EX-10.37
TAX SHARING AND INDEMNIFICATION AGREEMENT
THIS TAX SHARING AND INDEMNIFICATION AGREEMENT (the "Agreement") is
dated as of December 31, 1997, is by and among Nu Skin International, Inc., a
Utah corporation ("NSI"), Nu Skin USA, Inc., a Delaware corporation ("NUSA"),
and the shareholders of NSI and NUSA and their successors and assigns (the
"Shareholders").
RECITALS
WHEREAS, NSI and NUSA have entered into a Contribution and Distribution
Agreement dated as of December 31, 1997 (the "Distribution Agreement"); and
WHEREAS, pursuant to the Distribution Agreement, NSI shall distribute
all the issued and outstanding common stock of NUSA (pro rata) to the
Shareholders (the "Distribution"); and
WHEREAS, there are no tax allocation agreements between NSI and NUSA;
WHEREAS, NSI and NUSA each have been taxed as an "S corporation" as
that term is defined in Section 1361 of the Code at all times during their
respective existences;
WHEREAS, the Shareholders intend to transfer the stock of NSI along
with the stock of other corporations to Nu Skin Asia Pacific, Inc., a Delaware
corporation ("NSAP") in exchange for stock of NSAP.
WHEREAS, NSI will receive or has received an opinion of Price
Waterhouse that the Distribution, taking into account the contribution of NSI by
the Shareholders to NSAP, will qualify for tax-free treatment under Section
368(a)(1)(D) and 355 of the Code;
WHEREAS, NSI, NUSA and the Shareholders desire to enter into this
Agreement to provide for the allocation among NSI, NUSA and the Shareholders of
all responsibilities, liabilities and benefits relating to or affecting Taxes
(as hereinafter defined) paid or payable by any of them for all taxable periods,
whether beginning before, on or after the Distribution Date (as hereinafter
defined), to indemnify NSI if the Contribution and Distribution fails to qualify
for tax-free treatment under Section 368(a)(1)(D) and 355 of the Code, and to
provide for certain other matters. This Agreement also provides, among other
things, for NUSA, NSI and the Shareholders to assist each other for an interim
period in the preparation of Tax Returns (as hereinafter defined) required to be
filed after the Distribution Date.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
ARTICLE I.
DEFINITIONS
Section 1.1 As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and the plural forms of the terms defined). Capitalized terms used
herein and not otherwise defined shall have the meanings given to them in the
Distribution Agreement.
"Action" shall have the meaning ascribed to such term in Section 4.1.
"Change" shall mean (i) any audit, amendment or other change in a Tax
Return, or (ii) the expiration of the statute of limitations with respect to any
Tax Item allocated to NUSA and/or NSI in the Workpapers; provided, such Tax Item
was not subject to a Change by application of clause (i) of this definition.
"Closing Balance Sheets" shall mean the NUSA Closing Balance Sheet and
the NSI Closing Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
include corresponding provisions of any subsequently enacted federal tax laws.
"Corporate-Level Restructuring Taxes" shall mean Restructuring Taxes
payable by NSI or NUSA.
"Corporate-Level Taxes" means Taxes that are taxed to NSI or NUSA and
not to the Shareholders.
"Distribution" shall have the meaning ascribed to such term in the
recitals.
"Final Determination" shall mean the final resolution of the liability
for any Tax Item for a taxable period, (i) by IRS Form 870 or 870-AD (or any
successor forms thereto), on the date of acceptance by or on behalf of the IRS
with respect to United States Federal taxes, or by a comparable form under the
laws of other jurisdictions; except that a Form 870 or 870-AD or comparable form
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 for any Tax Item shall not constitute a Final
Determination for such Tax Item; (ii) by a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable; (iii) by a closing agreement or accepted offer in compromise under
Section 7121 or 7122 of the Code, with respect to Federal Taxes, or comparable
agreements as to other Taxes under the laws of other jurisdictions; (iv) by an
allowance of a refund or credit in respect of any overpayment of Tax, but only
after the expiration of all periods during which such refund may be recovered by
the Tax imposing jurisdiction; or (v) by any other final disposition, including
by reason of the expiration of the applicable statute of limitations.
"IRS" shall mean the Internal Revenue Service.
"NSI Businesses" means the businesses conducted by NSI immediately
following the Distribution.
