10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

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 incorporation or organization)	(I.R.S. Employer Identification No.)
16305 SWINGLEY RIDGE ROAD, SUITE 300
CHESTERFIELD, MO	63017
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone, including area code: (636)-534-2300

     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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 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 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. (Check one):

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

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

     As of May 14, 2010 there were 50,565,219 of the registrant’s Common Shares outstanding.

INDEX

PART I. FINANCIAL INFORMATION
Item 1. Interim Consolidated Financial Statements (unaudited)	3
Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009	3
Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009	4
Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009	5
Notes to Interim Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures about Market Risk	28
Item 4. Controls and Procedures	28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3. Defaults Upon Senior Securities	29
Item 4. Removed and Reserved	29
Item 5. Other Information	29
Item 6. Exhibits	29
Signatures	30
EX-2.1
EX-31.1
EX-31.2
EX-31.3
EX-32.1
EX-32.2
EX-32.3

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PART I. FINANCIAL INFORMATION

ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

TLC VISION CORPORATION
(DEBTOR-IN-POSSESION)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
(In thousands, except per share amounts)

	THREE MONTHS ENDED
	MARCH 31,
	2010			2009
Revenues:
Refractive centers	$	33,012		$	36,000
Doctor services		21,739			23,556
Eye care		6,641			9,866
Total revenues		61,392			69,422
Cost of revenues (excluding amortization expense shown below):
Refractive centers		22,272			26,035
Doctor services		15,793			18,334
Eye care		3,366			4,772
Total cost of revenues (excluding amortization expense shown below)		41,431			49,141
Gross profit		19,961			20,281
General and administrative		5,548			5,936
Marketing and sales		4,197			6,828
Amortization of intangibles		573			583
Other (income) expense, net		(144	)		2,518
		10,174			15,865
Operating income		9,787			4,416
Interest income		9			134
Interest expense		(4,400	)		(3,101	)
Earnings from equity investments		67			350
Income before reorganization items and income taxes		5,463			1,799
Reorganization items, net		(7,419	)		—
(Loss) income before income tax expense		(1,956	)		1,799
Income tax expense		(300	)		(210	)
Net (loss) income		(2,256	)		1,589
Less: Net income attributable to noncontrolling interest		2,168			2,913
Net loss attributable to TLC Vision Corporation	$	(4,424	)	$	(1,324	)
Net loss per share attributable to TLC Vision Corporation:
Basic	$	(0.09	)	$	(0.03	)
Diluted	$	(0.09	)	$	(0.03	)
Weighted average number of common shares outstanding:
Basic		50,565			50,518
Diluted		50,565			50,518

See notes to unaudited interim consolidated financial statements.

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TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS
(In thousands)

	(UNAUDITED)
	MARCH 31,			DECEMBER 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	17,995		$	14,623
Accounts receivable, net		18,117			16,824
Prepaid expenses, inventory and other		10,619			10,829
Total current assets		46,731			42,276
Restricted cash		—			1,033
Investments and other assets, net		2,570			2,875
Goodwill		26,755			26,755
Other intangible assets, net		7,107			7,680
Fixed assets, net		31,797			34,297
Total assets	$	114,960		$	114,916
LIABILITIES
Liabilities not subject to compromise
Current liabilities:
Accounts payable	$	8,619		$	8,636
Accrued liabilities		19,343			12,175
Current maturities of long-term debt		12,757			10,049
Total current liabilities		40,719			30,860
Other long-term liabilities		2,140			2,208
Long-term debt, less current maturities		4,366			4,800
Total liabilities not subject to compromise		47,225			37,868
Liabilities subject to compromise		129,454			134,444
Total liabilities		176,679			172,312
STOCKHOLDERS’ DEFICIT
Common stock, no par value; unlimited number authorized		340,663			340,059
Option and warrant equity		341			745
Accumulated deficit		(414,806	)		(410,382	)
Total TLC Vision Corporation stockholders’ deficit		(73,802	)		(69,578	)
Noncontrolling interest		12,083			12,182
Total stockholders’ deficit		(61,719	)		(57,396	)
Total liabilities and stockholders’ deficit	$	114,960		$	114,916

See notes to unaudited interim consolidated financial statements.

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TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)

	THREE MONTHS
	ENDED MARCH 31,
	2010			2009
OPERATING ACTIVITIES
Net (loss) income	$	(2,256	)	$	1,589
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization		3,597			4,012
Earnings from equity investments		(67	)		(350	)
Gain on sales and disposals of fixed assets		(66	)		(164	)
Non-cash compensation expense		200			208
Amortization of deferred finance fees		1,032			104
Other		(88	)		280
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(1,294	)		(1,604	)
Prepaid expenses, inventory and other current assets		(358	)		777
Accounts payable and accrued liabilities		3,124			423
Cash provided by operating activities		3,824			5,275
INVESTING ACTIVITIES
Purchases of fixed assets		(449	)		(417	)
Proceeds from sales of fixed assets		89			189
Distributions and loan payments received from equity investments		614			657
Acquisitions and equity investments		(533	)		(4,588	)
Other		(120	)		37
Cash used in investing activities		(399	)		(4,122	)
FINANCING ACTIVITIES
Decrease (increase) in restricted cash		1,033			(876	)
Proceeds from debtor-in-possession financing		10,000			—
Proceeds from Credit Facility and other debt financing		400			17,971
Principal payments of debtor-in-possession financing		(7,500	)		—
Principal payments of Credit Facility and other debt financing		(1,219	)		(1,770	)
Debtor-in-possession debt issuance costs		(500	)		—
Deferred Credit Facility debt issuance costs		—			(78	)
Distributions to noncontrolling interests		(2,267	)		(2,381	)
Proceeds from issuances of common stock		—			23
Cash (used in) provided by financing activities		(53	)		12,889
Net increase in cash and cash equivalents during the period		3,372			14,042
Cash and cash equivalents, beginning of period		14,623			4,492
Cash and cash equivalents, end of period	$	17,995		$	18,534

See notes to unaudited interim consolidated financial statements.

