EXHIBIT 2.1
FIRST AMENDMENT TO STOCK EXCHANGE AGREEMENT
This First Amendment to Stock Exchange Agreement ("First Amendment") is
dated July 20, 2006, and is by and between OraLabs Holding Corp., a Colorado
corporation ("OraLabs"), Partner Success Holdings Limited, a British Virgin
Islands international business company ("PSHL"), and Mr. Wo Xxxx Xx, sole
shareholder of PSHL (the "Shareholder").
WHEREAS, the parties entered into a Stock Exchange Agreement (the
"Exchange Agreement") dated as of March 31, 2006; and
WHEREAS, a form of Indemnification Agreement ("Prior Indemnification
Agreement") is attached to the Exchange Agreement as Exhibit A and the parties
wish to modify the obligations of OraLabs, Inc. (the "Subsidiary") under the
Prior Indemnification Agreement; and
WHEREAS, the parties agree that the form of a revised indemnification
agreement ("New Indemnification Agreement") attached to this First Amendment as
Exhibit 1 and made a part hereof will be signed at Closing under the Exchange
Agreement and will supersede the Prior Indemnification Agreement; and
WHEREAS, by signature below, OraLabs, Inc. (the "Subsidiary") agrees
upon the terms and provisions of the New Indemnification Agreement and the
provisions of this First Amendment applicable to it; and
WHEREAS, the parties wish to make other modifications to the Exchange
Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties agree as follows:
1. Except as expressly modified by this First Amendment, the provisions of
the Exchange Agreement remain in full force and effect. In the event of a
conflict between any provision of this First Amendment and any provision of the
Exchange Agreement, the provision of this First Amendment shall prevail.
Capitalized terms not otherwise defined in this First Amendment will have the
meanings specified for them in the Exchange Agreement.
2. A. The parties acknowledge and agree that under existing provisions of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"), a tax may be payable by OraLabs after
Closing with respect to the portion ("Spinoff Transaction") of the Closing
transactions whereby OraLabs redeems all of its common stock, par value $0.001
per share (the "Common Stock"), owned individually by Xxxx X. Xxxxxxxxx in
exchange for the conveyance to Xx. Xxxxxxxxx of all of the common stock that
OraLabs owns in its Subsidiary. The parties agree that an amount determined by
the excess, if any, of the value of the Subsidiary (the "Subsidiary Value") on
the date of Closing over OraLabs' basis in the common stock of the Subsidiary on
the date of Closing (the "Basis"), multiplied by 34% plus the state income tax
rate, if applicable (the "Spinoff Tax Liability"), will be paid by Subsidiary to
OraLabs as set forth in paragraphs 3 and 5 herein. Prior to Closing, OraLabs
will advise PSHL of the amounts of the estimated Basis and Subsidiary Value.
B. The parties acknowledge that Capitalink, L.C. will determine a range of
values for the Subsidiary as part of its rendering a fairness opinion as
contemplated by the Exchange Agreement. For purposes of this First Amendment,
the parties agree that a value selected by Xx. Xxxxxxxxx in the top half of the
range stated by Capitalink will be the estimated Subsidiary Value for purposes
of calculating the estimated Spinoff Tax Liability to be paid by OraLabs at
Closing. The percentage income tax rate to be applied to any excess of the
Subsidiary Value over the Basis, solely for purposes of Subsidiary making a
payment to OraLabs of such estimated tax liability at Closing, will be 34%. The
Subsidiary acknowledges and agrees that the amount of its estimated Spinoff Tax
Liability is calculated without regard to the actual income tax, if any, that
may be payable by OraLabs for any tax period.