"NSI Closing Balance Sheet" shall mean the balance sheet of NSI, dated
as of December 31, 1997.
"NSI Group" shall mean NSI and all of its future subsidiaries.
"NSI" shall have the meaning ascribed to such term in the preamble.
"NUSA Businesses" means the businesses conducted by NUSA immediately
following the Distribution.
"NUSA Closing Balance Sheet" shall mean the balance sheet of NUSA ,
dated as of December 31, 1997.
"NUSA Group" shall mean NUSA and all of its future subsidiaries.
"NUSA" shall have the meaning ascribed to such term in the preamble.
"Permanent Tax Item" shall mean any Tax Item other than a Temporary Tax
Item.
"Reorganization" shall mean NSI's distribution of all of the NUSA
shares to the Shareholders.
"Restricted Period" shall mean the two-year period following the
Distribution Date.
"Restructuring Taxes" means any Taxes (other than Transfer Taxes)
resulting from the Reorganization or the Distribution including, without
limitation, any Tax arising pursuant to, or as a result of, Section 311 of the
Code.
"Settlement Amount" shall have the meaning ascribed to such term in
Section 4.1.
"Tax Benefit" means any item of loss, deduction, credit or any other
Tax Item which decreases Taxes paid or payable.
"Tax Detriment" means any item or income, gain, recapture of credit or
any other Tax Item which increases Taxes paid or payable.
"Tax Item" means any return, form, filing, questionnaire or other
document required to be filed (or which may be filed), including requests for
extensions of time, filings made with estimated tax payments, claims for refund
and amended returns that may be filed, for any period with any taxing authority
(whether domestic or foreign) in connection with any Tax or Taxes (whether or
not a payment is required to be made with respect to such filing).
"Tax Returns" means any return, declaration, statement, report,
schedule, certificate, form, information return or any other document (and
related or supporting information) including an amended tax return filed with
respect to Taxes.
"Taxes" means all forms of taxation, whenever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, federation or other body, and without limiting
the generality of the foregoing, shall include income, sales, use, ad valorem,
gross receipts, value added, franchise, transfer, recording, withholding,
payroll, employment, excise, occupation, and property taxes, together with any
related interest, penalties and additions to any such tax, or additional amounts
imposed by any taxing authority (domestic or foreign) upon NSI or NUSA their
divisions or branches or upon the Shareholders.
"Temporary Tax Item" shall mean any Tax Item to the extent the Tax
Detriment or Tax Benefit relating to such Tax Item in one tax period creates or
results from a corresponding Tax Benefit or Tax Detriment, respectively, in a
different tax period; provided, that if the parties cannot agree whether a Tax
Item is a Temporary Tax Item, then generally accepted accounting principles in
effect on the Distribution Date shall determine if a Tax Item is a Temporary Tax
Item.
"Transfer Taxes" shall mean any real property transfer or gains, sales,
use, transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees, and any similar Taxes which become
payable in connection with the Distribution or Reorganization.
"Workpapers" shall mean the workpapers underlying the preparation of
the 1997 Federal Tax Return of NSI and the Closing Balance Sheets.
ARTICLE II.
PREPARATION AND FILING OF TAX RETURNS
Section 2.1 Manner of Preparation. All Tax Returns of NSI or NUSA filed
after the Distribution Date shall be prepared on a basis which is consistent
with the tax opinions obtained from Price Waterhouse in connection with the
Reorganization and the Distribution (in the absence of a controlling change in
law or circumstances) and shall be filed on a timely basis (including pursuant
to extensions) by the party responsible for such filing under this Agreement. In
the absence of a controlling change in law or circumstances, or except as
otherwise agreed in writing, all Tax Returns of NSI or NUSA filed after the date
of this Agreement shall be prepared on a basis consistent with the elections,
accounting methods, conventions, and principles of taxation used for the most
recent taxable periods for which Tax Returns of NSI involving similar Tax Items
have been filed, except that, with respect to Tax Items not relating to the
Reorganization or Distribution, one party may take an inconsistent position to
the extent that, with respect to Tax Items not relating to the Reorganization or
Distribution, such position does not create a Tax Detriment to the other party
or to the Shareholders of the other party.
Section 2.2 Pre-Distribution Tax Returns.
(a) All federal or state income Tax Returns that are required
to be filed for periods beginning before the Distribution Date shall be
prepared and filed by the Shareholders or by NSI.