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TLC VISION CORPORATION
(DEBTOR-IN-POSSESSION)

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010 (UNAUDITED)
(tabular amounts in thousands, except per share amounts)

1. Business and Accounting Policies

Business Overview

     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 70 centers that provide corrective laser surgery, of which 62 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 primarily provides franchise opportunities to independent optometrists under its Vision Source^® brand.

Basis of Presentation

     The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (GAAP) for complete financial statements. The unaudited interim consolidated financial statements included herein should be read in conjunction with the Annual Report on Form 10-K, including subsequent amendments, for the year ended December 31, 2009 filed by TLC Vision Corporation (Company or TLCVision) with the United States Securities and Exchange Commission (SEC). In the opinion of management, all normal recurring adjustments and estimates considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2010.

Consolidation

     The consolidated financial statements as of December 31, 2009 and unaudited interim consolidated financial statements for the three months ended March 31, 2010 and 2009 include the accounts and transactions of the Company and its majority-owned subsidiaries that are not considered variable interest entities (VIEs) and all VIEs for which the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated.

Recently Adopted Accounting Pronouncements

     In June 2009, the Financial Accounting Standards Board (FASB) issued accounting guidance on consolidations which clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The guidance also requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity, and additional disclosures about a company’s involvement in variable interest entities and any associated changes in risk exposure. The guidance became effective January 1, 2010, at which time there was no impact to the Company’s results of operations, financial condition or cash flows. The Company will continue monitoring and assessing its business ventures in accordance with the guidance.

     In June 2009, the FASB issued accounting guidance that seeks to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows;

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and a transferor’s continuing involvement, if any, in transferred financial assets. The guidance, which became effective January 1, 2010, did not affect the Company’s results of operations, financial condition or cash flows.

2. 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.

     Although the filing of the Chapter 11 Petitions constituted an event of default under certain of the Company’s debt obligations, actions to enforce payment of obligations existing prior to the Petitions Date stayed as a result of the filing of the Chapter 11 Petitions and the Canadian Petition.

     The December 21, 2009 petitions were filed to implement a 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 senior secured 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.

     On February 3, 2010, the Debtor Entities filed the first amended joint plan of reorganization (First Amended Plan). The First Amended Plan was sponsored 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 Debtor Entities. Charlesbank’s written funding commitment was subject to the satisfaction of conditions set forth in a Chapter 11 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 other secured and unsecured creditors. There was no assurance of any distribution 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 sponsored by affiliates of Charlesbank and H.I.G. Capital, LLC (H.I.G.), which joined as an investor in the plan sponsor. 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 general unsecured creditors of the Debtor Entities.

     The Debtor Entities filed the third and fourth amended joint plans of reorganization on March 17, 2010 and March 24, 2010, respectively. The third and fourth amended joint plans of reorganization 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.

     On May 5, 2010, the Debtor Entities filed the fifth amended joint plan of reorganization (Fifth Amended Plan). The Fifth Amended Plan did not significantly alter the fourth amended joint plan of reorganization, other than to change the treatment of certain classes of claims under the plan from impaired to unimpaired.

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     In order to successfully exit Chapter 11, the U.S. Court must confirm a Chapter 11 plan, such as the Fifth Amended Plan, and the Canadian Court must recognize that such plan has been confirmed. A confirmed plan of reorganization may, among other things, resolve the Company’s pre-petition obligations, set forth the revised capital structure of the newly reorganized entity, and provide for corporate governance subsequent to Chapter 11. Under the Fifth Amended Plan, the Company will cease operations, its assets will be sold or liquidated, and its business will be continued by TLC Vision (USA) Corporation and that entity’s affiliates.

     On May 6, 2010, the U.S. Court confirmed the Fifth Amended Plan. The Canadian Court recognized under the CCAA such confirmation on May 11, 2010. The Fifth Amended Plan will become effective upon satisfaction or waiver by the plan sponsor of all outstanding closing conditions. The Company expects that the Fifth Amended Plan will become effective on or before May 20, 2010. After such date, it is expected that any assets of the Company not sold to Charlesbank and H.I.G. will be liquidated under the CCAA in a Canadian proceeding and that net proceeds of such liquidation, if any, will be distributed first to the Company’s creditors and second, after all creditors are paid in full, to the Company’s stockholders.

     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 a motion with the US Court seeking authority 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 Debtor Entities borrowed $7.5 million under the Senior DIP Credit Agreement. For additional information regarding the terms of the Senior DIP Credit Agreement refer to Note 7, Debt.

     In connection with the First Amended Plan, the Company filed motions seeking approval from the U.S. Court of 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, is dated February 3, 2010 and is among the Debtors, various lenders and Charlesbank Equity Fund VII, Limited Partnership, as collateral and administrative agent. The U.S. Court entered a final order on March 9, 2010 approving the Junior DIP Credit Agreement. 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 $25.0 million. On February 25, 2010, the Debtor Entities 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 7, Debt.

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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. 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 has reviewed and, with one exception, determined which of its executory contracts and unexpired leases it will reject pursuant to the Fifth Amended Plan under Section 365 of the Bankruptcy Code. The Company expects that the assumption of 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.

     March 22, 2010 was the general bar date for potential creditors of the Company to file prepetition claims in the U.S. Court. 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 may not be eligible for consideration of recovery as part of the Company’s bankruptcy case. 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 were investigated and, if necessary, the U.S. Court will make a final determination of any claim filed in the U.S. Court. The ultimate amount of such liabilities is not determinable at this time. All claims allowed in the bankruptcy cases will be treated in accordance with the Fifth Amended Plan, if that plan becomes effective.

     Under the priority scheme established by the Bankruptcy Code, 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. 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

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successfully implement a plan of reorganization. Under the Fifth Amended Plan, the Company will cease doing business and will sell or liquidate all of its assets.

