1
Exhibit 2.1
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this 25th day
of June, 1998 between Complete Wellness Centers, Inc., a Delaware corporation
("CWC") and Optimum Health Services, Inc., a Delaware corporation and 86.67%
owned subsidiary of CWC ("Optimum").
WITNESSETH
WHEREAS, CWC controls, either through 100% or majority ownership, seven
separate operating subsidiaries and is the managing member of a limited
liability corporation;
WHEREAS, all of CWC's subsidiaries are focused in the healthcare industry
and each delivers a unique product or service sold to consumers directly or
through their sister companies.
WHEREAS, CWC provides administrative support services to such operating
subsidiaries including: (1) management services; (2) legal services; (3)
accounting services; (4) purchasing services, and (5) support services (the "CWC
Business");
WHEREAS, Optimum is a healthcare Management Service Organization ("MSO")
which provides services to health maintenance organizations including developing
provider networks, accepting delegated claims, credentialing, utilization
management, quality assurance, marketing and provider relations (the "Optimum
Business");
WHEREAS, the Optimum Business is conducted solely through Optimum and
its Subsidiaries;
WHEREAS, the Board of Directors of CWC has determined that it is in the
best interest of CWC and the stockholders of CWC to separate the Optimum
Business from the CWC Business through the distribution (the "Distribution") to
the holders of CWC Common Stock (as defined herein) all of the outstanding
shares of Optimum Common Stock (as defined herein) owned by CWC on May 13, 1998.
WHEREAS, in order to effect such separation, CWC will transfer to Optimum
prior to the Distribution certain assets and liabilities relating principally to
the Optimum Business not currently held by Optimum or an Optimum Subsidiary and
Optimum will transfer to CWC any assets and liabilities relating principally to
the CWC Business or the CWC Subsidiaries not currently held by CWC or a CWC
Subsidiary, if any, (the "Preliminary Transfers").
WHEREAS, in connection with the Distribution, CWC and Optimum have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
2
I. DEFINITIONS
Section 1.01. General.
As used in this Agreement, the following terms shall have the
following meanings:
Action: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: With respect to any specified Person, any other Person directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control,"
when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of CWC shall not include
Optimum, the Optimum Subsidiaries or any other Person which otherwise would be
an Affiliate of CWC by reason of CWC's ownership of the capital stock of Optimum
prior to the Distribution or the fact that any officer or director of Optimum or
any of the Optimum Subsidiaries shall also serve as an officer or director of
CWC or any of the CWC Subsidiaries, and (ii) the Affiliates of Optimum shall not
include CWC, the CWC Subsidiaries, or any other Person which otherwise would be
an Affiliate of Optimum by reason of CWC's ownership of the capital stock of
Optimum prior to the Distribution or the fact that any officer or director of
Optimum or any of the Optimum Subsidiaries shall also serve as an officer or
director of CWC or any of the CWC Subsidiaries.
Agent: American Stock Transfer & Trust Company, as distribution agent
appointed by Optimum Health Services, Inc. to distribute the Optimum Common
Stock pursuant to the Distribution.
Assumed Financing Obligations: All Financing Obligations of CWC and
its Subsidiaries set forth on the Optimum Pro Forma Balance Sheet.
CWC Assets: The assets of CWC and the CWC Subsidiaries including, without
limitation, (i) the capital stock of the CWC Subsidiaries; (ii) the CWC Books
and Records; (iii) all of the assets expressly to be retained by, or assigned or
allocated to, CWC or any of the CWC Subsidiaries under this Agreement or the
Related Agreements; and (iv) any other assets of CWC and its Subsidiaries not
composing Optimum Assets.
CWC Board: The Board of Directors of CWC as it is constituted prior to the
Distribution Date.
CWC Books and Records: The books and records (including computerized
records) of CWC and the CWC Subsidiaries and any other books and records of
CWC's Subsidiaries which relate principally to the CWC Group, are necessary to
conduct the CWC Business or are required by law to be retained by CWC or a CWC
Subsidiary, including, without limitation, (i) all such
2
3
books and records relating to CWC Employees, (ii) all files relating to any
Action being retained or assumed by CWC as part of the CWC Liabilities, and
(iii) original corporate minute books, stock ledgers and certificates and
corporate seals, and all licenses, leases, agreements and filings, relating to
CWC, the CWC Subsidiaries or the CWC Business (but not including the Optimum
Books and Records, provided that CWC shall have access to, and shall have the
right to obtain duplicate copies of, the Optimum Books and Records in accordance
with the provisions of Article VII).
CWC Business: The business conducted by Complete Wellness Centers, Inc.,
as referenced in the recitals to this Agreement.
CWC Common Stock: The common stock, par value $.0001665 per share, of
CWC.
CWC Group: CWC and the CWC Subsidiaries, collectively.
CWC Liabilities: (i) All of the Liabilities of CWC and the CWC
Subsidiaries under, or to be retained or assumed by CWC or any of the CWC
Subsidiaries pursuant to, this Agreement or any of the Related Agreements; (ii)
any Financing Obligations of CWC and its Subsidiaries not constituting Optimum
Liabilities; (iii) all Liabilities transferred to CWC or the CWC Subsidiaries in
connection with the Distribution; (iv) all claims, losses, damages, demands,
costs, expenses or Liabilities for Tax (which shall be governed by Sections
5.06, 6.05 and 9.02 hereof and by the Tax Sharing Agreement; (v) all other
Liabilities arising out of, or in connection with, any of the CWC Assets or the
CWC Business; and (vi) to the extent not otherwise provided for, all other
Liabilities of CWC and its Subsidiaries not constituting Optimum Liabilities.
CWC Policies: The Directors and Officers and General Liability policy
effective February, 2 1998 and any other policies current or past, which are
owned or maintained by or on behalf of CWC or any of its Affiliates or
predecessors, which, by mutual agreement of CWC and Optimum are to be assigned
to CWC or to any CWC Subsidiary.
CWC Subsidiaries: All Subsidiaries of CWC, except Optimum and the Optimum
Subsidiaries.
Commission: The Securities and Exchange Commission.
Conveyancing and Assumption Instruments: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
Distribution Date: The date determined by the CWC Board as the date on
which the Distribution shall be effected, which Distribution Date is
contemplated by the CWC Board to occur on or about August 27, 1998.