(b) All Tax Returns for state and local sales, use, property,
transfer and other Taxes for periods beginning before the Distribution
Date which are not measured by income shall be prepared and filed by
NSI. NSI shall prepare all Federal and state payroll Tax Returns
required to be filed by it after the Distribution which include any
period beginning before the Distribution Date.
(c) All foreign Tax Returns and any other Tax Returns not
described elsewhere in this Section 2.2 that are required to be filed
for any period beginning before the Distribution Date shall be prepared
and filed by NSI.
Section 2.3 Post-Distribution Corporate Tax Returns. All Tax Returns
for periods beginning after the Distribution Date with respect to NSI shall be
prepared and filed by NSI. All tax returns for periods beginning after the
Distribution Date with respect to NUSA shall be prepared and filed by NUSA. The
Shareholders shall file all Tax Returns required to be filed by them that relate
to or include Tax Items associated with NSI or NUSA.
ARTICLE III.
PAYMENT OF TAXES
Section 3.1 Tax for Taxable Periods Beginning Prior to the Distribution
Date.
(a) The Shareholders shall pay all Taxes due (or receive all
refunds) in connection with the filing of NSI's federal income Tax
Returns for all taxable periods ending on or before the Distribution
Date.
(b) NSI or the Shareholders shall pay to the relevant taxing
authority all non-U.S. federal income Taxes for the Tax Returns for all
taxable periods ending on or before the Distribution Date with respect
to which NSI and the Shareholders each have a respective filing
responsibility under relevant state, local or foreign law.
(c) NSI shall be responsible for the payment of all Taxes due
or payable with respect to taxable periods beginning on or before the
Distribution Date that are required to be reported on the Tax Returns
described in Sections 2.2(b) and 2.2(c).
Section 3.2 NSI and Shareholder Tax Deficiencies and Refunds for
Periods Prior to the Distribution Date. If there is a Change in a Tax Return
filed by NSI and with respect to which NSI, for a taxable period prior to the
Distribution Date, has tax liability pursuant to Section 3.1, irrespective of
whether such Change occurs before, on or after the Distribution Date, NSI shall
pay and discharge any Tax or receive any refund of Tax associated with such
Change. For taxable periods beginning prior to the Distribution Date, the
Shareholders shall bear the burden of any Tax arising from a Change in Tax
Returns filed by them that relate to or include Tax Items associated with NSI
and with respect to which they are liable, and shall have the benefit of any
refund of Tax associated with such Change, irrespective of whether such Change
occurs before, on or after the Distribution Date.
Section 3.3 Transfer Taxes. NUSA or the Shareholders shall pay to the
relevant taxing authority all Transfer Taxes.
Section 3.4 Indemnities, Payments, Temporary Tax Items and Code Section
336(e).
(a) NUSA and Shareholders Indemnity Obligations. NUSA and the
Shareholders shall indemnify and hold harmless NSI against:
(i) any and all Restructuring Taxes and
Corporate-Level Restructuring Taxes imposed as a result of the
completion of the Distribution or Reorganization, except to
the extent that such taxes result solely from NSI's breach of
the covenants contained in Section 5.4, and
(ii) any and all Taxes for which NUSA or the
Shareholders have agreed to be responsible pursuant to Article
III of this Agreement.
(b) NSI Indemnity Obligations. NSI shall indemnify and hold
harmless NUSA and the Shareholders against any Restructuring Taxes or
Corporate-Level Restructuring Taxes imposed upon or incurred by the
Shareholders or NUSA if NSI breaches the covenants contained in Section
5.4 and such breach results in the failure of the Distribution or
Reorganization to qualify for tax-free treatment under Section
368(a)(1)(D) or Section 355 of the Code or similar provisions of the
state or local law. The Shareholders shall be indemnified and held
harmless under this Section 3.4(b) without regard to the fact that NSI
received an opinion or ruling from the IRS as contemplated by Section
5.4(b).
(c) All payments required to be made by NUSA pursuant to
Section 3.4(a) or by NSI pursuant to Section 3.4(b) shall be made no
later than 10 days after notice of a Final Determination of such
Restructuring Taxes or Corporate-Level Restructuring Taxes. Any payment
not so made within 10 days shall thereafter bear interest at two
percentage points above the applicable Federal short-term rate
established pursuant to Section 6621 of the Code.