     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 U.S. Court entered an order denying this motion. On March 24, 2010 the Debtor Entities filed a Fourth Amended Disclosure Statement, describing and attaching the Fourth Amended Joint Plan of Reorganization, which disclosure statement the U.S. Court approved for solicitation purposes. The Debtor Entities solicited acceptances to the Fourth Amended Joint Plan of Reorganization in accordance with its terms and in accordance with the Bankruptcy Code. On May 5, 2010, the Debtor Entities filed the fifth amended joint plan of reorganization (Fifth Amended Plan). The Fifth Amended Plan did not significantly alter the fourth amended joint plan of reorganization, other than to change the treatment of certain classes of claims under the plan from impaired to unimpaired. Also on May 5, 2010, a hearing was held to confirm the Fifth Amended Plan and on May 6, 2010 the U.S. Court entered an order confirming it.

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. Under the confirmed Fifth Amended Plan, the Company will cease operations and sell or liquidate all of its assets. 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 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 expenses (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 March 31, 2010 and 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 the three months ended March 31, 2010 consisted of the following:

	THREE MONTHS ENDED
	MARCH 31, 2010
Professional fees directly related to reorganization (a)	$	7,443
Other		(24	)
Reorganization items, net		7,419

(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.

     Pre-petition restructuring charges incurred during the three months ended March 31, 2009 are included in other expense.

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     Liabilities subject to compromise consist of the following:

	MARCH 31,			DECEMBER 31,
	2010			2009
Accounts payable	$	6,106		$	8,554
Accrued expenses		11,233			13,132
Secured debt		100,060			100,060
Unsecured debt		7,557			8,075
Capitalized Credit Facility debt issuance costs		(1,294	)		(1,403	)
Other long-term liabilities		3,901			4,135
Kremer option (see Note 3)		1,891			1,891
Liabilities subject to compromise		129,454			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 Courts, assumption or 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 a plan of reorganization, and as such, may be subsequently reclassified to liabilities not subject to compromise. As some uncertainty will continue to exist until the end of the claims rconciliation process, 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 Debtor Entities “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 purported by their terms to become 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 other applicable bankruptcy law. As a result of the Chapter 11 Petitions and due to various debt obligations potentially being undersecured or unsecured, $106.3 million and $106.7 million of the Company’s pre-petition net debt is included in liabilities subject to compromise on the consolidated balance sheet at March 31, 2010 and December 31, 2009, respectively. 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 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 March 31, 2010, 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. 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.

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Condensed Combined Financial Information of Debtors

     The following unaudited condensed combined financial information is presented for the Debtors (in thousands):

	MARCH 31,			DECEMBER 31,
	2010			2009
Balance Sheet Information :
Cash and cash equivalents	$	9,452		$	7,851
Accounts receivable, net		415			601
Prepaid expenses, inventory and other short-term assets		1,265			2,162
Restricted cash		—			1,033
Investments and other long-term assets, net		41			61
Fixed assets, net		2,268			2,506
Total assets	$	13,441		$	14,214
Current liabilities	$	20,930		$	13,858
Long-term liabilities		246			302
Liabilities not subject to compromise		21,176			14,160
Liabilities subject to compromise		129,454			134,444
Total liabilities		150,630			148,604
Stockholders’ deficit		(137,189	)		(134,390	)
Total liabilities and stockholders’ deficit	$	13,441		$	14,214
Statement of Operations Information (Three months ended March 31, 2010)
Net sales	$	2,129
Gross profit		825
Operating loss		(12,689	)
Reorganization items, net		(7,419	)
Net loss attributable to TLC Vision Corporation		(14,247	)
Statement of Cash Flows Information (Three months ended March 31, 2010)
Cash used in operating activities	$	(12,917	)
Cash provided by investing activities		164
Cash provided by financing activities		14,353

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

Stock Market Compliance

     The Company’s common shares were delisted from the NASDAQ and the Toronto Stock Exchange 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”.

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3. Acquisitions and Investments

     The Company’s strategy includes periodic acquisitions of, or investments in, entities that operate within its chosen markets. During the three months ended March 31, 2010 and 2009, the Company made investments of $0.5 million and $4.6 million, respectively, to invest in various entities, none of which was individually material. Included in acquisition and equity investments are cash payments during 2009 of approximately $4.0 million related to the Company’s 2005 TruVision™ acquisition, which were included in the initial purchase price allocation.

     During 2005, the Company acquired a substantial portion of the assets of Kremer Laser Eye (Kremer). As of March 31, 2010, 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. 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 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.

     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 May 17, 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 March 31, 2010.

4. Restricted Cash

     During the three months ended March 31, 2010, the Company paid $1.0 million to settle outstanding bank letters of credit for leases. As of March 31, 2010, none of the Company’s cash balance was considered restricted.

5. Accrued Liabilities

     Accrued liabilities include $4.0 million and $3.4 million of accrued wages and related expenses as of March 31, 2010, and December 31, 2009, respectively.

6. Deferred Revenues

     The Company offers an extended lifetime warranty, i.e. the TLC Lifetime Commitment, at a separately priced fee to customers selecting a certain lower base priced surgical procedure. Revenues generated under this program are initially deferred and recognized over a period of five years based on management’s future estimates of retreatment volume, which are based on historical warranty claim activity. The Company’s deferred revenue balance was $0.7 million and $0.8 million at March 31, 2010 and December 31, 2009, respectively.

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7. Debt

     The Company’s debt consists of:

	MARCH 31,		DECEMBER 31,
	2010		2009
Secured Debt
Senior debtor-in-possession financing, weighted average interest rate of 13.0% at December 31, 2009	$	—	$	7,500
Junior debtor-in-possession financing, weighted average interest rate of 13.0% at March 31, 2010		10,000		—
Senior term loan; weighted average interest rate of 9.25% at March 31, 2010 and December 31, 2009		76,660		76,660
Revolving credit facility, weighted average interest rate of 9.25% and 8.24% at March 31, 2010 and December 31, 2009, respectively		23,400		23,400
		110,060		107,560
Unsecured Debt
Capital lease obligations, payable through 2013, interest at various rates		9,996		11,003
Sale-leaseback debt — interest imputed at 6.25%, due through October 2016		1,322		1,284
Other		3,362		3,137
		14,680		15,424
Less: Capitalized Credit Facility debt issuance costs		1,294		1,403
Total debt		123,446		121,581
Less liabilities subject to compromise		106,323		106,732
Less current portion		12,757		10,049
Total long-term debt	$	4,366	$	4,800

Senior Debtor-in-Possession Financing

     In connection with filing the Chapter 11 Petitions and the Canadian Petition, on December 21, 2009, the Debtor Entities filed a motion with the U.S. Court seeking authority to enter into a post-petition credit agreement. On December 22, 2009, the U.S. Court issued an interim order authorizing the 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 among the Company and various prepetition lenders of the Company’s Credit Facility. The Company could 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, was less than $3.0 million.

