (as hereinafter defined), internet web sites and the content thereof, whether registered or unregistered (“Copyrights”);

          (iv) all computer software, programs and databases (including, without limitation, source code, object code and all related applications and data files), firmware and documentation and materials relating thereto, together with any and all maintenance rights, service rights, programming rights, hosting rights, test rights, improvement rights, renewal rights and indemnification rights and any substitutions, replacements, improvements, error corrections, updates and new versions of any of the foregoing (“Computer Software”);

          (v) all confidential and proprietary information, including, without limitation, know-how, industrial designs, integrated circuit topographics, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, databases and data, including, without limitation, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information (collectively, “Trade Secrets”), and all other intellectual, industrial and intangible property of any type, including, without limitation, industrial designs and mask works;

          (vi) all registrations and applications for registration for any of the foregoing, including, without limitation, those registrations and applications for registration set forth in Schedule III hereto, together with all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations thereof;

          (vii) all tangible embodiments of the foregoing, all rights in the foregoing provided by international treaties or conventions, all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto;

          (viii) all agreements, permits, consents, orders and franchises relating to the license, development, use or disclosure of any of the foregoing to which such Grantor, now or hereafter, is a party or a beneficiary, including, without limitation, the agreements set forth in Schedule III hereto (“IP Agreements”); and

          (ix) any and all claims for damages and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse or breach with respect to any of the foregoing, with the right, but not the obligation, to sue for and collect, or otherwise recover, such damages;

          (h) all books and records (including, without limitation, customer lists, credit files, printouts and other computer output materials and records) of such Grantor pertaining to any of the Collateral;

          (i) all avoidance power claims or actions under section 549 of the Bankruptcy Code relating to postpetition transfers of Collateral and proceeds thereof, and subject to the entry of the Final Order, all avoidance power claims or actions under chapter 5 of the Bankruptcy Code and any proceeds thereof; and

          (j) all proceeds of, collateral for, income, royalties and other payments now or hereafter due and payable with respect to, and supporting obligations relating to, any and all of the Collateral (including, without limitation, proceeds, proceeds of proceeds, collateral and supporting obligations that constitute property of the types described in clauses (a) through (i) of this Section 1) and, to the extent not otherwise included, all (A) payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral, and (B) cash.

          Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and no Grantor shall be deemed to have granted a security interest in, (a) any consumer goods or shares in any unlimited company or unlimited liability corporation at any time owned or otherwise held by such Grantor; (b) any Intellectual Property Collateral, if the grant of such security interest shall constitute or result in the abandonment, invalidation or rendering unenforceable any right, title or interest of such Grantor therein; (c) in any license, contract or agreement to which such Grantor is a party or any of its rights or interests thereunder, including, without limitation, with respect to any pledged partnership interests or any pledged limited liability company interests, to the extent, but only to the extent, that such a grant would, under the terms of such license, contract or agreement (including, without limitation, any partnership agreements or any limited liability company agreements), or otherwise, be prohibited by or result in a breach or termination of the terms of, or constitute a default under or termination of any such license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406 of the UCC (or any successor provision) or PPSA of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity) or would otherwise constitute a violation of law, regulation or policy; provided, however, that immediately upon the ineffectiveness, lapse or termination of any such provision, the Collateral shall include, and each Grantor shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect; (d) any of the outstanding capital stock of a “controlled foreign corporation” as defined in the Internal Revenue Code of 1986, as amended from time to time (each, a “Controlled Foreign Corporation”), in excess of 65% of the voting power of all classes of capital stock of such controlled foreign corporation entitled to vote to the extent such security interest would result in a material adverse tax event under the United States tax laws; or (e) all equipment and other property to the extent, but only to the extent, that such a grant would, under the terms of any contract or agreement to which such Grantor is a party in connection with certain industrial revenue obligations, be prohibited by or would otherwise result in a breach or termination of the terms of, or constitute a default under or termination of any such contract or agreement or would otherwise constitute a violation of law, regulation or policy; provided, however, that immediately upon the ineffectiveness, lapse or termination of any such provision precluding the grant of security interest on such property, the Collateral shall include, and each Grantor shall be deemed to have granted a security interest in, all such rights and interests as if such provision had never been in effect; or (f) property owned by any Grantor that is subject to a purchase money Lien or a Capitalized Lease to the extent such purchase money Lien or Capitalized Lease is permitted under the Credit Agreement if the contract or other agreement in which such Lien is granted (or if the documentation providing for such purchase money Lien or Capitalized Lease prohibits or requires the consent of any Person other than the Borrowers and their Affiliates as a condition to

the creation of any other Lien on such property); provided, that the respective Grantor uses commercially reasonable efforts to permit the Collateral Agent to obtain a Lien on such property subject to the prior Lien under such purchase money Lien or Capitalized Lease, as the case may be.

          2. Security for Obligations and Attachment.

          This Agreement secures, in the case of each Grantor, the payment of all Obligations of such Grantor now or hereafter existing under the Loan Documents, whether direct or indirect, absolute or contingent, and whether for principal, reimbursement obligations, interest, fees, premiums, penalties, indemnifications, contract causes of action, costs, expenses or otherwise (all such Obligations being the “Secured Obligations”). Without limiting the generality of the foregoing, this Agreement secures, as to each Grantor, the payment of all amounts that constitute part of the Secured Obligations and would be owed by such Grantor to any Secured Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Loan Party. Each Grantor acknowledges that (a) value has been given, (b) it has rights in the Collateral of such Grantor or the power to transfer rights in the Collateral of such Grantor to the Collateral Agent (other than after-acquired Collateral), (c) it has not agreed to postpone the time of attachment of any of the security interests created under this Agreement, and (d) it has received a copy of this Agreement.

          3. Grantors Remain Liable.

          Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in such Grantor’s Collateral to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Collateral Agent of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral and (c) no Secured Party shall have any obligation or liability under the contracts and agreements included in the Collateral by reason of this Agreement or any other Loan Document, nor shall any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

          4. Delivery and Control of Security Collateral.

          (a) All certificates or instruments representing or evidencing Security Collateral shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Collateral Agent. The Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Security Collateral for certificates or instruments of smaller or larger denominations.

          (b) With respect to any Security Collateral that constitutes an uncertificated security, the relevant Grantor will cause the issuer thereof, at the reasonable request of the

Collateral Agent, either (i) to register the Collateral Agent as the registered owner of such security or (ii) to agree with such Grantor and the Collateral Agent that such issuer will comply with instructions with respect to such security originated by the Collateral Agent without further consent of such Grantor, such agreement to be in form and substance satisfactory to the Collateral Agent (such agreement being an “Uncertificated Security Control Agreement”).

          (c) With respect to any Security Collateral that constitutes a security entitlement as to which the financial institution acting as Collateral Agent hereunder is not the securities intermediary, the relevant Grantor, at the reasonable request of the Collateral Agent, will cause the securities intermediary with respect to such Account or security entitlement either (i) to identify in its records the Collateral Agent as the entitlement holder thereof or (ii) to agree with such Grantor and the Collateral Agent that such securities intermediary will comply with entitlement orders originated by the Collateral Agent without further consent of such Grantor, such agreement to be in form and substance satisfactory to the Collateral Agent (a “Securities Account Control Agreement”).

          (d) The Collateral Agent shall have the right, at any time in its discretion and without notice to any Grantor, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Security Collateral, subject only to the revocable rights specified in Section 12(a).

          (e) Upon the reasonable request of the Collateral Agent, each Grantor will notify each issuer of Security Collateral granted by it hereunder that such Security Collateral is subject to the security interest granted hereunder.

          5. Maintaining the Account Collateral.

          So long as any Loan or any other Obligation (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto) of any Loan Party under any Loan Document shall remain unpaid, or any Lender shall have any Commitment, each Grantor will maintain deposit accounts as provided under the Credit Agreement.

          6. Representations and Warranties.

          Each Grantor represents and warrants as follows:

          (a) Such Grantor’s exact legal name, location, chief executive office, type of organization, jurisdiction of organization and organizational identification number, as of the date hereof, as of the date hereof, is set forth in Schedule IV hereto.

          (b) Such Grantor is the legal and beneficial owner of the Collateral granted or purported to be granted by it free and clear of any Lien, claim, option or right of others, except for the security interest created under this Agreement or permitted under the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any part of such Collateral or listing such Grantor or any trade name of such Grantor as debtor is on file in

any recording office, except such as may have been filed in favor of the Collateral Agent relating to the Loan Documents or as otherwise permitted under the Credit Agreement.

          (c) All of the Equipment and Inventory of such Grantor are located at the places specified therefor in Schedule V hereto or at another location as to which such Grantor has complied with the requirements of Section 8(a) except for mobile laser equipment, Equipment being repaired and Equipment otherwise maintained at other locations in the ordinary course of business. Such Grantor has exclusive possession and control of its Equipment and Inventory, other than (i) Equipment being repaired, and (ii) Inventory stored at any leased premises or warehouse for which a landlord’s or warehouseman’s agreement, in form and substance satisfactory to the Collateral Agent, is in effect.

          (d) None of the Receivables or Agreement Collateral is evidenced by a promissory note or other instrument that has not been delivered to the Collateral Agent.

          (e) If such Grantor is an issuer of Security Collateral, such Grantor confirms that it has received notice of the security interest granted hereunder.

          (f) The Pledged Equity pledged by such Grantor hereunder has been duly authorized and validly issued, in the case of any entity, the equity of which is Pledged Equity that is a corporation, and is fully paid and non assessable. The Pledged Debt pledged by such Grantor hereunder has been duly authorized, authenticated or issued and delivered, is the legal, valid and binding obligation of the issuers thereof, is evidenced by one or more promissory notes (which promissory notes have been delivered to the Collateral Agent) and, to the knowledge of such Grantor is not in default.

          (g) The Initial Pledged Equity pledged by such Grantor constitutes the percentage of the issued and outstanding Equity Interests of the issuers thereof indicated on Schedule I hereto. The Initial Pledged Debt constitutes all of the outstanding indebtedness owed to such Grantor by the issuers thereof and, to the extent evidenced by an instrument and in a principal amount in excess of $150,000, as indicated on Schedule I hereto.

          (h) Such Grantor has no investment property other than the investment property listed on Schedule I hereto and additional investment property as to which such Grantor has complied with the requirements of Section 4.

          (i) Such Grantor has no deposit accounts constituting Collateral, other than the Pledged Deposit Accounts listed on Schedule II hereto and additional Pledged Deposit Accounts as to which such Grantor has complied with the applicable requirements of Section 5.

          (j) Such Grantor is not a beneficiary or assignee under any letter of credit, other than the letters of credit described in Schedule VI hereto and additional letters of credit as to which such Grantor has complied with the requirements of Section 13.

          (k) This Agreement creates in favor of the Collateral Agent for the benefit of the Secured Parties a valid and continuing first priority security interest in the Collateral granted by such Grantor, upon entry of the Order (subject only to the Carve Out and the Liens permitted

to be equal or superior in priority pursuant to the Credit Agreement), securing the payment of the Secured Obligations; all filings and other actions (including, without limitation, actions necessary to obtain control of Collateral as provided in the Securities Transfer Act (and other provincial equivalents) but excluding actions necessary to perfect the Collateral Agent’s security interest with respect to Collateral evidenced by a certificate of title) necessary to perfect the security interest in the Collateral granted by such Grantor have been duly made or taken and are in full force and effect with respect to Collateral in which a security interest can be perfected by the filing of a Uniform Commercial Code financing statement, the filing or recordation with the Patent and Trademark Office or the obtaining of control as provided in the Securities Transfer Act (and other provincial equivalents), except as otherwise permitted hereunder; and such security interest is first priority (subject to the Carve Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement).

          (l) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the grant by such Grantor of the security interest granted hereunder or for the execution, delivery or performance of this Agreement by such Grantor, (ii) the perfection or maintenance of the security interest created hereunder (including the first priority nature of such security interest subject to Liens permitted to be equal or superior in priority pursuant to the Credit Agreement), except for the filing of financing and continuation statements under the UCC or PPSA, the recordation of the Intellectual Property Security Agreements referred to in Section 11(f) with the Canadian Intellectual Property Office, which Agreements will be duly recorded and are in full force and effect, and the actions described in Section 4 with respect to the Security Collateral, which actions have been taken and are in full force and effect, except with respect to Collateral evidenced by a certificate of title or (iii) the exercise by the Collateral Agent of its voting or other rights provided for in this Agreement or the remedies in respect of the Collateral pursuant to this Agreement, except as may be required in connection with the disposition of any portion of the Security Collateral by laws affecting the offering and sale of securities generally.

          (m) [Intentionally omitted.]

          (n) As to itself and its Intellectual Property Collateral:

          (i) The operation of such Grantor’s business as currently conducted or as now contemplated to be conducted and the use of the Intellectual Property Collateral in connection therewith do not, to such Grantor’s knowledge, conflict with, infringe, misappropriate, dilute, misuse or otherwise violate the intellectual property rights of any third party.

          (ii) Such Grantor is the exclusive owner or licensed owner of all right, title and interest in and to the Intellectual Property Collateral, and is entitled to use all Intellectual Property Collateral subject only to the terms of the IP Agreements.

          (iii) The Intellectual Property Collateral set forth on Schedule III hereto includes all of the issued patents, patent applications, domain names, trademark registrations and applications, and copyright registrations and applications owned by such

Grantor and all IP Agreements to which such Grantor is a party or beneficiary as of the date hereof.

          (iv) The Intellectual Property Collateral material to the business of the Grantors is subsisting and has not been adjudged invalid or unenforceable in whole or part, and to the best of such Grantor’s knowledge, is valid and enforceable. Such Grantor is not aware of any uses of any item of Intellectual Property Collateral that could be expected to lead to such item becoming invalid or unenforceable.

          (v) As to each item of Intellectual Property Collateral material to the business of the Grantors, taken as a whole, such Grantor has made or performed all filings, recordings and other acts and has paid all required fees and taxes to maintain and protect its interest in each such item of Intellectual Property Collateral in full force and effect, including, without limitation, recordations of any of its interests in the Patents and Trademarks with the Canadian Intellectual Property Office, and in corresponding national and international patent offices, and recordation of any of its interests in the Copyrights with the Canadian Intellectual Property Office and in corresponding national and international copyright offices. Such Grantor has used proper statutory notice in connection with its use of each patent, trademark and copyright in the Intellectual Property Collateral material to the business of the Grantors taken as a whole.

          (vi) No claim, action, suit, investigation, litigation or proceeding has been asserted or is pending or, to such Grantor’s knowledge, threatened against such Grantor (A) based upon or challenging or seeking to deny or restrict the Grantor’s rights in or use of any of the Intellectual Property Collateral material to the business of the Grantors, (B) to such Grantor’s knowledge, alleging that the Grantor’s rights in or use of the Intellectual Property Collateral or that any services provided by, processes used by, or products manufactured or sold by, such Grantor infringe, misappropriate, dilute, misuse or otherwise violate any patent, trademark, copyright or any other proprietary right of any third party, or (C) alleging that the Intellectual Property Collateral is being licensed or sublicensed in violation or contravention of the terms of any license or other agreement. To such Grantor’s knowledge, no Person is engaging in any activity that infringes, misappropriates, dilutes, misuses or otherwise violates the Intellectual Property Collateral or the Grantor’s rights in or use thereof. Except as set forth on Schedule III hereto such Grantor has not granted any license, release, covenant not to sue, non-assertion assurance, or other right to any Person with respect to any part of the Intellectual Property Collateral. The consummation of the transactions contemplated by the Loan Documents will not result in the termination or impairment of any of the Intellectual Property Collateral.

          (vii) With respect to each IP Agreement, to such Grantor’s knowledge: (A) such IP Agreement is valid and binding and in full force and effect and represents the entire agreement between the respective parties thereto with respect to the subject matter thereof; (B) such IP Agreement will not cease to be valid and binding and in full force and effect on terms identical to those currently in effect as a result of the rights and interest granted herein, nor will the grant of such rights and interest constitute a breach or

default under such IP Agreement or otherwise give any party thereto a right to terminate such IP Agreement; (C) such Grantor has not received any notice of termination or cancellation under such IP Agreement; (D) such Grantor has not received any notice of a breach or default under such IP Agreement, which breach or default has not been cured; (E) such Grantor has not granted to any other third party any rights, adverse or otherwise, under such IP Agreement; and (F) neither such Grantor nor, to the knowledge of such Grantor, any other party to such IP Agreement is in breach or default thereof in any material respect, and no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such IP Agreement.

          (viii) To the best of such Grantor’s knowledge, (A) none of the Trade Secrets of such Grantor has been used, divulged, disclosed or appropriated to the detriment of such Grantor for the benefit of any other Person other than such Grantor; (B) no employee, independent contractor or agent of such Grantor has misappropriated any trade secrets of any other Person in the course of the performance of his or her duties as an employee, independent contractor or agent of such Grantor; and (C) no employee, independent contractor or agent of such Grantor is in default or material breach of any term of any employment agreement, non-disclosure agreement, assignment of inventions agreement or similar agreement or contract relating in any way to the protection, ownership, development, use or transfer of such Grantor’s Intellectual Property Collateral.

          (ix) No Grantor or Intellectual Property Collateral is subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling restricting the use of any Intellectual Property Collateral that is material to the business of the Grantors, taken as a whole, or that would impair the validity or enforceability of such material Intellectual Property Collateral.

          7. Further Assurances.

          (a) Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver, or otherwise authenticate, all further instruments and documents, and take all further action that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to perfect and protect any pledge or security interest granted or purported to be granted by such Grantor hereunder or by the Orders or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral of such Grantor. Without limiting the generality of the foregoing, each Grantor will promptly with respect to Collateral of such Grantor: (i) if any such Collateral shall be evidenced by a promissory note or other instrument or chattel paper, deliver and pledge to the Collateral Agent hereunder such note or instrument or chattel paper duly indorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent; (ii) file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the security interest granted or purported to be granted by such Grantor hereunder; (iii) at the reasonable

request of the Collateral Agent, take all action to ensure that the Collateral Agent’s security interest is noted on any certificate of title related to any Collateral evidenced by a certificate of title; and (iv) deliver to the Collateral Agent evidence that all other actions that the Collateral Agent may deem reasonably necessary or desirable in order to perfect and protect the security interest granted or purported to be granted by such Grantor under this Agreement has been taken.

          (b) Each Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, including, without limitation, one or more financing statements indicating that such financing statements cover all assets or all personal property (or words of similar effect) of such Grantor, regardless of whether any particular asset described in such financing statements falls within the scope of the UCC or PPSA or the granting clause of this Agreement. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law. Each Grantor ratifies its authorization for the Collateral Agent to have filed such financing statements, continuation statements or amendments filed prior to the date hereof.

          (c) Each Grantor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Collateral of such Grantor and such other reports in connection with such Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

          8. As to Equipment and Inventory.

          (a) Each Grantor will keep its Equipment, Inventory and other tangible personal property (other than Inventory sold in accordance with the terms of the Credit Agreement and except for mobile laser equipment and Equipment being repaired in the ordinary course of business) at the places therefor specified in Section 6(c) or, upon 30 days’ prior written notice to the Collateral Agent, at such other places designated by such Grantor in such notice, except as provided in Section 6(c).

          (b) Each Grantor will cause its Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and will forthwith, or in the case of any loss or damage to any of such Equipment as soon as practicable after the occurrence thereof, make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Each Grantor will promptly furnish to the Collateral Agent a statement respecting any loss or damage exceeding $10,000 per occurrence to any of its Equipment or Inventory.

          9. Insurance.

          (a) Each Grantor will, at its own expense, maintain insurance with respect to its Equipment and Inventory in such amounts, against such risks, in such form and with such insurers, as shall be satisfactory to the Collateral Agent from time to time. Each policy of each Grantor for liability insurance shall provide for all losses to be paid on behalf of the Collateral Agent and such Grantor as their interests may appear, and each policy for property damage insurance shall provide for all losses to be paid directly to the Collateral Agent. Each such policy shall in addition (i) name such Grantor and the Collateral Agent as insured parties

thereunder (without any representation or warranty by or obligation upon the Collateral Agent) as their interests may appear, (ii) contain the agreement by the insurer that any loss thereunder shall be payable to the Collateral Agent, upon its reasonable request, notwithstanding any action, inaction or breach of representation or warranty by such Grantor, (iii) provide that there shall be no recourse against the Collateral Agent for payment of premiums or other amounts with respect thereto and (iv) provide that at least 10 days’ prior written notice of cancellation or of lapse shall be given to the Collateral Agent by the insurer. Each Grantor will, if so reasonably requested by the Collateral Agent, deliver to the Collateral Agent original or duplicate policies of such insurance and, as often as the Collateral Agent may reasonably request, a report of a reputable insurance broker with respect to such insurance. Further, each Grantor will, at the reasonable request of the Collateral Agent, duly execute and deliver instruments of assignment of such insurance policies to comply with the requirements of Section 8 and cause the insurers to acknowledge notice of such assignment.

          (b) Reimbursement under any liability insurance maintained by any Grantor pursuant to this Section 9 may be paid directly to the Person who shall have incurred liability covered by such insurance.

          10. Post-Closing Changes; Collections on Assigned Agreements, Receivables and Related Contracts. (a) No Grantor will change its name, type of organization, jurisdiction of organization, organizational identification number or location from those set forth in Section 6(a) of this Agreement without first giving at least 30 days’ prior written notice to the Collateral Agent and taking all action required by the Collateral Agent for the purpose of perfecting or protecting the security interest granted by this Agreement. Each Grantor will hold and preserve its records relating to the Collateral, including, without limitation, the Assigned Agreements and Related Contracts, and will permit representatives of the Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and other documents. If any Grantor does not have an organizational identification number and later obtains one, it will forthwith notify the Collateral Agent of such organizational identification number.

          (b) Except as otherwise provided in this subsection (b), each Grantor will continue to collect, at its own expense, all amounts due or to become due such Grantor under the Assigned Agreements, Receivables and Related Contracts. In connection with such collections, such Grantor may take such action as such Grantor or the Collateral Agent may deem necessary or advisable to enforce collection of the Assigned Agreements and otherwise exercise all of its rights under the Assigned Agreements as it deems appropriate, Receivables and Related Contracts; provided, however, that the Collateral Agent shall have the right at any time, upon the occurrence and during the continuance of an Event of Default and upon written notice to such grantor of its intention to do so, to notify the Obligors under any Assigned Agreements, Receivables and Related Contracts of the assignment of such Assigned Agreements, Receivables and Related Contracts to the Collateral Agent and to direct such Obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Assigned Agreements, Receivables and Related Contracts, to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done, and to otherwise exercise all rights with respect to such Assigned Agreements,

Receivables and Related Contracts, including, without limitation, those set forth set forth in Section 9-607 of the UCC or in the PPSA. After receipt by any Grantor of the notice from the Collateral Agent referred to in the proviso to the preceding sentence, (i) all amounts and proceeds (including, without limitation, instruments) received by such Grantor in respect of the Assigned Agreements, Receivables and Related Contracts of such Grantor shall be received in trust for the benefit of the Collateral Agent hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary endorsement) and either (A) released to such Grantor so long as no Event of Default shall have occurred and be continuing or (B) if any Event of Default shall have occurred and be continuing, applied as provided in Section 18(b) and (ii) such Grantor will not adjust, settle or compromise the amount or payment of any Receivable or amount due on any Assigned Agreement or Related Contract, release wholly or partly any Obligor thereof or allow any credit or discount thereon. Except for the Carve Out, no Grantor will permit or consent to the subordination of its right to payment under any of the Assigned Agreements, Receivables and Related Contracts to any other indebtedness or obligations of the Obligor thereof.

          11. As to Intellectual Property Collateral.

          (a) With respect to each item of its Intellectual Property Collateral material to the business of the Grantors, each Grantor agrees to take, at its expense, all reasonable steps, and shall not knowingly omit to do any act, including, without limitation, in the Canadian Intellectual Property Office and any other relevant governmental authority, to (i) maintain the validity and enforceability of such Intellectual Property Collateral and maintain such Intellectual Property Collateral in full force and effect, and (ii) pursue the registration and maintenance of each patent, trademark, or copyright registration or application, now or hereafter included in such Intellectual Property Collateral of such Grantor, including, without limitation, the payment of required fees and taxes, the filing of responses to office actions issued by the Canadian Intellectual Property Office or other governmental authorities, the filing of applications for renewal or extension, continuation, continuation-in-part, reissue and renewal applications or extensions, the payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings. No Grantor shall, without the written consent of the Collateral Agent, discontinue use of or otherwise abandon any Intellectual Property Collateral material to the business of the Grantors, taken as a whole, or abandon any right to file an application for patent, trademark, or copyright, unless such Grantor shall have previously determined that such use or the pursuit or maintenance of such Intellectual Property Collateral is no longer desirable in the conduct of such Grantor’s business and that the loss thereof would not be reasonably likely to have a Material Adverse Effect.