(d) If Section 3.4(a)(i) applies to the payment of
Corporate-Level Restructuring Taxes, and the Tax Item creating such
Corporate-Level Restructuring Taxes is a Temporary Tax Item, NSI shall
pay to NUSA _______ percent of the Tax Benefit relating to such
Temporary Tax Item that NSI realizes. Any payment required to be made
under this Section 3.4(c) shall be made at the time the Tax Return on
which such Tax Benefit is realized is filed.
(e) If NSI is otherwise required to recognize gain pursuant to
Section 311 of the Code with respect to the Distribution, then, to the
extent permitted by law or regulation, the parties shall elect pursuant
to Section 336(e) of the Code to treat the Distribution as a
disposition of all the assets of NUSA.
Section 3.5 Reduction in Corporate-Level Taxes.
(a) If there is a reduction of any Corporate-Level Taxes of
NSI for a taxable period beginning after the Distribution Date, by
reason of a Tax Item attributable to the NUSA Businesses arising with
respect to a period on or before the Distribution Date, NSI shall pay
NUSA an amount equal to such reduction in Taxes. If there is a
reduction of any Corporate-Level Taxes of NUSA for a taxable period
beginning after the Distribution Date, by reason of a Tax Item
attributable to the NSI Businesses arising with respect to a period on
or before the Distribution Date, NUSA shall pay NSI an amount equal to
such reduction in Taxes.
(b) Any payment required to be made pursuant to this Section
3.5 shall be made no later than 10 days after the Tax reduction is
actually or deemed received, credited or otherwise utilized by a party.
Any payment not so made within 10 days shall thereafter bear interest
at two percentage points above the then applicable Federal short-term
rate established pursuant to Section 6621 of the Code.
Section 3.6 Payment. Pursuant to the Assumption of Liabilities and
Indemnification Agreement and Article III of this Agreement, NSI will or may
assume or satisfy, or make an indemnification payment with respect to, a
liability of NUSA, and vice versa. If, pursuant to a Final Determination, the
after-Tax position of either NUSA or NSI is different than it would have been
had NSI or NUSA made all payments directly to the relevant third party obligees,
then such party shall make a payment to the other party (or the other party
shall make a payment to such party) in an amount such that, on an after-Tax
basis, the parties will share the payment of the underlying claim in accordance
with the allocation of such claim between NUSA and NSI set forth in the
Assumption of Liabilities and Indemnification Agreement or this Agreement, as
the case may be.
ARTICLE IV.
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
Section 4.1 Notice of Proposed Adjustments. If a notice of audit is
given, an audit is begun, an audit adjustment is (or has been) proposed, or any
other claim is (or has been made) by any taxing authority with respect to a Tax
liability that, pursuant to the terms hereof, which could be indemnified
pursuant to Article III of this Agreement (collectively, a "Notice of Proposed
Adjustment"), the party receiving such Notice of Proposed Adjustment shall
promptly notify the other parties to this Agreement in writing of such receipt.
Thereafter, the party receiving such Notice of Proposed Adjustment shall keep
the other parties, on a timely basis, informed of all material developments in
connection with audits, administrative proceedings, litigation and other similar
matters that may affect their respective Tax liabilities. Failure or delay in
providing notification hereunder shall not relieve any party hereto of any
obligation hereunder in respect of any particular Tax liability, except to the
extent that (i) such failure or delay precludes the ability of such party to
contest such liability administratively or in the courts, and (ii) otherwise
materially and adversely prejudices such party.