     Borrowings under the term loans accrued 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%.

     Prepayments were permitted provided that each partial prepayment was 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 was due to the lenders.

     During the three months ended March 31, 2010, the Debtor Entities entered into a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement) described in further detail below. On February 25, 2010, the Debtor Entities borrowed $10.0 million under the Junior DIP Credit Agreement and used the funds,

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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 the exit fee of $0.2 million paid on February 25, 2010. During the three months ended March 31, 2010, the Company amortized $0.7 million in deferred Senior DIP debt issuance costs resulting in no unamortized Senior DIP debt issuance costs remaining as of March 31, 2010.

Junior Debtor-in-Possession Financing

     In connection with the First Amended Plan, as further described in Note 2, Bankruptcy Proceedings, the Debtor Entities filed a motion with the U.S. Court seeking authority to enter into a junior secured super priority debtor-in-possession credit agreement (Junior DIP Credit Agreement). The Junior DIP Credit Agreement, authorized 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 and is among the Debtors, various lenders and Charlesbank Equity Fund VII, Limited Partnership, as collateral and administrative agent.

     The Junior DIP Credit Agreement provides 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 Debtor Entities 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 Company capitalized $0.5 million in Junior DIP debt issuance costs in conjunction with the February 25, 2010 borrowing.

     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.

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 March 31, 2010 and December 31, 2009, $76.7 million was outstanding on this portion of the facility and 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 March 31, 2010 and 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.

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     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 Chapter 11 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 March 31, 2010 and 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 March 31, 2010, 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 through March 31, 2010, 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 March 31, 2010, 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 March 31, 2010 and December 31, 2009 capitalized debt costs of $1.3 million and $1.4 million, respectively, 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.

8. 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 March 31, 2010, 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.

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9. Stock-Based Compensation

     Total stock-based compensation was $0.2 million for each of the three months ended March 31, 2010 and 2009, and was related to the TLCVision Stock Option Plan.

     As of March 31, 2010, the total unrecognized compensation expense related to TLCVision non-vested awards was approximately $1.0 million. The unrecognized compensation expense will be recognized over the remaining vesting periods, the last of which expires during December 2012 for certain options. The Company granted no options during each of the three months ended March 31, 2010 and 2009.

10. Other (Income) Expense, Net

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

	THREE MONTHS ENDED
	MARCH 31,
	2010			2009
Other (income) expense:
Gain on sales and disposals of fixed assets	$	(66	)	$	(164	)
Center restructuring and closing costs		—			280
Employee severance expense		—			259
Financial and legal advisor costs		—			2,147
Miscellaneous income		(78	)		(4	)
	$	(144	)	$	2,518

11. Restructuring of Operations

     Beginning in early 2009 and continuing through March 2010, 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 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 $2.7 million for the three months ended March 31, 2009, which primarily included $2.1 million of financial and legal advisor costs, $0.3 million for employee severance and benefits and $0.3 million of center closing costs.

     Significant activities that occurred after December 21, 2009, were approved by the U.S. or Canadian Court when required under the Bankruptcy Code or the CCAA, respectively, as part of the Company’s reorganization efforts. 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 2, Bankruptcy Proceedings.

     As of March 31, 2010, restructuring reserves of $0.1 million of center restructuring costs were included in accrued liabilities and $0.9 million of employee severance and benefits were included in liabilities subject to compromise in the consolidated balance sheet. 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.

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     The following table sets forth activity that was recorded through the Company’s accrued restructuring accounts during the three months ended March 31, 2010:

	EMPLOYEE			CENTER
	SEVERANCE			RESTRUCTURING
	& BENEFITS			COSTS			TOTAL
Restructuring reserve balance as of December 31, 2009	$	1,214		$	210		$	1,424
Reorganization items, net		—			(24	)		(24	)
Non-cash write-downs		(5	)		—			(5	)
Cash payments		(275	)		(38	)		(313	)
Restructuring reserve balance as of March 31, 2010	$	934		$	148		$	1,082

     As of March 31, 2010, 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.

12. Income Taxes

     The Company’s tax provision for interim periods is determined using an estimate of its annual tax expense based on the forecasted taxable income for the full year. The Company believes there is the potential for volatility in its 2010 effective tax rate due to several factors, primarily from the impact of any changes to the forecasted earnings and the outcome of the Company’s pending bankruptcy proceedings.

     As of March 31, 2010, the Company continues to believe that there is insufficient evidence to recognize certain deferred tax assets. Accordingly, the Company continues to carry a full valuation allowance to offset its deferred tax assets. The determination of the appropriate amount of deferred tax asset to recognize is regularly evaluated and is primarily based on expected taxable income in future years, trends of historical taxable income, and other relevant factors.

     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 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.

13. Stockholders’ (Deficit) Equity

     The following table reflects the changes in stockholders’ (deficit) equity attributable to both TLC Vision Corporation and the noncontrolling interests of the subsidiaries in which the Company has a majority, but not total, ownership interest.

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				ATTRIBUTABLE
	ATTRIBUTABLE			TO
	TO TLC VISION			NONCONTROLLING
	CORPORATION			INTEREST			TOTAL
Stockholders’ (deficit) equity at December 31, 2009	$	(69,578	)	$	12,182		$	(57,396	)
Stock based compensation		200						200
Distributions to noncontrolling interest					(2,267	)		(2,267	)
Net (loss) income		(4,424	)		2,168			(2,256	)
Stockholders’ (deficit) equity at March 31, 2010	$	(73,802	)	$	12,083		$	(61,719	)

14. 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 $0.2 million and $0.4 million for the three months ended March 31, 2010 and 2009, 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.