          (b) Each Grantor agrees promptly to notify the Collateral Agent if such Grantor becomes aware (i) that any item of the Intellectual Property Collateral material to the business of the Grantors, taken as a whole, may have become abandoned, placed in the public domain, invalid or unenforceable, or of any adverse determination or development regarding such Grantor’s ownership or use of any such Intellectual Property Collateral or its right to register the same or to keep and maintain and enforce the same, or (ii) of any adverse determination or the institution of any proceeding (including, without limitation, the institution

of any proceeding in the Canadian Intellectual Property Office or any court) regarding any item of the Intellectual Property Collateral material to the business of the Grantors.

          (c) In the event that any Grantor becomes aware that any item of the Intellectual Property Collateral material to the business of the Grantors, taken as a whole, is being infringed or misappropriated by a third party, such Grantor shall promptly notify the Collateral Agent and shall take all reasonable actions, at its expense, to protect or enforce such Intellectual Property Collateral, including, without limitation, suing for infringement or misappropriation and for an injunction against such infringement or misappropriation.

          (d) Each Grantor shall use proper statutory notice in connection with its use of each item of material Intellectual Property Collateral.

          (e) Each Grantor shall take all steps which it or the Collateral Agent deems reasonable and appropriate under the circumstances to preserve and protect each item of its Intellectual Property Collateral material to the business of the Grantors, taken as a whole, including, without limitation, maintaining the quality of any and all products or services used or provided in connection with any of the material Trademarks, consistent with the quality of the products and services as of the date hereof, and taking all steps necessary to ensure that all licensed users of any of the material Trademarks use such consistent standards of quality.

          (f) With respect to its Intellectual Property Collateral, each Grantor agrees to execute or otherwise authenticate an agreement, in substantially the form set forth in Exhibit A hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “Intellectual Property Security Agreement”), for recording the security interest granted hereunder to the Collateral Agent in such Intellectual Property Collateral with the Canadian Intellectual Property Office and any other governmental authorities necessary to perfect the security interest hereunder in such Intellectual Property Collateral.

          (g) Each Grantor agrees that should it obtain an ownership interest in or license to any item of the type set forth in Section 1(g) that is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”) (i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral subject to the terms and conditions of this Agreement with respect thereto. Each Grantor shall give prompt written notice to the Collateral Agent identifying the After-Acquired Intellectual Property, and such Grantor shall execute and deliver to the Collateral Agent with such written notice, or otherwise authenticate, an agreement substantially in the form of Exhibit B hereto or otherwise in form and substance satisfactory to the Collateral Agent (an “IP Security Agreement Supplement”) covering such After-Acquired Intellectual Property, which IP Security Agreement Supplement shall be recorded with the Canadian Intellectual Property Office and any other relevant governmental authorities necessary to perfect the security interest hereunder in such After-Acquired Intellectual Property.

          12. Voting Rights; Dividends; Etc.

          (a) So long as no Event of Default shall have occurred and be continuing:

          (i) Each Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Security Collateral of such Grantor or any part thereof for any purpose; provided however, that such Grantor will not exercise or refrain from exercising any such right if such action would have a material adverse effect on the value of the Security Collateral or any part thereof.

          (ii) Each Grantor shall be entitled to receive and retain any and all dividends, interest and other distributions paid in respect of the Security Collateral of such Grantor if and to the extent that the payment thereof is not otherwise prohibited by the terms of the Loan Documents; provided, however, that any and all

          (1) dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Security Collateral,

          (2) dividends and other distributions paid or payable in cash in respect of any Security Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid in surplus and

          (3) cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Security Collateral

shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Security Collateral and shall, if received by such Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor and be forthwith delivered to the Collateral Agent as Security Collateral in the same form as so received (with any necessary indorsement).

          (iii) The Collateral Agent will execute and deliver (or cause to be executed and delivered) to each Grantor all such proxies and other instruments as such Grantor may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to paragraph (ii) above.

          (b) Upon the occurrence and during the continuance of an Event of Default:

          (i) All rights of each Grantor (x) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 12(a)(i) shall, upon notice to such Grantor by the Collateral Agent, cease and (y) to receive the dividends, interest and other distributions that it would

otherwise be authorized to receive and retain pursuant to Section 12(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Security Collateral such dividends, interest and other distributions.

          (ii) All dividends, interest and other distributions that are received by any Grantor contrary to the provisions of paragraph (i) of this Section 12(b) shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent as Security Collateral in the same form as so received (with any necessary indorsement).

          13. As to Letter-of-Credit Rights.

          (a) Each Grantor, by granting a security interest in its Receivables consisting of letter-of-credit rights to the Collateral Agent, intends to (and hereby does) assign to the Collateral Agent its rights (including its contingent rights) to the proceeds of all Related Contracts consisting of letters of credit of which it is or hereafter becomes a beneficiary or assignee. Each Grantor will promptly use its best efforts to cause the issuer of each letter of credit and each nominated person (if any) with respect thereto to consent to such assignment of the proceeds thereof pursuant to a consent in form and substance satisfactory to the Collateral Agent and deliver written evidence of such consent to the Collateral Agent.

          (b) Upon the occurrence and during the continuance of an Event of Default, each Grantor will, promptly upon reasonable request by the Collateral Agent, (i) notify (and such Grantor hereby authorizes the Collateral Agent to notify) the issuer and each nominated person with respect to each of the Related Contracts consisting of letters of credit that the proceeds thereof have been assigned to the Collateral Agent hereunder and any payments due or to become due in respect thereof are to be made directly to the Collateral Agent or its designee and (ii) arrange for the Collateral Agent to become the transferee beneficiary of letter of credit.

          14. Transfers and Other Liens; Additional Shares.

          (a) Each Grantor agrees that it will not (i) sell, assign or otherwise dispose of, or grant any option with respect to, any of the Collateral, other than sales, assignments and other dispositions of Collateral, and options relating to Collateral, permitted under the terms of the Credit Agreement, or (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral of such Grantor except for the pledge, assignment and security interest created under this Agreement and Liens permitted under the Credit Agreement.

          (b) Each Grantor agrees that it will (i) cause each issuer of the Pledged Equity pledged by such Grantor not to issue any Equity Interests or other securities in addition to or in substitution for the Pledged Equity issued by such issuer, except to such Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional Equity Interests or other securities of each issuer of the Pledged Equity.

          15. Collateral Agent Appointed Attorney in Fact.

          Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor’s attorney in fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time, upon the occurrence and during the continuation of an Event of Default, in the Collateral Agent’s discretion, to take any action and to execute any instrument that the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

          (a) to obtain and adjust insurance required to be paid to the Collateral Agent pursuant to Section 9,

          (b) to ask for, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral,

          (c) to receive, indorse and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) or (b) above, and

          (d) to file any claims or take any action or institute any proceedings that the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce compliance with the terms and conditions of any Assigned Agreement or the rights of the Collateral Agent with respect to any of the Collateral.

          16. Collateral Agent May Perform.

          If any Grantor fails to perform any agreement contained herein on or after the date required for performance thereof, the Collateral Agent may, but without any obligation to do so and without notice, itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor under, and to the extent provided in Section 19.

          17. The Collateral Agent’s Duties.

          (a) The powers conferred on the Collateral Agent hereunder are solely to protect the Secured Parties’ interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not any Secured Party has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which it accords its own property.

          (b) Anything contained herein to the contrary notwithstanding, the Collateral Agent may from time to time, when the Collateral Agent deems it to be necessary, appoint one or more subagents (each a “Subagent”) for the Collateral Agent hereunder with respect to all or any part of the Collateral. In the event that the Collateral Agent so appoints any Subagent with respect to any Collateral, (i) the assignment and pledge of such Collateral and the security interest granted in such Collateral by each Grantor hereunder shall be deemed for purposes of this Security Agreement to have been made to such Subagent, in addition to the Collateral Agent, for the ratable benefit of the Secured Parties, as security for the Secured Obligations of such Grantor, (ii) such Subagent shall automatically be vested, in addition to the Collateral Agent, with all rights, powers, privileges, interests and remedies of the Collateral Agent hereunder with respect to such Collateral, and (iii) the term “Collateral Agent,” when used herein in relation to any rights, powers, privileges, interests and remedies of the Collateral Agent with respect to such Collateral, shall include such Subagent; provided, however, that no such Subagent shall be authorized to take any action with respect to any such Collateral unless and except to the extent expressly authorized in writing by the Collateral Agent.

          18. Remedies.

          If any Event of Default shall have occurred and be continuing:

          (a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC or the PPSA (whether or not the UCC or the PPSA applies to the affected Collateral), the Bankruptcy Code, or any other applicable law, and also may: (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon reasonable request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place and time to be designated by the Collateral Agent that is reasonably convenient to both parties; (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable; (iii) occupy any premises owned or leased by any of the Grantors where the Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; and (iv) exercise any and all rights and remedies of any of the Grantors under or in connection with the Collateral, or otherwise in respect of the Collateral, including, without limitation, (A) any and all rights of such Grantor to demand or otherwise require payment of any amount under, or performance of any provision of, the Assigned Agreements, the Receivables, the Related Contracts and the other Collateral, (B) withdraw, or cause or direct the withdrawal, of all funds with respect to the Account Collateral and (C) exercise all other rights and remedies with respect to the Assigned Agreements, the Receivables, the Related Contracts and the other Collateral, including, without limitation, those set forth in the PPSA or Section 9-607 of the UCC. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days’ notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of

Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

          (b) Any cash held by or on behalf of the Collateral Agent and all cash proceeds received by or on behalf of the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter paid (after payment of any amounts payable to the Collateral Agent pursuant to Section 20) in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto) in the following manner:

          (i) first, paid to the Collateral Agent for any amounts then owing to the Collateral Agent pursuant to Section 9.04 of the Credit Agreement or otherwise under the Loan Documents; and

          (ii) second, ratably, paid to the Secured Parties for any amounts then owing to them, in their capacities as such, under the Loan Documents and the ratably in accordance with the amounts then owing to the Secured Parties.

          Any surplus of such cash or cash proceeds held by or on the behalf of the Collateral Agent and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantor or to whomsoever may be lawfully entitled to receive such surplus.

          (c) All payments received by any Grantor under or in connection with any Assigned Agreement or otherwise in respect of the Collateral shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of such Grantor and shall be forthwith paid over to the Collateral Agent in the same form as so received (with any necessary indorsement).

          (d) The Collateral Agent may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set off and otherwise apply all or any part of the Secured Obligations against any funds held with respect to the Account Collateral or in any other deposit account.

          (e) The Collateral Agent may send to each bank, securities intermediary or issuer party to any Deposit Account Control Agreement, Securities/Deposit Account Control Agreement, Securities Account Control Agreement or Uncertificated Security Control Agreement a “Notice of Exclusive Control” as defined in and under such Agreement; provided, that the Collateral Agent shall use reasonable commercial efforts to rescind such “Notice of Exclusive Control” within a reasonable period of time following the date on which no Default or Event of Default exists.

          (f) In the event of any sale or other disposition of any of the Intellectual Property Collateral of any Grantor, the goodwill symbolized by any Trademarks subject to such sale or other disposition shall be included therein, and such Grantor shall supply to the Collateral Agent or its designee such Grantor’s know-how and expertise, and documents and things relating to any Intellectual Property Collateral subject to such sale or other disposition, and such Grantor’s customer lists and other records and documents relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of products and services of such Grantor.

          (g) The Collateral Agent may realize upon the Collateral and enforce the rights of the Collateral Agent and the Secured Parties by (i) appointment by instrument in writing of a receiver (which term as used in this Agreement includes a receiver and manager) or agent of all or any part of the Collateral and the removal or replacement from time to time of any receiver or agent, and (ii) institution of proceedings in any court of competent jurisdiction for the appointment of a receiver of all or any part of the Collateral.

          19. Indemnity and Expenses.

          (a) Each Grantor agrees to indemnify, defend and save and hold harmless each Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct.

          (b) Each Grantor will upon demand pay to the Collateral Agent the amount of any and all reasonable expenses, including, without limitation, the reasonable fees and expenses of its counsel and of any experts and agents, that the Collateral Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral of such Grantor, (iii) the exercise or enforcement of any of the rights of the Collateral Agent or the other Secured Parties hereunder or (iv) the failure by such Grantor to perform or observe any of the provisions hereof.

          20. Amendments; Waivers; Additional Grantors; Etc.

          (a) No amendment or waiver of any provision of this Agreement, and no consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Collateral Agent or any other Secured Party to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof; nor shall any single or partial

exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.

          (b) Upon the execution and delivery by any Person of a security agreement supplement in substantially the form of Exhibit C hereto (each a “Security Agreement Supplement”), such Person shall be referred to as an “Additional Grantor” and shall be and become a Grantor hereunder, and each reference in this Agreement and the other Loan Documents to “Grantor” shall also mean and be a reference to such Additional Grantor, each reference in this Agreement and the other Loan Documents to the “Collateral” shall also mean and be a reference to the Collateral granted by such Additional Grantor and each reference in this Agreement to a Schedule shall also mean and be a reference to the schedules attached to such Security Agreement Supplement.

          21. Notices, Etc.

          All notices and other communications provided for hereunder shall be either (i) in writing (including facsimile communications) and mailed, sent via facsimile or otherwise delivered or (ii) by electronic mail (if electronic mail addresses are designated as provided below) confirmed immediately in writing, in the case of the Administrative Borrower or the Collateral Agent, addressed to it at its address specified in the Credit Agreement and, in the case of each Grantor other than the Borrowers, addressed to it at its address set forth opposite such Grantor’s name on the signature pages hereto or on the signature page to the Security Agreement Supplement pursuant to which it became a party hereto; or, as to any party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications shall, when mailed, sent by facsimile, electronic mail or otherwise, be effective when deposited in the mails, sent by facsimile, sent by electronic mail and confirmed in writing, or otherwise delivered (or confirmed by a signed receipt), respectively, addressed as aforesaid; except that notices and other communications to the Collateral Agent shall not be effective until received by the Collateral Agent. Delivery by facsimile of an executed counterpart of any amendment or waiver of any provision of this Agreement or of any Security Agreement Supplement or Schedule hereto shall be effective as delivery of an original executed counterpart thereof.

          22. Continuing Security Interest; Assignments under the Credit Agreement.

          This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Secured Obligations (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto), and (ii) the Maturity Date, (b) be binding upon each Grantor, its successors and assigns and (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Loans owing to it and the Note or Notes, if any, held by it) to any other Person, and such other Person shall thereupon become vested with all the

benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in the Credit Agreement.

          23. Release; Termination.

          (a) Upon any sale, lease, transfer or other disposition of any item of Collateral of any Grantor in accordance with the terms of the Loan Documents (other than sales of Inventory, equipment and other obsolete or worn-out equipment in the ordinary course of business), the Collateral Agent will, at such Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted hereby; provided, however, that (i) at the time of such request and such release no Event of Default shall have occurred and be continuing, (ii) such Grantor shall have delivered to the Collateral Agent, at least ten Business Days prior to the date of the proposed release, a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including, without limitation, the price thereof and any expenses in connection therewith, together with a form of release for execution by the Collateral Agent and a certificate of such Grantor to the effect that the transaction is in compliance with the Loan Documents and as to such other matters as the Collateral Agent may reasonably request and (iii) the proceeds of any such sale, lease, transfer or other disposition required to be applied, or any payment to be made in connection therewith, in accordance with Section 2.03 of the Credit Agreement shall, to the extent so required, be paid or made to, or in accordance with the instructions of, the Collateral Agent when and as required under Section 2.03 of the Credit Agreement.

          (b) Upon the latest of (i) the payment in full in cash of the Secured Obligations (other than contingent indemnification and reimbursement claims in respect of which no claim for payment has been asserted by the Person entitled thereto), and (ii) the Maturity Date, the pledge and security interest granted hereby shall terminate and all rights to the Collateral shall revert to the applicable Grantor. Upon any such termination, the Collateral Agent will, at the applicable Grantor’s expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

          24. Execution in Counterparts.

          This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means shall be effective as delivery of an original executed counterpart of this Agreement.

          25. Governing Law.

          This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

          26. Matters Relating to Security.

          (a) As set forth in the Order, each Grantor hereby agrees that upon the effectiveness of the Order (i) the Secured Obligations shall constitute allowed administrative expenses in such Grantor’s Chapter 11 Case having priority over all administrative expenses of and unsecured claims against such Grantor now existing or hereafter arising, of any kind or nature whatsoever, including without limitation all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject, as to priority, only to the Carve-Out and (B) the security interest shall not be subject to Section 551 of the Bankruptcy Code nor shall the Collateral be charged pursuant to Section 506(c) of the Bankruptcy Code.

          (b) The security interest and the administrative priority granted by and pursuant to this Agreement hereof may be independently granted by the Loan Documents and by other Loan Documents hereafter entered into. This Agreement, the Interim Order, the Final Order and such other Loan Documents supplement each other, and the grants, priorities, rights and remedies of Collateral Agent hereunder and thereunder are cumulative.

          (c) The security interest granted hereunder shall be deemed valid, binding, continuing, enforceable and fully-perfected first priority (subject only to the Carve-Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement) Liens on the Collateral by entry of the Interim Order and the Final Order, as the case may be. Collateral Agent shall not be required to file any financing statements, notices of Lien or similar instruments in any jurisdiction or filing office or to take any other action in order to validate or perfect the Liens and security interests granted by or pursuant to this Agreement, the Interim Order, the Final Order or any other Loan Document.

          (d) The security interest, the priority of the security interest, and the administrative priorities and other rights and remedies granted to Collateral Agent pursuant to this Agreement, the Interim Order, the Final Order and the other Collateral Documents (specifically including but not limited to the existence, validity, enforceability, extent, perfection and priority of the Security Interest) and the administrative priority provided herein and therein shall not be modified, altered or impaired in any manner by any other financing or extension of credit or incurrence of debt by any Grantor (pursuant to Section 364 of the Bankruptcy Code or otherwise), or by any dismissal or conversion of any Bankruptcy Case, or by any other act or omission whatsoever. Without limitation, notwithstanding any such order, financing, extension, incurrence, dismissal, conversion, act or omission:

          (i) except for the Carve-Out, no costs or expenses of administration which have been or may be incurred in the Chapter 11 Case or any conversion of the same or in any other proceedings related thereto, and no priority claims, are or will be prior to or on a parity with any claim of Collateral Agent or any Lender against any Grantor in respect of any Secured Obligation;

          (ii) the security interest granted to Collateral Agent pursuant to this Agreement, the Interim Order, the Final Order and the other Collateral Documents shall constitute valid, binding, continuing, enforceable and fully-perfected first priority (subject only to the Carve-Out and Liens permitted to be equal or superior in priority

pursuant to the Credit Agreement) Liens and shall be prior to all other Liens (except the Carve-Out and Liens permitted to be equal or superior in priority pursuant to the Credit Agreement) and interests, now existing or hereafter arising, in favor of any other creditor or any other Person whatsoever; and

          (iii) the security interest granted to Collateral Agent pursuant to this Agreement, the Interim Order, the Final Order and the Collateral Documents shall continue to be valid, binding, continuing, enforceable and fully-perfected without the necessity for Collateral Agent to file any financing statements or to otherwise perfect the security interest under applicable non-bankruptcy law.

[Remainder of page intentionally left blank.]

          IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

Address for Notices:	[GRANTOR]
	By:
		Name:
		Title:
Address for Notices:	TLC VISION CORPORATION
	By:
		Name:
		Title:
Address for Notices:	TLC THE LASER CENTER (MONCTON) INC.
	By:
		Name:
		Title:
Address for Notices:	RHEO CLINIC INC.
	By:
		Name:
		Title:
Address for Notices:	VISION CORPORATION
	By:
		Name:
		Title:

EXHIBIT E TO SENIOR DIP CREDIT AGREEMENT

GUARANTY

Dated as of December 23, 2009

From

THE GUARANTORS NAMED HEREIN

as Guarantors

in favor of

CANTOR FITZGERALD SECURITIES

as

Collateral Agent

TABLE OF CONTENTS

SECTION 1.	GUARANTY; LIMITATION OF LIABILITY
SECTION 2.	GUARANTY ABSOLUTE
SECTION 3.	WAIVERS AND ACKNOWLEDGMENTS
SECTION 4.	SUBROGATION
SECTION 5.	PAYMENTS FREE AND CLEAR OF TAXES, ETC
SECTION 6.	REPRESENTATIONS AND WARRANTIES
SECTION 7.	COVENANTS
SECTION 8.	AMENDMENTS, GUARANTY SUPPLEMENTS, ETC
SECTION 9.	NOTICES, ETC
SECTION 10.	NO WAIVER; REMEDIES
SECTION 11.	RIGHT OF SET-OFF
SECTION 12.	INDEMNIFICATION
SECTION 13.	SUBORDINATION
SECTION 14.	CONTINUING GUARANTY; ASSIGNMENTS UNDER THE CREDIT AGREEMENT
SECTION 15.	EXECUTION IN COUNTERPARTS
SECTION 16.	GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL, ETC
SECTION 17.	CREDIT AGREEMENT, ORDER

GUARANTY

          GUARANTY dated as of December 23, 2009 made by the Persons listed on the signature pages hereof (such Persons so listed, collectively, the “Guarantors” and, individually, each a “Guarantor”) in favor of Cantor Fitzgerald Securities as collateral agent (in such capacity, together with any successor collateral agent appointed pursuant to Article VII of the Credit Agreement (as hereinafter defined), the “Collateral Agent”) for the Secured Parties (as defined in the Credit Agreement referred to below).

          WHEREAS, TLC Vision (USA) Corporation, a Delaware corporation, as a debtor and a debtor-in-possession (“Holdco”), TLC Vision Corporation, a New Brunswick corporation, as a debtor and a debtor-in-possession (the “Parent”), and TLC Management Services Inc., a Delaware corporation, as a debtor and a debtor-in-possession (“TLC Management”, and together with Holdco and the Parent, the “Borrowers”) are party to a Senior Secured Super Priority Debtor in Possession Credit Agreement dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”); with certain Lenders party thereto, and Cantor Fitzgerald Securities, as administrative agent for such Lenders and collateral agent for the Secured Parties; the capitalized terms defined therein and not otherwise defined herein being used herein as therein defined);

          WHEREAS, on December 21, 2009 (the “Petition Date”), the Borrowers filed a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware;

          WHEREAS, subsequent to the Petition Date, the Parent filed a petition under Part IV of the Companies’ Creditors Arrangements Act (Canada) (the “CCAA”), as ancillary relief sought in the Ontario Superior Court of Justice (Commercial List);

          WHEREAS, the Borrowers intend to continue to operate their business pursuant to Sections 1107 and 1108 of the Bankruptcy Code;

          WHEREAS, the Borrowers have requested that the Lenders provide financing to the Borrowers consisting of a senior secured super priority term loan facility in an amount up to $15,000,000 (the “Facility”) pursuant to Sections 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, the Lenders have indicated their willingness to agree to extend the Facility to the Borrowers, all on terms and conditions set forth in the Credit Agreement and in the Order pursuant to Section 364(c) and 364(d) of the Bankruptcy Code;

          WHEREAS, Each Guarantor will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement;

          WHEREAS, it is a condition precedent to the making of the Term Loans by the Lenders under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty.

          NOW, THEREFORE, for and in consideration of the foregoing, each Guarantor, jointly and severally with each other Guarantor, hereby agrees as follows:

          1. Guaranty; Limitation of Liability. (a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of each other Loan Party now or hereafter existing under or in respect of the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Obligations being the “Guaranteed Obligations”), and agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Collateral Agent or any other Secured Party in enforcing any rights under this Guaranty or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any other Loan Party to any Secured Party under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such other Loan Party.

          (b) Each Guarantor, and by its acceptance of this Guaranty, the Collateral Agent and each other Secured Party, hereby confirms that it is the intention of all such Persons that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Collateral Agent, the other Secured Parties and the Guarantors hereby irrevocably agree that the Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means any proceeding of the type referred to in Title 11, U.S. Code, the Bankruptcy and Insolvency Act (Canada), the CCAA, or any similar foreign, federal, provincial or state law for the relief of debtors.

          (c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Secured Party under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Secured Parties under or in respect of the Loan Documents.

          2. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party with respect thereto. The Obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrowers or any other Loan Party or whether the Borrowers or any other Loan Party is joined in any such action or actions.

The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

          (a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

          (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

          (c) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

          (d) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other Obligations of any Loan Party under the Loan Documents or any other assets of any Loan Party or any of its Subsidiaries;

          (e) any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

          (f) any failure of any Secured Party to disclose to any Loan Party any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party now or hereafter known to such Secured Party (each Guarantor waiving any duty on the part of the Secured Parties to disclose such information);

          (g) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement (as hereinafter defined) or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

          (h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Secured Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety (other than payment in full and performance of the Guaranteed Obligations).