Section 4.2 Tax Audits and Controversies Involving Corporate-Level Tax
Items. In the event (i) either NSI or NUSA notifies the other party in writing
that it wishes to settle any audit, inquiry, suit, action or proceeding (each an
"Action") affecting the Tax liability of the other party (including by
application of this Agreement), and (ii) the Action relates to a Permanent Tax
Item, such other party shall have the right (by giving written notice to the
party wishing to settle the Action within a reasonable amount of time,
considering all the facts and circumstances, of having received notice of the
intention to settle), to prohibit such settlement, in which case the party
favoring settlement shall have the right (within 30 days of receipt of the other
party's written notice prohibiting the settlement) to pay to the other party (or
receive from the other party) an amount (a `Settlement Amount') equal to the
aggregate amount which it would have paid (or received), after application of
each provision of this Agreement other than this Section 4.2, in full
satisfaction of the Action and its obligation to pay amounts (or right to
receive amounts) as provided in this Agreement. The party opposing the
settlement shall thereafter control, in its sole and absolute discretion, the
further defense and disposition of the Action, shall be fully and wholly liable
for all Taxes (and receive any refund of Taxes) resulting therefrom and shall
indemnify and hold harmless the party favoring the settlement from and any and
all liability for Taxes which results from the ultimate resolution of the Action
in excess of the Settlement Amount. The party opposing the settlement shall have
no obligation or duty to reimburse or refund to the other party any portion of
the Settlement Amount, regardless of the ultimate resolution of the Action. The
party favoring the settlement shall have the right, at its own expense, to
participate in any Action for which the other party has assumed control under
this Section 4.2. If the party favoring settlement does not on a timely basis
exercise its right to make or receive a Settlement Amount, the obligations of
NSI and NUSA under this Agreement shall be determined as if the proposed
settlement did not exist (e.g., the party favoring settlement cannot settle an
action without again complying with the procedure set forth in this Section
4.2).
Section 4.3 Retention of Books and Records. NSI agrees to retain all
Tax Returns, related schedules and Workpapers, and all material records and
other documents relating thereto existing on the date hereof or created through
or with respect to taxable periods ending on or before the Distribution Date,
until the later of (i) the expiration of the statute of limitations (including
extensions) of the taxable year to which such Tax Returns and other documents
relate, or (ii) ten years from the date hereof.
Section 4.4 Cooperation in Return Filings, Examinations and
Controversies.
(a) In addition to any obligations imposed pursuant to the
Distribution Agreement, NUSA and the Shareholders shall fully cooperate
with NSI and its representatives and with the Shareholders (if
necessary), in a prompt and timely manner, in connection with (i) the
preparation and filing of and (ii) any inquiry, audit, examination,
investigation, dispute, or litigation involving, any Tax Return filed
or required to be filed by or for NSI and the Shareholders for any
taxable period beginning before the Distribution Date. Such cooperation
shall include, but not be limited to, making available to NSI and the
Shareholders, during normal business hours, and within sixty (60) days
of any request therefor, all books, records and information (which
books, records and information may be copied by NSI or the Shareholders
at their expense), and the assistance of all officers and employees,
reasonably necessary or useful in connection with any Action.
(b) In addition to any obligations imposed pursuant to the
Distribution Agreement, NSI and the Shareholders shall fully cooperate
with NUSA and its representatives, in a prompt and timely manner, in
connection with (i) the preparation and filing of and (ii) any inquiry,
audit, examination, investigation, dispute, or litigation involving,
any Tax Return filed or required to be filed by or NUSA or the
Shareholders. Such cooperation shall include, but not be limited to
making available to NUSA and the Shareholders, during normal business
hours, and within sixty (60) days of any request therefor, all books,
records and information (which books, records and information may be
copied by NUSA or the Shareholders at their expense), and the
assistance of all officers and employees, reasonably necessary or
useful in connection with any Action.
ARTICLE V.
REPRESENTATIONS AND COVENANTS
Section 5.1 Representations of NUSA and the Shareholders. NUSA and the
Shareholders hereby represent and warrant to NSI that NUSA has no present
intention to undertake any of the transactions set forth in Section 5.2 or to
cease to engage in the active conduct of the NUSA Businesses (within the meaning
of Section 355(b)(2) of the Code).
Section 5.2 Covenants of the Shareholders and NUSA.