Distribution Record Date: The date established by the CWC Board as the
date for taking a record of the Holders of record of CWC Common Stock entitled
to participate in the
3
4
Distribution, which Distribution Record Date has been established as May 13,
1998, subject to the fulfillment on or before August 27, 1998 of certain
conditions to the Distribution as provided in Section 4.02.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Financing Obligations: All (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, notes, debentures or similar instruments, (iii)
obligations under capitalized leases and deferred purchase arrangements, (iv)
reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
Holders: The holders of record of CWC Common Stock as of the
Distribution Record Date.
Insurance Administration: With respect to each Policy (including Self
Insurance Programs), the accounting for premiums, retrospectively rated
premiums, defense cost, adjuster's fees, indemnity payments, deductibles and
retentions as appropriate under the terms and conditions of each of the
Policies; and the reporting to excess insurance carriers of any losses or claims
in accordance with Policy provisions, and the distribution of Insurance Proceeds
as contemplated by this Agreement.
Insurance Proceeds: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
Insured Claims: Those Liabilities that, individually or in the aggregate,
are covered within the terms and conditions of any of the Policies (including
Self Insurance Programs), whether or not subject to deductibles, co-insurance,
uncollectability or retrospectively rated premium adjustments, but only to the
extent that such Liabilities are within applicable Policy limits, including
aggregates.
IRS: The Internal Revenue Service.
Liabilities: Any and all debts, liabilities and obligations, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
Optimum Board: The Board of Directors of Optimum.
Optimum Books and Records: The books and records (including computerized
records) of Optimum and the Optimum Subsidiaries and any other books and records
of CWC's
4
5
Subsidiaries which relate principally to Optimum, are necessary to
conduct the Optimum Business, or are required by law to be retained by Optimum
or a Optimum Subsidiary, including, without limitation, (i) all such books and
records relating to Optimum Employees, (ii) all files relating to any Action
being assumed by Optimum as part of the Optimum Liabilities, and (iii) original
corporate minute books, stock ledgers and certificates and corporate seals, and
all licenses, leases, agreements and filings, relating to Optimum, the Optimum
Subsidiaries or the Optimum Business (but not including the CWC Books and
Records, provided that Optimum shall have access to, and have the right to
obtain duplicate copies of, the CWC Books and Records which pertain to the
Optimum Business in accordance with the provisions of Article VII).
Optimum Amended Certificate: The Amendment to the Restated Certificate of
Incorporation of Optimum for the purpose of, among other things, increasing the
number of authorized shares of Optimum capital stock to 10,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock.
Optimum Bylaws: The Restated Bylaws of Optimum, substantially in the
form of Exhibit A, to be in effect at the Distribution Date.
Optimum Certificate: The Restated Certificate of Incorporation of
Optimum, substantially in the form of Exhibit B, to be in effect at the
Distribution Date.
Optimum Common Stock: The common stock, $.01 par value per share, of
Optimum.
Optimum: Optimum and the Optimum Subsidiaries, collectively.
Optimum Assets: (i) All outstanding capital stock of the Optimum
Subsidiaries; (ii) the Optimum Books and Records; (iii) all of the assets
expressly to be retained by, or assigned or allotted to, Optimum or any of the
Optimum Subsidiaries under this Agreement or the Related Agreements; and (iv)
any other assets of CWC and its Subsidiaries used principally in the Optimum
Business.
Optimum Liabilities: (i) All of the Liabilities of the Optimum under, or
to be retained or assumed by Optimum or any of the Optimum Subsidiaries pursuant
to, this Agreement or any of the Related Agreements, including, without
limitation, liabilities arising under the securities or blue sky laws of the
United States or of states or other political subdivisions of the United States
in connection with or related to, information contained in or omitted from the
SB-2 or the Proxy Statement; (ii) all Liabilities for payment of outstanding
drafts of Optimum and its Subsidiaries existing as of the Distribution Date;
(iii) the Assumed Financing Obligations; (iv) all Liabilities of Optimum and the
Optimum Subsidiaries, other than Liabilities transferred to CWC or to any CWC
Subsidiary in connection with the Distribution; and (v) all other Liabilities
arising out of, or in connection with, any of the Optimum Assets or the Optimum
Business; provided, however, that the Optimum Liabilities shall not include (i)
any Financing Obligations of CWC or the Optimum Subsidiaries other than the
Assumed Financing Obligations; and (ii) all claims, losses, damages, demands,
costs, expenses or Liabilities for any Tax (which shall be governed by Sections
5.06, 6.05 and 9.02 hereof and by the Tax Sharing Agreement).
5
6
Optimum Subsidiaries: All Subsidiaries of Optimum.
New Agreements: Tax Sharing Agreement; and Tax Administration Agreement.
Person: Any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
Policies: Insurance policies and insurance contracts of any kind relating
to the Optimum Business or the CWC Business as conducted prior to the
Distribution Date, including without limitation primary and excess policies,
comprehensive general liability policies, automobile, aircraft and workers'
compensation insurance policies, and self-insurance and captive insurance
company arrangements, including any "fronted policies" with respect to Self
Insurance Programs, together with the rights and benefits thereunder.
Privileged Information: All information as to which CWC, Optimum or
any of their Subsidiaries are entitled to assert the protection of a
Privilege.
Privileges: All privileges that may be asserted under applicable law
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
Related Agreements: All of the agreements, instruments,
understandings, assignments or other arrangements set forth in writing, which
are entered into in connection with the transactions contemplated hereby,
including, without limitation: [ ].
SB-2: The Registration Statement on SB-2 under the Exchange Act with
respect to the Optimum Common Stock.
Subsidiary: With respect to any Person, (a) any corporation of which at
least a majority in interest of the outstanding voting stock (having by the
terms thereof voting power under ordinary circumstances to elect a majority of
the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any corporate or non-corporate entity in which such Person,
one or more Subsidiaries of such Person, or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has an ownership interest and which is included in the
consolidated financial reports of such Person consistent with generally accepted
accounting principles.
Tax: The meaning set forth in the Tax Sharing Agreement.
Tax Administration Agreement: The Tax Administration Agreement between CWC
and Optimum pursuant to which such parties will provide to the other certain tax
administration
6
7
services after the consummation of the Distribution, which agreement shall be
entered into on or prior to the Distribution Date in substantially the form
attached hereto as Exhibit N.
Tax Sharing Agreement: The Tax Sharing Agreement between CWC and Optimum
pursuant to which such parties will provide for the allocation of certain tax
liabilities after the consummation of the Distribution, which agreement shall be
entered into on or prior to the Distribution Date in substantially in the form
attached hereto as Exhibit O.