5
3. In order to provide OraLabs with the funds with which to pay the
estimated Spinoff Tax Liability, OraLabs agrees to sell and the Subsidiary
agrees to purchase on the date of Closing such number of shares of Common Stock
(the "Purchased Shares") at a price per share (the "Purchase Price"), determined
in accordance with this Paragraph 3, that is the lesser of (i) such number of
shares of Common Stock that, in the aggregate, have a total Purchase Price equal
to the amount of the Spinoff Tax Liability, or (ii) 100,000 shares of Common
Stock. The Purchase Price per share will be equal to the greater of (iii) $4.00
per share, or (iv) the average of the high and low bid prices for the Common
Stock during the consecutive five (5) day trading period that ends on the date
that is two business days prior to Closing. The PSHL designees will be issued at
Closing such additional number of shares of Common Stock as necessary to retain
a 94% interest in OraLabs after giving effect to the acquisition of the
Purchased Shares. If the aggregate Purchase Price of 100,000 shares of Common
Stock is less than the estimated Spinoff Tax Liability (the "Shortfall Amount"),
the Subsidiary will, at the Closing and simultaneously with the Subsidiary's
acquisition of the Purchased Shares, pay to OraLabs in cash the Shortfall Amount
plus such additional sum (the "Gross-Up Amount") so as to enable OraLabs to net
the Shortfall Amount after paying United States federal and any state income tax
due (giving effect to any reduction of federal taxes due to the payment of state
taxes) with respect to the Subsidiary's payment to OraLabs of the Shortfall
Amount. The Gross-Up Amount shall be calculated by using a 34% federal income
tax rate plus the state income tax rate, if applicable and shall be determined
without regard to the actual income tax that may be payable with respect to such
Shortfall Amount.
4. The Purchased Shares will be "restricted securities". If at any time
during the period of 12 months following the date of Closing under the Exchange
Agreement, OraLabs shall file any registration statement under the Securities
Act of 1933, as amended, with respect to its common stock, OraLabs will notify
the Subsidiary thereof in writing not less than fifteen (15) days prior to
filing the registration statement with the SEC, and the Subsidiary (or its
assigns) will have the right to register all of the Purchased Shares as part of
the registration statement by notifying OraLabs in writing within ten (10) days
after the Subsidiary receives OraLabs' notice. In the Subsidiary's notice to
OraLabs that the Purchased Shares will be included in the registration
statement, the Subsidiary will specify the intended method of distribution of
such shares and such other information as OraLabs or its counsel will reasonably
require. Such registration will be without cost to the Subsidiary except for its
counsel fees and its sales commissions incurred if the Purchased Shares are
sold.
5. The provisions of a Tax Indemnity Agreement that will be separately
negotiated and executed by OraLabs, PSHL and the Subsidiary by no later than
July 14, 2006, and that will be attached to this First Amendment as Exhibit 2,
will govern all matters concerning determinations of the amount of the Spinoff
Tax Liability that occur after Closing.
6. The parties agree that the New Indemnification Agreement attached to
this First Amendment will be executed at Closing and will replace and supersede
the Prior Indemnification Agreement.
7. The parties agree that the shareholders of OraLabs will be asked to
approve the change of OraLabs' domicile from Colorado to Delaware, changes to
OraLabs' Articles of Incorporation to be included in a new Certificate of
Incorporation (collectively, the "Reincorporation"), and a long-term incentive
plan. The parties also agree that the Reincorporation, including the increase in
the number of authorized shares of Common Stock from 25,000,000 to up to
200,000,000, shall be the first item deemed to be completed at Closing.
8. This First Amendment may be executed in counterparts, each such
counterpart being deemed to be an original instrument, and all of such
counterparts shall together constitute one and the same instrument, and
facsimile signatures will be accepted as originals.
[Remainder of page intentionally left blank. Signatures on following page.]
6
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
on the dates specified below.
