STOCK ACQUISITION AGREEMENT, dated as of February 27, 1998, among
NU SKIN ASIA PACIFIC, INC., a Delaware corporation ("NSAP" or the "Company") and
each of the persons listed on the signature pages hereof (each, a "Stockholder"
and collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, Nu Skin International, Inc., a Utah corporation ("NSI"),
has contributed certain assets (the "Contributed Assets") to Nu Skin USA, Inc.
("Nu Skin USA"), a Delaware corporation, in exchange for common stock of Nu Skin
USA and NSI has distributed all of such outstanding common stock of Nu Skin USA
to the Stockholders, pursuant to a contribution and distribution agreement,
dated as of December 31, 1997 (the "NSI Contribution and Distribution
Agreement"), between NSI and Nu Skin USA;
WHEREAS, Nu Skin USA and NSI intended that the contribution of
Contributed Assets and distribution of all of the outstanding common stock of Nu
Skin USA pursuant to the NSI Contribution and Distribution Agreement qualify as
a reorganization and distribution under Sections 368(a)(1)(D) and 355 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, pursuant to the NSI Contribution and Distribution
Agreement, NSI has entered into a tax-sharing agreement with Nu Skin USA (the
"NSI Tax Sharing and Indemnification Agreement") and an indemnity agreement with
Nu Skin USA (the "NSI Indemnity Agreement") in respect of the Contributed
Assets;
WHEREAS, effective December 31, 1997, the Acquired Entities (as
defined) have declared distributions to the Stockholders in an aggregate amount
of approximately $155 million which comprise all of the Acquired Entities'
previously earned and undistributed S corporation earnings and such distribution
was distributed in the form of promissory notes due December 31, 2004 bearing
interest at 8% per annum (the "Original S Distribution Notes") and the Acquired
Entities have agreed to pay the accrued interest on the Original S Distribution
Notes from their date of issuance until the Closing Date (as defined).
WHEREAS, immediately prior to the Closing Date, the Acquired
Entities will declare distributions to the Stockholders which comprise all of
the Acquired Entities' earned and undistributed S corporation earnings during
the period from January 1, 1997 until the Closing Date which will be distributed
in the form of additional promissory notes due December 31, 2004 bearing
interest at 8% per annum (the "1998 S Distribution Notes" and together with the
Original S Distribution Notes, the "S Distribution Notes");
WHEREAS, the parties have agreed that the aggregate principal
amount of the Original S Distribution Notes and the 1998 S Distribution Notes
shall not exceed $180 million;
WHEREAS, the Stockholders are, as of the date of this Agreement,
the record and beneficial owners of all of the issued and outstanding shares of
common stock of each of NSI, Nu Skin Europe, Inc., a Delaware corporation; Nu
Skin U.K., Ltd., a United Kingdom corporation, domesticated in Delaware under
the name Nu Skin U.K., Inc.; Nu Skin Germany, GmbH, a German corporation,
domesticated in Delaware under the name Nu Skin Germany, Inc.; New Skin France,
SARL, a French corporation, domesticated in Delaware under the name Nu Skin
France, Inc.; Nu Skin Netherlands, B.V., a Netherlands corporation, domesticated
in Delaware under the name Nu Skin Netherlands, Inc.; Nu Skin Italy, (SRL.), an
Italian corporation, domesticated in Delaware under the name Nu Skin Italy,
Inc.; Nu Skin Spain, S.L., a Spanish corporation, domesticated in Delaware under
the name Nu Skin Spain, Inc.; Nu Skin Belgium, N.V., a Belgium corporation,
domesticated in Delaware under the name Nu Skin Belgium, Inc.; Nu Skin Personal
Care Australia, Inc., a Utah corporation; Nu Skin New Zealand, Inc., a Utah
corporation; Nu Skin Brazil, Ltda., a Brazilian corporation, domesticated in
Delaware under the name Nu Skin Brazil, Inc.; Nu Skin Argentina, Inc., a Utah
corporation; Nu Skin Chile, S.A., a Chilean corporation, domesticated in
Delaware under the name Nu Skin Chile, Inc.; Nu Skin Poland Spa., a Polish
Corporation, domesticated in Delaware under the name Nu Skin Poland, Inc.; Nu
Skin International Management Group, Inc., a Utah corporation; and Cedar
Xxxxxxx, X.X. (each, an "Acquired Entity" and collectively the "Acquired
Entities");
WHEREAS, the aggregate number of authorized, issued and