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     The Company’s reportable segments are as follows:

			DOCTOR SERVICES							EYE CARE
THREE MONTHS ENDED MARCH 31, 2010	REFRACTIVE		REFRACTIVE		MOBILE					OPTOMETRIC
(IN THOUSANDS)	CENTERS		ACCESS		CATARACT		OTHER			FRANCHISING		TOTAL
Revenues	$	33,012	$	7,047	$	9,160	$	5,532		$	6,641	$	61,392
Cost of revenues (excluding amortization)		22,272		5,071		6,762		3,960			3,366		41,431
Gross profit		10,740		1,976		2,398		1,572			3,275		19,961
Segment expenses:
Marketing and sales		2,366		28		982		47			774		4,197
G&A, amortization and other		896		16		816		246			9		1,983
(Earnings) loss from equity investments		55		—		—		(122	)		—		(67	)
Segment profit	$	7,423	$	1,932	$	600	$	1,401		$	2,492	$	13,848
Noncontrolling interest		405		9		—		575			1,179		2,168
Segment profit attributable to TLC Vision Corp.	$	7,018	$	1,923	$	600	$	826		$	1,313	$	11,680
Corporate operating expenses													(3,994	)
Reorganization items, net													(7,419	)
Interest expense, net													(4,391	)
Income tax expense													(300	)
Net loss attributable to TLC Vision Corporation													(4,424	)
Depreciation and amortization	$	2,030	$	530	$	695	$	322		$	20	$	3,597

				DOCTOR SERVICES								EYE CARE
THREE MONTHS ENDED MARCH 31, 2009	REFRACTIVE			REFRACTIVE		MOBILE						OPTOMETRIC
(IN THOUSANDS)	CENTERS			ACCESS		CATARACT			OTHER			FRANCHISING		TOTAL
Revenues	$	36,000		$	7,481	$	9,576		$	6,499		$	9,866	$	69,422
Cost of revenues (excluding amortization)		26,035			6,302		7,301			4,731			4,772		49,141
Gross profit		9,965			1,179		2,275			1,768			5,094		20,281
Segment expenses:
Marketing and sales		4,035			23		1,645			129			996		6,828
G&A, amortization and other		1,875			15		1,000			366			6		3,262
Loss (earnings) from equity investments		(147	)		—		—			(203	)		—		(350	)
Segment profit	$	4,202		$	1,141	$	(370	)	$	1,476		$	4,092	$	10,541
Noncontrolling interest		362			12		—			581			1,958		2,913
Segment profit attributable to TLC Vision Corp.	$	3,840		$	1,129	$	(370	)	$	895		$	2,134	$	7,628
Corporate operating expenses															(5,775	)
Interest expense, net															(2,967	)
Income tax expense															(210	)
Net loss attributable to TLC Vision Corporation															(1,324	)
Depreciation and amortization	$	2,427		$	527	$	717		$	329		$	12	$	4,012

15. Supplemental Cash Flow Information

     Non-cash transactions:

	THREE MONTHS ENDED MARCH 31,
	2010		2009
Capital lease obligations relating to equipment purchases	$	75	$	1,436
Other comprehensive income on hedge		—		(208	)
Option and warrant reduction		404		—

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     Cash paid for the following:

		THREE MONTHS ENDED MARCH 31,
		2010	2009
Interest	$	3,967	$	3,052
Income taxes		362		304

16. 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 $18.0 million at March 31, 2010 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 March 31, 2010, the carrying value and approximate fair value of the Company’s pre-petition Credit Facility advances and debtor-in-possession borrowings were $110.1 million and $109.5 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.

17. Subsequent Events

     On May 5, 2010, the Debtor Entities filed the Fifth Amended Plan. The Fifth Amended Plan did not significantly alter the fourth amended joint plan of reorganization other than to change the treatment of certain classes of claims under the plan from impaired to unimpaired.

     On May 6, 2010, the U.S. Court confirmed the Fifth Amended Plan. The Canadian Court recognized under the CCAA such confirmation on May 11, 2010. The Fifth Amended Plan will become effective upon satisfaction or waiver by the plan sponsor of outstanding closing conditions. The Company expects that the Plan of Reorganization, as amended, will become effective on or before May 20, 2010. After such date, it is expected that any assets of the Company not sold to Charlesbank and H.I.G. will be liquidated under the CCAA in a Canadian proceeding and that net proceeds of such liquidation, if any, will be distributed first to the Company’s creditors and second, after all creditors are paid in full, to the Company’s stockholders. Refer to Note 2, Bankruptcy Proceedings, for additional information.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (together with all amendments, exhibits and schedules hereto, referred to as the “Form 10-Q”) 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, which statements can be identified by the use of forward looking terminology, such as “may,” “will,” “expect,” “believes,” “could,” “might,” “anticipate,” “estimate,” “plans,” “intends” or “continue” or the negative thereof or other variations thereon or comparable terminology. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth elsewhere in this Form 10-Q in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. Unless the context indicates or requires otherwise, references in this Form 10-Q to the “Company” or “TLCVision” shall mean TLC Vision Corporation and its subsidiaries. References to “$” or “dollars” shall mean U.S. dollars unless otherwise indicated. References to “C$” shall mean Canadian dollars. References to the “Commission” shall mean the U.S. Securities and Exchange Commission.

Overview

     TLC Vision Corporation is an eye care services company dedicated to improving lives through improved 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 70 centers that provide corrective laser surgery, of which 62 are majority owned and 8 centers are minority owned. In its doctor services businesses, 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 primarily provides franchise opportunities to independent optometrists under its Vision Source^® brand.