ORALABS HOLDINGS CORP., a Colorado corporation
By: /s/ Xxxxxxx X. Xxxxxx /s/ Wo Xxxx Xx
-------------------------------------- ------------------------
Xxxxxxx X. Xxxxxx, Authorized Director Wo Xxxx Xx, Individually
Date: Date:
------------------------------------- -------------------
The signature of the undersigned is to evidence its PARTNER SUCCESS HOLDINGS
obligation to comply with the provisions of this First LIMITED, a British Virgin
Amendment that are applicable to it. Islands international
business company
ORALABS, INC., a Colorado corporation
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Wo Xxxx Xx
-------------------------------------- --------------------------
Xxxx X. Xxxxxxxxx, President Wo Xxxx Xx, President and
CEO
Date: Date:
------------------------------------- ---------------------
7
INDEMNIFICATION AGREEMENT
This Agreement is made and entered into this _____ day of ___________
2006, by and between Partner Success Holdings Limited ("PSHL"), OraLabs Holding
Corp. ("OraLabs"), and OraLabs, Inc. (the "Company"), a wholly-owned subsidiary
of OraLabs.
WHEREAS, PSHL and OraLabs have entered into a Stock Exchange Agreement
dated March 31, 2006, as amended, pursuant to which among other things, all of
the issued and outstanding stock of PSHL was acquired by OraLabs in exchange for
the issuance to PSHL's designees of 94% of the total issued and outstanding
shares of Common Stock of OraLabs on a fully diluted basis (the "Exchange
Agreement"); and
WHEREAS, pursuant to the Exchange Agreement, the Company has agreed to
indemnify OraLabs from certain liability as set forth in the Exchange Agreement
and herein.
NOW, THEREFORE, in consideration of the foregoing, it is hereby agreed
as follows:
1. The Company hereby agrees to indemnify OraLabs, PSHL and each of their
respective officers, agents and directors following the Closing, from any
liabilities of any kind or nature, direct or indirect, known or unknown,
contingent or otherwise, that may exist immediately prior to the Closing or that
may be asserted after the Closing Date regarding any claim or liability arising
from the operations of OraLabs or any other matter prior to the Closing,
including without limitation any liability under applicable environmental laws;
(ii) any breach or default in the performance by OraLabs of any covenant or
agreement made by OraLabs or OraLabs, Inc. in the Exchange Agreement; (b) any
breach of any representation or warranty made by OraLabs or OraLabs, Inc. in the
Exchange Agreement; (c) any loss, liability, claim, damage, or expense
(including, but not limited to, any and all expense whatsoever reasonably
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever) relating to the OraLabs
Redemption defined in the Exchange Agreement; and (d) any and all litigation
incident to any of the foregoing.
2. Notwithstanding the foregoing, the indemnity by the Company with respect
to the Spinoff Tax Liability defined in the First Amendment to Stock Exchange
Agreement ("First Amendment"), is not governed by this Agreement. Instead, any
such liability will be determined under and governed solely by the provisions of
a Tax Indemnity Agreement attached to the First Amendment as Exhibit 2. In the
event of a conflict between any provision of this Agreement and any provision of
said Tax Indemnity Agreement, the provision of the Tax Indemnity Agreement
controls.
3. The Company further agrees to perform its obligations under the terms of
Section 7.4 of the Exchange Agreement regarding payments to the holders of
dissenters' shares, such terms being hereby incorporated herein by reference.
4. Any notices or other communications required or permitted hereunder
shall be addressed as follows:
If to the Company: OraLabs, Inc.
c/o Xx. Xxxx X. Xxxxxxxxx, President
00000 Xxxx Xxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Telephone: 000.000.0000
Facsimile: 303.499.6666
1
With copies to: Xxxxxxx X. Xxxx, Esq.
Xxxx, Corn & Xxxxxx, P.C.
000 X. 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
Telephone: 000.000.0000
Facsimile: 303.861.0601
Email: xxxxx@xxxxxxx.xxx
If to OraLabs or PSHL: Mr. Wo Xxxx Xx
Partner Success Holdings Limited
0xx Xxxxx Xxxx Xxxxxxxx
00 Xxxx Xxx Xxxxxx, Xxxxxxxxx
Xxxx Xxxx Special Administrative Region
The People's Republic of China
Telephone: (852)
Facsimile: (852)
Email:
With copies to: Xxxxx X Xxxxxxxxx
Xxxxxxxxx & Associates P.C.