Section 1.02. Terms Defined Elsewhere in Agreement. Each of the
following terms is defined in the Section set forth opposite such term:
II. TRANSFER OF ASSETS
Section 2.01. Transfer of Assets to Optimum.
Prior to the Distribution Date, CWC shall take or cause to be taken all
actions necessary to cause the transfer, assignment, delivery and conveyance to
Optimum or the Optimum Subsidiary designated by Optimum, of all of CWC's and its
Subsidiaries' right, title and interest in any Optimum Assets held, on or prior
to the Distribution Date, by CWC or any CWC Subsidiary.
Section 2.02. Transfers of Assets from Optimum Subsidiaries to CWC or CWC
Subsidiaries.
Prior to the Distribution Date, Optimum shall take or cause to be taken
all action necessary to cause the transfer, assignment, delivery and conveyance
to CWC or the CWC Subsidiary designated by CWC, of all of Optimum's and the
Optimum Subsidiaries' right, title and interest in CWC Assets held, on or prior
to the Distribution Date by Optimum or one of the Optimum Subsidiaries, if any.
Section 2.03. Transfers Not Effected Prior to the Distribution.
To the extent that any transfers contemplated by this Article II shall not
have been fully effected on the Distribution Date, the parties shall cooperate
to effect such transfers as promptly as shall be practicable following the
Distribution Date. Nothing herein shall be deemed to require the transfer of any
assets or the assumption of any Liabilities which by their terms or operation of
law cannot be transferred or assumed; provided, however, that CWC and Optimum
and their respective Subsidiaries and Affiliates shall cooperate in seeking to
obtain any necessary consents or approvals for the transfer of all assets and
Liabilities contemplated to be transferred pursuant to this Article II. In the
event that any such transfer of assets or Liabilities has not been consummated
effective as of the Distribution Date, the party retaining such asset or
Liability shall thereafter hold such asset in trust for the use and benefit of
the party entitled thereto (at the expense of the party entitled thereto) and
retain such Liability for the account of the party by whom such Liability is to
be assumed pursuant hereto, and take such other actions as may be reasonably
required in order to place the parties, insofar as reasonably possible, in the
same position as would have existed had such asset been transferred or such
Liability been assumed as
7
8
contemplated hereby. As and when any such asset or Liability becomes
transferable, such transfer and assumption shall be effected forthwith. The
parties agree that, except as set forth in this Section 2.03, as of the
Distribution Date, each party hereto shall be deemed to have acquired complete
and sole beneficial ownership over all of the assets, together with all rights,
powers and privileges incidental thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Liabilities, and all
duties, obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04. Cooperation Re: Assets.
In the case that at any time after the Distribution Date, Optimum
reasonably determines that any of the CWC Assets are essential for the conduct
of the Optimum Business, or CWC reasonably determines that any of the Optimum
Assets are essential for the conduct of the CWC Business, and the nature of such
assets makes it impracticable for Optimum or CWC, as the case may be, to obtain
substitute assets or to make alternative arrangements on commercially reasonable
terms to conduct their respective businesses, and reasonable provisions for the
use thereof are not already included in the Related Agreements, then Optimum
(with respect to the Optimum Assets) and CWC (with respect to the CWC Assets)
shall cooperate to make such assets available to the other party on commercially
reasonable terms, as may be reasonably required for such party to maintain
normal business operations. However, (i) the usage of such assets by the other
party shall not materially interfere with the use of such assets by the party
holding such assets, and (ii) such assets shall be required to be made available
only until such time as the other party may reasonably obtain substitute assets
or make alternative arrangements on commercially reasonable terms to permit it
to maintain normal business operations.
Section 2.05. No Representations or Warranties; Consents.
Each of the parties hereto understands and agrees that no party hereto is,
in this Agreement, in any Related Agreement, or otherwise, representing or
warranting in any way (i) as to the value or freedom from encumbrance of, or any
other matter concerning, any assets of such party or (ii) as to the legal
sufficiency to convey title to any asset transferred pursuant to this Agreement
or any Related Agreement. It is also agreed and understood that there are no
warranties, express or implied, as to the merchantability or fitness of any of
the assets either transferred to or retained by the parties, as the case may be,
and all such assets shall be "as is, where is" and "with all faults" provided,
however, that the absence of warranties shall have no effect upon the allocation
of Liabilities under this Agreement and provided further that Optimum represents
and warrants that, prior to the Distribution Date, Optimum and the Optimum have
maintained their accounts payable and accounts receivable in a manner consistent
with the customary practices of the Optimum Business. Each party hereto
understands and agrees that no party hereto is, in this Agreement, in any
Related Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications contemplated
by this Agreement, any Related Agreement or otherwise will satisfy the
provisions of any or all applicable laws or judgments or other instruments or
agreements relating to such assets. Notwithstanding the foregoing, the parties
shall use their good faith efforts to obtain all consents
8
9
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications which may be reasonably required for the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, and shall take all such further reasonable actions as shall be
reasonably necessary to preserve for each of the Optimum and the CWC Group, to
the greatest extent feasible, the economic and operational benefits of the
allocation of assets and liabilities provided for in this Agreement. In case at
any time after the Distribution Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action.
Section 2.06. Conveyancing and Assumption Instruments.
In connection with the Preliminary Transfers described in Article II and
Article III hereof, and the assignment of assets and the assumption of
Liabilities contemplated by any Related Agreements, the parties shall execute,
or cause to be executed by the appropriate entities, the Conveyancing and
Assumption Instruments in such forms as the parties shall reasonably agree. The
transfer of capital stock shall be effected by means of delivery of stock
certificates and executed stock powers and notation on the stock record books of
the corporation or other legal entities involved and, to the extent required by
applicable law, by notation on public registries.
Section 2.07. Cash Allocation; Cash Management.
(a) Cash Allocation on the Distribution Date.
The allocation between CWC and Optimum of all domestic and international
cash bank balances, short-term investments and outstanding checks and drafts of
CWC and its Subsidiaries recorded per the books of CWC and its Subsidiaries
shall be in accordance with all cash received in, and deposits of cash, checks,
drafts or short-term investments made to, depository accounts, as of the close
of [business on] the Distribution Date shall be remitted to Optimum.
All Liabilities for payment of outstanding checks or drafts drawn on or
prior to the Distribution Date on accounts allocated to Optimum shall be paid by
Optimum.