outstanding shares of common stock of each Acquired Entity (collectively, the
"Nu Skin Shares") and the number of Nu Skin Shares owned individually by each
Stockholder are as set forth on Schedule A hereto;
WHEREAS, NSAP wishes to acquire the Nu Skin Shares (the "Stock
Acquisitions") and the Stockholders wish to transfer the Nu Skin Shares in
exchange for, and in consideration for, the indirect assumption by NSAP of the
Acquired Entities' obligations under the S Distribution Notes, the Contingent
Payment (as defined herein) and the newly issued shares (the "Series A Preferred
Shares") of preferred stock, $0.001 par value per share (the "Series A Preferred
Stock") of NSAP, upon the terms and subject to the conditions set forth herein;
WHEREAS, the parties hereto intend that the Stock Acquisitions
contemplated by this Agreement shall qualify as part purchase and part in a
manner similar to pooling for financial reporting purposes;
WHEREAS, the parties hereto intend that the Stock Acquisitions
contemplated by this Agreement shall, in part, qualify for United States federal
income tax purposes as tax-free exchanges under Section 351 of the Code and that
any cash or notes distributed by NSAP to make up a shortfall in the S
Distribution Notes or under NSAP's Contingent Payment obligations hereunder will
be taxed as ordinary income;
WHEREAS, the special committee of the Board of Directors (the
"Special Committee") of NSAP has received an opinion from its financial advisor,
Xxxxxxxxx, Lufkin & Xxxxxxxx, that the consideration to be paid by NSAP for the
Nu Skin Shares pursuant to the transactions contemplated hereunder is fair, from
a financial point of view, to NSAP; and
WHEREAS, the Board of Directors of NSAP has delegated its power to
approve this Agreement and the transactions contemplated hereunder to the
Special Committee and the Special Committee has approved this Agreement and the
transactions contemplated hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, NSAP and the Stockholders hereby
agree as follows: ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Acquired Entities" has the meaning specified in the recitals to
this Agreement.
"Acquisition Documents" has the meaning specified in Section 8.01.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Actual NSAP Cumulative EBITDA" has the meaning specified in
Section 2.04(a).
"Actual NSI Cumulative EBITDA" has the meaning specified in
Section 2.04(a).
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Acquisition
Agreement, dated as of February 27, 1998, between the Stockholders and NSAP
(including the Exhibits hereto and the Disclosure Schedule) and all amendments
hereto made in accordance with the provisions of Section 11.09.
"Assets" has the meaning specified in Section 3.18.
"Average NSAP Common Stock Price at Closing" has the meaning
specified in Section 2.03(a).
"Big Planet Option" has the meaning specified in Section 7.02(i).
"Business" means the business of marketing and distributing of Nu
Skin products, managing the Nu Skin Global Compensation Plan, licensing of the
right to use the Nu Skin trade names, products and Distributor Lists, providing
management services to local Nu Skin entities, developing new formulas and
ingredients for Nu Skin products and all other businesses which prior to the
date hereof have been conducted by the Acquired Entities.
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in the
City of New York.
"Certificate of Designation" has the meaning specified in Section
2.09(a).
"Closing" has the meaning specified in Section 2.05.
"Closing Balance Sheet" means the unaudited balance sheet
(including the related notes and schedules thereto) of the Acquired Entities, to
be prepared pursuant to Section 2.08(a) and to be dated as of the Closing Date.
"Closing Date" has the meaning specified in Section 2.05.
"Code" means the Internal Revenue Code of 1986, as amended through
the date hereof.
"Common Stock Redemption Price" has the meaning specified in
Section 2.09(b).
"Contingent Payment" has the meaning specified in Section 2.04(a).
"Contingent Payment Date" has the meaning specified in Section
2.04(a).
"Contingent Payment Report" has the meaning specified in Section
2.04(f).
"Contingent Payment Years" has the meaning specified in Section
2.04(a).
"Contributed Assets" has the meaning specified in the recitals to
this Agreement.