0000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000 0000
Facsimile: (000) 000 0000
Email: xxxxxxxxxxx@xxxxxxx.xxx
Xxxxxxx X. Xxxxx
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxx@xxxx.xxx
Xxxxx Xxxx Wan
Belmont Capital Group Limited
Suite C, 20th Floor, Neich Tower
000 Xxxxxxxxxx Xxxx, Xxxxxxx
Xxxx Xxxx Special Administrative Region
The People's Republic of China
Telephone: (000) 0000 0000
Facsimile: (000) 0000 0000
Email: xxxxxxxx@xxxxx.xxx
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder. Each notice or other communication shall
only be effective and deemed to have been received (i) if given by facsimile,
one business day after such facsimile is transmitted to the facsimile number
specified above, and confirmation of delivery by the sender's machine is given,
(ii) if given by hand delivery, the date of delivery as evidenced by a written
receipt, or (iii) if given by a courier service, the third business day
following the business day of deposit with such service, with shipping charges
for the most expedited delivery prepaid or prearranged. As used herein, a
"business day" means Mondays through Fridays, excluding days (at the location
where the notice is to be delivered) that are holidays for national banks in the
United States.
2
5. The Parties agree that facsimile copies of this Agreement and any
signature thereon shall be as legally binding and enforceable as the original or
copy original of this Agreement or any signatures thereof. This Agreement may be
executed in any number of counterparts, each such counterpart being deemed to be
an original instrument, and all of such counterparts shall together constitute
one and the same instrument.
6. The Parties agree that this Agreement shall be construed in accordance
with the laws of the State of Colorado and that exclusive jurisdiction and venue
for any controversy, claim or suit arising out of or connected with this
Agreement shall be in the courts located in Denver, Colorado.
7. Nothing in this instrument shall be construed to obligate the Company to
indemnify OraLabs or its officers, agents or directors with respect to any
matter caused by PSHL, any of its Shareholders defined in the Exchange Agreement
or any of their respective affiliates, officers, employees, agents, or
representatives.
8. Except with respect to the indemnity described in section 2, the
provisions of this instrument automatically expire and this instrument is then
of no further force or effect as of the date that is twelve months after the
Closing Date under the Exchange Agreement, except with respect to claims made
under this instrument on or before said date.
9. This Agreement supersedes in its entirety the executed Indemnification
Agreement attached to the Stock Exchange Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PSHL: Partner Success Holdings Limited
By: /s/ Wo Xxxx Xx
--------------------------------------------------
Wo Xxxx Xx, President and CEO
The Company: OraLabs, Inc.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------------------------
Xxxx X. Xxxxxxxxx, President
OraLabs: OraLabs Holding Corp.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------------------
3
TAX INDEMNITY AGREEMENT
This Tax Indemnity Agreement ("Agreement") is dated for reference purposes
only __________________, 2006, and is by and between OraLabs, Inc., a Colorado
corporation ("OraLabs"), China Specialty Steel, Inc., formerly known as OraLabs
Holding Corp. a Colorado corporation ("Holding") and Partner Success Holdings
Limited, a British Virgin Islands international business company ("PSHL").
WHEREAS, Holding and PSHL entered into a Stock Exchange Agreement (the
"Exchange Agreement") dated as of May 31, 2006, as amended by First Amendment to
Stock Exchange Agreement ("First Amendment") under which, among other things,
PSHL became on even date herewith (the "Closing Date") a wholly-owned subsidiary
of Holding in consideration for the issuance to the principals of PSHL and their
designees of controlling ownership of Holding; and
WHEREAS, under the Exchange Agreement, such acquisition of the
ownership of PSHL was followed immediately on the Closing Date by the redemption
by Holding of all of the stock of Holding owned individually by Xxxx X.