(b) Cash Management After the Distribution Date. All xxxxx cash,
depository and disbursement accounts of CWC on the Distribution Date shall be
transferred to Optimum after the allocations are made pursuant to this Section
2.07.
(c) For purposes of this Section 2.07, the parties contemplate that the
Optimum Business and the CWC Business, including, but not limited to, the
administration of accounts payable and accounts receivable, will be conducted in
the ordinary course of business and consistent with the past policies and
practices of Optimum prior the Distribution Date.
(d) For purposes of this Section 2.07, any disagreement or dispute shall
be resolved by the Chief Financial Officer of Optimum, which resolution shall be
binding and final upon each of the parties hereto and not subject to further
review.
9
10
Section 2.08. Agreements Between CWC and Optimum.
On or prior to the Distribution Date, CWC and Optimum shall enter into
the New Agreements.
III. ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. Assumption and Satisfaction of Liabilities.
Except as set forth in one or more of the Related Agreements, effective as
of and after the Distribution Date, (a) Optimum shall, and/or shall cause the
Optimum Subsidiaries to, assume, pay, perform and discharge in due course all of
the Optimum Liabilities, and (b) CWC shall, and/or shall cause the CWC
Subsidiaries to, assume, pay, perform and discharge in due course all of the CWC
Liabilities.
IV. THE DISTRIBUTION
Section 4.01. Cooperation Prior to the Distribution.
(a) Optimum and CWC shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(b) Optimum and CWC shall use all reasonable efforts to obtain any
third-party consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").
(c) Optimum and CWC will use all reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary or
desirable under applicable law, to consummate the transactions contemplated
under this Agreement and the Related Agreements.
Section 4.02. CWC Board Action; Conditions Precedent to the
Distribution.
The CWC Board, in its sole discretion, has established the Record Date as
May 13, 1998, and the Distribution Date and any appropriate procedures in
connection with the Distribution to coincide with the SEC effective date. In no
event shall the Distribution occur unless the following conditions shall have
been satisfied:
(a) the transactions contemplated in Article II and Article III shall have
been consummated in all material respects;
(b) the Optimum Board members, comprised as contemplated by Section 6.01,
shall have been elected by Optimum, and the Optimum Certificate and
Optimum Bylaws shall have been adopted and shall be in effect;
10
11
(c) the Ruling Request shall have been granted in form and substance
satisfactory to the CWC Board, in its sole discretion and the
representations made to the IRS therein shall be true in all
material respects;
(d) the SB-2 shall have been declared effective by the Commission;
(e) Optimum and CWC shall have entered into the Related Agreements to
which they are a party and each of the transactions contemplated by
the Related Agreements to be consummated on or prior to the
Distribution Date shall have been consummated;
(f) all necessary regulatory approvals and consents of third parties shall
have been received;
(g) Optimum shall have obtained, or CWC shall have obtained for Optimum,
insurance (or binders therefor) providing coverage to Optimum
similar to the coverage provided by insurance in place prior to the
Distribution Date; and,
(h) all financing arrangements with respect to CWC and Optimum
satisfactory to the CWC and Optimum Boards shall be in place.
provided, however, that (x) any such condition may be waived by the CWC Board in
its sole discretion, and (y) the satisfaction of such conditions shall not
create any obligation on the part of CWC or any other party hereto to effect the
Distribution or in any way limit CWC's power of termination set forth in Section
9.08 or alter the consequences of any such termination from those specified in
such Section.
Section 4.03. The Distribution.
On the Distribution Date, or as soon thereafter as practicable, subject to
the conditions and rights of termination set forth in this Agreement, CWC shall
deliver to the Agent a share certificate representing all of the then
outstanding shares of Optimum Common Stock owned by CWC, endorsed in blank, and
shall instruct the Agent to distribute to each Holder, on or as soon as
practicable following the Distribution Date, a certification, or if requested by
such Holder, a certificate, representing one share of Optimum Common Stock for
each twelve shares of CWC Common Stock so held. Optimum agrees to provide all
share certificates that the Agent shall require in order to effect the
Distribution.
V. INDEMNIFICATION
Section 5.01. Indemnification by CWC.
Except as otherwise expressly set forth in a Related Agreement, CWC shall
indemnify, defend and hold harmless Optimum and each of the Optimum
Subsidiaries, and each of their respective directors, officers, employees,
agents and Affiliates and each of the heirs, executors, successors and assigns
of any of the foregoing (the "Optimum Indemnities") from and against any and all
Indemnifiable Losses incurred or suffered by any of the Optimum Indemnities and
11
12
arising out of or due to the failure or alleged failure of CWC, any CWC
Subsidiaries, or any of their Affiliates to pay, perform or otherwise discharge
in due course any of the CWC Liabilities or comply with the provisions of
Section 6.04. To the extent that counsel is provided to Optimum under this
Indemnification, such counsel shall be selected by CWC and such counsel may
include its in-house corporate counsel.
Section 5.02. Indemnification by Optimum.
Except as otherwise expressly set forth in a Related Agreement, Optimum
shall indemnify, defend and hold harmless CWC and each of the CWC Subsidiaries,
and each of their respective directors, officers, employees, agents and
Affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (the "CWC Indemnities") from and against any and all Indemnifiable
Losses incurred or suffered by any of the CWC Indemnities and arising out of or
due to the failure or alleged failure of Optimum, any Optimum Subsidiaries, or
any of their Affiliates to pay, perform or otherwise discharge in due course any
of the Optimum Liabilities or comply with the provisions of Section 6.04. To the
extent that counsel is provided to CWC under this Indemnification, such counsel
shall be selected by Optimum and such counsel may include its in-house corporate
counsel.
Section 5.03. Insurance Proceeds.
The amount which any party (an "Indemnifying Party") is or may be required
to pay to any other Person (an "Indemnified Person") pursuant to Section 5.01 or
Section 5.02 shall be reduced (including, without limitation, retroactively) by
any Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnified Party in reduction of the related Indemnifiable Loss. If an
Indemnified Party shall have received the payment required by this Agreement
from an Indemnifying Party in respect of an Indemnifiable Loss and shall
subsequently actually receive Insurance Proceeds, or other amounts in respect of
such Indemnifiable Loss as specified above, then such Indemnified Party shall
pay to such Indemnifying Party a sum equal to the amount of such Insurance
Proceeds or other amounts actually received.
Section 5.04. Procedure for Indemnification.