"Control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of
the affairs or management of a Person, whether through the ownership of voting
securities, as trustee or executor, by contract or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such Person.
"Designated Amount" has the meaning specified in Section 8.02(b).
"Disclosure Schedule" means the Disclosure Schedule attached
hereto, dated as of the date hereof, and forming a part of this Agreement.
"Distributors" means the independent distributors who have entered
into distribution agreements with NSI for the sale and distribution of Nu Skin
products.
"Distributor Lists" means the list of the Acquired Entities
independent distributors who operate under the Nu Skin Global Compensation Plan.
"Downward Adjustment" has the meaning specified in Section
2.08(c)(i).
"EBITDA" has the meaning specified in Section 2.04(e).
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, ground waters, surface water
sediment, soil, subsurface strata and ambient air.
"Environmental Claims" means any and all actions, suits, demands,
demand letters, claims, liens, notices of non-compliance or violation, notices
of liability or potential liability, investigations, proceedings, consent orders
or consent agreements relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Material or arising from any alleged
injury or threat of injury to health, safety or the Environment.
"Environmental Law" means any Law, now or hereafter in effect and
as amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the Environment, health or safety or to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required to operate the Business or the
Real Property under any applicable Environmental Law.
"ERISA" has the meaning specified in Section 3.20(a).
"Financial Statements" has the meaning specified in Section
3.07(a).
"Foreign Government Scheme or Arrangement" has the meaning
specified in Section 3.20(f).
"Foreign Plan" has the meaning specified in Section 3.20(f).
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
waste under any applicable Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed money, (b)
all obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all obligations of such Person as
lessee under leases that have been or should be, in accordance with U.S. GAAP,
recorded as capital leases, (f) all obligations, contingent or otherwise, of
such Person under acceptance, letter of credit or similar facilities, (g) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any capital stock of such Person or any warrants, rights or
options to acquire such capital stock, valued, in the case of redeemable
preferred stock, at the greater of its voluntary or involuntary liquidation
preference plus
accrued and unpaid dividends, (h) all Indebtedness of others referred to in
clauses (a) through (f) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell services,
primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to
supply funds to or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of whether such property
is received or such services are rendered) or (iv) otherwise to assure a
creditor against loss, and (i) all Indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Encumbrance on
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness.
"Indemnified Party" has the meaning specified in Section 8.02(a).
"Independent Accounting Firm" has the meaning specified in Section
2.08(b).
"Intellectual Property" means (a) inventions, whether or not
patentable, whether or not reduced to practice, and whether or not yet made the
subject of a pending patent application or applications, (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (c) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights therein
provided by international treaties or conventions and all improvements to the
inventions disclosed in each such registration, patent or application, (d)
trademarks, service marks, trade dress, logos, trade names and corporate names,
whether or not registered, including all common law rights, and registrations
and applications for registration thereof, including, but not limited to, all
marks registered in the United States Patent and Trademark Office, the Trademark
Offices of the States and Territories of the United States of America, and the
Trademark Offices of other nations throughout the world, and all rights therein
provided by international treaties or conventions, (e) copyrights (registered or
otherwise) and registrations and applications for registration thereof, and all
rights therein provided by international treaties or conventions, (f) moral
rights (includin-g, without limitation, rights of paternity and integrity), and
waivers of such rights by others, (g) computer software, including, without
limitation, source code, operating systems and specifications, data, data bases,
files, documentation and other materials related thereto, data and
documentation, (h) trade secrets and confidential, technical and business
information (including ideas, formulas, compositions, inventions, and
conceptions of inventions whether patentable or unpatentable and
whether or not reduced to practice), (i) whether or not confidential, technology
(including know-how and show-how), manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans and Distributor Lists and supplier lists and information, (j)
copies and tangible embodiments of all the foregoing, in whatever form or
medium, (k) all rights to obtain and rights to apply for patents, and to
register trademarks and copyrights, (l) all rights to the Nu Skin Global
Compensation Plan and Distributor Lists and (m) all rights to xxx or recover and
retain damages and costs and attorneys' fees for present and past infringement
of any of the foregoing.