Xxxxxxxxx ("Xxxxxxxxx") in exchange for the conveyance to Xxxxxxxxx of all of
the stock of OraLabs owned by Holding (the "Redemption Transaction"); and
WHEREAS, the parties agree that the Redemption Transaction is a taxable
transaction under the Internal Revenue Code of 1986, as amended, (the "Code"),
calculated upon the excess, if any, of the value of OraLabs ("OraLabs Value") on
the Closing Date over Holding's basis in the OraLabs' common stock owned by
Holding immediately prior to the distribution of those shares of common stock to
Xxxxxxxxx (the "Basis"), and that income taxes assessed by a State may also be
payable with respect to the Redemption Transaction; and
WHEREAS, on the Closing Date, OraLabs estimated that the Basis is
$________________ and the OraLabs Value is $_________________, (as determined
from a fairness opinion from Capitalink, L.C.); and
WHEREAS, on the Closing Date, the Spinoff Tax Liability (defined below)
was estimated to be $________, and to pay the same, OraLabs purchased shares of
common stock from Holding for the total purchase price of $________________,
[and paid to Holding an additional sum of $____________ (the "Cash Payment")]
(collectively, the "Estimated Tax") plus a Gross-Up Amount (as defined in
Section 5B below) on the Cash Payment, to provide the public company with the
funds to pay the Estimated Tax and taxes thereon; and
WHEREAS, Holding and PSHL have required an indemnity from OraLabs to
the extent that the amount of Spinoff Tax Liability owing with respect to the
Redemption Transaction is Finally Determined to be more than the Estimated Tax,
and OraLabs is willing to provide an indemnity in accordance with the provisions
of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the receipt and sufficiency of which is
acknowledged by the parties, the parties agree as follows:
1. For the purposes of this Agreement, the capitalized terms set forth
below have the meanings set forth in this Section:
1.1 "Final Determination" or "Finally Determined" means with respect to any
liability for Taxes for any period, (a) a final, unappealable decision by a
court of competent jurisdiction, (b) the expiration of applicable statutes of
limitations on assessment of Taxes or filing of claims for refund, (c) the
execution of a closing agreement under section 7121 of the Code or the
acceptance by the IRS of an offer in compromise pursuant to section 7122 of the
Code (or similar agreements with tax authorities entered into under applicable
state or local tax law), but excluding any agreement or compromise that reserves
(whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund and/or the right of the Taxing Authority to assert a further
deficiency, or (d) any other final, irrevocable and unappealable determination
of Taxes for such period.
4
1.2 "IRS" means the United States Internal Revenue Service or any successor
thereto.
1.3 "Income Tax" or "Income Taxes" means Taxes based upon or measured by
net income.
1.4 "Income Tax Return" means a Tax Return relating to the payment or
receipt of any refund of any Income Tax.
1.5 "Neutral Auditors" means a firm of nationally or regionally recognized
independent accountants who shall not have had a material relationship with
OraLabs, Holding or PSHL.
1.6 "Preclosing Taxable Period" means a Taxable Year that ends on or before
the Closing Date.
1.7 "Spinoff Tax Liability" means the excess of the OraLabs Value over the
Basis multiplied by 34% plus the state income tax rate, if applicable.
1.8 "Tax" or "Taxes" means any taxes imposed by any federal, state or local
government or agency thereof within the United States.
1.9 "Tax Practices" means the most recently applied policies, procedures
and practices employed by Holding in the preparation and filing of, and
positions taken on, any Tax Returns of Holding for any Preclosing Taxable
Period.
1.10 "Tax Return" means all returns and other filings relating to, or
required to be filed by any taxpayer in connection with, the payment or receipt
of any refund of any Income Tax.
1.11 "Taxable Year" means a taxable year (which may be shorter than a full
calendar or fiscal year) or similar period with respect to which any Tax may be
imposed.
1.12 "Taxing Authority" means the IRS or any other governmental authority
responsible for the administration of any Tax.