(a) Except as may be set forth in a Related Agreement, if an Indemnified
Party shall receive notice or otherwise learn of the assertion by a Person
(including, without limitation, any governmental entity) who is not a party to
this Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person or its Affiliate of any Action with respect to
which an Indemnifying Party may be obligated to provide indemnification pursuant
to this Agreement (a "Third-Party Claim"), such Indemnified Party shall give
such Indemnifying Party written notice thereof promptly after becoming aware of
such Third-Party Claim; provided, that the failure of any Indemnified Party to
give notice as required by this Section 5.04 shall not relieve the Indemnifying
Party of its obligations under this Article V, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been or
may be sustained by such Indemnified Party.
12
13
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnified Party is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 30 days
of the receipt of notice from an Indemnified Party in accordance with Section
5.04(a) (or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnified Party of its election whether to
assume responsibility for such Third-Party Claim (provided that if the
Indemnifying Party does not so notify the Indemnified Party of its election
within 30 days after receipt of such notice from the Indemnified Party, the
Indemnifying Party shall be deemed to have elected not to assume responsibility
for such Third-Party Claim), and such Indemnified Party shall cooperate in the
defense or settlement or compromise of such Third-Party Claim. After notice from
an Indemnifying Party to an Indemnified Party of its election to assume
responsibility for a Third-Party Claim, such Indemnifying Party shall not be
liable to such Indemnified Party under this Article V for any legal or other
expenses (except expenses approved in advance by the Indemnifying Party)
subsequently incurred by such Indemnified Party in connection with the defense
thereof; provided, that if the defendants in any such claim include both the
Indemnifying Party and one or more Indemnified Parties and in such Indemnified
Parties' reasonable judgment a conflict of interest between such Indemnified
Parties and such Indemnifying Party exists in respect of such claim, such
Indemnified Parties shall have the right to employ separate counsel and in that
event the reasonable fees and expenses of such separate counsel (but not more
than one separate counsel reasonably satisfactory to the Indemnifying Party)
shall be paid by such Indemnifying Party. If an Indemnifying Party elects not to
assume responsibility for a Third-Party Claim (which election may be made only
in the event of a good faith dispute that a claim was inappropriately tendered
under Section 5.01 or 5.02, as the case may be) such Indemnified Party may
defend or (subject to the following sentence) seek to compromise or settle such
Third-Party Claim. Notwithstanding the foregoing, an Indemnified Party may not
settle or compromise any claim without prior written notice to the Indemnifying
Party, which shall have the option within ten days following the receipt of such
notice (i) to disapprove the settlement and assume all past and future
responsibility for the claim, including reimbursing the Indemnified Party for
prior expenditures in connection with the claim, or (ii) to disapprove the
settlement and continue to refrain from participation in the defense of the
claim, in which event the Indemnifying Party shall have no further right to
contest the amount or reasonableness of the settlement if the Indemnified Party
elects to proceed therewith, or (iii) to approve the amount of the settlement,
reserving the Indemnifying Party's right to contest the Indemnified Party's
right to indemnity, or (iv) to approve and agree to pay the settlement. In the
event the Indemnifying Party makes no response to such written notice from the
Indemnity, the Indemnifying Party shall be deemed to have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to compromise
any Third-Party Claim, the Indemnified Party shall make available to such
Indemnifying Party any personnel and any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense.
(d) Any claim on account of an Indemnifiable Loss which does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnified Party to the applicable
13
14
Indemnifying Party. Such Indemnifying Party shall have a period of 15 days after
the receipt of such notice within which to respond thereto. If such Indemnifying
Party does not respond within such 15-day period, such Indemnifying Party shall
be deemed to have refused to accept responsibility to make payment. If such
Indemnifying Party does not respond within such 15-day period or rejects such
claim in whole or in part, such Indemnified Party shall be free to pursue such
remedies as may be available to such party under applicable law or under this
Agreement.
(e) In addition to any adjustments required pursuant to Section 5.03, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnified Party to the
Indemnifying Party.
(f) In the event of payment by an Indemnifying Party to any Indemnified
Party in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnified Party as to any
events or circumstances in respect of which such Indemnified Party may have any
right or claim relating to such Third-Party Claim against any claimant or
plaintiff asserting such Third-Party Claim. Such Indemnified Party shall
cooperate with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated right or
claim.
Section 5.05. Remedies Cumulative.
The remedies provided in this Article V shall be cumulative and shall not
preclude assertion by any Indemnified Party of any other rights or the seeking
of any and all other remedies against any Indemnifying Party.
Section 5.06. After-Tax Indemnification Payments.
Except as otherwise expressly provided herein or in a Related Agreement,
any indemnification payment made by any Indemnifying Party under this Article V
shall be computed by taking into account the value of any and all applicable
deductions, losses, credits, offsets or other items for Federal, State or other
Tax purposes attributable to the payment of the Indemnified Losses by the
Indemnified Party attributable to receipt of the indemnification payment.
Section 5.07. Survival of Indemnities.
The obligations of each of Optimum and CWC under this Article V shall
survive the sale or other transfer by it of any assets or businesses or the
assignment by it of any Liabilities, with respect to any Indemnifiable Loss of
the other related to such assets, businesses or Liabilities.
14
15
VI. CERTAIN ADDITIONAL MATTERS.
Section 6.01. Optimum Board.
Optimum and CWC shall take all actions which may be required to appoint as
officers and directors of Optimum those persons named in the SB-2 (as may be
altered or supplemented prior to the date hereof by the CWC Board and the
Optimum Board) to constitute, effective as of the Distribution Date, the
officers and the directors of Optimum.
Section 6.02. CWC and Optimum Board.
C. Xxxxxx XxXxxxxx shall serve as a director of both Optimum and CWC.
Section 6.03. Certificate and Bylaws.
(a) On or prior to the Distribution Date, Optimum shall adopt the Optimum
Certificate and the Optimum Bylaws, and shall file the Optimum Certificate with
the Secretary of State of the State of Delaware. CWC shall provide all necessary
shareholder approvals for the Optimum Certificate prior to the filing of the
Optimum Certificate with the Secretary of State of the State of Delaware.
(b) On or prior to the Distribution Date, CWC shall obtain all necessary
corporate approvals (including the approval by the holders of CWC Common Stock)
to the CWC Amended Certificate, and shall file the CWC Amended Certificate with
the Secretary of State of the State of Delaware.
Section 6.04. Certain Post-Distribution Transactions.
