STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (this "Agreement") is entered into and is
effective for all purposes as of the 10th day of February, 1997, by and between
TLC The Laser Center, Inc., a corporation organized under the laws of Ontario
("TLC") and Xxxxxxxxx X. Xxxxxx ("Xxxxxx").
RECITALS
WHEREAS, Karmin is an officer and employee of 20/20 Laser Centers, Inc., a
Maryland corporation ("20/20") as well as a holder of certain incentive stock
options to purchase stock in 20/20, both vested and unvested (the "Options"),
pursuant to that certain Stock Option Agreement (the "Stock Option Agreement")
between 20/20 and Karmin dated as of August 31, 1995, as amended by First
Amendment to Stock Option Agreement (the "First Amendment") dated as of
September 1, 1996 and by Second Amendment to Stock Option Agreement (the "Second
Amendment") to be executed concurrently herewith. The Stock Option Agreement as
amended by the First Amendment and Second Amendment shall be referred to herein
as the "Option Agreement".
WHEREAS, 20/20 and TLC have entered into a Share for Share Exchange
Agreement dated as of December 15, 1996 (the "TLC Exchange Agreement") pursuant
to which TLC is offering to purchase all of the outstanding shares of 20/20 from
its existing shareholders.
WHEREAS, Karmin received her Options in consideration of personal services
provided to 20/20 as an officer and employee of 20/20.
WHEREAS, 20/20 and TLC requested that Karmin waive her right to vest
certain options that were granted to her under the Stock Option Agreement, and,
pursuant to the Second Amendment to the Stock Option Agreement, Karmin has
agreed to do so in consideration of TLC entering into this agreement concerning
the exchange of shares at the time Karmin exercises her outstanding options to
purchase shares of 20/20, and TLC is willing to do so on the terms and
conditions set forth below.
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NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, agree to the following terms:
1. Ratification of Option. The parties hereto ratify and confirm the
Option Agreement, as amended by the First Amendment and Second Amendment and
acknowledge that it is in full force and effect.
2. Share Exchange. In the event Karmin exercises her options to purchase
20/20 stock pursuant to the Option Agreement on or before March 1, 1999, then
immediately upon the exercise of such option, TLC agrees to issue TLC stock in
exchange for the 20/20 stock purchased by Karmin, at an exchange ratio of .37517
shares of TLC stock for each share of 20/20 stock and Karmin agrees to accept
such exchange of TLC stock, subject to the provisions of paragraphs 3 and 7
below. In the event any Options are not exercised on or before March 1, 1999,
then the obligations of TLC and Karmin under this paragraph 2 shall be null and
void with respect to such Options. The parties are entering into this Agreement
in connection with a transaction described in Section 424(a) of the Internal
Revenue Code in order to retain the status of the Options as qualified incentive
stock options.
3. Adjustment of Option Shares and Change in Capital Structure.
a. This Agreement shall not affect in any way the right or power of
TLC or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in TLC's capital
structure or its business, or any merger or consolidation of TLC, or any
issuance of bonds, debentures, preferred or prior preference stock ahead
of or affecting the common stock or the rights thereof, or the dissolution
or liquidation of TLC, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
b. If TLC shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the common stock
outstanding, without receiving compensation therefor in money, services or
property, then (1) the number, class, and per share price of shares of
common stock to be exchanged hereunder shall be appropriately adjusted in
such a manner as to entitle Karmin to receive upon exercise of an Option,
for the same aggregate cash consideration, the same total number and class
of shares as he would have received had Karmin exercised her Option in
full immediately prior to the event requiring the adjustment; and (2) the
number and class of shares then reserved for issuance hereunder as a
result of Options outstanding shall be adjusted by substituting for the
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total number and class of shares of common stock then reserved that number
and class of shares of common stock that would have been received by the
owner of an equal number of outstanding shares of each class of common
stock as the result of the event requiring the adjustment.
c. After a merger of one or more corporations with TLC or after a
consolidation of TLC and one or more corporations, Karmin shall, at no
additional cost, be entitled upon exercise of an Option to receive
pursuant to this Agreement in lieu of the number and class of shares as to
which he would be entitled to exchange pursuant to paragraph 2 hereof, the
number and class of shares of stock or other securities to which Karmin
would have been entitled pursuant to the terms of the agreement of merger
or consolidation if, immediately prior to such merger or consolidation,
Karmin had been the holder of record of the number and class of shares of
common stock equal to the number and class of shares as to which he would
be entitled under paragraph 2 hereof.
d. Except as previously expressly provided, neither the issuance by
TLC of shares of stock of any class, or securities convertible into shares
of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of TLC
convertible into such shares or other securities, nor the increase or
decrease of the number of authorized shares of stock, nor the addition or
deletion of classes of stock, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number, class or price of
shares of common stock then subject to this Agreement.
e. Adjustment under the preceding provisions of this section will be
made by the Board of Directors of TLC in good faith, whose determination
as to what adjustments will be made and the extent thereof will be final,
binding, and conclusive.