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Secured Party or any other Person upon the insolvency, bankruptcy or reorganization of the Borrowers or any other Loan Party or otherwise, all as though such payment had not been made.

          3. Waivers and Acknowledgments. (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Secured Party protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Loan Party or any other Person or any Collateral.

          (b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

          (c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Secured Party that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person or any Collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Obligations of such Guarantor hereunder.

          (d) Each Guarantor acknowledges that the Collateral Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage by nonjudicial sale, and each Guarantor hereby waives any defense to the recovery by the Collateral Agent and the other Secured Parties against such Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law.

          (e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of any Secured Party to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party or any of its Subsidiaries now or hereafter known by such Secured Party.

          (f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits.

          4. Subrogation. Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrowers, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Obligations under or in respect of this Guaranty or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against the Borrowers, any other Loan Party or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive

from the Borrowers, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations (other than contingent indemnification and reimbursement obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) and all other amounts payable under this Guaranty shall have been paid in full in cash, and the Commitments shall have expired or been terminated. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations (other than contingent indemnification and reimbursement obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) and all other amounts payable under this Guaranty and (b) the Maturity Date, such amount shall be received and held in trust for the benefit of the Secured Parties, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Collateral Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any Guarantor shall make payment to any Secured Party of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations (other than contingent indemnification and reimbursement obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) and all other amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Maturity Date shall have occurred, the Secured Parties will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

          5. Payments Free and Clear of Taxes, Etc. (a) Any and all payments made by any Guarantor under or in respect of this Guaranty or any other Loan Document shall be made, in accordance with Section 2.09 of the Credit Agreement, free and clear of and without deduction for any and all present or future Taxes. If any Guarantor shall be required by law to deduct any Taxes from or in respect of any sum payable under or in respect of this Guaranty or any other Loan Document to any Secured Party, (i) the sum payable by such Guarantor shall be increased as may be necessary so that after such Guarantor and the Collateral Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 5), such Secured Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make all such deductions and (iii) such Guarantor shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

          (b) In addition, each Guarantor agrees to pay any present or future Other Taxes that arise from any payment made by or on behalf of such Guarantor under or in respect of this Guaranty or any other Loan Document or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Guaranty and the other Loan Documents.

          (c) Each Guarantor will indemnify each Secured Party for and hold it harmless against the full amount of Taxes and Other Taxes, and for the full amount of Taxes imposed by any jurisdiction on amounts payable under this Section 5, imposed on or paid by such Secured Party and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto whether or not such amounts were correctly or legally imposed by the relevant Governmental Authority). This indemnification shall be made within 30 days from the date such Secured Party makes written demand therefor.

          (d) Within 30 days after the date of any payment of Taxes by or on behalf of any Guarantor, such Guarantor shall furnish to the Collateral Agent, at its address referred to in Section 9, the original or a certified copy of a receipt evidencing such payment, to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Collateral Agent. In the case of any payment hereunder by or on behalf of any Guarantor through an account or branch outside the United States or by or on behalf of such Guarantor by a payor that is not a United States person, if such Guarantor determines that no Taxes are payable in respect thereof, such Guarantor shall furnish, or shall cause such payor to furnish, to the Collateral Agent, at such address, an opinion of counsel acceptable to the Collateral Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 5, the terms “United States” and “United States person” shall have the meanings specified in Section 7701 of the Internal Revenue Code.

          (e) Each Secured Party entitled to an exemption from, or reduction or, withholding tax shall, on or prior to the date of its execution and delivery of the Credit Agreement in the case of each Secured Party that is a party to the Credit Agreement as of the date hereof and on the date of the Assignment and Acceptance pursuant to which it becomes a Secured Party in the case of each other Secured Party, and from time to time thereafter as reasonably requested in writing by any Guarantor (but only so long thereafter as such Secured Party remains lawfully able to do so), provide each of the Collateral Agent and such Guarantor with two original Internal Revenue Service Forms W-8ECI or W-8BEN or (in the case of a Secured Party that has certified in writing to the Collateral Agent that it is not (i) a “bank” (as defined in Section 881(c)(3)(A) of the Internal Revenue Code), (ii) a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of any Guarantor or (iii) a controlled foreign corporation related to any Guarantor (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), Internal Revenue Service Form W-8BEN, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, or any such form or forms as may be required under the laws of any jurisdiction other than the United States as a condition to exemption from, or reduction of, withholding tax in such jurisdiction, certifying that such Secured Party is exempt from or entitled to a reduced rate of United States withholding tax on payments pursuant to this Guaranty or any other Loan Document or, in the case of a Secured Party that has certified that it is not a “bank” as described above, certifying that such Secured Party is a foreign corporation, partnership, estate or trust. If the forms provided by a Secured Party at the time such Secured Party first becomes a party to the Credit Agreement indicate a United States or other interest withholding tax rate, as applicable, in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Secured Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods

governed by such forms; provided, however, that if, a Secured Party becoming a party to the Credit Agreement, at the effective date of the Assignment and Acceptance pursuant to which a Secured Party becomes a party to the Credit Agreement, the Secured Party assignor was entitled to payments under subsection (a) of this Section 5 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Secured Party assignee on such date. If any form or document referred to in this subsection (e) and requested by any Guarantor pursuant to this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service Form W-8 BEN or W-8 ECI or the related certificate described above, or any forms required by any jurisdiction other than the United States, that the applicable Secured Party reasonably considers to be confidential, such Secured Party shall give notice thereof to the Administrative Borrower and shall not be obligated to include in such form or document such confidential information.

          (f) For any period with respect to which a Secured Party has failed to provide the Administrative Borrower or any Guarantor with the appropriate form described in subsection (e) above (other than if such failure is due to a change in law, or in the interpretation or application thereof, occurring after the date on which a form , certificate or other document originally was required to be provided or if such form, certificate or other document otherwise is not required under subsection (e) above), such Secured Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 5 with respect to Taxes imposed by the United States by reason of such failure; provided, however, that should a Secured Party become subject to Taxes because of its failure to deliver a form, certificate or other document required hereunder, such Guarantor shall take such steps as such Secured Party shall reasonably request to assist such Secured Party to recover such Taxes.

          (g) Each Guarantor will make payment relative to each Obligation in the currency (the “Original Currency”) in which the Borrowers are required to pay such Obligation. If a Guarantor makes payment relative to any Guaranteed Obligation to the Collateral Agent or the Secured Parties in a currency (the “Other Currency”) other than the Original Currency (whether voluntarily or pursuant to an order or judgment of a court or tribunal of any jurisdiction), such payment will constitute a discharge of the liability of such Guarantor hereunder in respect of such Obligation only to the extent of the amount of the Original Currency which the Collateral Agent or the Secured Parties are able to purchase with the amount it receives on the date of receipt. If the amount of the Original Currency which the Collateral Agent or the Secured Parties are able to purchase on the date of receipt is less than the amount of such currency originally due to it in respect to the relevant Obligation, such Guarantor will indemnify and save the Collateral Agent and the Secured Parties harmless from and against any loss or damage arising as a result of such deficiency. This indemnity will constitute an obligation separate and independent from the other obligations contained in this Guaranty, will give rise to a separate and independent cause of action, will apply irrespective of any indulgence granted by the Collateral Agent or the Secured Parties and will continue in full force and effect notwithstanding any judgment or order in respect of any amount due hereunder or under any judgment or order.

          6. Representations and Warranties. Each Guarantor hereby makes each representation and warranty made in the Loan Documents by the Borrowers with respect to such Guarantor.

          7. Covenants. Each Guarantor covenants and agrees that, so long as any part of the Guaranteed Obligations (other than contingent indemnification and reimbursement obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) shall remain unpaid or any Lender shall have any Commitment, such Guarantor will perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms, covenants and agreements set forth in the Loan Documents on its or their part to be performed or observed or that the Borrowers have agreed to cause such Guarantor or such Subsidiaries to perform or observe.

          8. Amendments, Guaranty Supplements, Etc. (a) No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders (other than any Lender that is, at such time, a Defaulting Lender), (a) reduce or limit the obligations of any Guarantor hereunder, release any Guarantor hereunder or otherwise limit any Guarantor’s liability with respect to the Obligations owing to the Secured Parties under or in respect of the Loan Documents, or (b) reduce the percentage specified in the definition of “Required Lenders”.

          (b) Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each, a “Guaranty Supplement”), (i) such Person shall be referred to as a “Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “Guarantor” shall also mean and be a reference to such Guarantor, and each reference in any other Loan Document to a “Guarantor” shall also mean and be a reference to such Guarantor and (ii) each reference herein to “this Guaranty”, “hereunder”, “hereof” or words of like import referring to this Guaranty, and each reference in any other Loan Document to the “Guaranty”, “thereunder”, “thereof” or words of like import referring to this Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement.

          9. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including electronic or facsimile communication) and mailed, faxed, sent via electronic mail or delivered to it, if to any Guarantor, addressed to it in care of the Borrowers at the Administrative Borrower’s address specified in Section 9.02 of the Credit Agreement, if to Collateral Agent or any Lender, at its address specified in Section 9.02 of the Credit Agreement, or, as to any party, at such other address as shall be designated by such party in a written notice to each other party in accordance with Section 9.02 of the Credit Agreement. All such notices and other communications shall, when mailed, faxed or sent via electronic mail, be effective when deposited in the mails, transmitted by facsimile or via electronic mail, respectively. Delivery by telecopier of an executed counterpart of a signature page to any amendment or waiver of any provision of this Guaranty or of any Guaranty Supplement to be

executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof.

          10. No Waiver; Remedies. No failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

          11. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 of the Credit Agreement to authorize the Collateral Agent to declare the Notes due and payable pursuant to the provisions of said Section 6.01, the Collateral Agent and each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Collateral Agent, such Lender or such Affiliate to or for the credit or the account of any Guarantor against any and all of the Obligations of such Guarantor now or hereafter existing under the Loan Documents, irrespective of whether the Collateral Agent or such Lender shall have made any demand under this Guaranty or any other Loan Document and although such Obligations may be unmatured. Collateral Agent and each Lender agrees promptly to notify such Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent and each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that the Collateral Agent, such Lender and their respective Affiliates may have.

          12. Indemnification. (a) Without limitation on any other Obligations of any Guarantor or remedies of the Secured Parties under this Guaranty, each Guarantor shall, to the fullest extent permitted by law, indemnify, defend and save and hold harmless each Secured Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of any Loan Party enforceable against such Loan Party in accordance with their terms; provided, however, that no Guarantor shall be liable for any claims, damages, losses, liabilities and expenses resulting from Secured Parties’ gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction.

          (b) Each Guarantor hereby also agrees that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to any of the Guarantors or any of their respective Affiliates or any of their respective officers, directors, employees, agents and advisors, and each Guarantor hereby agrees not to assert any claim against any Indemnified Party on any theory of liability, for special, indirect, consequential or

punitive damages arising out of or otherwise relating to the Facility, the actual or proposed use of the proceeds of the Term Loans, the Loan Documents or any of the transactions contemplated by the Loan Documents; provided, however, that each Indemnified Party shall be liable to any of the Guarantors or any of their respective Affiliates or any of their respective officers, directors, employees, agents and advisors for any claims for actual damages resulting from such Indemnified Party’s gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction.

          (c) Without prejudice to the survival of any of the other agreements of any Guarantor under this Guaranty or any of the other Loan Documents, the agreements and obligations of each Guarantor contained in Section 1(a) (with respect to enforcement expenses), the last sentence of Section 2, Section 5 and this Section 12 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under this Guaranty.

          13. Subordination. Each Guarantor hereby subordinates any and all debts, liabilities and other Obligations owed to such Guarantor by each other Loan Party (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 13:

          (A) Prohibited Payments, Etc. Except during the continuance of an Event of Default, each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default, however, unless the Collateral Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

          (B) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to any other Loan Party, each Guarantor agrees that the Secured Parties shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) (but excluding any contingent indemnification and reimbursement obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) before such Guarantor receives payment of any Subordinated Obligations.

          (C) Turn-Over. After the occurrence and during the continuance of any Event of Default (including, to the extent permitted by law, the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), each Guarantor shall, if the Collateral Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Secured Parties and deliver such payments to the Collateral Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

          (D) Collateral Agent Authorization. After the occurrence and during the continuance of any Event of Default (including, to the extent permitted by law, the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Loan Party), the Collateral Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest) and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Collateral Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

          14. Continuing Guaranty; Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations (other than contingent indemnification and reimbursement obligations in respect of which no claim for payment has been asserted by the Person entitled thereto) and all other amounts payable under this Guaranty and (ii) the Maturity Date, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Secured Parties and their successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Secured Party may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitments, the Term Loans owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise, in each case as and to the extent provided in Section 10.07 of the Credit Agreement. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Secured Parties.

          15. Execution in Counterparts. This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier or other electronic means shall be effective as delivery of an original executed counterpart of this Guaranty.

          16. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc. (a) This Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York.

          (b) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any of the other Loan

Documents to which it is or is to be a party, or for recognition or enforcement of any judgment, and each Guarantor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such federal court. Each Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty or any other Loan Document shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Guaranty or any other Loan Document in the courts of any jurisdiction.

          (c) Each Guarantor irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents to which it is or is to be a party in any New York State or federal court. Each Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court.

          (d) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE ACTIONS OF ANY SECURED PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

          17. Credit Agreement, Order. In the event of any direct conflict between the terms and conditions of this Guaranty and the Credit Agreement, the provisions of the Credit Agreement shall govern and control. In the event of any inconsistency between the terms and conditions of this Guaranty and the Order, the provisions of the Order shall govern and control.

     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

[GUARANTOR]
By
	Name:
	Title:

EX-10.20

Exhibit 10.20

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

	)
In re:	)	Chapter 11
	)
TLC Vision (USA) Corporation , et al.,1	)	Case No. 09-14473 (KG)
	)
Debtors.	)	Jointly Administered
	)

FOURTH AMENDED JOINT CHAPTER 11 PLAN OF
REORGANIZATION DATED AS OF MARCH 24, 2010

     The above-captioned debtors and debtors in possession hereby submit their Fourth Amended Joint Chapter 11 Plan of Reorganization Dated as of March 24, 2010.

	RICHARDS LAYTON & FINGER, P.A.
	One Rodney Square
	920 North King Street
	Wilmington, Delaware 19801
	Telephone: (302) 651-7700
	Facsimile: (302) 651-7701
	Counsel for Debtors and Debtors in Possession
Dated: Wilmington, Delaware	PROSKAUER ROSE LLP
March 24, 2010	Mark K. Thomas
	Paul V. Possinger
	Jeremy T. Stillings
	Three First National Plaza
	70 West Madison, Suite 3800
	Chicago, Illinois 60602
	Telephone: (312) 962-3550
	Facsimile: (312) 962-3551
	Counsel for Debtors and Debtors in Possession

¹ The Debtors in the cases, along with the last four digits of each Debtor’s federal tax identification number and address, are: TLC Vision (USA) Corporation (6220) 16305 Swingley Ridge Road, Chesterfield, MO 63017; TLC Vision Corporation (1150) 5280 Solar Drive, Suite 300, Mississauga, Ontario, L4W 5M8; and TLC Management Services, Inc. (0374) 1209 Orange Street, Wilmington, DE 19801.

Table of Contents

Page No.

ARTICLE I.

DEFINITIONS, INTERPRETATION AND EXHIBITS.

Section 1.01.	Definitions
Section 1.02.	Rules of Interpretation
Section 1.03.	Exhibits

ARTICLE II.

CLASSIFICATION OF CLAIMS AND INTERESTS

Section 2.01.	Generally
Section 2.02.	Unclassified Claims
Section 2.03.	Classification of Claims Against and Interests in TLC USA.
Section 2.04.	Classification of Claims Against and Interests in TLC Canada.
Section 2.05.	Classification of Claims Against and Interests in TLC MSI.

ARTICLE III.

PROVISIONS FOR TREATMENT OF CLASSES OF CLAIMS AND INTERESTS

Section 3.01.	Satisfaction of Claims and Interests
Section 3.02.	Unclassified Claims, Classified Unimpaired and Impaired Claims and Classified Interests
Section 3.03.	Administrative Claims
Section 3.04.	Priority Tax Claims
Section 3.05.	Junior DIP Claims
Section 3.06.	Treatment of Claims Against and Interests in TLC USA:
Section 3.07.	Treatment of Claims Against and Interests in TLC Canada:
Section 3.08.	Treatment of Claims Against and Interests in TLC MSI:

ARTICLE IV.

ACCEPTANCE OR REJECTION OF THE PLAN; CRAMDOWN

Section 4.01.	Acceptance by Impaired Classes of Claims and Interests
Section 4.02.	Voting Classes
Section 4.03.	Ballot Instructions
Section 4.04.	Cramdown

ARTICLE V.

PROVISIONS GOVERNING DISTRIBUTIONS UNDER THE PLAN

Section 5.01.	Timing of Distributions
Section 5.02.	Distributions to Holders of Allowed Claims
Section 5.03.	Delivery of Distributions
Section 5.04.	Method of Cash Distributions
Section 5.05.	Fractional Dollars
Section 5.06.	Failure to Negotiate Checks
Section 5.07.	Unclaimed Distributions
Section 5.08.	Limitation on Distribution Rights
Section 5.09.	Compliance With Tax Requirements
Section 5.10.	Documentation Necessary to Release Liens

ARTICLE VI.

EXECUTORY CONTRACTS AND UNEXPIRED LEASES; INDEMNIFICATION
OBLIGATIONS; BENEFIT PROGRAMS

Section 6.01.	Treatment of Executory Contracts and Unexpired Leases
Section 6.02.	Cure of Defaults for Assumed Contracts and Leases
Section 6.03.	Resolution of Objections to Assumption of Executory Contracts and Unexpired Leases
Section 6.04.	Bar Date for Rejection Claims

Section 6.05.	Treatment of Rejection Claims
Section 6.06.	Executory Contracts and Unexpired Leases Entered Into and Other Obligations Incurred After the Petition Date
Section 6.07.	Modification of Change of Control Provisions
Section 6.08.	Reorganized Debtors’ Indemnification Obligations
Section 6.09.	Benefit Programs

ARTICLE VII.

MEANS FOR IMPLEMENTATION OF THE PLAN

Section 7.01.	Corporate Action
Section 7.02.	Plan Funding
Section 7.03.	Plan Sponsor Agreement
Section 7.04.	Articles of Organization
Section 7.05.	Operations Between the Confirmation Date and the Effective Date
Section 7.06.	Revesting of Assets
Section 7.07.	Approval of Agreements
Section 7.08.	Adoption or Assumption of Senior Management Contracts
Section 7.09.	Adoption of New Management Incentive Plan
Section 7.10.	Corporate Structure Changes

ARTICLE VIII.

PRESERVATION OF CAUSES OF ACTION AND RIGHT TO DEFEND AND CONTEST

Section 8.01.	Preservation of Rights
Section 8.02.	Rights of Action
Section 8.03.	Setoffs
Section 8.04.	No Payment or Distribution Pending Allowance
Section 8.05.	Resolution of Disputed Claims

ARTICLE IX.

CONDITIONS TO CONFIRMATION and CONSUMMATION OF THE PLAN

Section 9.01.	Conditions to Confirmation
Section 9.02.	Conditions to Effective Date
Section 9.03.	Waiver of Conditions to Confirmation and Consummation
Section 9.04.	Effect of Failure or Absence of Waiver of Conditions Precedent to the Effective Date of the Plan

ARTICLE X.

OPERATION AND MANAGEMENT OF THE REORGANIZED DEBTORS

Section 10.01.	Post-Effective Date Operation of Business
Section 10.02.	Post Effective Date Officers and Directors

ARTICLE XI.

EFFECTS OF CONFIRMATION

Section 11.01.	Discharge
Section 11.02.	Injunction
Section 11.03.	Exculpation
Section 11.04.	Releases
Section 11.05.	Indemnification
Section 11.06.	Other Documents and Actions
Section 11.07.	Term of Injunctions or Stays
Section 11.08.	Preservation of Insurance
Section 11.09.	Guaranties
Section 11.10.	Subordination Rights
Section 11.11.	No Successor Liability

ARTICLE XII.

RETENTION OF JURISDICTION

Section 12.01.	Exclusive Jurisdiction of Bankruptcy Court
Section 12.02.	Failure of Bankruptcy Court to Exercise Jurisdiction

ARTICLE XIII.

MISCELLANEOUS PROVISIONS

Section 13.01.	Binding Effect of Plan
Section 13.02.	Withdrawal of the Plan
Section 13.03.	Final Order
Section 13.04.	Modification of the Plan
Section 13.05.	Business Days
Section 13.06.	Severability
Section 13.07.	Governing Law
Section 13.08.	Dissolution of Committee
Section 13.09.	Payment of Fees and Expenses of the Junior DIP Agent and Junior DIP Lenders
Section 13.10.	Payment of Statutory Fees
Section 13.11.	Post-Confirmation Operating Reports
Section 13.12.	Notices
Section 13.13.	Filing of Additional Documents
Section 13.14.	Section 1125 of the Bankruptcy Code
Section 13.15.	Section 1146 Exemption
Section 13.16.	Release of Liens
Section 13.17.	Time
Section 13.18.	No Attorneys’ Fees

Section 13.19.	No Injunctive Relief
Section 13.20.	Non-Voting Equity Securities
Section 13.21.	Continued Confidentiality Obligations
Section 13.22.	No Admissions or Waivers
Section 13.23.	Entire Agreement
Section 13.24.	Waiver
Section 13.25.	Bar Date for Professionals

INTRODUCTION

          This fourth amended joint plan of reorganization under chapter 11 of the Bankruptcy Code (as amended or modified hereafter in accordance with its terms, the “Plan”), dated as of March 24, 2010, is proposed by TLC Vision Corporation, TLC Vision (USA) Corporation, and TLC Management Services Inc. (collectively, the “Debtors”). Reference is made to the Disclosure Statement accompanying the Plan for a discussion of the Debtors’ history, business, results of operations, historical financial information, properties, projections for future operations and risk factors, a summary and analysis of the Plan, and certain related matters. The Debtors are proponents of the Plan within the meaning of section 1129 of the Bankruptcy Code.

          ALL CREDITORS OF THE DEBTORS ARE ENCOURAGED TO READ THE PLAN AND THE DISCLOSURE STATEMENT IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. SUBJECT TO CERTAIN RESTRICTIONS AND REQUIREMENTS SET FORTH IN SECTION 1127 OF THE BANKRUPTCY CODE, BANKRUPTCY RULE 3019 AND THE PLAN, THE DEBTORS RESERVE THE RIGHT TO ALTER, AMEND, MODIFY, REVOKE OR WITHDRAW THE PLAN PRIOR TO ITS SUBSTANTIAL CONSUMMATION.

          The Debtors have obtained Bankruptcy Court authority to have the Chapter 11 Cases jointly administered for administrative and procedural purposes only. Accordingly, the Plan is being proposed as a joint plan of reorganization of the Debtors for administrative and procedural purposes only. The Plan is not premised upon the substantive consolidation of the Debtors or the Chapter 11 Cases and nothing herein shall be otherwise construed. The Debtors, however, reserve the right to seek substantive consolidation by motion or amendment to the Plan if they conclude that substantive consolidation is necessary or appropriate for effectuation of the Plan. Claims against, and Interests in, the Debtors (other than Administrative Claims, Priority Tax Claims, and Junior DIP Claims) are classified in Article II hereof and treated in Article III hereof.

ARTICLE I.
DEFINITIONS, INTERPRETATION AND EXHIBITS.

          Section 1.01. Definitions. Unless the context requires otherwise, the following terms shall have the following meanings whether presented in the Plan or the Disclosure Statement with initial capital letters or otherwise. As used herein:

          “Administrative Claim” means a Claim for: (a) any cost or expense of administration (including, without limitation, Professional Fee Claims) of any of the Chapter 11 Cases asserted or arising under sections 503, 507(a)(2), 507(b) or 1114(e)(2) of the Bankruptcy Code including, but not limited to (i) any actual and necessary post Petition Date cost or expense of preserving the Debtors’ respective Estates or operating the businesses of the Debtors, (ii) any payment to be made under the Plan to cure a default under an assumed executory contract or unexpired lease, (iii) any post-Petition Date cost, indebtedness or contractual obligation duly and validly incurred or assumed by the Debtors in the ordinary course of their respective businesses, (iv) compensation or reimbursement of expenses of Professionals to the extent Allowed by the

Bankruptcy Court under sections 330(a) or 331 of the Bankruptcy Code, and (v) all Allowed Claims that are entitled to be treated as Administrative Claims pursuant to a Final Order of the Bankruptcy Court under Section 546 of the Bankruptcy Code; (b) any fees or charges assessed against the Debtors’ respective Estates under section 1930 of title 28 of the United States Code; and (c) any Allowed administrative claim or superpriority claim granted pursuant to the Junior DIP Order.