     The Company serves surgeons who performed approximately 51,000 and 56,000 procedures, including refractive and cataract procedures, at the Company’s centers or using the Company’s equipment during each of the three months ended March 31, 2010 and 2009, respectively. Being an elective procedure, laser vision correction volumes fluctuate due to changes in economic conditions, unemployment rates, consumer confidence and political uncertainty. Demand for laser vision correction also is affected by perceived safety and effectiveness concerns given the lack of long-term follow-up data.

Recent Developments

Confirmation of Amended Plan of Reorganization

     On May 6, 2010, the U.S. Court confirmed the Fifth Amended Plan. The Canadian Court recognized under the CCAA such confirmation on May 11, 2010. The Fifth Amended Plan will become effective upon satisfaction or waiver by the plan sponsor of outstanding closing conditions. The Company expects that the Plan of Reorganization, as amended, will become effective on or before May 20, 2010. After such date, it is expected that any assets of the Company not sold to Charlesbank and H.I.G. will be liquidated under the CCAA in a Canadian proceeding and that net proceeds of such liquidation, if any, will be distributed first to the Company’s creditors and second, after all creditors are paid in full, to the Company’s stockholders. Refer to Note 2, Bankruptcy Proceedings, for additional information.

Junior Debtor-in-Possession Financing

     In connection with the First Amended Plan, as further described in Note 2, Bankruptcy Proceedings, the Debtor Entities filed a motion seeking authority 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

22

February 3, 2010 and is among the Debtors, various lenders and Charlesbank Equity Fund VII, Limited Partnership, as collateral and administrative agent. The U.S. Court entered a Final order on March 9, 2010 approving the Junior DIP Credit Agreement. 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 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. Refer to Note 7, Debt, for additional information.

Results of Operations

     The following table sets forth certain center and procedure operating data for the periods presented:

	THREE MONTHS ENDED
	MARCH 31,
	2010		2009
OPERATING DATA (unaudited)
Number of majority-owned eye care centers at end of period		62		65
Number of minority-owned eye care centers at end of period		8		8
Number of TLCVision branded eye care centers at end of period		70		73
Number of laser vision correction procedures:
Majority-owned centers		19,300		21,400
Minority-owned centers		4,100		4,200
Total TLCVision branded center procedures		23,400		25,600
Total access procedures		10,600		11,000
Total laser vision correction procedures		34,000		36,600
Total other surgical procedures (including cataract)		17,100		19,400
Total laser vision correction and other surgical procedures		51,100		56,000

Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009

     Total revenues for the three months ended March 31, 2010 were $61.4 million, a decrease of $8.0 million (12%) from revenues of $69.4 million for the three months ended March 31, 2009. The decrease in revenue was primarily attributable to the decline in refractive center procedures and the timing of the annual Vision Source^® National Conference, as explained below.

     Revenues from refractive centers for the three months ended March 31, 2010 were $33.0 million, a decrease of $3.0 million (8%) from revenues of $36.0 million for the three months ended March 31, 2009. The decrease in revenues from centers resulted from lower center procedure volume, which accounted for a decrease in revenues of approximately $3.1 million. This decline was partially offset by an increase in average price per procedure, which accounted for an increase in revenues of approximately $0.1 million. For the three months ended March 31, 2010, majority-owned center procedures were approximately 19,300, a decrease of 2,100 from 21,400 procedures for the three months ended March 31, 2009. The procedure decline was attributable to the weakened U.S. economy, which has negatively impacted consumer discretionary spending, and lower direct-to-consumer marketing spend.

     Revenues from doctor services for the three months ended March 31, 2010 were $21.7 million, a decrease of $1.9 million (8%) from revenues of $23.6 million for the three months ended March 31, 2009. The revenue decrease from doctor services was due principally to procedure shortfalls in refractive access, the disposal of a majority-owned ambulatory surgical center and the discontinuance of the PHP Foresee product offering in cataract access.

• Revenues from the refractive access services segment for the three months ended March 31, 2010 were $7.0 million, a decrease of $0.5 million (6%) from revenues of $7.5 million for the three months ended March 31, 2009. For the three months ended March 31, 2010, excimer procedures declined by approximately 400 (4%) from the prior year period, on lower customer demand, and lower average

23

sales price of 3%. The procedure decline accounted for a decrease in revenues of approximately $0.3 million and lower average sales price decreased revenues by approximately $0.2 million.

• Revenues from the Company’s mobile cataract segment for the three months ended March 31, 2010 were $9.2 million, a decrease of $0.4 million (4%) from revenues of $9.6 million for the three months ended March 31, 2009. The decrease in mobile cataract revenues was due to the discontinuance of the PHP Foresee product offering during late 2009, which contributed revenues of $0.5 million during the three months ended March 31, 2009, partially offset by an increase in surgical procedure volume of 1% and a higher surgical average sales price of 1%.

• Revenues from the Company’s businesses that manage cataract and secondary care centers for the three months ended March 31, 2010 were $5.5 million, a decrease of $1.0 million (15%) from revenues of $6.5 million for the three months ended March 31, 2009. The decrease was primarily driven by the sale of a majority-owned ambulatory surgical center in the second half of 2009, which contributed no revenue during the quarter ended March 31, 2010 compared to $1.2 million during the comparable prior year period.

     Revenues from eye care for the three months ended March 31, 2010 were $6.6 million, a decrease of $3.3 million (33%) from revenues of $9.9 million for the three months ended March 31, 2009. This decrease was primarily due to the timing of the Vision Source^® National Conference, which is an annual optometric conference hosted by the Company’s Vision Source^® subsidiary. The 2009 Vision Source^® National Conference was hosted during the three months ended March 31, 2009, and contributed approximately $3.8 million in revenue, whereas the 2010 conference will not take place until the three month period ended June 30, 2010. As of March 31, 2010 the Company had 2,152 total franchisees, an increase of 10% compared to March 31, 2009.

     Total cost of revenues (excluding amortization expense for all segments) for the three months ended March 31, 2010 was $41.4 million, a decrease of $7.7 million (16%) from the cost of revenues of $49.1 million for the three months ended March 31, 2009.