Each of CWC and Optimum shall, and shall cause each of their respective
Subsidiaries to, comply in all material respects with each representation and
statement made, or to be made, to any taxing authority in connection with the
IRS Ruling or any other ruling obtained, or to be obtained, by CWC and Optimum
acting together, from any such taxing authority with respect to any transaction
contemplated by this Agreement.
Section 6.05. Sales and Transfer Taxes.
CWC and Optimum agree to cooperate to determine the amount of sales,
transfer or other taxes or fees, including, without limitation, all real estate,
patent, trademark and transfer taxes and recording fees payable in connection
with the transactions contemplated by the Agreement (the "Transaction Taxes").
CWC agrees to file promptly and timely the returns for such Transaction Taxes
and Optimum will join in the execution of any such tax returns or other
documentation. Payment of all such Transaction Taxes shall be the responsibility
of CWC and Optimum on a 50%-50% basis.
15
16
VII. ACCESS TO INFORMATION AND SERVICES
Section 7.01. Provision of Corporate Records.
(a) Except as may otherwise be provided in a Related Agreement, CWC shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at Optimum's cost) to Optimum of the Optimum
Books and Records in its possession, except to the extent such items are already
in the possession of Optimum or a Optimum Subsidiary. The Optimum Books and
Records shall be the property of Optimum, but the Optimum Book and Records that
reasonably relate to the CWC business shall be available to CWC for review and
duplication until CWC shall notify Optimum in writing that such records are no
longer of use to CWC.
(b) Except as otherwise provided in a Related Agreement, Optimum shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at CWC's cost) to CWC of the CWC Books and
Records in its possession, except to the extent such items are already in the
possession of CWC. The CWC Books and Records shall be the property of CWC, but
the CWC Books and Records that reasonably relate to the Optimum Business shall
be available to Optimum for review and duplication until Optimum shall notify
CWC in writing that such records are no longer of use to Optimum.
Section 7.02. Access to Information.
Except as otherwise provided in a Related Agreement, from and after the
Distribution Date, CWC shall afford to Optimum and its authorized accountants,
counsel and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information relating to
pre-Distribution operations (collectively, "Information") within CWC's
possession insofar as such access is reasonably required by Optimum for the
conduct of its business, subject to appropriate restrictions for classified or
Privileged Information. Similarly, except as otherwise provided in a Related
Agreement, Optimum shall afford to CWC and its authorized accountants, counsel
and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within
Optimum's possession, insofar as such access is reasonably required by CWC for
the conduct of its business, subject to appropriate restrictions for classified
or Privileged Information. Information may be requested under this Article VII
for the legitimate business purposes of either party, including without
limitation, audit, accounting, claims (including claims for indemnification
hereunder), litigation and tax purposes, as well as for purposes of fulfilling
disclosure and reporting obligations and for performing this Agreement and the
transactions contemplated hereby. The parties hereby agree that Optimum shall
also grant to CWC reasonable access to the computer systems maintained by
Optimum after the Distribution that contain data and other information
reasonably related to the CWC Assets or the CWC Business, for purposes of review
and retrieval of such data (including the generation of reports containing such
data).
16
17
Section 7.03. Production of Witnesses.
At all times from and after the Distribution Date, each of Optimum and CWC
shall use reasonable efforts to make available to the other, upon written
request, its and its Subsidiaries' officers, directors, employees and agents as
witnesses to the extent that such persons may reasonably be required in
connection with any Action.
Section 7.04. Reimbursement.
Except to the extent otherwise contemplated in any Related Agreement, a
party providing Information or witnesses to the other party under this Article
VII shall be entitled to receive from the recipient, upon the presentation of
invoices therefor, payments of such amounts, relating to supplies, disbursements
and other out-of-pocket expenses (at cost) and direct and indirect expenses of
employees who are witnesses or otherwise furnish assistance (at cost), as may be
reasonably incurred in providing such Information or witnesses.
Section 7.05. Retention of Records.
Except as otherwise required by law or agreed to in a Related Agreement or
otherwise in writing, each of Optimum and CWC may destroy or otherwise dispose
of any of the Information, which is material Information and is not contained in
other Information retained by CWC or Optimum, as the case may be, at any time
after the tenth anniversary of this Agreement, provided that, prior to such
destruction or disposal, (a) it shall provide no less than 90 or more than 120
days prior written notice to the other, specifying in reasonable detail the
Information proposed to be destroyed or disposed of and (b) if a recipient of
such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the Information proposed to be destroyed or
disposed of be delivered to such requesting party, the party proposing the
destruction or disposal shall promptly arrange for the delivery of such of the
Information as was requested at the expense of the party requesting such
Information.
Section 7.06. Confidentiality.
Each of CWC and its Subsidiaries on the one hand, and Optimum and its
Subsidiaries on the other hand, shall hold, and shall cause its consultants and
advisors to hold, in strict confidence, all Information concerning the other in
its possession or furnished by the other or the other's representatives pursuant
to this Agreement (except to the extent that such Information has been (i) in
the public domain through no fault of such party or (ii) later lawfully acquired
from other sources by such party), and each party shall not release or disclose
such Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers and other consultants and advisors, unless
compelled to disclose by judicial or administrative process or, as reasonably
advised by its counsel, by other requirements of law, or unless such Information
is reasonably required to be disclosed in connection with (x) any litigation
with any third-parties or litigation between the CWC Group and the Optimum , (y)
any contractual agreement to which the CWC Group or the Optimum are currently
parties, or (z) in exercise of either party's rights hereunder.
17
18
Section 7.07. Privileged Matters.
Optimum and CWC recognize that legal and other professional services that
have been and will be provided prior to the Distribution Date have been and will
be rendered for the benefit of both the CWC Group and the Optimum and that both
the CWC Group and the Optimum should be deemed to be the client for the purposes
of asserting all Privileges.
To allocate the interests of each party in the Privileged Information, the
parties agree as follows:
(a) CWC shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the CWC Group, whether or not the Privileged Information is in the
possession of or under the control of CWC or Optimum. CWC shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information that relates solely to the subject matter
of any claims constituting CWC Liabilities, now pending or which may be asserted
in the future, in any lawsuits or other proceedings initiated against or by CWC,
whether or not the Privileged Information is in the possession of or under the
control of CWC or Optimum.