          “Affiliate” shall have the meaning set forth in section 101(2) of the Bankruptcy Code.

          “Allowed” means: (i) with reference to any unsatisfied Claim, (a) any Claim against any of the Debtors that has been listed by the Debtors in the Schedules, as such Schedules may have been amended by the Debtors from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent, and with respect to which no proof of claim has been filed, (b) any Claim specifically allowed under the Plan, (c) any Claim the amount or existence of which has been determined or allowed by a Final Order (including the Junior DIP Order), or (d) any Claim as to which a proof of claim has been timely filed before the Bar Date and to which no objection to the allowance thereof has been filed by the Claims Objection Deadline; provided, however, that the term “Allowed”, with reference to any Claim, shall not include (x) any unliquidated claim or (y) interest or attorneys’ fees on or related to any Claim that accrues from and after the Petition Date unless otherwise expressly provided for in the Plan; and (ii) with reference to any Interests, an Interest which is registered as of the Record Date in such stock register as may be maintained on behalf of the Debtors.

          “Allowed Claim” means a Claim that is Allowed.

          “Allowed Interest” means an Interest that is Allowed.

          “Avoidance Actions” means any and all Causes of Action which a trustee, debtor-in-possession, the estate or other appropriate party in interest may assert under sections 502, 510, 541, 542, 543, 544, 545, 547, 548, 549, 550, 551, or 553 of the Bankruptcy Code (other than those which are released or dismissed as part of and pursuant to the Plan) or under other similar or related state or federal statutes or common law, including fraudulent conveyance laws.

          “Ballot” means the forms of ballots accompanying the Disclosure Statement upon which Holders of Impaired Claims entitled to vote on the Plan shall, among other things, indicate their acceptance or rejection of the Plan in accordance with the instructions regarding voting.

          “Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as codified in title 11 of the United States Code, 11 U.S.C. §§ 101 et seq., as in effect on the Petition Date, together with all amendments and modifications thereto that subsequently may be made applicable to the Chapter 11 Cases.

          “Bankruptcy Court” means the United States Bankruptcy Court for the District of Delaware or, if such court ceases to exercise jurisdiction over these proceedings, the court or adjunct thereof that exercises jurisdiction over the Chapter 11 Cases.

          “Bankruptcy Rules” means: (a) the Federal Rules of Bankruptcy Procedure and the Official Bankruptcy Forms, as amended and promulgated under section 2075 of title 28 of the United States Code; (b) the Federal Rules of Civil Procedure, as amended and promulgated under section 2072 of title 28 of the United States Code; (c) the Local Rules of the Bankruptcy Court; and (d) any standing orders governing practice and procedure issued by the Bankruptcy Court, each as in effect on the Petition Date, together with all amendments and modifications thereto that subsequently may be applicable to the Chapter 11 Cases or proceedings therein, as the case may be.

          “Bar Date” means the applicable bar date by which a proof of Claim must be, or must have been, Filed, as established by an order of the Bankruptcy Court, in accordance with the Bankruptcy Code, or as set forth in Section 6.04 hereof.

          “BIA” means the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c B-3, as amended from time to time.

          “Business Day” means any day which is not a Saturday, a Sunday, a “legal holiday” as defined in Bankruptcy Rule 9006(a), or a day on which banking institutions in the State of New York are authorized or obligated by law, executive order or governmental decree to be closed.

          “Buyer” means Thriller Acquisition Corp., a Delaware corporation.

          “Buyer Parties” mean Buyer and Canadian Buyer.

          “Canadian Buyer” means Thriller Canada Acquisition Corp., a New Brunswick corporation.

          “Canadian Court” means the Ontario Superior Court of Justice (Commercial List).

          “Canadian Priority Employee Claims” means the claims of the employees and former employees of TLC Canada pursuant to section 6(5) of the CCAA, and the claims of the employees and former employees of TLC Canada and other Persons pursuant to section 6(6) of the CCAA.

          “Canadian Priority Tax Claim” means the claims of Her Majesty in Right of Canada pursuant to section 6(3) of the CCAA.

          “Canadian Recognition Order” means an order of the Canadian Court issued in respect of the CCAA Case recognizing the Plan Sponsor Order and the Junior DIP Order.

          “Canadian Sanction Order” means an order of the Canadian Court recognizing the Plan and the Confirmation Order in their entirety and declaring the Plan and the Confirmation Order to be effective in Canada.

          “Cash” means money, currency and coins, negotiable checks, balances in bank accounts and other lawful currency of the United States of America and its equivalents.

          “Causes of Action” means any and all actions, claims, rights, defenses, third-party claims, damages, executions, demands, crossclaims, counterclaims, suits, choses in action, controversies, agreements, promises, rights to legal remedies, rights to equitable remedies, rights to payment and claims whatsoever, whether known, unknown, reduced to judgment, not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured and whether asserted or assertable directly, indirectly or derivatively, at law, in equity or otherwise, accruing to the Debtors or the Reorganized Debtors, including, but not limited to, the Avoidance Actions.

          “CCAA” shall mean the Companies’ Creditors Arrangement Act (Canada), R.S.C. 1985, c. C-36, as amended from time to time.

          “CCAA Case” means the proceeding commenced under Part IV of the CCAA by TLC Canada in the Canadian Court.

          “Chapter 11 Cases” means the cases under chapter 11 of the Bankruptcy Code commenced by the Debtors in the Bankruptcy Court on the Petition Date.

          “Charlesbank” means Charlesbank Equity Fund VII, Limited Partnership, its direct and indirect affiliates, and any fund and any accounts managed by Charlesbank Equity Fund VII or a direct or indirect affiliate thereof.

          “Claim” shall have the meaning set forth in section 101(5) of the Bankruptcy Code.

          “Claims Objection Deadline” means the latest of (a) 75 days after the Effective Date, (b) 75 days after the date on which any Claim is Filed, or (c) such later date as may be fixed by the Bankruptcy Court, whether fixed before or after the date specified in clauses (a) and (b) above. The filing of a motion to extend the Claims Objection Deadline shall automatically extend the Claims Objection Deadline until a Final Order is entered on such motion. In the event that such motion to extend the Claims Objection Deadline is denied by the Bankruptcy Court, the Claims Objection Deadline shall be the later of the current Claims Objection Deadline (as previously extended, if applicable) or 30 days after the Bankruptcy Court’s entry of an order denying the motion to extend the Claims Objection Deadline.

          “Class” means each class, subclass or category of Claims or Interests as classified in Article II of the Plan.

          “Committee” means the committee appointed in the Chapter 11 Cases pursuant to section 1102(a) of the Bankruptcy Code by the United States Trustee on January 5, 2010, as the membership of such committee is from time to time constituted and reconstituted.

          “Committee Members” means the members of any Committee.

          “Confirmation” means the entry by the Bankruptcy Court of the Confirmation Order.

          “Confirmation Date” means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order on the docket of the Bankruptcy Court with respect to the Chapter 11 Cases within the meaning of Bankruptcy Rules 5003 and 9021.

          “Confirmation Hearing” means the hearing held before the Bankruptcy Court to consider Confirmation of the Plan pursuant to sections 1128 and 1129 of the Bankruptcy Code.

          “Confirmation Order” means the order entered by the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code.

          “Creditor” means any Person that is the Holder of any Claim against any of the Debtors.

          “Day(s)” means, unless expressly otherwise provided, calendar day(s).

          “Debtors” shall have the meaning set forth in the Introduction of this Plan.

          “Disallowed” means, with respect to any Claim or Interest or portion thereof, any Claim against or Interest in the Debtors which: (a) has been withdrawn, in whole or in part, by agreement of the Debtors or Reorganized Debtors and the Holder thereof; (b) has been withdrawn, in whole or in part, by the Holder thereof; or (c) has been disallowed, in whole or part, by Final Order of a court of competent jurisdiction. In each case, a Disallowed Claim or a Disallowed Interest is disallowed only to the extent of disallowance or withdrawal.

          “Disallowed Claim” means a Claim, or any portion thereof, that is Disallowed.

          “Disallowed Interest” means an Interest, or any portion thereof, that is Disallowed.

          “Disbursing Agent” means Reorganized TLC USA or such other Entity that is designated by Reorganized TLC USA to be the holder of the General Unsecured Creditor Note and/or to disburse Property pursuant to the Plan.

          “Disclosure Statement” means the Debtors’ Fourth Amended Disclosure Statement With Respect to the Fourth Amended Joint Chapter 11 Plan of Reorganization Dated as of March 24, 2010, including all exhibits, appendices, schedules and annexes, if any, attached thereto, as submitted by the Debtors, as the same may be altered, amended, supplemented or modified from time to time, and which was prepared and distributed in accordance with sections 1125 and 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018.

          “Disputed” means any Claim or Interest that has been neither Allowed nor Disallowed.

          “Disputed Claim” means a Claim, or any portion thereof, that is Disputed. For purposes of the Plan, a Claim that has been neither Allowed nor Disallowed shall be considered a Disputed Claim.

          “Disputed Interest” means an Interest, or any portion thereof, that is Disputed. For purposes of the Plan, an Interest that has been neither Allowed nor Disallowed shall be considered a Disputed Interest.

          “Effective Date” means the date on which all conditions to consummation set forth in Article IX of the Plan have been satisfied or waived (if capable of being duly and expressly waived), provided that no stay of the Confirmation Order is then in effect, as evidenced by the filing and service of a notice thereof with the Bankruptcy Court.

          “Entity” means any individual, corporation, limited or general partnership, joint venture, association, joint stock company, limited liability company, estate, trustee, United States Trustee, unincorporated organization, government, governmental unit (as defined in the Bankruptcy Code), agency or political subdivision thereof.

          “Essential Trade Claims” shall mean those Claims identified by TLC USA as such in the Plan Supplement.

          “Estates” means the estates created in these Chapter 11 Cases pursuant to section 541 of the Bankruptcy Code upon commencement of the Chapter 11 Cases.

          “Exculpated Persons” means: (a) each of the Debtors, (b) directors, officers and employees of the Debtors, as of the Petition Date but prior to the Effective Date, (c) Charlesbank, (d) the Buyer Parties, and (e) the respective current and former officers, directors, employees, agents, stockholders, managers, members, affiliates, partners, advisors, attorneys and professionals of the parties identified in subclauses (a) through (d).

          “Excluded Assets” shall have the same meaning set forth in the Plan Sponsor Agreement.

          “File, Filed or Filing” means file, filed or filing with the Bankruptcy Court in the Chapter 11 Cases.

          “Final Decree” means the final decree entered by the Bankruptcy Court after the Effective Date and pursuant to section 350(a) of the Bankruptcy Code and Bankruptcy Rule 3022.

          “Final Order” means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket of such court, the operation or effect of which has not been stayed, reversed, vacated, modified or amended, and as to which order or judgment (or any revision, modification, or amendment thereof) the time to appeal, petition for certiorari, or seek review or rehearing has expired and as to which no appeal, petition for certiorari, or petition for review or rehearing was filed or, if filed, remains pending; provided, however, that the possibility that a motion may be filed pursuant to Rules 9023 or 9024 of the Bankruptcy Rules or Rules 59 or 60(b) of the Federal Rules of Civil Procedure shall not mean that an order or judgment is not a Final Order.

          “General Unsecured Claims” means all Allowed Claims, but excluding Administrative Claims, Priority Tax Claims, Professional Fee Claims, Other Secured Claims, Prepetition Lender Secured Claims, Essential Trade Claims, and Other Priority Claims.

          “General Unsecured Creditor Note” means an unsecured promissory note with a zero nominal interest rate to be issued by the Buyer Parties to the Disbursing Agent for the benefit of Holders of Allowed General Unsecured Claims in Classes A5 and B5 in a principal amount equal to the lesser of (a) 10% of the aggregate amount of the Allowed General Unsecured Claims in Classes A5 and B5 hereof, and (b) $3,000,000, to be paid to the Disbursing Agent for the benefit of Holders of Allowed Claims in such Classes on the later of (i) one year after the Effective Date, or (ii) promptly after any such Claim is Allowed, a copy of which shall be filed with the Plan Supplement.

          “Holder” means an Entity holding a beneficial interest in a Claim or Interest and, when used in conjunction with a Class or type of Claim or Interest, means a holder of a beneficial interest in a Claim or Interest in such Class or of such type.

          “Impaired” means, when used with reference to a Claim or Interest, a Claim or Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code.

          “Impaired Claim” means a Claim which is Impaired.

          “Impaired Interest” means an Interest which is Impaired.

          “Information Officer” means Alvaraz & Marsal Canada Inc., the information officer appointed by the Canadian Court in connection with the CCAA Case.

          “Intercompany Claims” means all claims owing to any Debtor by any other Debtor.

          “Interests” means any and all equity interests, ownership interests or shares in the Debtors issued by the Debtors prior to the Petition Date (including, without limitation, all capital stock, stock certificates, common stock, preferred stock, partnership interests, rights, options, warrants, contingent warrants, convertible or exchangeable securities, investment securities, subscriptions or other agreements and contractual rights to acquire or obtain such an interest or share in the Debtors, partnership interests in the Debtors’ stock appreciation rights, conversion rights, repurchase rights, redemption rights, dividend rights, preemptive rights and liquidation preferences, puts, calls or commitments of any character whatsoever relating to any such equity, ownership interests or shares of capital stock of the Debtors or obligating the Debtors to issue, transfer or sell any shares of capital stock) whether or not certificated, transferable, voting or denominated “stock” or a similar security, and any Claim or Cause of Action related to or arising from any of the foregoing.

          “Junior DIP Agent” means Charlesbank as collateral agent and administrative agent under the Junior DIP Loan Agreement.

          “Junior DIP Claims” means the claims of the Junior DIP Agent and the Junior DIP Lenders based upon, evidenced by, arising under or related to the Junior DIP Loan Agreement, plus all accrued and unpaid interest, fees and costs thereunder.

          “Junior DIP Financing” means the post-petition loan facility provided to the Debtors by the Junior DIP Lenders pursuant to the Junior DIP Loan Agreement.

          “Junior DIP Lenders” means the lender parties to the Junior DIP Loan Agreement.

          “Junior DIP Loan Agreement” means that certain Junior Secured Super Priority Debtor in Possession Credit Agreement dated as of February 3, 2010 by and among the Debtors, the Junior DIP Agent and the Junior DIP Lenders.

          “Junior DIP Order” means the interim or final order, as in effect from time-to-time, entered by the Bankruptcy Court authorizing and approving the Junior DIP Financing and the Debtors’ use of cash collateral pursuant to section 363 of the Bankruptcy Code, and any extensions or amendments thereof.

          “Liens” means, with respect to any asset or Property (or the rents, revenues, income, profits or proceeds therefrom), and in each case, whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise: (a) any and all mortgages, liens, pledges, attachments, charges, leases evidencing a capitalizable lease obligation, conditional sale or other title retention agreement, or other security interest or encumbrance or other legally cognizable security devices of any kind in respect of any asset or Property, or upon the rents, revenues, income, profits or proceeds therefrom; or (b) any arrangement, express or implied, under which any Property is transferred, sequestered or otherwise identified for the purpose of subjecting or making available the same for the payment of debt or performance of any other obligation in priority to the payment of general unsecured Creditors.

          “Management Interests” means equity interests in the Buyer Parties to be issued to each member of the Senior Management team pursuant to the New Management Incentive Plan.

          “Medical Pending Litigation Claims” means all Claims relating to pending litigation against any of the Debtors for medical malpractice or similar liability, as further disclosed in the Disclosure Statement.

          “New Management Incentive Plan” means, collectively, the equity incentive and bonus plans and other terms of employment of Senior Management to be adopted by the Buyer Parties on the Effective Date which provide for the issuance of equity awards to officers and key employees of the Debtors. The Plan Supplement will include the forms of the New Management Incentive Plan in substantially the form to be implemented on the Effective Date.

          “New TLC USA Certificates of Incorporation and By-Laws” means the amended and restated certificates of incorporation, articles of organization, by-laws or other governing charter documents, as appropriate, of TLC USA which will be included in the Plan Supplement.

The Plan Supplement will include the forms of the New TLC USA Certificates of Incorporation and By-Laws in substantially the form to be implemented on the Effective Date.

          “Objection” means any objection, application, motion, complaint or any other legal proceeding seeking, in whole or in part, to Disallow, determine, liquidate, classify, reclassify or establish the priority, expunge, subordinate or estimate any Claim (including the resolution of any request for payment of any Administrative Claim) or Interest other than a Claim or an Interest that is Allowed.

          “Other Priority Claims” means any Claim against the Debtors entitled to priority pursuant to section 507(a) of the Bankruptcy Code, including the Canadian Priority Employee Claims other than a Priority Tax Claim or an Administrative Claim.

          “Other Secured Claims” means any Secured Claim (other than the Prepetition Lender Secured Claims).

          “Person” means and includes a natural person, individual, partnership, corporation (as defined in section 101(9) of the Bankruptcy Code), or organization including, without limitation, officers and directors of the Debtors, corporations, limited partnerships, limited liability companies, general partnerships, joint ventures, joint stock companies, trusts, land trusts, business trusts, unincorporated organizations or associations, or other organizations, irrespective of whether they are legal entities, governmental bodies (or any agency, instrumentality or political subdivision thereof), or any other form of legal entities; provided, however, “Person” does not include governmental units, except that a governmental unit that (a) acquires an asset from a Person (i) as a result of the operation of a loan guarantee agreement or (ii) as receiver or liquidating agent of a Person; (b) is a guarantor of a pension benefit payable by or on behalf of a Debtor or an Affiliate of a Debtor; or (c) is the legal or beneficial owner of an asset of (i) an employee pension benefit plan that is a governmental plan, as defined in section 414(d) of the Internal Revenue Code of 1986 or (ii) an eligible deferred compensation plan, as defined in section 457(b) of the Internal Revenue Code of 1986, shall be considered for purposes of section 1102 of the Bankruptcy Code to be a Person with respect to such asset or such benefit.

          “Petition Date” means December 21, 2009, the date on which the Debtors Filed their respective petitions for relief commencing the Chapter 11 Cases.

          “Plan” means this Fourth Amended Joint Chapter 11 Plan of Reorganization Dated as of March 24, 2010, including all exhibits, appendices, schedules and annexes, if any, attached hereto, as submitted by the Debtors, including the Plan Supplement, as such Plan may be altered, amended, supplemented or modified from time to time in accordance with the provisions of the Bankruptcy Code, the Bankruptcy Rules, the Confirmation Order and the terms and conditions of Section 13.04 of the Plan.

          “Plan Documents” means the form of the Plan Sponsor Agreement, the New Management Incentive Plan, the Senior Management Contracts, a schedule of the identities of the members of the Boards of Directors of the Reorganized Debtors, and such other definitive documents as may be necessary to implement the Plan.

          “Plan Sponsor” means Charlesbank.

          “Plan Sponsor Agreement” means that certain Plan Sponsor Agreement dated February 3, 2010 among the Buyer Parties and the Debtors, as amended.

          “Plan Sponsor Order” means an order of the Bankruptcy Court, substantially in the form attached to the Plan Sponsor Agreement, approving the assumption of the Plan Sponsor Agreement by the Debtors and the Break-Up Fee, Expense Reimbursement and other amounts paid or payable thereunder, and approving and directing the execution, delivery and performance of the Plan Sponsor Agreement and the applicable ancillary agreements.

          “Plan Supplement” means the supplement to this Plan containing the Plan Documents which shall be filed with the Bankruptcy Court. The Plan Supplement, which shall be reasonably satisfactory to the Debtors and Charlesbank, is incorporated into, and is a part of, this Plan as if set forth in full herein, and all references to this Plan shall refer to this Plan together with all documents contained in the Plan Supplement. The Plan Supplement (containing drafts or final versions of the Plan Documents) shall be filed with the Bankruptcy Court on or before the date that is ten (10) days prior to the Confirmation Hearing, or on such other date as the Bankruptcy Court may establish.

          “Prepetition Agent” means Wells Fargo Bank, N.A., as collateral agent and administrative agent under the Prepetition Credit Agreement, and any predecessor agent thereunder.

          “Prepetition Credit Agreement” means the Amended and Restated Credit Agreement dated as of June 21, 2007 (as amended from time to time), by and among TLC USA, TLC Canada, the guarantors party thereto, the Prepetition Lenders, and the Prepetition Agent pursuant to which the Prepetition Lenders agreed to provide loans and other financial accommodations to TLC USA secured by first priority liens and security interests on substantially all of the Debtors’ assets.

          “Prepetition Lenders” shall mean the lenders party to the Prepetition Credit Agreement.

          “Prepetition Lender Secured Claims” means the claims of the Prepetition Agent and the Prepetition Lenders based upon, evidenced by, arising under or related to the Prepetition Credit Agreement estimated to include, without limitation, (i) outstanding principal amount of term loans of US $76,659,696.92, (ii) outstanding principal amount of revolving loans of US $23,400,000, (iii) the outstanding letter of credit exposure of US $50,000 and CAD $1,000,000, (iv) the outstanding amount under hedge agreements of $1,605,478.79, plus (v) all interest, fees and costs thereunder, all as may be Allowed by the Bankruptcy Court.

          “Prepetition Loan Documents” shall mean the Prepetition Credit Agreement and the other Loan Documents (as defined in the Prepetition Credit Agreement).

          “Priority Tax Claim” means any and all Claims accorded priority in payment pursuant to section 507(a)(8) of the Bankruptcy Code and the Canadian Priority Tax Claim.

          “Professional Fee Claim” means a claim for compensation for services rendered and for reimbursement of expenses incurred pursuant to sections 327, 328, 330, 331 or 503(b) of

the Bankruptcy Code, relating to services incurred on and after the Petition Date and prior to and including the Effective Date in connection with an application made to the Bankruptcy Court by Professionals in the Chapter 11 Cases or Professionals retained by or on behalf of the Debtors or their estates in connection with parallel restructuring proceedings in the Canadian Court.

          “Professionals” means any professional employed in these Chapter 11 Cases pursuant to sections 327 or 1103 of the Bankruptcy Code or any Professional entitled to compensation pursuant to sections 327, 328, 330, 331, 503(b)(2) or (4), or 1103 of the Bankruptcy Code or retained by or on behalf of the Debtors or their estates in connection with parallel restructuring proceedings in the Canadian Court.

          “Property” means all assets or property of the Debtors’ respective Estates or the Reorganized Debtors, as applicable, of any nature whatsoever, real or personal, tangible or intangible, including contract rights, accounts and Causes of Action, previously or now owned by the Debtors, or acquired by the Debtors’ respective Estates, or by the Reorganized Debtors, as applicable, as defined in section 541 of the Bankruptcy Code.

          “Purchased Assets” has the meaning ascribed thereto in the Plan Sponsor Agreement.

          “Record Date” means (a) for the purpose of voting on the Plan, the date of entry of the order approving the Disclosure Statement respecting the Plan and (b) for the purposes of any distribution to Holders of Claims and Interests and for the determination of which Interests and Claims are Allowed, the Confirmation Date.

          “Reinstated or Reinstatement” means: (a) leaving unaltered the legal, equitable, and contractual rights to which a Claim entitles the Holder of such Claim so as to leave such Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code, or (b) notwithstanding any contractual provision or applicable law that entitles the Holder of such Claim to demand or receive accelerated payment of such Claim after the occurrence of a default, (i) curing any such default that occurred before or after the Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code; (ii) reinstating the maturity of such Claim as such maturity existed before such default; (iii) compensating the Holder of such Claim for any damages incurred as a result of any reasonable reliance by such Holder on such contractual provision or such applicable law; and (iv) not otherwise altering the legal, equitable, or contractual rights to which such Claim entitled the Holder of such Claim; provided, however, that any contractual right that does not pertain to the payment when due of principal and interest on the obligation on which such Claim is based, including, but not limited to, financial covenant ratios, negative pledge covenants, covenants or restrictions on merger or consolidation, and affirmative covenants regarding corporate existence or which prohibit certain transactions or actions contemplated by the Plan, or conditioning such transactions or action on certain factors, shall not be required to be reinstated in order to accomplish Reinstatement.

          “Rejection Claims” means claims of any non-Debtor counterparty to any unexpired leased of nonresidential real property or executory contract arising on account of the rejection of such lease or contract either during the administration of these Chapter 11 Cases

under section 365 of the Bankruptcy Code or as a result of the occurrence of the Effective Date of this Plan.