4. Authorization and Reservation of Shares. During the term of this
Agreement, TLC will at all times have authorized and reserved a sufficient
number of shares of its common stock to provide for the rights to exchange as
provided for herein. TLC represents and warrants that (i) all stock issued to
Karmin in exchange for 20/20 stock shall be validly issued, fully paid and
non-assessable, and (ii) such stock shall be free of restrictions on
transferability imposed by 20/20 or TLC other than the provisions of paragraph 7
hereof and the terms and conditions of the Holdback Agreement (defined in
paragraph 7), provided however, that, subject to the provisions of paragraph 6
hereof and the terms and conditions of the Registration Rights Agreement
(defined in paragraph 6), such stock may be subject to restrictions on
transferability imposed by applicable law.
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5. No Fractional Share or Scrip. No fractional shares or scrip
representing fractional shares shall be issued hereunder. Any fractional shares
shall be rounded to the nearest whole share such that fractions of .50 and
greater shall be rounded up to the next whole share and fractions of less than
.50 shall be rounded down.
6. Registration Rights Agreement. TLC acknowledges and agrees that the TLC
shares issuable to Karmin pursuant to this Agreement (a) shall be included as
part of the shares that are subject to that certain Registration Rights
Agreement dated concurrently herewith between TLC and the shareholders of 20/20
(the "Registration Rights Agreement"), and (b) shall be included in any
obligation of TLC to register shares of former 20/20 shareholders on the Toronto
Stock Exchange pursuant to the TLC Exchange Agreement.
7. Holdback Agreement. The parties acknowledge and agree that the TLC
shares to which Karmin may be entitled pursuant to this Agreement are subject to
the terms and conditions of that certain Holdback Agreement dated concurrently
herewith between TLC and the shareholders of 20/20 (the "Holdback Agreement")
and that any TLC shares issued to Karmin pursuant to this Agreement shall be
subject to the terms and conditions of the Holdback Agreement. In the event TLC
is entitled to indemnification under the Holdback Agreement prior to a time that
Karmin has exercised all of her Options, then the exchange ratio set forth in
paragraph 2 hereof shall be modified so that the number of TLC shares that
Karmin receives pursuant to this Agreement upon exercise of an Option shall be
adjusted so that upon the exercise of an Option, Karmin receives the number and
class of shares of stock or other securities to which Karmin would have been
entitled pursuant to the terms of the Holdback Agreement if, immediately prior
to the exercise of such Options, Karmin had been the holder of record of the
number and class of shares of common stock equal to the number and class of
shares as to which he would be entitled under paragraph 2 hereof. Karmin
acknowledges that she is an "Insider" for purposes of the Holdback Agreement.
TLC agrees that in the event Karmin's employment agreement with TLC is
terminated for any reason prior to the time that all of her stock is released
from the Holdback Agreement, then TLC shall release at least a sufficient amount
of Karmin's stock from the Holdback Agreement so that she can use the stock to
pay the tax liability on any deferred compensation that Karmin receives pursuant
to Karmin's deferred compensation agreement with 20/20 as a result of such
termination and on capital gain from the sale of the stock.
8. Miscellaneous. This Agreement shall be governed by and construed under
the laws of the State of Maryland. This Agreement shall be binding upon and
benefit the parties hereto and their respective successors, heirs, personal
representatives and assigns. The titles of the sections and subsections of this
Agreement are for convenience only and are not to be considered in construing
this Agreement. This Agreement does not entitle Karmin to any voting rights or
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other rights as a shareholder of TLC with respect to any shares that are the
subject matter hereof prior to the exercise of the Options as provided for
herein. All notices required or permitted to be given under this Agreement shall
be in writing and shall be delivered in person, by telecopy, by express courier
or by certified mail, return receipt requested, postage prepaid.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date first set forth above.
TLC:
TLC The Laser Center, Inc.
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx Xxxxx, Vice President
KARMIN:
/s/ Xxxxxxxxx X. Xxxxxx
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Xxxxxxxxx X. Xxxxxx
Acknowledged and Agreed To:
20/20 Laser Centers, Inc.
By: /s/ Xxxx X. Xxxxx
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