2. Holding has the responsibility to file the Income Tax Return(s) that
will report the Redemption Transaction for the Taxable Year during which the
Closing Date occurs. Holding will prepare the Tax Return(s) with respect thereto
in a manner consistent with past Tax Practices except as otherwise required by
changes in applicable law or material underlying facts. Holding will report the
Redemption Transaction in the Income Tax Return(s) for said Taxable Year and
agrees that the basis in its OraLabs stock and the value of OraLabs will be
reported as the Basis and OraLabs Value stated above. However, the Basis
calculation (but not the OraLabs Value) may be adjusted as required by changes
in applicable law or material underlying facts, or by a determination by Holding
after Holding's compliance with Section 4 below of a different amount of Basis.
The parties agree that OraLabs has no indemnity obligation with respect to the
amount of Income Tax owed with respect to the Redemption Transaction except to
the extent that the amount of Spinoff Tax Liability exceeds the Estimated Tax.
Prior to Holding's filing any Income Tax Return that reports the Redemption
Transaction, Holding will comply with the provisions of Section 4 of this
Agreement, and if the amount of Basis reported in said Income Tax Return is
lower than the Basis used to compute the Estimated Tax, OraLabs will pay to
Holding, within 30 days after filing the Income Tax Return, the additional
amount of Estimated Tax calculated upon the lower Basis, plus the applicable
Gross-Up Amount defined in Section 5B. If the amount of Basis reported in said
Income Tax Return is higher than used to calculate the Estimated Tax at Closing,
then to the extent of any Cash Payment (and Gross-Up Amount thereon) made at
Closing, Holding will refund to OraLabs an amount equal to the sum of the
overpayment portion of the Cash Payment made at Closing, plus the applicable
Gross-Up Amount on the refunded amount.
5
3. In the event that Holding does not comply with its obligations under
this Agreement, then notwithstanding any provision of this Agreement to the
contrary, OraLabs will be relieved of all of its indemnity obligations under
this Agreement.
4. OraLabs will cooperate and assist Holding in the preparation and filing
of all Tax Returns required to be filed for Holding after the date hereof that
relate to a Preclosing Taxable Period. At least 45 days prior to the filing of
any Tax Return (including amendments thereto) for Holding for a Preclosing
Taxable Period, Holding will provide OraLabs with a copy of those portions of
the proposed Tax Return that relate to the Redemption Transaction and/or any Tax
claimed to be payable in connection therewith, and OraLabs will have the right
to review all related work papers prior to the filing of any such Tax Return.
Holding will consult with OraLabs regarding its comments with respect to such
portions of the Tax Returns, will in good faith consult with OraLabs in an
effort to resolve any differences with respect to the preparation and accuracy
of such portions of the Tax Returns and their consistency with past Tax
Practices, and will consider OraLabs' recommendations for alternative positions
with respect to items reflected on such portions of the Tax Returns.
5. A. Subject to the provisions of this Agreement, OraLabs agrees to
indemnify and hold harmless Holding and PSHL, and their respective officers,
agents and directors, from and against any obligation of Holding to pay an
amount of federal and state (if applicable) Income Tax attributable to the
Redemption Transaction in an amount equal to the excess of the Spinoff Tax
Liability over the Estimated Tax. However, the parties agree that the amount of
Spinoff Tax Liability will be determined without regard to the actual Income Tax
that may be payable by Holding for any Taxable Year. Provided that Holding and
PSHL comply with their obligations under this Agreement, OraLabs will pay to
Holding the amount indemnified hereunder that is due with the filing of the Tax
Return that reports the Redemption Transaction, or that results from a Final
Determination that an indemnified amount is due with respect to the Redemption
Transaction. If an amount representing state Income Tax is payable by OraLabs to
Holding under this paragraph, the amount of federal Income Tax payable by
Holding will give effect to any reduction of federal taxes due to the payment of
state taxes.