          “Releasees” means: (a) the directors, officers and employees of the Debtors, in each case as of the Petition Date or that have become directors, officers, or employees thereafter but prior to the Effective Date, and the Debtors’ agents and Professionals; (b) the Junior DIP Agent and each of the Junior DIP Lenders; (c) Charlesbank; (d) the Prepetition Lenders and the Prepetition Agent; (e) the Senior DIP Agent and the Senior DIP Lenders; (f) the Junior DIP Agent and the Junior DIP Lenders; (g) the Committee and its members (solely in their capacity as Committee members); and (h) the respective current and former officers, directors, employees, agents, stockholders, managers, members, affiliates, partners, attorneys, advisors, investment bankers, consultants and professionals of the parties identified in subclauses (a) through (g); provided, however, that the foregoing released parties identified in subclauses (a) through (g) above shall be released only from liabilities arising out of actions taken in such capacity.

          “Reorganized Debtors” means Reorganized TLC Canada, Reorganized TLC USA, and Reorganized TLC MSI on and after the Effective Date.

          “Reorganized TLC Canada” means TLC Canada on and after the Effective Date.

          “Reorganized TLC USA” means TLC USA on and after the Effective Date.

          “Reorganized TLC MSI” means TLC MSI on and after the Effective Date.

          “Schedule of Rejected Contracts” means the schedule listing certain executory contracts and unexpired leases to be rejected by the Debtors as of the Effective Date, which schedule shall be included in the Plan Supplement.

          “Schedules” means the schedules of assets and liabilities and statements of financial affairs Filed on January 5, 2010 by any of the Debtors in the Chapter 11 Cases, as required by section 521 of the Bankruptcy Code, as the same may have been or may be amended, modified or supplemented.

          “Secured Claim” means any Claim arising before the Petition Date that is: (a) secured in whole or part, as of the Petition Date, by a Lien which is valid, perfected and enforceable under applicable law on Property in which the Debtors’ respective Estates has an interest and is not subject to avoidance under the Bankruptcy Code or applicable non-bankruptcy law, or (b) subject to setoff under section 553 of the Bankruptcy Code, but, with respect to both case (a) and (b), only to the extent of each such Estate’s interest in the value of the assets or Property securing any such Claim or the amount subject to setoff, as the case may be.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Senior DIP Agent” means Cantor Fitzgerald Securities, in its capacity as agent under the Senior DIP Facility.

          “Senior DIP Facility” means the debtor-in-possession financing facility provided by the Senior Agent and the Senior Lenders pursuant to that certain Senior Secured Superpriority Debtor In Possession Credit Agreement dated as of December 23, 2009 among the Senior DIP Agent and the Debtors.

          “Senior DIP Lenders” means the lender parties to the Senior DIP Facility.

          “Senior Management” means the Chief Executive Officer, Chief Financial Officer, and the Chief Operating Officer, and such other executives and employees designated by the Buyer Parties. The Reorganized Debtors’ senior management shall be substantially the same as the Debtors’ senior management on the date immediately prior to the Effective Date.

          “Senior Management Contracts” means: (a) certain of the existing employment and severance agreements with Senior Management which shall be assumed by the Debtors as of the Effective Date (each as they may be amended with the approval of the Buyer Parties); and (b) any new employment agreements with Senior Management which shall be subject to the approval of the Debtors and the Buyer Parties and which shall become effective as of the Effective Date. The form of the Senior Management Contracts will be Filed under seal with the Bankruptcy Court in connection with the Filing of the Plan Supplement.

          “Subordinated Claims” means any and all claims subordinated pursuant to section 510 of the Bankruptcy Code or pursuant to an order of the Bankruptcy Court.

          “Tax” means any tax, charge, fee, levy, impost or other assessment by any federal, state, local or foreign governmental authority, including, without limitation, income, excise, property, sales, transfer, employment, payroll, franchise, profits, license, use, ad valorem, estimated, severance, stamp, occupation and withholding tax, together with any interest, penalties, fines or additions attributable to, imposed on, or collected by any such federal, state, local or foreign governmental authority.

          “TLC Canada” means TLC Vision Corporation, a New Brunswick Corporation.

          “TLC USA” means TLC Vision (USA) Corporation, a Delaware Corporation.

          “TLC MSI” means TLC Management Services Inc., a Delaware Corporation.

          “TLC Canada Common Stock and Interests” means all authorized, issued and outstanding shares of common stock of, and Interests in, TLC Canada, as of the Petition Date, including, without limitation, all issued, outstanding and unexpired options, warrants, conversion, privilege or other legal or contractual rights to acquire shares of TLC Canada Common Stock or Interests. TLC Canada Common Stock and Interests also includes any contingent, disputed or unliquidated Claims related to or in connection with any of the foregoing.

          “TLC MSI Common Stock and Interests” means all authorized, issued and outstanding shares of common stock of, and Interests in, TLC MSI, as of the Petition Date, including, without limitation, all issued, outstanding and unexpired options, warrants, conversion, privilege or other legal or contractual rights to acquire shares of TLC MSI Common

Stock or Interests. TLC MSI Common Stock and Interests also includes any contingent, disputed or unliquidated Claims related to or in connection with any of the foregoing.

          “TLC USA Common Stock and Interests” means all authorized, issued and outstanding shares of common stock of, and Interests in, TLC USA, as of the Petition Date, including, without limitation, all issued, outstanding and unexpired options, warrants, conversion, privilege or other legal or contractual rights to acquire shares of TLC USA Common Stock or Interests. TLC USA Common Stock and Interests also includes any contingent, disputed or unliquidated Claims related to or in connection with any of the foregoing.

          “Unclaimed Property” means any distribution of Cash or any other Property made to the Holder of an Allowed Claim pursuant to the Plan that: (a) is returned to the Reorganized Debtors as undeliverable and no appropriate forwarding address is received within the later of (a) one (1) year after the Effective Date and (b) one (1) year after such distribution is made to such Holder, or (b) in the case of a distribution made in the form of a check, is not negotiated and no request for reissuance is made as provided for in Section 5.06 of the Plan.

          “Unimpaired” means any Claim that is not Impaired within the meaning of section 1124 of the Bankruptcy Code.

          “United States Trustee” means the United States Trustee appointed under section 581(a)(3) of title 28 of the United States Code to serve in the District of Delaware.

          “U.S. Trustee’s Fee Claims” means any fees assessed against the Debtors’ Estates pursuant to section 1930(a)(6) of title 28 of the United States Code.

          “Vision Source, L.P.” means the Debtors’ optometric franchising segment that provides marketing, practice development and purchasing power to independently owned and operated practices in the U.S. and Canada.

          “Voting Agent” means Epiq Bankruptcy Solutions, LLC.

          Section 1.02. Rules of Interpretation. All references to “the Plan” herein shall be construed, where applicable, to include references to this document and all its exhibits, appendices, schedules and annexes, if any (and any amendments thereto made in accordance with the Bankruptcy Code), including the Plan Supplement. Whenever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and the neuter. The words “herein,” “hereof,” “hereto,” “hereunder,” and other words of similar import refer to the Plan as a whole and not to any particular paragraph, subparagraph, or clause contained in the Plan. The words “includes” and “including” are not limiting and mean that the things specifically identified are set forth for purposes of illustration, clarity or specificity and do not in any respect qualify, characterize or limit the generality of the class within which such things are included. The captions and headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the provisions hereof. Any term used in the Plan that is not defined in the Plan, either in Article I hereof or elsewhere, but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning assigned to that term in (and shall be construed in accordance with the rules of construction under) the

Bankruptcy Code or the Bankruptcy Rules (with the Bankruptcy Code controlling in the case of a conflict or ambiguity). Without limiting the preceding sentence, the rules of construction set forth in section 102 of the Bankruptcy Code shall apply to the Plan, unless superseded herein. In computing any period of time prescribed or allowed by the Plan, the provisions of Bankruptcy Rule 9006(a) and Section 13.17 hereof shall apply, but Bankruptcy Rule 9006(a) shall govern.

          Section 1.03. Exhibits. All Exhibits to the Plan, including the Plan Supplement, are incorporated into and are a part of the Plan as if set forth in full herein, regardless of when Filed.

ARTICLE II.
CLASSIFICATION OF CLAIMS AND INTERESTS

          Section 2.01. Generally. Pursuant to section 1122 of the Bankruptcy Code, set forth below is a designation of Classes of Claims and Interests. A Claim or an Interest is classified in a particular Class only to the extent that the Claim or Interest qualifies within the description of the Class and is classified in a different Class to the extent the Claim or Interest qualifies within the description of that different Class. A Claim or Interest is placed in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim or an Allowed Interest in that Class and such Claim or Interest has not been paid, released, settled or otherwise satisfied prior to the Effective Date.

          Section 2.02. Unclassified Claims. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims are not classified and are excluded from the Classes designated in this Article II of the Plan. The Junior DIP Claims likewise are not classified and are excluded from the Classes designated in this Article II of the Plan. The treatment accorded Administrative Claims, Priority Tax Claims and Junior DIP Claims is set forth in Article III of the Plan.

          Section 2.03. Classification of Claims Against and Interests in TLC USA.

               (a) Unimpaired Classes. The Plan classifies the following Unimpaired Claims that are not entitled to vote to accept or reject the Plan. Pursuant to section 1126(f) of the Bankruptcy Code, each Holder of a Claim in the following Classes is conclusively presumed to have accepted the Plan on account of such Claims and is not entitled to vote to accept or reject the Plan:

                    (i) Class A1 shall consist of all Other Secured Claims (subject to Section 3.02).

                    (ii) Class A2 shall consist of all Essential Trade Claims.

                    (iii) Class A3 shall consist of Other Priority Claims.

                    (iv) Class A4 shall consist of all Prepetition Lender Secured Claims.

               (b) Impaired Classes Entitled to Vote. The Plan classifies the following Classes as Impaired Classes that may receive a distribution under the Plan and that are entitled to vote to accept or reject the Plan:

                    (i) Class A5 shall consist of the General Unsecured Claims.

                    (ii) Class A6 shall consist of Medical Pending Litigation Claims.

               (c) Impaired Classes Deemed to Reject. The Plan classifies the following Impaired Classes of Interests and Claims as Impaired Classes that are not entitled to vote to accept or reject the Plan. Pursuant to section 1126(g) of the Bankruptcy Code, each Holder of an Interest or Claim in these Classes is conclusively presumed to have rejected the Plan on account of such Interests or Claims, because the Plan does not entitle the Holders of such Interests and Claims to receive or retain any property under the Plan on account of such Interests or Claims. Accordingly, Holders of such Interests and Claims are not entitled to vote to accept or reject the Plan:

                    (i) Class A7 shall consist of all Subordinated Claims.

                    (ii) Class A8 shall consist of all Intercompany Claims.

                    (iii) Class A9 shall consist of all TLC USA Common Stock and Interests.

          Section 2.04. Classification of Claims Against and Interests in TLC Canada.

               (a) Unimpaired Classes. The Plan classifies the following Unimpaired Claims that are not entitled to vote to accept or reject the Plan. Pursuant to section 1126(f) of the Bankruptcy Code, each Holder of a Claim in the following Classes is conclusively presumed to have accepted the Plan on account of such Claims and is not entitled to vote to accept or reject the Plan:

                    (i) Class B1 shall consist of all Other Secured Claims (subject to Section 3.02).

                    (ii) Class B2 shall consist of all Other Priority Claims.

                    (iii) Class B3 shall consist of all Essential Trade Claims.

                    (iv) Class B4 shall consist of all Prepetition Lender Secured Claims.

               (b) Impaired Classes Entitled to Vote. The Plan classifies the following Classes as Impaired Classes that may receive a distribution under the Plan and that are entitled to vote to accept or reject the Plan:

                    (i) Class B5 shall consist of the General Unsecured Claims.

                    (ii) Class B6 shall consist of Medical Pending Litigation Claims.

               (c) Impaired Classes Deemed to Reject. The Plan classifies the following Impaired Classes of Interests and Claims as Impaired Classes that are not entitled to vote to accept or reject the Plan. Pursuant to section 1126(g) of the Bankruptcy Code, each Holder of an Interest or Claim in this Classes is conclusively presumed to have rejected the Plan on account of such Interests or Claims, because the Plan does not entitle the Holders of such Interests and Claims to receive or retain any property under the Plan on account of such Interests or Claims (unless, with respect to Class B8, Classes B5 and B6 vote in favor of the Plan, in which case it will be entitled to the treatment set forth in Section 3.07(h). Accordingly, Holders of such Interests and Claims are not entitled to vote to accept or reject the Plan:

                    (i) Class B7 shall consist of all Intercompany Claims.

                    (ii) Class B8 shall consist of all TLC Canada Common Stock and Interests.

          Section 2.05. Classification of Claims Against and Interests in TLC MSI.

               (a) Unimpaired Classes. The Plan classifies the following Unimpaired Claims and Unimpaired Interests that are not entitled to vote to accept or reject the Plan. Pursuant to section 1126(f) of the Bankruptcy Code, each Holder of a Claim or Interest in the following Classes is conclusively presumed to have accepted the Plan on account of such Claims or Interests and is not entitled to vote to accept or reject the Plan:

                    (i) Class C1 shall consist of all Other Secured Claims (subject to Section 3.02).

                    (ii) Class C2 shall consist of all Other Priority Claims.

                    (iii) Class C3 shall consist of the General Unsecured Claims.

                    (iv) Class C4 shall consist of all TLC MSI Common Stock and Interests.

                    (v) Class C5 shall consist of Prepetition Lender Secured Claims.

               (b) Impaired Classes Deemed to Reject. The Plan classifies the following Impaired Class of Claims as an Impaired Class that is not entitled to vote on the Plan. Pursuant to section 1126(g) of the Bankruptcy Code, each Holder of an Interest in this Class is conclusively presumed to have rejected the Plan on account of such Claims, because the Plan does not entitle the Holders of such Claims to receive or retain any property under the Plan on account of such Claims. Accordingly, Holders of such Claims are not entitled to vote to accept or reject the Plan:

                    (i) Class C6 shall consist of all Intercompany Claims.

               (c) Impaired Classes Entitled to Vote. The Plan classifies the following Classes as Impaired Classes that may receive a distribution under the Plan and that are entitled to vote to accept or reject the Plan:

                    (i) Class C7 shall consist of Medical Pending Litigation Claims.

ARTICLE III.
PROVISIONS FOR TREATMENT OF CLASSES OF
CLAIMS AND INTERESTS

          Section 3.01. Satisfaction of Claims and Interests. The treatment of and consideration to be received by Holders of Allowed Claims or Allowed Interests pursuant to this Article III and the Plan shall be in full satisfaction, settlement, release, extinguishment and discharge of their respective Claims against or Interests in the Debtors and the Debtors’ respective Estates, except as otherwise provided in the Plan or the Confirmation Order.

          Section 3.02. Unclassified Claims, Classified Unimpaired and Impaired Claims and Classified Interests. Administrative Claims and Priority Tax Claims are treated in accordance with section 1129(a)(9)(A) and section 1129(a)(9)(C) of the Bankruptcy Code, respectively. Such Claims are Unimpaired under the Plan and, in accordance with

section 1123(a)(1) of the Bankruptcy Code, are not designated as Classes of Claims for purposes of this Plan and for purposes of sections 1123, 1124, 1126 and 1129 of the Bankruptcy Code. The Junior DIP Claims likewise are Unimpaired under the Plan and are not designated as a Class of Claims for purposes of this Plan. In addition, Claims and Interests in Classes A1, A2, A3, A4, B1, B2, B3, B4, C1, C2, C3, C4 and C5 are classified as Classes of Claims and Interests that are Unimpaired. In accordance with section 1126(f) of the Bankruptcy Code, the Holders of Claims or Interests in such Classes are conclusively presumed to have accepted the Plan and are not entitled to vote to accept or reject the Plan. However, in the event that holders of Claims in Classes A1, B1 and/or C1 are treated as set forth in Sections 3.06(a)(iv), 3.07(a)(iv) or 3.08(a)(iv), they shall be entitled to vote on the Plan. Claims in Classes A5, A6, B5, B6 and C7 are Impaired, and the Holders thereof are entitled to vote to accept or reject the Plan. Claims and Interests in Classes A7, A8, A9, B7, B8 and C6 are Impaired under the Plan, and the Holders thereof will receive no distribution on account of their respective Claims and, pursuant to section 1126(g) of the Bankruptcy Code, such Holders are conclusively presumed to have rejected the Plan and are not entitled to vote to accept or reject the Plan.

          Section 3.03. Administrative Claims. Administrative Claims are Unimpaired. Unless otherwise provided for herein, each Holder of an Allowed Administrative Claim, including Professional Fee Claims, shall receive in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (a) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (i) the Effective Date, (ii) the date on which such Administrative Claim becomes Allowed, or (iii) a date agreed to in writing by the Debtors or Reorganized Debtors, as the case may be, and the Holder of such Administrative Claim; or (b) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order; provided, however, that Allowed Administrative Claims representing (i) liabilities, accounts payable or other Claims, or obligations incurred in the ordinary course of business of the Debtors consistent with past practices subsequent to the Petition Date, or (ii) contractual liabilities incurred subsequent to the Petition Date, whether or not incurred in the ordinary course of business, shall be paid or performed by the Debtors or the Reorganized Debtors in accordance with the terms and conditions of the particular transactions relating to such liabilities and any agreements relating thereto.

          Section 3.04. Priority Tax Claims. Priority Tax Claims are Unimpaired. Each Holder of an Allowed Priority Tax Claim shall receive, at the option of the Debtors or the Reorganized Debtors, as the case may be, in full satisfaction, settlement, release, extinguishment and discharge of such Priority Tax Claim: (a) the amount of such unpaid Allowed Priority Tax Claim in Cash on or as soon as reasonably practicable after the later of (i) the Effective Date, (ii) the date on which such Priority Tax Claim becomes Allowed and (iii) a date agreed to by the Debtors or Reorganized Debtors, as the case may be, and the Holder of such Priority Tax Claim; (b) equal Cash payments from the Reorganized Debtors made on the last Business Day of every three (3) month period following the Effective Date, over a period not exceeding five (5) years after the assessment of the tax on which such Priority Tax Claim is based, totaling the principal amount of such Priority Tax Claim plus simple interest on any outstanding balance from the Effective Date calculated at the interest rate publicly quoted on the Effective Date for obligations backed by the full faith and credit of the United States of America maturing in ninety (90) days; or (c) such other treatment on such other terms and conditions as may be agreed upon in writing

by the Holder of such Priority Tax Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order. The Debtors or the Reorganized Debtors, as the case may be, shall have the right, in their sole discretion, to prepay at any time, in whole or in part, any Allowed Priority Tax Claim without premium or penalty of any sort or nature. Notwithstanding any provision to the contrary in the Plan, the implementing Plan documents or the Order confirming the Plan: (1) nothing shall affect the rights of the United States Internal Revenue Service (the “IRS”) to assert setoff and recoupment; and (2) the Priority Tax Claims of the IRS shall be paid on a no less than quarterly basis within five (5) years of the Petition Date and interest shall accrue on such claims from the Effective Date at the rate and method set forth in 26 U.S.C. Sections 6621 and 6622. Notwithstanding the foregoing, unless Her Majesty in Right of Canada agrees otherwise, each Allowed Canadian Priority Tax Claim shall be paid within six (6) months of the Canadian Sanction Order, or as the Canadian Court may order.

          Section 3.05. Junior DIP Claims. The Junior DIP Claims are Unimpaired. The Junior DIP Claims shall be paid in full in cash (a) on or as soon as practicable after the Effective Date or (b) upon such other terms as the Reorganized Debtors and the Holders of such Claims may agree.

          Section 3.06. Treatment of Claims Against and Interests in TLC USA:

               (a) Class A1: Other Secured Claims. Class A1 Other Secured Claims are Unimpaired (unless such Claims are treated pursuant to clause (iv) in the following sentence, in which case such Claims are Impaired and shall be entitled to vote). Each Holder of an Allowed Class A1 Other Secured Claim shall receive, in the sole discretion of the Debtors or the Reorganized Debtors, as the case may be, in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) Cash equal to the amount of such Allowed Other Secured Claim on or as soon as practicable after the later of (x) the Effective Date, (y) the date that such Other Secured Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class A1 Other Secured Claim; (ii) treatment such that such Other Secured Claim is Reinstated; (iii) the Property securing such Other Secured Claim, with any deficiency to result in a General Unsecured Claim; or (iv) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (b) Class A2: Essential Trade Claims. Class A2 Essential Trade Claims are Unimpaired. Each Holder of an Allowed Class A2 Essential Trade Claim shall receive in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (x) the Effective Date, (y) the date on which such Class A2 Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class A2 Essential Trade Claim; or (ii) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (c) Class A3: Other Priority Claims. Class A3 Other Priority Claims are Unimpaired. Each Holder of an Allowed Class A3 Other Priority Claim shall receive in full

satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (x) the Effective Date, (y) the date on which such Class A3 Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class A3 Claim; or (ii) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (d) Class A4: Prepetition Lender Secured Claims. Class A4 Prepetition Lender Secured Claims are Unimpaired. Each Holder of an Allowed Class A4 Prepetition Lender Secured Claim shall receive, on or as soon as reasonably practicable after the Effective Date, in full satisfaction, settlement, release, extinguishment and discharge of such Claim, cash in an amount equal to such Allowed Class A4 Prepetition Lender Secured Claim.

               (e) Class A5: General Unsecured Claims. Class A5 General Unsecured Claims are Impaired. Each Holder of an Allowed Class A5 General Unsecured Claim shall receive, on or as soon as reasonably practicable after the Effective Date, in full satisfaction, settlement, release, extinguishment and discharge of such Claim, its pro rata share of: (i) Cash in the amount of 90% of the aggregate amount of all Allowed Class A5 Claims, up to a maximum amount (when combined with the aggregate amount of all Allowed Class B5 Claims) of $9,000,000; and (ii) from the General Unsecured Creditor Note, 10% of all Allowed Class A5 Claims, up to a maximum amount (when combined with the aggregate amount of all Allowed Class B5 Claims) of $3,000,000; provided, however, that in the event that Holders of Allowed Class A5 Claims are paid in full pursuant to this Section 3.06(e), any remaining balance from the foregoing shall be distributed pro rata to Holders of Allowed Claims in Class B5.

               (f) Class A6: Medical Pending Litigation Claims. Class A6 Medical Pending Litigation Claims are Impaired. On the Effective Date, the Holders of Class A6 Medical Pending Litigation Claims shall be entitled to payment exclusively by way of any insurance coverage held by TLC USA or its affiliates covering such Medical Pending Litigation Claims.

               (g) Class A7: Subordinated Claims. Class A7 Subordinated Claims are Impaired. Holders of Class A7 Subordinated Claims shall not receive or retain any Property under the Plan on account of such Subordinated Claims. On the Effective Date, all Subordinated Claims shall be extinguished.

               (h) Class A8: Intercompany Claims. Class A8 Intercompany Claims are Impaired. Holders of Class A8 Intercompany Claims shall not receive or retain any Property under the Plan on account of such Intercompany Claims. On the Effective Date, all Intercompany Claims shall be extinguished, provided that claims owing by non-debtor subsidiaries and affiliates to TLC USA shall not be affected by this Plan.

               (i) Class A9: TLC USA Common Stock and Interests. Class A9 TLC USA Common Stock and Interests are Impaired. Holders of Class A9 TLC USA Common Stock and Interests shall not receive or retain any Property under the Plan on account of such

Common Stock and Interests. All TLC USA Common Stock and Interests shall be transferred to the Buyer Parties pursuant to the Plan Sponsor Agreement.

          Section 3.07. Treatment of Claims Against and Interests in TLC Canada:

               (a) Class B1: Other Secured Claims. Class B1 Other Secured Claims are Unimpaired (unless such Claims are treated pursuant to clause (iv) in the following sentence, in which case such Claims are Impaired and shall be entitled to vote). Each Holder of an Allowed Class B1 Other Secured Claim shall receive, in the sole discretion of the Debtors or the Reorganized Debtors, as the case may be, in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) Cash equal to the amount of such Allowed Other Secured Claim on or as soon as practicable after the later of (x) the Effective Date, (y) the date that such Other Secured Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class B1 Other Secured Claim; (ii) treatment such that such Other Secured Claim is Reinstated; (iii) the Property securing such Other Secured Claim, with any deficiency to result in a General Unsecured Claim; or (iv) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (b) Class B2: Other Priority Claims. Class B2 Other Priority Claims are Unimpaired. Each Holder of an Allowed Class B2 Other Priority Claim shall receive in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (x) the Effective Date, (y) the date on which such Class B2 Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class B2 Claim; or (ii) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order. Notwithstanding the foregoing, each Allowed Canadian Priority Employee Claim shall be paid immediately after the Canadian Sanction Order, or as the Canadian Court may order.