(b) Optimum shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the Optimum , whether or not the Privileged Information is in the
possession of or under the control of CWC or Optimum. Optimum shall also be
entitled, in perpetuity, to control the assertion or waiver of all Privileges in
connection with Privileged Information which relates solely to the subject
matter of any claims constituting Optimum Liabilities, now pending or which may
be asserted in the future, in any lawsuits or other proceedings initiated
against or by Optimum, whether or not the Privileged Information is in the
possession of or under the control of CWC or Optimum.
(c) Optimum and CWC agree that they shall have a shared Privilege, with
equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters which involve both Optimum and CWC or in
respect of which both Optimum and CWC retain any responsibility or liability
under this Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between a member of the CWC
Group and a member of the Optimum, either party may waive a Privilege in which
the other party has a shared Privilege, without obtaining the consent of the
other party, provided that such waiver of a shared Privilege shall be effective
only as to the use of Information with respect to the litigation
18
19
or dispute between the CWC Group and the Optimum, and shall not operate as a
waiver of the shared Privilege with respect to third-parties.
(f) If a dispute arises between the parties regarding whether a Privilege
should be waived to protect or advance the interest of either party, each party
agrees that it shall negotiate in good faith, shall endeavor to minimize any
prejudice to the rights of the other party, and shall not unreasonably withhold
consent to any request for waiver by the other party. Each party specifically
agrees that it will not withhold consent to waiver for any purpose except to
protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other request
which arguably calls for the production or disclosure of Information subject to
a shared Privilege or as to which the other party has the sole right hereunder
to assert a Privilege, or if any party obtains knowledge that any of its current
or former directors, officers, agents or employees have received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Optimum Books and Records and the CWC Books and
Records and other Information between CWC and its Subsidiaries and Optimum and
its Subsidiaries is made in reliance on the agreement of Optimum and CWC, as set
forth in Sections 7.06 and 7.07, to maintain the confidentiality of Privileged
Information and to assert and maintain all applicable Privileges. The access to
information being granted pursuant to Sections 7.01 and 7.02 hereof, the
agreement to provide witnesses and individuals pursuant to Section 7.03 hereof
and the transfer of Privileged Information between CWC and its Subsidiaries and
Optimum and its Subsidiaries pursuant to this Agreement shall not be deemed a
waiver of any Privilege that has been or may be asserted under this Agreement or
otherwise.
VIII. INSURANCE.
Section 8.01. Policies and Rights Included Within the Optimum Assets.
Without limiting the generality of the definition of the Optimum Assets or
the effect of Section 2.01, the Optimum Assets shall include (a) any and all
rights of an insured party under each of the Shared Policies, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer, with respect to all injuries, losses, liabilities, damages and
expenses incurred or claimed to have been incurred on or prior to the
Distribution Date by any party in or in connection with the conduct of the
Optimum or, to the extent any claim is made against Optimum, any of its
Subsidiaries or the Optimum, and which injuries, losses, liabilities, damages
and expenses may arise out of insured or insurable occurrences or events under
one or more of the Shared Policies; provided, however, that nothing in this
clause shall be deemed to constitute (or to reflect) the assignment of the
Shared Policies, or any of them, to Optimum and (b) the Optimum Policies.
19
20
Section 8.02. Post-Distribution Date Claims.
(a) If, subsequent to the Distribution Date, any person, corporation, firm
or entity shall assert a claim against Optimum or any of its Subsidiaries with
respect to any injury, loss, liability, damage or expense incurred or claimed to
have been incurred prior to the Distribution Date in, or in connection with, the
conduct of the Optimum Business or, to the extent any claim is made against
Optimum or any of its Subsidiaries, the Optimum Business, and which injury,
loss, liability, damage or expense may arise out of insured or insurable
occurrences or events under one or more of the Shared Policies, CWC shall at the
time such claim is asserted be deemed to assign, without need of further
documentation, to Optimum any and all rights of an insured party under the
applicable Shared Policy with respect to such asserted claim, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer; provided, however, that nothing in this sentence shall be deemed
to constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to Optimum.
(b) If, subsequent to the Distribution Date, any person, corporation, firm
or entity shall assert a claim against CWC or any of its Subsidiaries with
respect to any injury, loss, liability, damage or expense incurred or claimed to
have been incurred prior to the Distribution Date and which injury, loss,
liability, damage or expense may arise out of insured or insurable occurrences
or events under one or more of the Shared Policies, Optimum shall at the time
such claim is asserted be deemed to assign, without need of further
documentation, to CWC any and all rights of an insured party under the
applicable Shared Policy with respect to such asserted claim, specifically
including rights of indemnity and the right to be defended by or at the expense
of the insurer; provided, however, that nothing in this sentence shall be deemed
to constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to CWC.
Section 8.03. Administration and Reserves.
(a) Notwithstanding the provisions of Article III, but subject to any
contrary provisions of any Related Agreement, from and after the Distribution
Date:
(i) Optimum shall be entitled to any reserves established by CWC or
any of its Subsidiaries, or the benefit of reserves held by any insurance
carrier, with respect to the Optimum Liabilities; and
(ii) CWC shall be entitled to any reserves established by Optimum or
any of its Subsidiaries, or the benefit of reserves held by any insurance
carrier, with respect to the CWC Liabilities.
(b) Insurance Premiums. Optimum shall have the right but not the
obligation to pay the premiums, to the extent that CWC does not pay premiums
with respect to CWC Liabilities (retrospectively rated or otherwise), with
respect to Shared Policies and the CWC Policies, as required under the terms and
conditions of the respective Policies, whereupon CWC shall forthwith reimburse
Optimum for that portion of such premiums paid by Optimum as are attributable to
the CWC Liabilities. CWC shall provide continued coverage under its director and
officer liability insurance policy for a period of not less than one year for
acts which took place
20
21
or were alleged to have taken place prior to the Distribution Date covering
persons who were directors and officers of CWC prior to the Distribution Date.
Fifty percent of the additional premiums, if any, for such coverage shall be
reimbursed by Optimum. Such coverage for director and officer liability
insurance shall not be discontinued by CWC without the consent of Optimum, which
consent shall not be unreasonably withheld.
(c) Allocation of Insurance Proceeds. Insurance Proceeds received with
respect to claims, costs and expenses under the Policies shall be paid to
Optimum with respect to the Optimum Liabilities and to CWC with respect to the
CWC Liabilities. Payment of the allocable portions of indemnity costs of
Insurance Proceeds resulting from the liability policies will be made to the
appropriate party upon receipt from the insurance carrier. In the event that the
aggregate limits on any Policies are exceeded, the parties agree to provide an
equitable allocation of Insurance Proceeds received after the Distribution Date
based upon their respective bona fide claims. The parties agree to use their
best efforts to cooperate with respect to insurance matters.