B. The parties agree that any payment made to Holding under Section 5A
above will be a taxable transaction to Holding. OraLabs agrees that when it pays
the amount ("Tax Amount") of indemnified Spinoff Tax Liability required to be
paid under Section 5A, it will simultaneously pay to Holding an amount (a
"Gross-Up Amount") that will enable Holding to net the amount of the Tax Amount
after paying United States federal and any state income tax due (giving effect
to any reduction of federal taxes due to the payment of state taxes) with
respect to OraLabs' payment to Holding of the Tax Amount. The Gross-Up Amount
shall be calculated by using a 34% federal income tax rate plus the state income
tax rate, if applicable and shall be determined without regard to the actual
Income Tax that may be payable with respect to such Tax Amount. The parties
agree that the payment made by OraLabs to Holding under the preceding sentence
will be deemed to be in full satisfaction of any Income Tax that may be payable
by Holding that arises from OraLabs' payment of the Tax Amount, and shall be a
full and final settlement between the parties.
6. Holding and OraLabs will endeavor in good faith to resolve any dispute
under this Agreement, including without limitation any dispute about a reporting
position in connection with the Redemption Transaction. If any such dispute is
not so resolved, then either party may deliver to the other a written notice
detailing such party's objections. If the parties are unable to resolve the
dispute within 15 days after such notice is given, then either party shall have
the right to refer the dispute for resolution to Neutral Auditors selected by
the parties within 10 days after the expiration of such 15-day period. If the
parties do not agree upon the Neutral Auditors within that time, then either
party has the right to request that the American Arbitration Association appoint
the Neutral Auditors, and any costs in connection therewith will be shared
equally by the parties. Each party agrees to execute, if requested by the
Neutral Auditors, a reasonable engagement letter. All fees and expenses relating
to the work, if any, to be performed by the Neutral Auditors shall be borne
equally by the parties. The Neutral Auditors shall act as an arbitrator to
determine, based solely on presentations by OraLabs and Holding, and not by
independent review, only those issues that remain in dispute between the
parties. The Neutral Auditors' determination shall be made within 30 days of
such firm's selection, shall be set forth in a written statement delivered to
the parties, and shall be final, binding and conclusive.
6
7. A. In the event that Holding is notified of any audit, examination or
other controversy (any such proceeding will be referred to as a "Proceeding")
before a Taxing Authority with respect to the amount of Income Tax due from the
Redemption Transaction, Holding will within 15 business days thereafter give
written notice to OraLabs of the Proceeding. The notification required by this
Section must include, insofar as relevant to the Redemption Transaction, copies
of any correspondence between the Taxing Authority and Holding and, as
applicable, written summaries of any oral communications, as well as a detailed
statement of the reasons why Holding believes that the Proceeding may result in
an indemnification obligation under this Agreement. To the extent known by
Holding, the notice will also include a calculation of the estimated amount of
Spinoff Tax Liability in excess of the Estimated Tax that may be payable.
B. Holding and OraLabs will comply with the provisions of Section 4 with
respect to any Proceeding described in the previous paragraph. Holding will
deliver to OraLabs copies of any correspondence between the Taxing Authority and
Holding and, as applicable, written summaries of any subsequent oral
communications, that occur throughout the course of the Proceeding, , insofar as
relevant to the Redemption Transaction. OraLabs will have ultimate control over
whether to settle a Proceeding, the amount of any settlement, and whether to
challenge the Proceeding until a Final Determination, but only to the extent
that the Proceeding relates to the Redemption Transaction. Holding will execute
a power of attorney to facilitate OraLabs' direct communications with the Taxing
Authority. In no event will Holding or PSHL take any action with any Taxing
Authority that Holding or PSHL could reasonably foresee would have a material
and adverse effect upon any indemnification obligation of OraLabs under this
Agreement.
C. OraLabs will reimburse Holding for its reasonable costs and fees
incurred in connection with the conduct and resolution of a Proceeding, but if
the Proceeding involves any Tax matter other than the Redemption Transaction,
the obligation of OraLabs under this sentence will only apply to the reasonable
costs and fees incurred by Holding that relate to the Redemption Transaction.