               (c) Class B3: Essential Trade Claims. Class B3 Essential Trade Claims are Unimpaired. Each Holder of an Allowed Class B3 Essential Trade Claim shall receive in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (x) the Effective Date, (y) the date on which such Class B3 Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class B3 Essential Trade Claim; or (ii) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (d) Class B4: Prepetition Lender Secured Claims. Class B4 Prepetition Lender Secured Claims are Unimpaired. Each Holder of an Allowed Class B4 Prepetition Lender Secured Claim shall receive, on or as soon as reasonably practicable after the Effective Date, in full satisfaction, settlement, release, extinguishment and discharge of such Claim, cash in an amount equal to such Allowed Class B4 Prepetition Lender Secured Claim.

               (e) Class B5: General Unsecured Claims. Class B5 General Unsecured Claims are Impaired. Class B5 General Unsecured Claims are Impaired. Each holder of an Allowed Class B5 General Unsecured Claim shall receive, in full satisfaction, settlement, release, extinguishment, and discharge of such Claim, its pro rata share of: (i) (i) Cash in the amount of 90% of the aggregate amount of all Allowed Class B5 Claims, up to a maximum amount (when combined with the aggregate amount of all Allowed Class A5 Claims) of $9,000,000; and (ii) from the General Unsecured Creditor Note, 10% of all Allowed Class B5 Claims, up to a maximum amount (when combined with the aggregate amount of all Allowed Class A5 Claims) of $3,000,000; provided, however, that in the event that Holders of Allowed Class B5 Claims are paid in full pursuant to this Section 3.07(e), any remaining balance from the foregoing shall be distributed pro rata to Holders of Allowed Claims in Class A5.

               (f) Class B6: Medical Pending Litigation Claims. Class B6 Medical Pending Litigation Claims are Impaired. On the Effective Date, the Holders of Class B6 Medical Pending Litigation Claims shall be entitled to payment exclusively by way of any insurance coverage held by TLC Canada or its affiliates covering such Medical Pending Litigation Claims.

               (g) Class B7: Intercompany Claims. Class B7 Intercompany Claims are Impaired. Holders of Class B7 Intercompany Claims shall not receive or retain any Property under the Plan on account of such Intercompany Claims. On the Effective Date, all Intercompany Claims shall be extinguished, provided that claims owing by non-debtor subsidiaries and affiliates to TLC Canada shall not be affected by this Plan.

               (h) Class B8: TLC Canada Common Stock and Interests. Class B8 TLC Canada Common Stock and Interests are Impaired and deemed to have rejected the Plan. The Holders of the TLC Canada Common Stock and Interests shall retain such Common Stock and Interests although TLC Canada shall no longer have any assets following the consummation of the Plan and Plan Sponsor Agreement. The Holders of the TLC Canada Common Stock and Interests shall not receive or retain any Property under the Plan on account of such Common Stock and Interests; provided, however, that solely in the event that Holders of Class B5 General Unsecured Claims and Class B6 Medical Pending Litigation Claims vote to accept the Plan, each Holder of an Allowed Class B8 TLC Canada Common Stock and Interest shall receive its pro rata share of a cash pool of $287,500.

          Section 3.08. Treatment of Claims Against and Interests in TLC MSI:

               (a) Class C1: Other Secured Claims. Class C1 Other Secured Claims are Unimpaired (unless such Claims are treated pursuant to clause (iv) in the following sentence, in which case such Claims are Impaired and shall be entitled to vote). Each Holder of an Allowed Class C1 Other Secured Claim shall receive, in the sole discretion of the Debtors or the Reorganized Debtors, as the case may be, in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) Cash equal to the amount of such Allowed Other Secured Claim on or as soon as practicable after the later of (x) the Effective Date, (y) the date that such Other Secured Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class C1 Other Secured Claim; (ii) treatment such that such Other Secured Claim is Reinstated; (iii) the Property securing such Other Secured Claim, with any deficiency to result in a General Unsecured Claim; or (iv) such

other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (b) Class C2: Other Priority Claims. Class C2 Other Priority Claims are Unimpaired. Each Holder of an Allowed Class C2 Other Priority Claim shall receive in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (x) the Effective Date, (y) the date on which such Class C2 Claim becomes Allowed, and (z) a date agreed to by the Debtors or the Reorganized Debtors, as the case may be, and the Holder of such Class C2 Claim; or (ii) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (c) Class C3: General Unsecured Claims. Class C3 General Unsecured Claims are Unimpaired. Each Holder of an Allowed Class C3 General Unsecured Claim not satisfied as of the Effective Date of the Plan shall receive, in full satisfaction, settlement, release, extinguishment and discharge of such Claim: (i) the amount of such unpaid Allowed Claim in Cash on or as soon as reasonably practicable after the later of (x) the Effective Date, (y) the date on which such General Unsecured Claim becomes Allowed, or (z) a date agreed to in writing by the Debtors or Reorganized Debtors, as the case may be, and the Holder of such General Unsecured Claim; (ii) treatment such that such General Unsecured Claim is Reinstated; or (iii) such other treatment on such other terms and conditions as may be agreed upon in writing by the Holder of such Claim and the Debtors or the Reorganized Debtors, as the case may be, or as the Bankruptcy Court may order.

               (d) Class C4: TLC MSI Common Stock and Interests. Class C4 TLC MSI Common Stock and Interests is Unimpaired. Holders of Allowed Class C4 TLC MSI Common Stock and Interests shall retain their Interests.

               (e) Class C5: Prepetition Lender Secured Claims. Class C5 Prepetition Lender Secured Claims are Unimpaired. Each Holder of an Allowed Class C5 Prepetition Lender Secured Claim shall receive, on or as soon as reasonably practicable after the Effective Date, in full satisfaction, settlement, release, extinguishment and discharge of such Claim, cash in an amount equal to such Allowed Class C5 Prepetition Lender Secured Claim.

               (f) Class C6: Intercompany Claims. Class C6 Intercompany Claims are Impaired. Holders of Class C6 Intercompany Claims shall not receive or retain any Property under the Plan on account of such Intercompany Claims. On the Effective Date, all Intercompany Claims shall be extinguished, provided that claims owing by non-debtor subsidiaries and affiliates to TLC MSI shall not be affected by this Plan.

               (g) Class C7: Medical Pending Litigation Claims. Class C7 Medical Pending Litigation Claims are Impaired. On the Effective Date, the Holders of Class C7 Medical Pending Litigation Claims shall be entitled to payment exclusively by way of any insurance coverage held by TLC MSI or its affiliates covering such Medical Pending Litigation Claims.

ARTICLE IV.
ACCEPTANCE OR REJECTION OF THE PLAN; CRAMDOWN

          Section 4.01. Acceptance by Impaired Classes of Claims and Interests. Pursuant to section 1126(c) of the Bankruptcy Code, an Impaired Class of Claims shall have accepted the Plan if: (a) the Holders of at least two-thirds (2/3) in dollar amount of the Allowed Claims actually voting in such Class (other than Claims held by any Holder designated pursuant to section 1126(e) of the Bankruptcy Code) have timely and properly voted to accept the Plan, and (b) more than one-half (1/2) in number of the Holders of such Allowed Claims actually voting in such Class (other than Claims held by any Holder designated pursuant to section 1126(e) of the Bankruptcy Code) have timely and properly voted to accept the Plan. No Class of Interests is entitled to vote on the Plan pursuant to section 1126 of the Bankruptcy Code.

          Section 4.02. Voting Classes. Except as otherwise required by the Bankruptcy Code or the Bankruptcy Rules or as otherwise provided in this Section 4.02, the Holders of Claims against TLC USA in Classes A5 and A6, Holders of Claims or Interests against TLC Canada in Classes B5 and B6, and Holders of Claims against TLC MSI in Class C7 shall be entitled to vote to accept or reject the Plan in accordance with Section 4.01 of the Plan. Classes of Claims and Interests Unimpaired under the Plan (Classes A1, A2, A3, A4, B1, B2, B3, B4, C1, C2, C3, C4 and C5) shall not be entitled to vote to accept or reject the Plan, and shall be conclusively presumed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code. However, in the event that holders of Claims in Classes A1, B1 and C1 are treated as set forth in Sections 3.06(a)(iv), 3.07(a)(iv) or 3.08(a)(iv), they shall be entitled to vote on the Plan. The Classes of Claims and Interests that are Impaired that are receiving no distribution under the Plan (Classes A7, A8, A9, B7, B8 and C6) shall not be entitled to vote to accept or reject the Plan and shall be conclusively presumed to have rejected the Plan. Administrative Claims, Priority Tax Claims and the Junior DIP Claims are Unimpaired and not classified under the Plan and hence are not entitled to vote to accept or reject the Plan.

          Section 4.03. Ballot Instructions. Each Holder of a Claim entitled to vote on the Plan will be asked to complete and return a Ballot to the Voting Agent, which will compile the votes so received. Any questions as to the validity, form, and eligibility (including time of receipt) of Ballots will be resolved by the Bankruptcy Court upon application or at the Confirmation Hearing.

          Section 4.04. Cramdown. If all applicable requirements for Confirmation of the Plan are met as set forth in section 1129(a)(1) through (13) of the Bankruptcy Code except subsection (8) thereof, the Debtors intend to request that the Bankruptcy Court confirm the Plan in accordance with section 1129(b) of the Bankruptcy Code, notwithstanding the requirements of section 1129(a)(8) thereof, on the bases that the Plan is fair and equitable, and does not discriminate unfairly, with respect to each Class of Claims or Interests that is Impaired under, and has not accepted or is deemed to have rejected, the Plan.

ARTICLE V.
PROVISIONS GOVERNING DISTRIBUTIONS
UNDER THE PLAN

          Section 5.01. Timing of Distributions. Except as set forth in Section 5.03 below, distributions of Property will be made to Holders of Allowed Claims and Allowed Interests in accordance with Article III of the Plan. If a Claim or Interest is not an Allowed Claim or an Allowed Interest as of the applicable distribution date, distributions will be made only if and when the Claim or Interest is Allowed, and then in accordance with Article III of the Plan and, with respect to the cure of defaults for assumed executory contracts and unexpired leases, Section 6.02 of the Plan, and in each case, subject to Article VIII of the Plan.

          Section 5.02. Distributions to Holders of Allowed Claims. The Reorganized Debtors shall deliver to the Disbursing Agent sufficient Cash to make the distributions to be made on the Effective Date to the Holders of Allowed Claims entitled to receive Cash in accordance with Article III of the Plan. Payments and other distributions to be made pursuant to the Plan will be available from the funds held by the Reorganized Debtors as of the Effective Date. If any dispute arises as to the identity of a Holder of an Allowed Claim who is to receive any distribution, the Reorganized Debtors shall, in lieu of making such distribution to such Holder, delay such distribution until the disposition thereof shall be determined by Final Order of the Bankruptcy Court or by written agreement among the interested parties to such dispute.

          Section 5.03. Delivery of Distributions. Distributions to Holders of Allowed Claims shall be made by the Disbursing Agent: (a) at the last known addresses of such Holders or (b) at the addresses set forth in any written notices of address changes delivered to the Disbursing Agent. If any Holder’s distribution is returned as undeliverable, no further distributions to such Holder shall be made unless and until the Disbursing Agent is notified of such Holder’s then current address, at which time all missed distributions shall be made to such Holder without interest; provided, however, that such notice be received by the Disbursing Agent prior to such distribution becoming Unclaimed Property. All distributions pursuant to the Plan shall be at the Reorganized Debtors’ expense.

          Section 5.04. Method of Cash Distributions. Any Cash payment to be made pursuant to the Plan may be made by Cash, draft, check, wire transfer, or as otherwise required or provided in any relevant agreement or applicable law at the option of the Reorganized Debtors.

          Section 5.05. Fractional Dollars. Whenever any payment of a fraction of a dollar would otherwise be called for, the actual payment shall reflect a rounding of such fraction to the nearest whole dollars (rounding down in the case of $0.50 or less and rounding up in the case of more than $0.50).

          Section 5.06. Failure to Negotiate Checks. Checks issued in respect of distributions under the Plan shall be null and void if not negotiated within sixty (60) days after the date of issuance. Any amounts returned to the Reorganized Debtors in respect of such non-negotiated checks shall be held by the Reorganized Debtors, as appropriate. Requests for reissuance for any such check shall be made directly to the Reorganized Debtors by the Holder of the Allowed Claim with respect to which such check originally was issued. All amounts represented by any voided check will be held until the later of one (1) year after (a) the Effective Date or (b) the date that a particular Claim is Allowed, and all requests for reissuance by the Holder of the Allowed Claim in respect of a voided check are required to be made prior to such

date. Thereafter, all such amounts shall be deemed to be Unclaimed Property, in accordance with Section 5.07 of the Plan, and all Holders of Claims in respect of void checks shall be forever barred, estopped and enjoined from asserting a claim to such funds in any manner against the Debtors or their respective assets or the Reorganized Debtors or their respective assets.

          Section 5.07. Unclaimed Distributions. All Property distributed on account of Claims must be claimed within the later of (a) one (1) year after the Effective Date or (b) one (1) year after such distribution is made to such Holder or, in the case of a distribution made in the form of a check, must be negotiated and a request for reissuance be made as provided for in Section 5.06 of the Plan. All Unclaimed Property will be retained by and will revest in the Reorganized Debtors and will no longer be subject to distribution. All full or partial payments made by the Disbursing Agent and received by the Holder of a Claim prior to the Effective Date will be deemed to be payments under the Plan for purposes of satisfying the obligations of the Debtors pursuant to the Plan. Nothing contained in the Plan shall require the Reorganized Debtors to attempt to locate any Holder of an Allowed Claim other than by reviewing the records of the Debtors or the Reorganized Debtors, as applicable, and any Claims filed in these Cases. Pursuant to section 1143 of the Bankruptcy Code, all Claims in respect of Unclaimed Property shall be deemed Disallowed and the Holder of any Claim Disallowed in accordance with this Section 5.07 will be forever barred, expunged, estopped and enjoined from asserting such Claim in any manner against the Debtors or their respective assets or the Reorganized Debtors or their respective assets.

          Section 5.08. Limitation on Distribution Rights. If a claimant holds more than one Claim in any one Class, all Claims of the claimant in that Class will be aggregated into one Claim and one distribution will be made with respect to the aggregated Claim.

          Section 5.09. Compliance With Tax Requirements. In connection with each distribution with respect to which the filing of an information return (such as an Internal Revenue Service Form 1099 or 1042) or withholding is required, the Reorganized Debtors shall file such information return with the Internal Revenue Service and provide any required statements in connection therewith to the recipients of such distribution or effect any such withholding and deposit all moneys so withheld as required by law. With respect to any Person from whom a tax identification number, certified tax identification number or other tax information required by law to avoid withholding has not been received by the Reorganized Debtors within thirty (30) days from the date of such request, the Reorganized Debtors may, at their option, withhold the amount required and distribute the balance to such Person or decline to make such distribution until the information is received.

          Section 5.10. Documentation Necessary to Release Liens. Each Creditor which is to receive a Cash distribution under the Plan in full satisfaction of a Secured Claim shall not receive such distribution until such Creditor executes and delivers any documents necessary to release all Liens arising under any applicable security agreement or non-bankruptcy law (in recordable form if appropriate) in connection with such Secured Claim and such other documents as the Debtors or the Reorganized Debtors, as applicable, may reasonably request or otherwise turns over and releases any and all Property of the Debtors that secures or purportedly secures such Claim. Any such Holder that fails to execute and deliver such release of liens within 120 days of the Effective Date shall be deemed to have no further Claim against the

Debtors, the Reorganized Debtors or their assets or Property in respect of such Claim and shall not participate in any distribution hereunder on account of such Claim. Notwithstanding the immediately preceding sentence, any such Holder of a Disputed Claim shall not be required to execute and deliver such release until at least the date that is 30 days after the date on which such Claim is Allowed or Disallowed.

ARTICLE VI.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES; INDEMNIFICATION
OBLIGATIONS; BENEFIT PROGRAMS

          Section 6.01. Treatment of Executory Contracts and Unexpired Leases. Pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts and unexpired leases that exist between the Debtors and any Person or Entity shall be deemed assumed by the Debtors as of the Effective Date, except for any executory contract or unexpired lease that (a) has expired or terminated pursuant to its own terms, (b) has previously been assumed, assumed and assigned, or rejected pursuant to an order of the Bankruptcy Court on or prior to the Confirmation Date, and, if necessary, by order of the Canadian Court, (c) is the subject of a pending motion to assume, assume and assign, or reject as of the Confirmation Date, or (d) is listed on the Schedule of Rejected Contracts which shall be included with the Plan Supplement; provided, however, that the Debtors shall have the right, with the consent of the Buyer Parties, at any time prior to the Confirmation Date, to amend the Schedule of Rejected Contracts upon notice to the counterparty to such contract or lease (a) to delete any executory contract or unexpired lease listed therein, thus providing for its assumption pursuant to this Section 6.01 or (b) to add any executory contract or unexpired lease thereto, thus providing for its rejection pursuant to this Section 6.01. The Confirmation Order (except as otherwise provided therein) shall constitute an order of the Bankruptcy Court pursuant to section 365 of the Bankruptcy Code, effective as of the Effective Date, approving the assumptions and rejections hereunder. Each contract and lease assumed pursuant to this Section 6.01 shall be assumed only to the extent that any such contract or lease constitutes an executory contract or unexpired lease. Assumption of a contract or lease pursuant to this Section 6.01 shall not constitute an admission by the Debtors or the Reorganized Debtors that such contract or lease is an executory contract or unexpired lease or that the Debtors or the Reorganized Debtors have any liability thereunder. All executory contracts and unexpired leases that are assumed will be assumed under their present terms or upon such terms as are agreed to in writing between the applicable Debtor and the counterparty to the executory contract or unexpired lease; provided, however, that any leases and executory contracts of TLC Canada that are assumed under this Plan shall be deemed to be assigned to the Canadian Buyer. Each executory contract and unexpired lease that is assumed and relates to the use, ability to acquire, or occupancy of real property shall include: (a) all modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affect such executory contract or unexpired lease and (b) all executory contracts or unexpired leases appurtenant to the premises, including all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, reciprocal easement agreements, vaults, tunnel or bridge agreements or franchises, and any other interests in real estate or rights in rem related to such premises, unless any of the foregoing agreements has been rejected pursuant to an order of the Bankruptcy Court.

          Section 6.02. Cure of Defaults for Assumed Contracts and Leases. Within fifteen (15) days after the Effective Date, the Reorganized Debtors shall pay to the nondebtor parties to such executory contracts and unexpired leases being assumed the cure amounts. The nondebtor parties to such executory contracts and unexpired leases shall have thirty (30) days from receipt of such cure amounts to object thereto. If any objections are filed, and cannot be resolved by agreement, the Bankruptcy Court shall hold a hearing to determine the cure amount with respect to the executory contract or unexpired lease subject to the objection or to otherwise resolve such objection. Any party failing to object (whether to the proposed cure amount or otherwise) within thirty (30) days after receipt of the cure amount by the Reorganized Debtors shall be forever barred from asserting, collecting, or seeking to collect from the Reorganized Debtors any amounts in excess of the cure amount or from otherwise objecting to the assumption, by the Debtors, of such executory contract or unexpired lease. Notwithstanding the foregoing, or anything else in this Article VI, with respect to any executory contract or unexpired lease which is the subject of an objection, the Reorganized Debtors shall retain the right, until five (5) Business Days after any order resolving the objection becomes a Final Order, to reject such executory contract or unexpired lease.

          Section 6.03. Resolution of Objections to Assumption of Executory Contracts and Unexpired Leases. Any party objecting to the Debtors’ proposed assumption of an executory contract or unexpired lease on any grounds other than the proposed cure amount, including, without limitation, the ability of the Reorganized Debtors to provide “adequate assurance of future performance” (within the meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed shall File and serve on counsel for the Debtors a written objection to the assumption of such contract or lease not later than thirty (30) days from service of notice of the Debtors’ intent to assume such executory contract or unexpired lease. Service of such notice shall be sufficient if served on the other party to the executory contract or unexpired lease at the address indicated on (a) the contract or lease, (b) any proof of Claim filed by such other party in respect of such contract or lease, or (c) the Reorganized Debtors’ books and records; provided, however, that if such a notice is served by the Reorganized Debtors to one of the foregoing addresses and is promptly returned as undeliverable, the Reorganized Debtors shall attempt reservice of the notice on an alternative address, if any, from the above listed sources. Failure to File an objection within the time period set forth above shall constitute an acknowledgement of the assumption and revestment of such contract or lease, subject to payment of the cure amount, if any, including an acknowledgment that the proposed assumption provided adequate assurance of future performance. To the extent that any objections to the assumption of a contract or lease are timely Filed and served and such objections are not resolved between the Debtors and the objecting parties, the Bankruptcy Court shall resolve such disputes at the Confirmation Hearing or as soon as reasonable practicable thereafter. Notwithstanding the foregoing, or anything else in this Article VI, with respect to any executory contract or unexpired lease which is subject to an objection, the Reorganized Debtors shall retain the right, until five (5) Business Days after any order resolving the objection becomes a Final Order, to reject such executory contract or unexpired lease.

          Section 6.04. Bar Date for Rejection Claims. Rejection Claims arising out of the rejection of any executory contract or unexpired lease pursuant to Section 6.01 hereof must be filed with the Bankruptcy Court no later than the later of thirty (30) days after the entry of an order rejecting such executory contract or unexpired lease or the Bar Date. Any Claim not filed

within such time period shall be forever barred. The Reorganized Debtors shall have the exclusive right to object to any Claim arising out of the rejection of an executory contract or unexpired lease pursuant to the terms of Section 8.05 of this Plan.

          Section 6.05. Treatment of Rejection Claims. The Bankruptcy Court shall determine any Objections Filed in accordance with Section 8.05 hereof at a hearing to be held on a date to be determined by the Bankruptcy Court. Subject to any statutory limitation, including, but not limited to, the limitations contained in sections 502(b)(6) and 502(b)(7) of the Bankruptcy Code, any Claims arising out of the rejection of executory contracts and unexpired leases shall, pursuant to section 502(g) of the Bankruptcy Code, be treated as Class A5, B5, or C3 General Unsecured Claims, as appropriate, in accordance with Sections 3.05, 3.06, or 3.07 of the Plan.

          Section 6.06. Executory Contracts and Unexpired Leases Entered Into and Other Obligations Incurred After the Petition Date. On the Effective Date, all contracts, leases, and other agreements entered into by any or all of the Debtors on or after the Petition Date, which agreements have not been terminated in accordance with their terms on or before the Effective Date, shall revest in and remain in full force and effect as against the Reorganized Debtors and the other parties to such contracts, leases and other agreements.

          Section 6.07. Modification of Change of Control Provisions. To the extent any contracts of the Debtors contain provisions modifying their rights or the rights of the subject counterparties, or give rise to rights or obligations of the Debtors or such counterparties, as a result of a change in control of any of the Debtors, such contracts are hereby deemed to be modified such that the consummation of the transactions contemplated hereby, including the Plan Sponsor Agreement, shall not modify or give rise to any such rights or obligations.

          Section 6.08. Reorganized Debtors’ Indemnification Obligations. To the extent not inconsistent with the Plan, any obligations of the Debtors, pursuant to their respective articles of incorporation or by-laws, applicable state law or their specific agreement, to indemnify a Person with respect to all present and future actions, suits and proceedings against the Debtors, the Reorganized Debtors or such indemnified Person, based upon any act or omission related to service with, or for or on behalf of, the Debtors or the Reorganized Debtors, shall survive Confirmation of the Plan and shall not be impaired by Confirmation of the Plan, but shall be deemed and treated as executory contracts that are assumed and, as applicable, amended by the Debtors pursuant to the Plan and section 365 of the Bankruptcy Code, except to the extent any such obligation has been released, discharged or modified pursuant to the Plan. Such indemnification obligations shall survive unaffected by the Plan and shall be performed and honored by the Reorganized Debtors. The Debtors will purchase “tail” coverage to their existing D&O insurance policies pursuant to Section 6.12 of the Plan Sponsor Agreement.