     The cost of revenues from refractive centers for the three months ended March 31, 2010 was $22.3 million, a decrease of $3.7 million (14%) from cost of revenues of $26.0 million for the three months ended March 31, 2009. This decrease was attributable to a $1.1 million cost of revenue decline related to lower procedure volume, $1.4 million in fixed cost reductions and $1.2 million in decreased variable costs per procedure. Gross margin for centers was 32.5% during the three months ended March 31, 2010, up from prior year gross margin of 27.6% due to various cost savings initiatives.

     The cost of revenues from doctor services for the three months ended March 31, 2010 was $15.8 million, a decrease of $2.5 million (14%) from cost of revenues of $18.3 million for the three months ended March 31, 2009. Gross margin increased to 27.4% during the three months ended March 31, 2010 from 22.2% in the prior year period. The decrease in cost of revenues was due to the following:

• The cost of revenues from the refractive access segment for the three months ended March 31, 2010 was $5.1 million, a decrease of $1.2 million (20%) from cost of revenues of $6.3 million for the three months ended March 31, 2009. This decrease was primarily attributable to $0.2 million of lower costs associated with decreased excimer procedures and lower cost of revenues of $1.0 million primarily associated with lower costs per procedure on fixed cost reductions.

• The cost of revenues from the Company’s mobile cataract segment for the three months ended March 31, 2010 was $6.8 million, a decrease of $0.5 million (7%) from cost of revenues of $7.3 million for the three months ended March 31, 2009. This decrease was primarily due to lower PHP Foresee costs of $0.3 million on the late 2009 discontinuance of this product line.

• The cost of revenues from the Company’s businesses that manage cataract and secondary care centers for the three months ended March 31, 2010 was $4.0 million, a decrease of $0.7 million (16%) from cost of revenues of $4.7 million for the three months ended March 31, 2009. The decrease was caused

24

by the third quarter 2009 sale of a majority-owned ambulatory surgical center, which contributed no cost of revenue during the current quarter but $0.7 million during the three months ended March 31, 2009.

     The cost of revenues from eye care for the three months ended March 31, 2010 was $3.4 million, a decrease of $1.4 million (29%) from cost of revenues of $4.8 million for the three months ended March 31, 2009. This decrease was due to the timing of the annual Vision Source^® National Conference, which took place during the three months ended March 31, 2009 and contributed $1.9 million of cost of revenues in the prior year period. The 2010 National Conference is not scheduled until the three month period ending June 30, 2010. Gross margins decreased to 49.3% during the three months ended March 31, 2010 from 51.6% in the prior year period due to the timing of the National Conference, which typically contributes a high gross margin.

     General and administrative expenses of $5.5 million for the three months ended March 31, 2010 decreased $0.4 million from $5.9 million for the three months ended March 31, 2009. The decrease was primarily related to lower fees, including professional fees, in corporate overhead and an unfavorable change of $0.2 million in foreign exchange expense.

     Marketing expenses decreased to $4.2 million for the three months ended March 31, 2010 from $6.8 million for the three months ended March 31, 2009. The $2.6 million (39%) decrease was due to a $1.7 million (41%) reduction in refractive center marketing spend in order to reduce costs during the economic downturn and a $0.8 million (41%) reduction in doctor services on lower advertising costs associated with the discontinuance of the PHP Foresee product offering during late 2009.

     Other operating income was $0.1 million for the three months ended March 31, 2010 compared to other operating expense of $2.5 million for the three months ended March 31, 2009. The $2.6 million favorable change was primarily related to $2.1 million of financial and legal advisor expenses and $0.3 million of severance expense incurred during the three months ended March 31, 2009, all of which was related to the Company’s restructuring efforts. Financial and legal advisor expenses related to the Company’s restructuring efforts during the three months ended March 31, 2010 are classified as reorganization items.

     Interest expense increased to $4.4 million for the three months ended March 31, 2010 from $3.1 million for the three months ended March 31, 2009. This $1.3 million increase was primarily due to the write-off of capitalized senior DIP debt issuance costs during February 2009 and higher average borrowing rates.

     For the three months ended March 31, 2010, the Company recognized income tax expense of $0.3 million, which was determined using an estimate of the Company’s 2010 total annual tax expense based on the forecasted taxable income for the full year. For the three months ended March 31, 2009, the Company recognized income tax expense of $0.2 million.

     Net loss attributable to TLC Vision Corporation for the three months ended March 31, 2010 was ($4.4) million, or ($0.09) per basic and diluted share, compared to ($1.3) million, or ($0.03) per basic and diluted share, for the three months ended March 31, 2009.

Liquidity and Capital Resources

     Since the bankruptcy Petitions Date, as further described in Note 2, Bankruptcy Proceedings, our liquidity position has improved. At March 31, 2010, we had unrestricted cash and cash equivalents of $18.0 million compared to $14.6 million at December 31, 2009. The improvement in liquidity primarily resulted from $2.5 million of additional borrowings under the Junior DIP Credit Agreement, net of repayments 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 three months ended March 31:

	2010			2009
Net cash provided by (used in):
Operating activities	$	3,824		$	5,275
Investing activities		(399	)		(4,122	)
Financing activities		(53	)		12,889
Net increase in cash	$	3,372		$	14,042

Cash Provided By Operating Activities

     Net cash provided by operating activities was $3.8 million for the three months ended March 31, 2010. The cash flows provided by operating activities during the three months ended March 31, 2010 were primarily comprised of the $2.3 million net loss plus non-cash items including depreciation and amortization of $3.6 million, amortization of deferred finance fees of $1.0 million and a $1.5 million change in working capital. Our 2010 cash flow from operating activities was favorably impacted by the stay 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 $0.4 million for the three months ended March 31, 2010. The cash used in investing activities included capital expenditures of $0.4 million and investments of $0.5 million. These cash outflows were partially offset by $0.6 million of distributions and loan payments received from equity investments.

Cash Used In Financing Activities

     Net cash used in financing activities was $0.1 million for the three months ended March 31, 2010. Net cash used in financing activities during this period was primarily related to principal payments of debtor-in-possession financing of $7.5 million, principal payments of other debt financing of $1.2 million, distributions to noncontrolling interests of $2.3 million and debtor-in-possession debt issuance costs of $0.5 million, partially offset by proceeds from debtor-in-possession and other debt financing of $10.4 million and a decrease of $1.0 million in restricted cash.