(a) Except as provided in Section 5.2(b), the Shareholders,
both directly and on behalf of NUSA, and NUSA directly covenant and
agree with NSI that during the Restricted Period:
(i) NUSA shall continue to actively conduct the NUSA
Businesses in the United States (within the meaning of Section
355(b)(2) of the Code) and shall continue to maintain in the
United States a substantial portion of its assets and business
operations as they existed prior to the Distribution, provided
that the foregoing shall not be deemed to prohibit NUSA from
entering into or acquiring other businesses or operations
which may or may not be consistent with NUSA's Businesses and
operations as they existed prior to the Distribution so long
as NUSA continues to conduct the NUSA Businesses in the United
States and continues to so maintain such substantial portion
of its assets in the United States;
(ii) NUSA shall not dispose of any of the assets that
NUSA owned immediately after the Distribution, except for
dispositions of such assets made in the ordinary course of
business;
(iii) neither NUSA nor any of its directors,
officers, or other representatives shall undertake, authorize,
approve, recommend, facilitate, or enter into any contract, or
consummate any transaction with respect to: (A) the issuance
of NUSA capital stock (including options, warrants, rights or
securities exercisable for, or convertible into, NUSA capital
stock) in a single transaction or in a series of related or
unrelated transactions or otherwise or in the aggregate which
would exceed ten percent (10%) when expressed as a percentage
of the outstanding capital stock of NUSA immediately following
the Distribution; (B) any redemptions, repurchases or other
acquisitions or capital stock of NUSA in a single transaction
or a series of related or unrelated transactions or otherwise
or in the aggregate which would exceed ten percent (10%) when
expressed as a percentage of the outstanding capital stock of
NUSA immediately following the Distribution; or (C) the
dissolution, merger or complete or partial liquidation of NUSA
or any announcement of such action.
(b) The Shareholders, both directly and on behalf of NUSA, and
NUSA directly, may take any action or engage in conduct otherwise
prohibited by Section 5.2 so long as prior to such action or conduct,
as the case may be, NUSA receives: (i) an opinion from NUSA's counsel
in form and substance reasonably satisfactory to NSI and upon which NSI
can rely to the effect that the proposed action or conduct, as the case
may be, will not cause the Distribution and Reorganization to fail to
qualify for the tax-free treatment under Section 368(a)(1)(D) and
Section 355 of the Code, or (ii) a ruling from the IRS in form and
substance reasonably satisfactory to NSI and upon which NSI can rely to
the effect that the proposed action or conduct, as the case may be,
will not cause the Distribution and Reorganization to fail to qualify
for tax-free treatment under Section 368(a)(1)(D) and Section 355 of
the Code.
Section 5.3 Representations of NSI. NSI hereby represents and warrants
to the Shareholders that NSI has no present intention to undertake any of the
transactions set forth in Section 5.4 or to cease to engage in the active
conduct of the NSI Businesses (within the meaning of Section 355(b)(2) of the
Code).
Section 5.4 Covenants of NSI.
(a) Except as provided in Section 5.4(b), NSI covenants and
agrees with NUSA and the Shareholders that during the Restricted
Period:
(i) NSI shall continue to actively conduct the NSI
Businesses in the United States (within the meaning of Section
355(b)(2) of the Code) and shall continue to maintain in the
United States a substantial portion of its assets and business
operations as they existed prior to the Distribution, provided
that the foregoing shall not be deemed to prohibit NSI from
entering into or acquiring other businesses or operations
which may or may not be consistent with the NSI Businesses and
operations as they existed prior to the Distirbution so long
as NUSA continues to conduct the NSI Businesses in the United
States and continues to so maintain such substantial portion
of its assets in the United States;
(ii) NSI not dispose of any of the assets that NSI
owned immediately after the Distribution, except for the
dispositions of such assets made in the ordinary course of
business;
(iii) neither NSI nor any of its directors, officers,
or other representatives shall undertake, authorize, approve,
recommend, facilitate, or enter into any contract, or
consummate any transaction with respect to: (A) the issuance
of NSI capital stock (including options, wrrants, rights or
securities exercisable for, or convertible into, NSI capital
stock) in a single transaction or in a series of related or
unrelated transactions or otherwise or in the aggregate which
would exceed ten percent (10%) when expressed as a percentage
of the outstanding capital stock of NSI immediately following
the Distribution; (B) any redemptions, repurchases or other
acquisitions of capital stock of NSI in a single transaction
or a series of related or unrelated transactions or otherwise
or in the aggregate which would exceed ten percent (10%) when
expressed as a percentage of the outstanding capital stock of
NSI immediately following the Distribution; or (C) the
dissolution, merger or complete or partial liquidation of NSI
or any announcement of such action.
(b) NSI may take any action or engage in conduct otherwise
prohibited by Section 5.4 so long as prior to such action or conduct,
as the case may be, NSI receives (i) an opinion from NSI's counsel in
form and substance reasonably satisfactory to NUSA and upon which NUSA
can rely to the effect that the proposed action or conduct, as the case
may be, will not cause the Distribution and Reorganization to fail to
qualify for the tax-free treatment under Section 368(a)(1)(D) and
Section 355 of the Code, or (ii) a ruling from the IRS in form and
substance reasonably satisfactory to NUSA and upon which NUSA can rely
to the effect that the proposed action or conduct, as the case may be,
will not cause the Distribution and Reorganization to fail to qualify
for tax-free treatment under Section 368(a)(1)(D) and Section 355 of
the Code.