          Section 6.09. Benefit Programs. Employees of TLC Canada to be transferred to the Buyers will be given full credit for their years of service with TLC Canada before the Effective Date for purposes of vesting and eligibility to participate (but not accrual of benefits for any purpose) in benefit plans, vacation and leave, severance and other programs of Buyer and its Affiliates that are made available to such employees after the Effective Date. Such employees shall cease to participate in TLC Canada’s benefit plans (other than any Assumed Benefit Plans

as defined in the Plan Sponsor Agreement) as at the Effective Date and shall commence participation in the Buyers’ benefit plans as at the Effective Date. In respect of any Assumed Benefit Plan, effective as of the Effective Date, TLC Canada shall assign to the subject new employer the Assumed Benefit Plans and all of its rights, duties, obligations and liabilities under and in relation to the Assumed Benefit Plans and all related agreements. Buyer shall cause the employer to accept such assignment and become the sponsor and administrator (where applicable) of the Assumed Benefit Plans as of the Effective Date. Except and to the extent previously assumed by an order of the Bankruptcy Court on or before the Effective Date, all officer, director or employee compensation and benefit programs of Debtors TLC USA and TLC MSI entered into before or after the Petition Date and not since terminated, shall be deemed to be, and shall be treated as though they are, executory contracts that are assumed under Section 6.01 of the Plan, but only to the extent that rights under such programs are held by such Debtors or Persons who are employees of the Debtors as of the Effective Date, and the Debtors’ obligations under such programs to Persons who are employees of the Debtors on the Effective Date shall survive Confirmation of the Plan, except for (a) executory contracts or plans specifically rejected pursuant to the Plan, and (b) executory contracts or plans that have previously been rejected, are the subject of a motion to reject, or have been specifically waived by the beneficiaries of any plans or contracts.

ARTICLE VII.
MEANS FOR IMPLEMENTATION OF THE PLAN

          Section 7.01. Corporate Action. The entry of the Confirmation Order shall constitute authorization for the Debtors and the Reorganized Debtors to take or to cause to be taken all corporate actions necessary or appropriate to consummate and implement the provisions of the Plan prior to, on and after the Effective Date, and all such actions taken or caused to be taken shall be deemed to have been authorized and approved by the Bankruptcy Court, including, without limitation, (a) the consummation of the transactions contemplated by the Plan Sponsor Agreement; (b) the election of directors and officers in accordance with Section 10.02 of the Plan; (c) the adoption of the New TLC USA Certificates of Incorporation and By-Laws; (d) the execution and delivery of the new Senior Management Contracts; (e) the adoption of the New Management Incentive Plan; and (f) the filing of liquidation proceedings in the Canadian Court. All such actions shall be deemed to have occurred and shall be in effect pursuant to applicable non-bankruptcy law and the Bankruptcy Code, without any requirement of further action by the stockholders or directors of the Debtors or the Reorganized Debtors. On the Effective Date, the appropriate officers and directors of the Debtors and the Reorganized Debtors are authorized and directed to execute and deliver the agreements, documents and instruments contemplated by the Plan and the Plan Supplement in the name and on behalf of the Debtors and the Reorganized Debtors to effect the actions detailed herein.

          Section 7.02. Plan Funding. The funds to be utilized to make Cash payments under this Plan have been and/or will be generated from, among other things, payments made, funds available, or obligations assumed under the Plan Sponsor Agreement, payments under the General Unsecured Creditor Note, the Cash of the Debtors as of the Effective Date, and Cash generated from operations of the Debtors or Reorganized Debtors.

          Section 7.03. Plan Sponsor Agreement. On the Effective Date, the transactions contemplated by the Plan Sponsor Agreement shall be consummated.

          Section 7.04. Articles of Organization. The New TLC USA Certificates of Incorporation and By-Laws shall contain such provisions as are required to satisfy the provisions of the Plan and the Bankruptcy Code and shall include, among other things, (a) a prohibition on the issuance of nonvoting equity securities to the extent, and only to the extent, required by section 1123(a)(6) of the Bankruptcy Code, (b) provisions for a five (5) member Board of Directors of Reorganized TLC USA consisting of initial members who will be identified in the Plan Supplement, and (c) other provisions ordinary and customary in such situations so long as they are not inconsistent with any of the provisions contained in the foregoing (a) and (b).

          Section 7.05. Operations Between the Confirmation Date and the Effective Date. The Debtors shall continue to operate as debtors-in-possession, subject to the supervision of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code, during the period from the Confirmation Date through and until the Effective Date.

          Section 7.06. Revesting of Assets. Except as otherwise expressly provided in the Plan, pursuant to sections 1123(a)(5), 1123(b)(3) and 1141(b) of the Bankruptcy Code, all Property comprising the Estates of each Debtor, including, but not limited to, all Avoidance Actions and all Causes of Action shall automatically be retained and revest in the relevant Reorganized Debtor or its respective successor, free and clear of all Claims, Liens, contractually-imposed restrictions, charges, encumbrances and Interests of Creditors and equity security holders on the Effective Date, with all such Claims, Liens, contractually-imposed restrictions, charges, encumbrances and Interests being extinguished except as otherwise provided in the Plan and Plan Sponsor Agreement. As of the Effective Date, each Reorganized Debtor may operate its business and use, acquire and dispose of Property and settle and compromise Claims or Interests without supervision of the Bankruptcy Court free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and Confirmation Order. Without limiting the foregoing, each Reorganized Debtor may pay the charges it incurs for professional fees, disbursements, expenses, or related support services after the Effective Date without any application to the Bankruptcy Court.

          Section 7.07. Approval of Agreements. The solicitation of votes on the Plan shall be deemed a solicitation of the Holders of Claims for the approval of all other agreements and transactions contemplated by the Plan and the Plan Supplement. Entry of the Confirmation Order shall constitute approval of such agreements and transactions and the Confirmation Order shall so provide.

          Section 7.08. Adoption or Assumption of Senior Management Contracts. On the Effective Date, the Reorganized Debtors shall (i) assume existing Senior Management Contracts (each as they may be amended with the approval of the Buyer Parties), and (ii) shall enter into an employment agreement with Jim Tiffany, current President and Chief Operating Officer, and Ellen Jo Plass (on terms and conditions acceptable to the Buyer Parties).

          Section 7.09. Adoption of New Management Incentive Plan. On the Effective Date, the Buyer Parties will adopt the New Management Incentive Plan.

          Section 7.10. Corporate Structure Changes. Following the Effective Date, the Reorganized Debtors shall have the same corporate structure as existed prior to the Effective Date, as may be modified in a manner acceptable by the Buyer Parties; provided, however, that Reorganized TLC Canada shall cease all operations and the Information Officer of TLC Canada appointed by the Canadian Court shall be authorized, pursuant to powers set out in the Confirmation Order and Canadian Sanction Order, to liquidate any remaining assets of TLC Canada and distribute the net proceeds of such assets to Holders of Allowed Class B5 Claims.

ARTICLE VIII.
PRESERVATION OF CAUSES OF ACTION AND
RIGHT TO DEFEND AND CONTEST

          Section 8.01. Preservation of Rights. Except to the extent that any Claim is Allowed during the Chapter 11 Cases or expressly by this Plan, nothing, including, but not limited to, the failure of the Debtors or the Reorganized Debtors to object to a Claim or Interest for any reason during the pendency of the Chapter 11 Cases, shall affect, prejudice, diminish or impair the rights and legal and equitable defenses of the Debtors or the Reorganized Debtors with respect to any Claim or Interest, including, but not limited to, all rights of the Debtors or Reorganized Debtors to contest or defend themselves against such Claims or Interests in any lawful manner or forum when and if such Claim or Interest is sought to be enforced by the Holder thereof.

          Section 8.02. Rights of Action. Except as otherwise provided in the Plan, all Causes of Action, including Avoidance Actions, shall automatically be retained and preserved and will revest in the Reorganized Debtors. Pursuant to section 1123(b)(3) of the Bankruptcy Code, the Reorganized Debtors (as representatives of the Debtors’ Estates) will retain and have the exclusive right to enforce and prosecute such Causes of Action against any Entity, that arose before the Effective Date, other than those expressly released or compromised as part of or pursuant to the Plan.

          Section 8.03. Setoffs. Except to the extent that any Claim is Allowed, the Debtors or the Reorganized Debtors, as applicable, may, but shall not be required to, set off against any Claims and the payments or distributions to be made pursuant to the Plan in respect of such Claims, any and all debts, liabilities, Causes of Action and claims of every type and nature whatsoever which the Estates, the Debtors or the Reorganized Debtors may have against their Creditors, but neither the failure to do so nor the allowance of any such Claims, whether pursuant to the Plan or otherwise, shall constitute a waiver or release by the Debtors of any such claims or Causes of Action the Debtors may have against such Creditors, and all such claims and Causes of Action which are not expressly released pursuant to the Plan shall be reserved to and retained by the Reorganized Debtors.

          Section 8.04. No Payment or Distribution Pending Allowance. All references to Claims and amounts of Claims refer to the amount of the Claim Allowed by agreement of the Debtors or Reorganized Debtors and the Holder of such Claim, by operation of law, by Final Order, or by this Plan. Notwithstanding any other provision in the Plan, no payment or distribution shall be made on account of or with respect to any Claim to the extent it is a Disputed Claim unless and until the Disputed Claim becomes an Allowed Claim.

          Section 8.05. Resolution of Disputed Claims. Unless otherwise ordered by the Court after notice and a hearing, the Reorganized Debtors shall have the exclusive right, on and after the Effective Date, to File Objections to Claims (except those specifically Allowed by this Plan) and shall serve a copy of each such objection upon the holder of the Claim to which the objection is made as soon as practicable, but in no event later than the Claims Objection Deadline. The foregoing deadlines may be extended by order of the Court. An Objection to any Claim shall be deemed properly served on the Holder thereof if the Reorganized Debtors effect service in any of the following manners: (a) in accordance with Rule 4 of the Federal Rules of Civil Procedure, as modified and made applicable by Federal Rule of Bankruptcy Procedure 7004; (b) by first class mail, postage prepaid, on the signatory on the proof of claim or other representative identified in the proof of Claim or any attachment thereto; or (c) by first class mail, postage prepaid, on any counsel that has appeared on the Holder’s behalf in the Chapter 11 Cases.

ARTICLE IX.
CONDITIONS TO CONFIRMATION AND CONSUMMATION OF THE PLAN

          Section 9.01. Conditions to Confirmation. The Confirmation Order shall not be entered unless and until the following conditions have occurred or have been duly waived (if waivable) pursuant to Section 9.03 below:

               (a) the Plan, including any amendments, modifications, or supplements thereto, and all documentation contemplated by the Plan, shall be in form and substance reasonably satisfactory to the Buyer Parties;

               (b) no default or event of default shall have occurred under the Junior DIP Loan Agreement;

               (c) the Bankruptcy Court shall have entered the Plan Sponsor Order;

               (d) the Canadian Court shall have entered the Canadian Recognition Order;

               (e) all material third party consents and waivers shall have been obtained, reasonably satisfactory to the Buyer Parties; and

               (f) the Debtors shall not be in breach of the Plan Sponsor Agreement.

          Section 9.02. Conditions to Effective Date. The Plan shall not be consummated, and the Effective Date shall not occur, unless and until the following conditions have occurred or have been duly waived (if waivable) pursuant to Section 9.03 below:

               (a) the Bankruptcy Court shall have approved the information contained in the Disclosure Statement as adequate;

               (b) the Confirmation Order, which order shall be in form and substance satisfactory to the Debtors and Buyer Parties, shall have been entered and shall not be stayed by order of a court of competent jurisdiction;

               (c) the Bankruptcy Court shall have entered an order confirming the Plan, which order shall be in form and substance satisfactory to the Debtors and Buyer Parties

               (d) all documents and agreements required to be executed or delivered under the Plan on or prior to the Effective Date shall have been executed and delivered by the parties thereto;

               (e) the Bankruptcy Court shall have entered an order (contemplated to be part of the Confirmation Order) authorizing and directing the Debtors and the Reorganized Debtors to take all actions necessary or appropriate to enter into, implement, and consummate the contracts, instruments, releases, indentures and other agreements or documents created, amended, supplemented, modified or adopted in connection with the Plan;

               (f) the Canadian Court shall have entered the Canadian Sanction Order;

               (g) the Debtors’ obligations under the Junior DIP Financing shall have been paid in full;

               (h) the New Debtors Certificates of Incorporation shall have been filed with the applicable authority of each Reorganized Debtors’ jurisdiction of incorporation or organization in accordance with such jurisdiction’s applicable law;

               (i) all authorizations, consents and regulatory approvals required, if any, in connection with the Plan’s effectiveness shall have been obtained;

               (j) the conditions to closing under the Plan Sponsor Agreement shall have been satisfied;

               (k) the Buyer Parties shall have issued the General Unsecured Creditor Note to the Disbursing Agent;

               (l) the Senior Management Contracts shall have been entered into by the parties thereto (as applicable); and

               (m) all Plan Documents shall have been adopted, shall be in full force and effect and shall be in form and substance acceptable to the Debtors and the Buyer Parties.

          Section 9.03. Waiver of Conditions to Confirmation and Consummation. The conditions to confirmation in Section 9.01 and to consummation in Section 9.02 (other than 9.02(a) and (b)) may be waived at any time by a writing signed by an authorized representative of each of the Debtors and the Buyer Parties without notice or order of the Bankruptcy Court or any further action other than proceeding to consummation of the Plan.

          Section 9.04. Effect of Failure or Absence of Waiver of Conditions Precedent to the Effective Date of the Plan. In the event that one or more of the conditions specified in Section 9.02 of the Plan have not occurred (or been waived) within ninety (90) days after entry of the Confirmation Order, upon notification submitted by the Debtors to the Bankruptcy Court,

(a) the Confirmation Order, automatically and without further order of the Bankruptcy Court, shall be deemed, vacated, null and void, with no force or legal effect whatsoever, (b) no distributions under the Plan shall be made, (c) all Property of the Estates shall revest in the Debtors’ Estates, (d) the Debtors and all Holders of Claims and Interests shall be restored to the status quo ante as of the day immediately preceding the Confirmation Date as though the Confirmation Date never occurred, and (e) the Debtors’ obligations with respect to the Claims and Interests shall remain unchanged and nothing contained herein shall constitute or be deemed a waiver or release of any Claims or Interests by or against the Debtors or any other Person or Entity or to prejudice in any manner the rights of the Debtors or any Person or Entity in any further proceedings involving the Debtors.

ARTICLE X.
OPERATION AND MANAGEMENT OF THE REORGANIZED DEBTORS

          Section 10.01. Post-Effective Date Operation of Business. From and after the Effective Date, the Reorganized Debtors will continue to exist as separate corporate entities, in accordance with the applicable law in the respective jurisdictions in which they are incorporated and pursuant to the New TLC USA Certificates of Incorporation and By-Laws and the existing Certificates of Incorporation and By-Laws of TLC Canada and TLC MSI.

          Section 10.02. Post Effective Date Officers and Directors. On the Effective Date, the officers of the Reorganized Debtors (a) shall be the individuals with such titles as set forth in the Plan Supplement, and (b) will be reimbursed for all reasonable costs and expenses, and will receive compensation, as set forth in the Senior Management Contracts or such other employment arrangements, with all such payments to be made by the respective Reorganized Debtors. The members of each of the Boards of Directors of the Reorganized Debtors, which shall serve starting on the Effective Date, will be identified in the Plan Supplement.

ARTICLE XI.
EFFECTS OF CONFIRMATION

          Section 11.01. Discharge. To the fullest extent permitted by applicable law (including, without limitation, section 105 of the Bankruptcy Code), and except as otherwise provided in the Plan or in the Confirmation Order, all consideration distributed under the Plan shall be in exchange for, and in complete satisfaction, settlement, discharge and release of, all Claims of any nature whatsoever against the Debtors or any of their assets or Properties, regardless of whether any Property shall have been distributed or retained pursuant to the Plan on account of such Claims. Upon the Effective Date, and except as expressly contemplated in this Plan, the Debtors, and each of them, shall: be deemed discharged and released under section 1141(d)(1)(A) of the Bankruptcy Code from any and all Claims, including, but not limited to, demands and liabilities that arose before the Effective Date, debts (as such term is defined in section 101(12) of the Bankruptcy Code), Liens, security interests, and encumbrances of and against all Property of the respective Estates, the Debtors, or the Reorganized Debtors that arose prior to the Effective Date, including, without limitation, all debts of the kind specified in sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or not (i) such Claim has been Allowed pursuant to section 502 of the Bankruptcy Code, or (ii) the Holder of such Claim has voted to accept the Plan. Further, as of the Effective Date, all entities, including, without

limitation, all Holders of Claims or Interests, shall be barred and enjoined from asserting against the Debtors or the Reorganized Debtors, their successors or their Property any other or further Claims, debts, rights, Causes of Action, liabilities or Interests relating to the Debtors based upon any act, omission, transaction or other activity of any nature that occurred prior to the Effective Date, except for those obligations expressly created by, or reserved in, this Plan. In accordance with the foregoing, except as provided in the Plan or the Confirmation Order, the Confirmation Order shall be a judicial determination of discharge of all such Claims and other debts and liabilities against the Debtors, pursuant to sections 524 and 1141 of the Bankruptcy Code, and such discharge and termination shall void any judgment obtained against the Debtors or the Reorganized Debtors at any time, to the extent that such judgment relates to a discharged Claim or terminated Interest.

          Section 11.02. Injunction.

               (a) Discharged Claims and Terminated Interests. Except as otherwise expressly provided for in the Plan or the Confirmation Order and to the fullest extent authorized or provided by the Bankruptcy Code, including sections 524 and 1141 thereof, the entry of the Confirmation Order shall, provided that the Effective Date occurs, permanently enjoin all Persons that have held, currently hold or may hold a Claim or other debt or liability that is discharged or an Interest or other right of an equity security holder that is Impaired or terminated pursuant to the terms of the Plan from taking any of the following actions against the Debtors, the Reorganized Debtors or their Property on account of any such discharged Claims, debts or liabilities or such terminated Interests or rights: (i) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind; (ii) enforcing, levying, attaching, collecting or otherwise recovering in any manner or by any means, whether directly or indirectly, any judgment, award, decree or order; (iii) creating, perfecting or enforcing in any manner, directly or indirectly, any Lien or encumbrance of any kind; (iv) asserting any setoff, offset, right of subrogation or recoupment of any kind, directly or indirectly, against any debt, liability or obligation due to the Debtors or the Reorganized Debtors; and (v) proceeding in any manner in any place whatsoever, including employing any process, that does not conform to or comply with or is inconsistent with the provisions of the Plan.

               (b) Released Claims. As of the Effective Date, the Confirmation Order shall constitute an injunction permanently enjoining any Person that has held, currently holds or may hold a Claim, demand, debt, right, Cause of Action or liability that is released pursuant to Section 11.04 of the Plan from enforcing or attempting to enforce any such Claim, demand, debt, right, Cause of Action or liability against any (i) Debtor, (ii) Reorganized Debtor, (iii) Releasee, or (iv) Exculpated Person, or any of their respective Property, based on, arising from or relating to, in whole or in part, any act, omission, or other occurrence taking place on or prior to the Effective Date with respect to or in any way relating to the Chapter 11 Cases, all of which claims, demands, debts, rights, Causes of Action or liabilities shall be deemed released on and as of the Effective Date; provided, however, this injunction shall not apply to (a) any claims Creditors may assert under the Plan to enforce their rights thereunder to the extent permitted by the Bankruptcy Code or (b) any claims Creditors or other third parties may have against each other, which claims are not related to the Debtors and the Reorganized Debtors, it being understood, however, that any defenses, offsets or counterclaims of any kind or nature

whatsoever which the Debtors may have or assert in respect of any of the claims of the type described in (a) or (b) of this proviso are fully preserved.

          Section 11.03. Exculpation. None of the Debtors, Reorganized Debtors or Exculpated Persons shall have or incur any liability to any Person, including, without limitation, any Holder of a Claim or Interest or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys or affiliates or any of their successors or assigns, for: (i) any act taken or omission made in connection with, relating to, or arising out of, the Chapter 11 Cases; (ii) Filing, negotiating, prosecuting, administering, formulating, implementing, confirming or consummating this Plan; or (iii) the Property to be distributed under this Plan, including all activities leading to the promulgation and confirmation of the Plan, the Disclosure Statement (including any information provided or statement made in the Disclosure Statement or omitted therefrom), or any contract, instrument, release or other agreement or document created in connection with or related to the Plan or the administration of the Debtors or these Chapter 11 Cases; provided, however, that the foregoing exculpation shall not apply to any act of gross negligence or willful misconduct.

          Section 11.04. Releases.

               (a) Releases by Debtors. Effective as of the Effective Date, and except as otherwise provided in the Plan or the Confirmation Order, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtors and the Reorganized Debtors, in their individual capacities and as debtors in possession, will be deemed to have forever released, waived and discharged the Releasees from any and all claims, obligations, suits, judgments, damages, demands, debts, rights, Causes of Action and liabilities (other than the rights of the Debtors or Reorganized Debtors to enforce the Plan and the contracts, instruments, releases, and other agreements or documents delivered thereunder), whether for tort, contract, violations of federal or state securities laws, or otherwise, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction, event or other occurrence, including actions in connection with indebtedness for money borrowed by the Debtors, taking place on or prior to the Effective Date in any way relating to any of the Debtors, the Reorganized Debtors, the Chapter 11 Cases, or the Plan, and the subject matter of, or the transactions or events giving rise to, any claim or interest that is treated in the Plan (other than claims based on gross negligence or willful misconduct) arising on or prior to the Effective Date, that the Debtors or the Reorganized Debtors have, had or may have, provided, however, that no Releasee shall be released or discharged from any Claims, obligations, suits, judgments, debts or Causes of Action arising out of or in connection with indebtedness for money borrowed by any such person from any of the Debtors, provided¸ however, that such release provisions will not impact, modify or limit the ability of the Debtors or the Reorganized Debtors to take any defensive measure, including, without limitation, as to impleading any party into such matter, necessary to respond to any litigation, adversary proceeding or other proceeding that may be brought by any other party in interest to the bankruptcy proceeding or in relation thereto, as necessary to fully and properly protect their interests. Notwithstanding anything to the contrary contained herein, the Plan shall not release former officers of the Debtors from any continuing obligations the former officers owe to the

Debtors under employment, separation, severance, non-competition, non-disclosure or proprietary rights agreements existing between the Debtors and the former officers.

               (b) Releases by Holders of Claims and Interests. Effective as of the Effective Date, and except as otherwise provided in the Plan or the Confirmation Order, in consideration for the obligations of the Debtors under the Plan and the payments, contracts, instruments, releases, agreements or documents to be entered into or delivered in connection with the Plan, each Holder of a Claim or Interest and any Affiliate of any such Holder (as well as any trustee or agent on behalf of each such Holder) that either affirmatively votes in favor of the Plan or is deemed to have accepted this Plan pursuant to section 1126(f) of the Bankruptcy Code, shall be deemed to have forever waived, released and discharged (i) the Debtors, (ii) the Reorganized Debtors, and (iii) the Releasees from any and all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities, whether for tort, contract, violations of federal or state securities laws or otherwise, or whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to any of the Debtors or the Plan that such person or entity has, had or may have against the Debtors, the Releasees, the Junior DIP Lenders and the Junior DIP Agent, and each of their respective present or former directors, affiliates, officers, employees, attorneys, accountants, underwriters, investment bankers, professionals, financial advisors and agents (acting in such capacity and excluding claims based on gross negligence or willful misconduct); provided however that, the foregoing provision will not impact, modify or limit the ability of any such party to take any defensive measure, including, without limitation, as to impleading any party into such matter, necessary to respond to any litigation, adversary proceeding or other proceeding that may be brought by any other party in interest to the bankruptcy proceeding or in relation thereto, as necessary to fully and properly protect its interests.

          Section 11.05. Indemnification. To the extent not inconsistent with the Plan or the Confirmation Order and to the fullest extent permitted by applicable law, including, but not limited to, the extent provided in their constituent documents, contracts (including, but not limited to, employment agreement or indemnification agreement), statutory law or common law, the Reorganized Debtors will indemnify, hold harmless and reimburse the Exculpated Persons from and against any and all losses, claims, Causes of Action, damages, fees, expenses, liabilities and actions: (a) for any act taken or omission made in good faith in connection with or in any way related to negotiating, formulating, implementing, confirming or consummating the Plan, the Disclosure Statement, or any contract, instrument, release or other agreement or document created in connection with the Plan or the administration of the Chapter 11 Cases; or (b) for any act or omission in connection with or arising out of the administration of the Plan or the Property to be distributed under the Plan or the operations or activities of the Reorganized Debtors, and any Claims of any such Exculpated Person against the Debtors or the Reorganized Debtors on account of such indemnification obligations shall be unaltered and Unimpaired within the meaning of section 1124(1) of the Bankruptcy Code, except that none of the Debtors or the Reorganized Debtors shall have any obligation to indemnify any Exculpated Person for any acts or omissions that constitute gross negligence or willful misconduct as such is finally determined by a court of competent jurisdiction. Such indemnification obligations shall survive unaffected

by entry of the Confirmation Order, irrespective of whether such indemnification is owed for an act or event occurring before or after the Petition Date.

          Section 11.06. Other Documents and Actions. The Debtors and the Reorganized Debtors are authorized to execute such documents and take such other action as is necessary to effectuate the transactions provided for in the Plan.

          Section 11.07. Term of Injunctions or Stays. Unless otherwise provided herein or in the Confirmation Order, all injunctions or stays provided for in the Chapter 11 Cases under sections 105(a) or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date.