Promptly upon resolution of the Proceeding, the parties will in good faith seek
to agree upon how the costs and fees incurred by Holding will be allocated on
the one hand to OraLabs and on the other hand to Holding. If the parties do not
agree upon the allocation, then either party may deliver to the other a written
notice detailing such party's objections. Thereafter, the resolution procedure
in Section 6 above will be undertaken to resolve the disagreement. The Neutral
Auditors will act as an arbitrator to determine, based solely on presentations
by OraLabs and Holding, and not by independent review, the allocation of the
costs and fees, and the Neutral Auditors shall (i) assess to OraLabs the costs
and fees that are found to be solely attributable to the Reimbursement
Transaction, (ii) assess to Holding the costs and fees that are found to be
solely attributable to matters other than the Redemption Transaction, and (iii)
allocate the costs and fees incurred in the Proceeding in general, not
specifically allocable to a specific Tax matter that is addressed in the
Proceeding, as determined to be appropriate.
8. Holding shall retain all Tax Returns relating to the Redemption
Transaction and any Proceeding involving the Redemption Transaction, and all
books, records, schedules, work papers and other documents relating thereto,
until the expiration of the later of (i) all applicable statutes of limitations
(including any waivers or extensions thereof), and (ii) any retention period
required by law or pursuant to any record retention agreement. OraLabs has the
right to review and copy any of such books and records of the Proceeding
relating to the Redemption Transaction from time to time upon reasonable advance
notice to Holding. Holding shall notify OraLabs in writing of any waivers,
extensions or expirations of applicable statutes of limitations, and shall
provide at least 30 days prior written notice of any intended destruction of the
documents referred to in the preceding sentence. Holding shall not dispose of
any of the foregoing materials without first obtaining the written approval of
OraLabs, which may not be unreasonably withheld.
7
9. Except as required by law or with a prior written consent of the other
parties, all Tax Returns, documents, schedules, work papers and similar items
and all information contained therein, which Tax Returns and other materials are
within the scope of this Agreement, shall be kept confidential by the parties
and their representatives, shall not be disclosed to any other person or entity
and shall be used only for the purposes provided in this Agreement.
10. This Agreement contains the entire agreement among the parties with
respect to the indemnification by OraLabs of Taxes arising from the Redemption
Transaction. In the event of a conflict between any provision of this Agreement
and any provision of the Exchange Agreement, First Amendment, or Indemnification
Agreement attached to the First Amendment, the provision of this Agreement
controls. Notices under this Agreement shall be given only in the same manner
described in the Indemnification Agreement attached to the First Amendment, to
the addresses specified therein or to such other address as any party may
designate by proper written notice to the other.
11. The Parties agree that this Agreement shall be construed in accordance
with the laws of the State of Colorado and that exclusive jurisdiction and venue
for any controversy, claim or suit arising out of or connected with this
Agreement shall be in the courts located in Denver, Colorado. This Agreement may
be executed in counterparts, each such counterpart being deemed to be an
original instrument, and all of such counterparts shall together constitute one
and the same instrument. Facsimile signatures will be accepted as originals.
12. This Agreement may be amended only by written agreement executed and
delivered by all of the parties. This Agreement is solely for the benefit of the
parties to this Agreement and shall not be deemed to confer upon third parties
any remedy, claim, liability, reimbursement, claim of action or other right.
Except as otherwise stated in this Agreement, each party agrees to pay its own
costs and expenses (including without limitation attorneys fees) resulting from
the fulfillment of its respective obligations hereunder. Any ambiguities in this
Agreement shall be resolved without regard to which party drafted this
Agreement.
13. The parties acknowledge that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or were otherwise breached. The parties shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court having jurisdiction. Any such remedy shall be in addition to any other
remedy available at law or in equity.
[Remainder of page intentionally left blank. Signatures on following page.]
8
ORALABS HOLDINGS CORP., a Colorado corporation PARTNER SUCCESS HOLDINGS
LIMITED, a British
Virgin Islands
international business
company
By: , Authorized Director
---------------------------- By:
---------------------
Date: Wo Xxxx Xx, President
------------------------------------------------ and CEO
Date:
-------------------
ORALABS, INC., a Colorado corporation
By:
----------------------------------------
Xxxx X. Xxxxxxxxx, President
Date:
---------------------------------------
9