Debtor-in-Possession Financing

     In connection with the First Amended Plan, as further described in Note 2, Bankruptcy Proceedings, the Debtor Entities filed a motion seeking authority from the U.S. Court 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 provides 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 Debtor Entities 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,

26

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.

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 March 31, 2010 and 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 March 31, 2010 and 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 Chapter 11 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 March 31, 2010 and 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 March 31, 2010, 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 through March 31, 2010, 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 March 31, 2010, 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.

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     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 March 31, 2010 and December 31, 2009 capitalized debt costs of $1.3 million and $1.4 million, respectively, 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

     As of March 31, 2010 the Company had $123.4 million in debt, which is significantly exposed to variable interest rates. As of March 31, 2010, the Company did not have any interest rate hedging instruments to hedge the variable interest rate exposure.

Foreign Currency Risk

     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 $0.1 million and a foreign exchange gain of $0.1 million for the three months ended March 31, 2010 and 2009, respectively.

ITEM 4. 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-Q, 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 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.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Charles Benjamin Dickerson recently filed a class action in the United States District Court for the District of South Carolina, against various subsidiaries and affiliates of the Company in connection with laser vision correction surgeries performed at TLC centers. The suit alleges violation of the Federal Racketeer Influenced and Corrupt Organizations Act and seeks, among other things, unspecified monetary damages and declaratory relief. While the ultimate result of the litigation cannot be predicted with certainty, the Company believes the suit is without merit and intends to vigorously defend the suit.

     There have been no other material changes in legal proceedings from that reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

     Not applicable.

ITEM 6. EXHIBITS

2.1	Fifth Amended Joint Chapter 11 Plan of Reorganization dated as of May 5, 2010.
31.1	Chairman of the Board’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	President and Chief Operating Officer’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.3	Interim Chief Financial Officer’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Chairman of the Board’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
32.2	President and 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.
32.3	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.

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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/ Warren S. Rustand
	Warren S. Rustand
	Chairman of the Board May 17, 2010
By:	/s/ James B. Tiffany
	James B. Tiffany
	President and Chief Operating Officer May 17, 2010
By:	/s/ William J. McManus
	William J. McManus
	Interim Chief Financial Officer May 17, 2010

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EXHIBIT INDEX

No.	Description
2.1	Fifth Amended Joint Chapter 11 Plan of Reorganization dated as of May 5, 2010.
31.1	Chairman of the Board’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	President and Chief Operating Officer’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.3	Interim Chief Financial Officer’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	Chairman of the Board’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
32.2	President and 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
32.3	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

EX-2.1

EXHIBIT 2.1

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
	)

FIFTH AMENDED JOINT CHAPTER 11 PLAN OF
REORGANIZATION DATED AS OF MAY 5, 2010

     The above-captioned debtors and debtors in possession hereby submit their Fifth Amended Joint Chapter 11 Plan of Reorganization Dated as of May 5, 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
	May 5, 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

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 fifth 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 May 5, 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; (e) the Committee and its members (solely in their capacity as Committee members); and (f) 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 Fifth Amended Joint Chapter 11 Plan of Reorganization Dated as of May 5, 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; and (g) 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 (f); provided, however, that the foregoing released parties identified in subclauses (a) through (f) 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.

               (vi) Class C6 shall consist of all Intercompany Claims.

               (vii) 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, C5, C6 and C7 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, and B6 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, and B8 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 Unimpaired. Each Holder of an Allowed Class C6 Intercompany 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 C6 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 C6 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.

          (g) Class C7: Medical Pending Litigation Claims. Class C7 Medical Pending Litigation Claims are Unimpaired. Each Holder of an Allowed Class C7 Medical Pending Litigation 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 C7 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 C7 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.

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, and Holders of Claims or Interests against TLC Canada in Classes B5 and B6 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, C5, C6 and C7) 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, and B8) 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 (other than with respect to any right of setoff validly asserted against any of the Debtors prior to the Effective Date and any valid defense of recoupment held by any non-debtor party); 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: May 5, 2010

TLC VISION CORPORATION; TLC VISION (USA) CORPORATION; AND TLC MANAGEMENT SERVICES INC.
By:	/s/ Michael F. Gries
	Title: Chief Restructuring Officer

EX-31.1

EXHIBIT 31.1

CERTIFICATION

     I, Warren S. Rustand, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of TLC Vision Corporation (the registrant);

     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 period 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 quarterly 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 the 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 quarterly 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 in the case of an annual report) 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: May 17, 2010

/s/ Warren S. Rustand  

Warren S. Rustand 

Chairman of the Board 

EX-31.2

EXHIBIT 31.2

CERTIFICATION

     I, James B. Tiffany, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of TLC Vision Corporation (the registrant);

     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 period 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 quarterly 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 the 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 quarterly 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 in the case of an annual report) 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: May 17, 2010

/s/ James B. Tiffany  

James B. Tiffany 

President and Chief Operating Officer 

EX-31.3

EXHIBIT 31.3

CERTIFICATION

     I, William J. McManus, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of TLC Vision Corporation (the registrant);

     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 period 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 quarterly 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 the 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 quarterly 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 in the case of an annual report) 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: May 17, 2010

/s/ William J. McManus  

William J. McManus 

Interim Chief Financial Officer 

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHAIRMAN OF THE BOARD
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 Quarterly Report of TLC Vision Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Warren S. Rustand, Chairman of the Board, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 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: May 17, 2010

/s/ Warren S. Rustand Warren S. Rustand

Chairman of the Board

* 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 PRESIDENT AND 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 Quarterly Report of TLC Vision Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James B. Tiffany, President and Chief Operating Officer, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 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: May 17, 2010

/s/ James B. Tiffany James B. Tiffany

President and 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-32.3

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 Quarterly Report of TLC Vision Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2010 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. ss. 1350, as adopted pursuant to ss. 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: May 17, 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.