          Section 11.08. Preservation of Insurance. Except as necessary to be consistent with the Plan, the Plan and the discharge provided herein shall not diminish or impair: (a) the enforceability of insurance policies that may cover Claims against the Debtors or any other Person or Entity; or (b) the continuation of workers’ compensation programs in effect, including self-insurance programs.

          Section 11.09. Guaranties. Notwithstanding the existence of guaranties by the Debtors of obligations of any Entity or Entities, and the Debtors’ joint obligations with another Entity or Entities with respect to the same obligations, all Claims against the Debtors based upon any such guaranties shall be satisfied, discharged and released in the manner provided in this Plan and the Holders of Claims shall be entitled to only one distribution with respect to any given obligation of the Debtors.

          Section 11.10. Subordination Rights. Any distributions under the Plan shall be received and retained free of and from any obligations to hold or transfer the same to any other Creditor, and shall not be subject to levy, garnishment, attachment or other legal process by any Holder by reason of claimed contractual subordination rights and such subordination rights shall be waived and the Confirmation Order shall constitute an injunction enjoining any Person from enforcing or attempting to enforce any contractual, legal or equitable subordination rights to Property distributed under the Plan, in each case other than as provided in the Plan.

          Section 11.11. No Successor Liability. Except as otherwise expressly provided in the Plan, the Debtors and the Reorganized Debtors do not, pursuant to the Plan or otherwise, assume, agree to perform, pay, or indemnify or otherwise have any responsibilities for any liabilities or obligations of the Debtors relating to or arising out of the operations of or assets of the Debtors, whether arising prior to, on, or after the Effective Date. The Reorganized Debtors are not, and shall not be, successors to the Debtors by reason of any theory of law or equity, and none shall have any successor or transferee liability of any kind or character, except that the Reorganized Debtors shall assume the obligations specified in the Plan and the Confirmation Order.

ARTICLE XII.
RETENTION OF JURISDICTION

          Section 12.01. Exclusive Jurisdiction of Bankruptcy Court. Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court

shall retain after the Effective Date exclusive jurisdiction of all matters arising out of, arising in or related to the Chapter 11 Cases to the fullest extent permitted by applicable law, including, without limitation, jurisdiction to:

               (a) classify or establish the priority or secured or unsecured status of any Claim (whether Filed before or after the Effective Date and whether or not contingent, Disputed or unliquidated) or resolve any dispute as to the treatment of any Claim pursuant to the Plan;

               (b) grant or deny any applications for allowance of compensation or reimbursement of expenses pursuant to sections 330, 331 or 503(b) of the Bankruptcy Code or otherwise provided for in the Plan, for periods ending on or before the Effective Date;

               (c) determine and resolve any matters related to the assumption, assumption and assignment or rejection of any executory contract or unexpired lease to which any Debtor is a party or with respect to which any Debtor may be liable, and to hear, determine and, if necessary, liquidate any Claims arising therefrom;

               (d) ensure that all payments due under the Plan, including, without limitation, payments of Allowed Administrative Claims, and performance of the provisions of the Plan are accomplished as provided herein and resolve any issues relating to distributions to Holders of Allowed Claims pursuant to the provisions of the Plan;

               (e) construe, take any action and issue such orders, prior to and following the Confirmation Date and consistent with section 1142 of the Bankruptcy Code, as may be necessary for the enforcement, implementation, execution and consummation of the Plan and all contracts, instruments, releases, and other agreements or documents created in connection with the Plan, including, without limitation, the Disclosure Statement and the Confirmation Order, for the maintenance of the integrity of the Plan and protection of the Reorganized Debtors in accordance with sections 524 and 1141 of the Bankruptcy Code following consummation;

               (f) determine and resolve any cases, controversies, suits or disputes that may arise in connection with the consummation, interpretation, implementation or enforcement of the Plan Sponsor Agreement, the Plan (and all Exhibits to the Plan and the Plan Supplement) or the Confirmation Order, including the indemnification and injunction provisions set forth in and contemplated by the Plan Sponsor Agreement, the Plan or the Confirmation Order, or any Entity’s rights arising under or obligations incurred in connection therewith;

               (g) hear any application of the Debtors or Reorganized Debtors to modify the Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code and Section 13.04 hereof or modify the Disclosure Statement, the Confirmation Order or any contract, instrument, release, or other agreement or document created in connection with the Plan, the Disclosure Statement or the Confirmation Order, or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court order, the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release, indenture or other agreement or document created in connection with the Plan, the Disclosure Statement or the Confirmation

Order, in such manner as may be necessary or appropriate to consummate the Plan, to the extent authorized by the Bankruptcy Code and the Plan;

               (h) issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Entity with consummation, implementation or enforcement of the Plan or the Confirmation Order;

               (i) enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked or vacated;

               (j) determine any other matters that may arise in connection with or relating to the Plan Sponsor Agreement, the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release, or other agreement or document created in connection with the Plan Sponsor Agreement, the Plan, the Disclosure Statement or the Confirmation Order, except as otherwise provided in the Plan;

               (k) determine such other matters and for such other purposes as may be provided in the Confirmation Order;

               (l) hear and determine any other matters related hereto and not inconsistent with chapter 11 of the Bankruptcy Code;

               (m) hear and determine disputes arising in connection with the interpretation, implementation or enforcement of the Plan;

               (n) enter a final decree closing the Chapter 11 Cases;

               (o) determine and resolve any and all controversies relating to the rights and obligations of the Disbursing Agent in connection with the Chapter 11 Cases;

               (p) allow, disallow, determine, liquidate or estimate any Claim, including the compromise, settlement and resolution of any request for payment of any Claim, the resolution of any Objections to the allowance of Claims and to hear and determine any other issue presented hereby or arising hereunder, including during the pendency of any appeal relating to any Objection to such Claim (to the extent permitted under applicable law);

               (q) permit the Debtors and the Reorganized Debtors to recover all assets of the Debtors and Property of their respective Estates, wherever located;

               (r) hear and determine any motions or contested matters involving taxes, tax refunds, tax attributes and tax benefits and similar or related matters with respect to the Debtors or the Debtors’ respective Estates arising prior to the Effective Date or relating to the period of administration of the Chapter 11 Cases, including, without limitation, matters concerning federal, state and local taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;

               (s) hear and determine any motions, applications, adversary proceedings, contested matters and other litigated matters pending on, Filed or commenced after

the Effective Date that may be commenced by the Debtors or the Reorganized Debtors thereafter, including Avoidance Actions, proceedings with respect to the rights of the Debtors or their Estates to recover Property under sections 542, 543 or 553 of the Bankruptcy Code, or proceedings to otherwise collect to recover on account of any claim or Cause of Action that the Debtors may have; and

               (t) hear any other matter not inconsistent with the Bankruptcy Code.

          Section 12.02. Failure of Bankruptcy Court to Exercise Jurisdiction. If the Bankruptcy Court abstains from exercising or declines to exercise jurisdiction over any matter arising under, arising in or related to the Debtors, including with respect to the matters set forth above in Section 12.01 hereof, this Article XII shall not prohibit or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to such subject matter.

ARTICLE XIII.
MISCELLANEOUS PROVISIONS

          Section 13.01. Binding Effect of Plan. The provisions of the Plan shall be binding upon and inure to the benefit of the Debtors, the Estates, the Reorganized Debtors, any Holder of any Claim or Interest treated herein or any Person named or referred to in the Plan, and each of their respective heirs, executors, administrators, representatives, predecessors, successors, assigns, agents, officers and directors, and, to the fullest extent permitted under the Bankruptcy Code and other applicable law, each other Person affected by the Plan.

          Section 13.02. Withdrawal of the Plan. The Debtors reserve the right, at any time prior to Confirmation of the Plan, though subject to the terms of the Plan Sponsor Agreement, to withdraw the Plan. If the Plan is withdrawn, the Plan shall be null and void and have no force and effect. In such event, nothing contained herein shall be deemed to constitute a waiver or release of any claims by or against the Debtors or any other Person or to prejudice in any manner the rights of the Debtors or any Person in any further proceedings involving the Debtors.

          Section 13.03. Final Order. Except as otherwise expressly provided in the Plan, any requirement in the Plan for a Final Order may be waived by the Debtors (with the consent of the Buyer Parties) or, after the Effective Date, the Reorganized Debtors upon written notice to the Bankruptcy Court. No such waiver shall prejudice the right of any party in interest to seek a stay pending appeal of any order that is not a Final Order.

          Section 13.04. Modification of the Plan. The Debtors may alter, amend or modify the Plan (with the consent of the Buyer Parties) in accordance with section 1127 of the Bankruptcy Code or as otherwise permitted at any time prior to the Confirmation Date. After the Confirmation Date and prior to the substantial consummation of the Plan, and in accordance with the provisions of section 1127(b) of the Bankruptcy Code and the Bankruptcy Rules, the Debtors may (with the consent of the Buyer Parties), so long as the treatment of Holders of Claims or Interests under the Plan is not adversely affected, institute proceedings in the Bankruptcy Court to remedy any defect or omission or to reconcile any inconsistencies in the Plan, the Disclosure Statement or the Confirmation Order and any other matters as may be necessary to carry out the

purposes and effects of the Plan; provided, however, prior notice of such proceedings shall be served in accordance with Bankruptcy Rules 2002 and 9014.

          Section 13.05. Business Days. If any payment or act under the Plan is required to be made or performed on a date that is not a Business Day, then the making of such payment or the performance of such act may be completed on the next succeeding Business Day, but shall be deemed to have been completed as of the required date.

          Section 13.06. Severability. Should the Bankruptcy Court determine, prior to the Confirmation Date, that any provision of the Plan is either illegal on its face or illegal as applied to any Claim or Interest, such provision shall be unenforceable as to all Holders of Claims or Interests or to the specific Holder of such Claim or Interest, as the case may be, as to which such provision is illegal. Unless otherwise determined by the Bankruptcy Court, such a determination of unenforceability shall in no way limit or affect the enforceability and operative effect of any other provision of the Plan. The Debtors reserve the right not to proceed with Confirmation or consummation of the Plan if any such ruling occurs. In the event that the Canadian Court does not enter an accompanying order that includes the approval of Sections 3.07(e)(2) and 3.07(h) of this Plan, such provisions are expressly severed from this Plan.

          Section 13.07. Governing Law. EXCEPT TO THE EXTENT THAT THE BANKRUPTCY CODE OR BANKRUPTCY RULES OR OTHER FEDERAL LAWS ARE APPLICABLE, AND SUBJECT TO THE PROVISIONS OF ANY CONTRACT, INSTRUMENT, RELEASE, OR OTHER AGREEMENT OR DOCUMENT ENTERED INTO IN CONNECTION WITH THE PLAN, THE CONSTRUCTION, IMPLEMENTATION AND ENFORCEMENT OF THE PLAN AND ALL RIGHTS AND OBLIGATIONS ARISING UNDER THE PLAN SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO CONFLICTS-OF-LAW PRINCIPLES WHICH WOULD APPLY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF DELAWARE.

          Section 13.08. Dissolution of Committee. On the Effective Date, any Committee shall be automatically dissolved and all of its members, Professionals and agents shall be deemed released of their duties, responsibilities and obligations, and shall be without further duties, responsibilities and authority in connection with the Debtors, the Chapter 11 Cases, the Plan or its implementation.

          Section 13.09. Payment of Fees and Expenses of the Junior DIP Agent and Junior DIP Lenders. The Debtors or the Reorganized Debtors (as applicable) shall pay the reasonable fees and expenses incurred by the Junior DIP Agent and the Junior DIP Lenders in connection with the Chapter 11 Cases and the performance of their duties pursuant to the terms of the Plan Sponsor Agreement (as long as such duties are performed prior to the Effective Date) in accordance with the provisions of the Junior DIP Order and without further Order of the Bankruptcy Court.

          Section 13.10. Payment of Statutory Fees. All U.S. Trustee’s Fee Claims, as determined, if necessary, by the Bankruptcy Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or before the Effective Date.

          Section 13.11. Post-Confirmation Operating Reports. The Debtors or the Reorganized Debtors, as applicable, shall continue to file quarterly operating reports as required by the United States Trustee until such time as an order is entered under section 350(a) of the Bankruptcy Code closing the Bankruptcy Cases.

          Section 13.12. Notices. Any notice required or permitted to be provided under this Plan to the Debtors or the Reorganized Debtors, or any request for information with respect to the Plan, shall be in writing and served by either (a) certified mail, return receipt requested, postage prepaid, (b) hand delivery or (c) reputable overnight delivery service, freight prepaid, to be addressed as follows:

TLC Vision (USA) Corporation
16305 Swingley Ridge Road
Chesterfield, MO 63017
Attn:William McManus
Email: wmcmanus@cdgco.com

With a copy to:

Proskauer Rose LLP
70 West Madison Street
Chicago, Illinois 60602
Attn: Mark K. Thomas
Email: mthomas@proskauer.com

          Section 13.13. Filing of Additional Documents. On or before substantial consummation of the Plan, the Debtors shall issue, execute, deliver, and File with the Bankruptcy Court or record any agreements and other documents, and take any action as may be necessary or appropriate to effectuate, consummate and further evidence the terms and conditions of the Plan.

          Section 13.14. Section 1125 of the Bankruptcy Code. The Debtors have, and upon Confirmation of the Plan shall be deemed to have, solicited acceptances of the Plan in good faith and in compliance with the applicable provisions of the Bankruptcy Code and the Debtors (and each of their respective Affiliates, officers, directors, employees, consultants, agents, advisors, members, attorneys, accountants, financial advisors, other representatives and Professionals), have participated in good faith and in compliance with the applicable provisions of the Bankruptcy Code in the offer, issuance, sale, and purchase of the securities offered and sold under the Plan, and are not, and on account of such offer, issuance, sale, solicitation, and/or purchase will not be, liable at any time for the violation of any applicable law, rule, or regulation governing the solicitation of acceptances or rejections of the Plan or the offer, issuance, sale, or purchase of the securities offered and sold under the Plan.

          Section 13.15. Section 1146 Exemption. To the fullest extent permitted under section 1146(a) of the Bankruptcy Code, the issuance, transfer or exchange of any security under the Plan, if any, or the execution, delivery or recording of an instrument of transfer under the Plan, or the revesting, transfer or sale of any real or other Property of or to the Debtors or the Reorganized Debtors, shall not be taxed under any state or local law imposing a stamp tax,

transfer tax or similar tax or fee. Consistent with the foregoing, each recorder of deeds or similar official for any county, city or governmental unit in which any instrument hereunder is to be recorded shall, pursuant to the Confirmation Order, be ordered and directed to accept such instrument, without requiring the payment of any documentary stamp tax, deed stamps, stamp tax, transfer tax, mortgage recording tax, intangible tax or similar tax.

          Section 13.16. Release of Liens. Upon entry of the Confirmation Order, all Liens of the Prepetition Lenders against all non-debtor guarantors under the Prepetition Credit Agreement and the related Prepetition Loan Documents shall be released. Furthermore, the Debtors are permitted to file termination statements to effectuate such releases of those Liens.

          Section 13.17. Time. Unless otherwise specified herein, in computing any period of time prescribed or allowed by the Plan, the day of the act or event from which the designated period begins to run shall not be included. The last day of the period so computed shall be included, unless it is not a Business Day, in which event the period runs until the end of next succeeding day that is a Business Day. Otherwise, the provisions of Bankruptcy Rule 9006 shall apply.

          Section 13.18. No Attorneys’ Fees. No attorneys’ fees will be paid by the Debtors with respect to any Claim or Interest except as expressly specified herein or by order of the Bankruptcy Court (including the Junior DIP Order).

          Section 13.19. No Injunctive Relief. No Claim or Interest shall under any circumstances be entitled to specific performance or other injunctive, equitable or other prospective relief.

          Section 13.20. Non-Voting Equity Securities. The Debtors shall comply with the provisions of section 1123(a)(6) of the Bankruptcy Code.

          Section 13.21. Continued Confidentiality Obligations. Pursuant to the terms thereof, members of and advisors to the Committee, any other Holder of a Claim or Interest and their respective predecessors, successors and assigns shall continue to be obligated and bound by the terms of any confidentiality agreement executed by them in connection with these Chapter 11 Cases or the Debtors, to the extent that such agreement, by its terms, may continue in effect after the Confirmation Date.

          Section 13.22. No Admissions or Waivers. Notwithstanding anything herein to the contrary, nothing contained in the Plan shall be deemed an admission or waiver by the Debtors with respect to any matter set forth herein, including, without limitation, liability on any Claim or Interest or the propriety of any classification of any Claim or Interest.

          Section 13.23. Entire Agreement. The Plan (and all Exhibits to the Plan and the Plan Supplement) sets forth the entire agreement and undertakings relating to the subject matter hereof and supersedes all prior discussions and documents. The Debtors shall not be bound by any terms, conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof, other than as expressly provided for herein or as may hereafter be agreed to by the parties in writing.

          Section 13.24. Waiver. The Debtors or the Reorganized Debtors, as applicable, reserve the right to waive (with the consent of the Buyer Parties) any provision of this Plan to the extent such provision is for the sole benefit of the Debtors and/or their officers or directors.

          Section 13.25. Bar Date for Professionals. Applications for compensation for services rendered and reimbursement of expenses incurred by Professionals (a) from the Petition Date through the Effective Date, or (b) at any time during the Chapter 11 Cases when such compensation is sought pursuant to sections 503(b)(2) through (b)(5) of the Bankruptcy Code, shall be Filed no later than forty-five (45) days after the Effective Date or such later date as the Bankruptcy Court approves. Such applications shall be served on: (a) the Reorganized Debtors at the address set forth in Section 13.12 of the Plan; (b) counsel to the Debtors at the address set forth in Section 13.12 of the Plan; (c) the Office of the United States Trustee, 844 King Street, Room 2202, Wilmington, DE 19801, Attn: Mark Kenney; (d) counsel for Charlesbank, Goodwin Procter, LLP, The New York Times Building, 620 Eighth Avenue, New York, NY 10018-1405, Attn: Brian W. Harvey; and (e) counsel to the Committee, Winston & Strawn LLP, 200 Park Avenue, New York, NY 10166-4193, Attn: David Neier. Applications that are not timely Filed will not be considered by the Court. The Reorganized Debtors may pay any Professional fees and expenses incurred after the Effective Date without any application to the Bankruptcy Court.

CONFIRMATION REQUEST

          The Debtors hereby request confirmation of the Plan pursuant to section 1129(a) or section 1129(b) of the Bankruptcy Code.

Dated: March 24, 2010

TLC VISION CORPORATION; TLC VISION (USA) CORPORATION; AND TLC MANAGEMENT SERVICES INC.
By:	/s/ Michael F. Gries
	Title:Chief Restructuring Officer

EX-21

Exhibit 21

Listing of the TLC Vision Corporation Subsidiaries

Name	State/Province of Incorporation/Organization
American Eye Instruments, Inc.	OR
Del Val ASC, LLC	DE
Delaware Valley Vision Assoc. Group Practice, LLC	PA
Eastern Oregon Regional Surgery Center, LLC	OR
Eau Claire Refractive, LLC	DE
Kirkwood Surgery Center LLC	MO
Laser Eye Care of Ventura, LLC	DE
Laser Eye Care of California, LLC	DE
Laser Eye Surgery, Inc.	UT
Laser Vision Center of Edina LLC	MN
Laser Vision Centers, Inc.	DE
LECC Berg Feinfeld Eye Centers, LLC	CA
LVCI California, LLC	DE
Memphis Refractive, LLC	DE
OccuLogix Canada Corp	DE
OccuLogix Holdings, Inc.	DE
OccuLogix, Inc.	DE
OccuLogix LLC	DE
Ogden Refractive LLC	DE
OR Partners, Inc.	DE
OR Providers, Inc.	OH
Pacific Hills Surgery Center, Inc.	CA
Pheresys Therapeutics Corporation	DE
Philadelphia Vision Associates Group Practice, LLC	PA
Providence Refractive LLC	DE
Rheo Clinic, Inc.	CANADA
Robins Iowa Refractive, LLC	DE
San Jose Refractive LLC	DE
Sightpath Medical Inc. (formerly MSS, Inc.)	MN
Smile Source LP	TX
Smile Source Management L.L.C.	TX
Smile Source Marketing Inc.	TX
Southeast Medical, Inc.	LA
Southern Ophthalmics, Inc.	SC
Surgical Services of Michigan, L.L.C.	MI
TLC Capital Corporation	DE
TLC Florida Eye Laser Center LLC	DE
TLC Laser Eye Care of La Jolla LLC	DE
TLC Laser Eye Centers (ATAC) LLC	DE
TLC Laser Eye Centers (Refractive I) Inc.	DE
TLC Management (Delaware Valley), LLC	DE
TLC Management Services Inc.	DE
TLC Michigan L.L.C.	MI
TLC Michigan Investments, LLC	MI
TLC Midwest Eye Laser Center, Inc.	IL
TLC Northwest Ohio LLC	OH
TLC Oklahoma Doctors L.L.C.	OK
TLC Personnel Services LLC	MI
TLC The Laser Center (Annapolis) Inc.	MD

Name	State/Province of Incorporation/Organization
TLC The Laser Center (Baltimore Management) LLC	MD
TLC The Laser Center (Baltimore) Inc.	MD
TLC The Laser Center (Boca Raton) Limited Partnership	FL
TLC The Laser Center (Carolina) Inc.	NC
TLC The Laser Center (Connecticut) L.L.C.	CT
TLC The Laser Center (Indiana) Inc.	IN
TLC The Laser Center (Indiana) LLC	IN
TLC The Laser Center (Institute) Inc.	DE
TLC The Laser Center (Moncton) Inc.	CANADA – ONTARIO
TLC The Laser Center (Northeast) Inc.	MD
TLC The Laser Center (Pittsburgh) L.L.C.	PA
TLC The Laser Center (Tri-Cities) Inc.	TN
TLC VC, LLC	DE
TLC Vision (USA) Corporation	DE
TLC Vision Source, Inc.	TX
TLC Whitten Laser Eye Associates LLC	DE
TruVision, Inc.	UT
TruVision Contacts, Inc.	UT
TruVision Provider Online Services, Inc.	UT
Valley Laser Eye Center LLC	ND
Vision Corporation	CANADA – ONTARIO
Vision Source LP	TX
Vision Source Management LLC	TX
Vision Source Marketing, Inc.	TX
Vision Source Laser Clinic LP	TX
Vision Source Canada LP	TX
Vision Source Canada Marketing Inc.	TX
N2itive Marketing LLC	TX

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8, No. 333-115910, Form S-8, No. 333-116769, Form S-8, No. 333-71532, Form S-8, No. 333-55480, Form S-8, No. 333-62907, and Form S-8, No. 333-137159) of TLC Vision Corporation of our report dated March 31, 2010, with respect to the consolidated financial statements of TLC Vision Corporation, included in the Annual Report (Form 10-K) for the year ended December 31, 2009.

/s/ Ernst & Young LLP  

St. Louis, Missouri
March 31, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION

          I, James B. Tiffany, certify that:

          1. I have reviewed this annual report on Form 10-K of TLC Vision Corporation;

          2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

          (b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

          5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2010
 

/s/ James B. Tiffany  

James B. Tiffany 

Chief Operating Officer 

EX-31.2

Exhibit 31.2

CERTIFICATION

          I, Michael F. Gries, certify that:

          1. I have reviewed this annual report on Form 10-K of TLC Vision Corporation;

          2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

          (b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

          5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2010
 

/s/ Michael F. Gries  

Michael F. Gries 

Chief Restructuring Officer 

EX-31.3

Exhibit 31.3

CERTIFICATION

          I, William J. McManus, certify that:

          1. I have reviewed this annual report on Form 10-K of TLC Vision Corporation;

          2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report;

          3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

          4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

          (b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

          5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2010
 

/s/ William J. McManus  

William J. McManus 

Interim Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF OPERATING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of TLC Vision Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James B. Tiffany, Chief Operating Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2010
 

/s/ James B. Tiffany  

James B. Tiffany 

Chief Operating Officer 

* A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to TLC Vision Corporation and will be retained by TLC Vision Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF RESTRUCTURING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of TLC Vision Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael F. Gries, Chief Restructuring Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2010
 

/s/ Michael F. Gries  

Michael F. Gries 

Chief Restructuring Officer 

* A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to TLC Vision Corporation and will be retained by TLC Vision Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.3

Exhibit 32.3

CERTIFICATION OF INTERIM CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of TLC Vision Corporation (the “Company”) on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. McManus, Interim Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 31, 2010
 

/s/ William J. McManus  

William J. McManus 

Interim Chief Financial Officer 

* A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to TLC Vision Corporation and will be retained by TLC Vision Corporation and furnished to the Securities and Exchange Commission or its staff upon request.