Section 5.5 The parties hereto recognize that failure to comply with
their respective obligations under this Section 5.1 may result in irreparable
harm to the other party and that the other party may not be adequately
compensated by monetary damages for such failure. If either party shall fail to
comply with its respective obligations under this Section 5.1, the other party
shall be entitled to injunctive relief and specific performance in addition to
all other remedies.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Expenses. Unless otherwise expressly provided in this
Agreement or in the Distribution Agreement, each party shall bear any and all
expenses that arise from their respective obligations under this Agreement.
Section 6.2 Entire Agreement; Termination of Prior Agreements. This
Agreement constitutes the entire agreement of the parties concerning the subject
matter hereof and supersedes all other agreements, whether or not written, in
respect of any Tax between or among them. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto. Anything in
this Agreement or the Distribution Agreement and/or Assumption of Liabilities
and Indemnification Agreement to the contrary notwithstanding, in the event and
to the extent that there shall be a conflict between the provisions of this
Agreement and the Distribution Agreement and/or the Assumption of Liabilities
and Indemnification Agreement, the provisions of this Agreement shall control.
Section 6.3 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:
If to NSI:
Nu Skin International, Inc.
Xxx Xx Xxxx Xxxxx
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxxx
If to NUSA:
Nu Skin USA, Inc.
Xxx Xx Xxxx Xxxxx
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxxx
With a copy to:
Holland & Xxxx, LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
If the last day for providing any notice, communication or payment hereunder is
a Saturday, Sunday or legal holiday, such due date shall be extended to the next
business day.
Section 6.4 Resolution of Disputes. In the event of a dispute arising
with respect to this Agreement which the parties are unable to resolve on their
own, such dispute shall be resolved by arbitration conducted as described in
Section 3.9 of the Assumption of Liabilities and Indemnification Agreement being
executed concurrently herewith, with the parties on each side of the dispute
selecting one arbitrator and the two arbitrators so selected selecting a third
arbitrator.
Section 6.5 Application to Present and Future Subsidiaries. This
Agreement is being entered into by NSI and NUSA on behalf of themselves and each
member of the NSI Group and NUSA Group, respectively. This Agreement shall
constitute a direct obligation of each such member and shall be deemed to have
been readopted and affirmed on behalf of any corporation which becomes a member
of the NSI Group or NUSA Group in the future. NSI and NUSA hereby guarantee the
performance of all actions, agreements and obligations provided for under this
Agreement of each member of the NSI Group and the NUSA Group, respectively. NSI
and NUSA shall, upon the written request of the other, cause any of their
respective Group members formally to execute this Agreement. This Agreement
shall be binding upon, and shall inure to the benefit of, the successors,
assigns and persons controlling any of the corporations bound hereby for so long
as such successors, assigns or controlling persons are members of the NSI Group
or the NUSA Group, respectively, or their respective successors and assigns.
Section 6.6 Term. This Agreement shall commence on the date of
execution indicated below and shall continue in effect until otherwise agreed to
in writing by NSI and NUSA, or their successors.
Section 6.7 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 or to affect the meaning or interpretation of this Agreement.
Section 6.8 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
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
Section 6.9 Singular and Plural. As used herein, the singular shall
include the plural and vice versa.
Section 6.10 Governing Law. This Agreement shall be governed by the
laws of Utah.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
31st day of December, 1997.
THE COMPANIES:
NU SKIN INTERNATIONAL, INC.
By: /s/ Xxxxx Halls
Name: Xxxxx Halls
Title: Vice President
NU SKIN USA, INC.
By: /s/ Xxxxx Halls
Name: Xxxxx Halls
Title: Vice President
THE SHAREHOLDERS:
/s/ Xxxxx X. Xxxxx
Xxxxx X. Xxxxx
/s/ Xxxxx Xxx Xxxxx
Xxxxx Xxx Xxxxx
/s/Xxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
/s/ Xxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
/s/ Xxxx X. Xxxxx
Xxxx X. Xxxxx
/s/ Xxxxx X. Halls
Xxxxx X. Halls