Section 8.04. Agreement for Waiver of Conflict and Shared Defense.
In the event that Insured Claims of both Optimum and CWC exist relating to
the same occurrence, Optimum and CWC agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this paragraph shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
IX. MISCELLANEOUS.
Section 9.01. Complete Agreement; Construction.
This Agreement, including the Schedules and Exhibits and the Related
Agreements and other agreements and documents referred to herein, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Related Agreements, then the Related Agreements shall
control.
Section 9.02. Tax Sharing Agreement; After-Tax Payments.
(a) Other than as provided in this Section 9.02 and Sections 5.06 and
6.05, this Agreement shall not govern any Tax, and any and all claims, losses,
damages, demands, costs, expenses, liabilities, refunds, deductions, write-offs,
or benefits relating to Taxes shall be exclusively governed by the Tax Sharing
Agreement or the Tax Administration Agreement.
(b) If, at the time Optimum is required to make any payment to CWC under
this Agreement, CWC owes Optimum any amount under the Tax Sharing Agreement,
then such amounts shall be offset and the excess shall be paid by the party
liable for such excess. Similarly,
21
22
if, at the time CWC is required to make any payment to Optimum under this
Agreement, Optimum owes CWC any amount under the Tax Sharing Agreement, then
such amounts shall be offset and the excess shall be paid by the party liable
for such excess.
Section 9.03. Expenses.
Except as specifically provided in this Agreement or in a Related
Agreement, all costs and expenses incurred in connection with the preparation,
execution, delivery and implementation of this Agreement and with the
consummation of the transactions contemplated by this Agreement shall be paid by
the party incurring the expense. The determination of who has incurred an
expense shall be made by the Chief Financial Officer of Optimum, which
determination shall be binding and final upon each of the parties hereto and not
subject to further review. In addition, it is understood and agreed that [ ]
shall pay the legal, filing, accounting, printing and other accountable and
out-of-pocket expenditures in connection with the preparation, printing and
filing of the SB-2 and the Proxy Statement.
Section 9.04. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to the principles of conflicts of
laws thereof.
Section 9.05. Notices.
All notices and other communications hereunder shall be in writing and
shall be delivered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such other
addresses for a party as shall be specified by like notice) and shall be deemed
given on the date on which such notice is received:
To Optimum:
Optimum Health Services, Inc.
00000 X.X. 00 Xxxxx, Xxxxx #000
Xxxxxxxxxx, XX 00000
Attention: General Counsel
To CWC:
Complete Wellness Centers, Inc.
000 00xx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: General Counsel
Section 9.06. Amendments.
This Agreement may not be modified or amended except by an agreement in
writing signed by the parties.
22
23
Section 9.07. Successors and Assigns.
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
Section 9.08. Termination.
This Agreement may be terminated and the Distribution abandoned at any
time prior to the Distribution Date by and in the sole discretion of the CWC
Board without the approval of Optimum's or of CWC's stockholders. In the event
of such termination, CWC will pay for all costs incurred in contemplation of the
terminated distribution including, but not limited to, legal and accounting
fees.
Section 9.09. Subsidiaries.
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.10. No Third-Party Beneficiaries.
Except for the provisions of Article VI relating to Indemnities, this
Agreement is solely for the benefit of the parties hereto and their respective
Subsidiaries and Affiliates and should not be deemed to confer upon
third-parties any remedy, claim, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 9.11. Titles and Headings.
Titles and headings to sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
Section 9.12. Exhibits and Schedules.
The Exhibits and Schedules shall be construed with and as an integral part
of this Agreement to the same extent as if the same had been set forth verbatim
herein.
Section 9.13 Legal Enforceability.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available to
any party hereto, each party hereto acknowledges that damages would be an
inadequate remedy for any breach of
23
24
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 9.14. Arbitration of Disputes.
(a) Any dispute, controversy or disagreement ("Dispute") between the
Parties related to the obligations of the parties under this Agreement in
respect to which an amicable resolution cannot be reached shall be submitted for
mediation to a committee made up of an equal number of non-common members of
each company's Board of Directors ("Committee"). Any award issued as a result of
such arbitration shall be final and binding between the parties thereto and
shall be enforceable by any court having jurisdiction over the party against
whom enforcement was sought and application may be made to such court for
judicial acceptance of the award and order of enforcement. The fees and expenses
of arbitration (including reasonable attorneys' fees) shall be paid by the party
that does not prevail in such arbitration.
(b) Attorneys' Fees. If any party to this Agreement brings an action to
enforce its rights under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses, including without limitation reasonable
attorneys' fees, incurred in connection with such action, including any appeal
of such action.
(c) Nothing contained in this Section 9.14 shall limit or restrict in any
way the right or power of a party at any time to seek injunctive relief in any
court and to litigate the issues relevant to such request for injunctive relief
before such court (i) to restrain the other party from breaching this Agreement
or (ii) for specific enforcement of this Section 9.14. The parties agree that
any legal remedy available to a party with respect to a breach of this Section
9.14 will not be adequate and that, in addition to all other legal remedies,
each party is entitled to an order specifically enforcing this Section 9.14.
(d) The Parties hereby consent to the jurisdiction of the federal courts
located in the State of Delaware for all purposes under this Agreement.
(e) Neither party nor the arbitrators may disclose the existence or
results of any arbitration under this Agreement or any evidence presented during
the course of the arbitration without the prior written consent of both parties,
except as required to fulfill applicable disclosure and reporting obligations,
or as otherwise required by law.
Section 9.15. Prompt Payment.
Where the terms of this Agreement require payment of an amount "as
promptly as possible," "as soon as practicable," or "as soon as possible",
following a specified event, occurrences or date, such payment shall be made
within five (5) business days of such event, occurrence or date.
24
25
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
Complete Wellness Centers, Inc.
By: /s/ C. XXXXXX XXXXXXXX
----------------------
C. Xxxxxx XxXxxxxx
Optimum Health Services, Inc.
By: /s/ XXXXX X. XXXXXXX
----------------------
Xxxxx X. Xxxxxxx
26
INDEX OF EXHIBITS
Exhibit A Optimum Bylaws
Exhibit B Optimum Certificate
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Exhibit J
Exhibit K
Exhibit L
Exhibit M
Exhibit N Tax Administration Agreement
Exhibit O Tax Sharing Agreement