"Inventories" means all inventory, merchandise, sales materials,
finished goods, and raw materials, packaging, supplies and other personal
property related to the Business maintained, held or stored by or for the
Acquired Entities on the Closing Date and any prepaid deposits for any of the
same.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Leased Real Property" means the real property leased by the
Acquired Entities, as tenant, together with, to the extent leased by the
Acquired Entities, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Acquired Entities attached or
appurtenant thereto, and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Liabilities" means any and all debts, liabilities and
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable, including, without limitation, those
arising under any Law (including, without limitation, any Environmental Law),
Action or Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Licensed Intellectual Property" means all Intellectual Property
licensed or sublicensed to the Acquired Entities from a third party.
"Loss" has the meaning specified in Section 8.02(a).
"Material Adverse Effect" means any circumstance, change in, or
effect on the Business or the Acquired Entities that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the Business
or the Acquired Entities: (a) is, or could
be, materially adverse to the business, operations, assets or Liabilities,
employee relationships, Distributor or supplier relationships, prospects,
results of operations or the condition (financial or otherwise) of the Acquired
Entities or (b) could adversely affect the ability of NSAP or the Acquired
Entities to operate or conduct the Business in the manner in which it is
currently operated or conducted by the Stockholders and the Acquired Entities.
"Material Contracts" has the meaning specified in Section 3.14(a).
"Maximum Contingent Payment Amount" has the meaning specified in
Section 2.04(a).
"Minimum Target NSAP Cumulative EBITDA" has the meaning specified
in Section 2.04(a).
"Minimum Target NSI Cumulative EBITDA" has the meaning specified
in Section 2.04(a).
"1998 S Distribution Notes" has the meaning specified in the
recitals to this Agreement.
"Notice of Redemption" has the meaning specified in Section
2.09(c).
"NSAP" has the meaning specified in the recitals to this
Agreement.
"NSAP's Accountants" means Price Waterhouse L.L.P., independent
accountants of NSAP.
"NSAP Common Stock" has the meaning specified in Section 2.03(a).
"Nu Skin Global Compensation Plan" means the global distributor
compensation plan developed by NSI which compensates Distributors for product
sales in all of the countries where NSI and its affiliates operate.
"Nu Skin Names" has the meaning specified in Section 5.04.
"Nu Skin Shares" has the meaning specified in the recitals to this
Agreement.
"Nu Skin Share Certificates" has the meaning specified in Section
2.01.
"Nu Skin USA" has the meaning specified in the recitals to this
Agreement.
"NSI" has the meaning specified in the recitals to this Agreement.
"NSI Contribution and Distribution Agreement" has the meaning
specified in the recitals to this Agreement.
"NSI Indemnity Agreement" has the meaning specified in the
recitals to this Agreement.
"NSI Shares" means the common stock of Nu Skin International,
Inc., par value $.001 per share, to be delivered to NSAP in connection with this
Agreement.
"NSI Tax Sharing and Indemnification Agreement" has the meaning
specified in the recitals to this Agreement.
"Original S Distribution Notes" has the meaning specified in the
recitals to this Agreement.
"Owned Intellectual Property" means all Intellectual Property in
and to which the Acquired Entities hold, or have a right to hold, right, title
and interest.
"Owned Real Property" means the real property owned by the
Acquired Entities, together with all buildings and other structures, facilities
or improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Acquired Entities attached or
appurtenant thereto and all easements, licenses, rights and appurtenances
relating to the foregoing.
"Permits" has the meaning specified in Section 3.13.
"Permitted Encumbrances" means such of the following as to which
no enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable which are not in excess of the amount accrued
therefor on the Reference Balance Sheet (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations
that (i) are not overdue for a period of more than 30 days and (ii) are not in
excess of $10,000 in the case of a single property or $100,000 in the aggregate
at any time; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or statutory
obligations; and (d) minor survey exceptions, reciprocal easement agreements and
other customary encumbrances on title to real property that (i) were not
incurred in connection with any Indebtedness, (ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually or in
the aggregate, materially adversely affect the value or use of such property for
its current and anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Plans" has the meaning specified in Section 3.20(a).
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Redemption Date" has the meaning specified in Section 2.09(c).
"Reference Balance Sheet" means the unaudited combined balance
sheet (including the related notes and schedules thereto) of the Acquired
Entities, dated as of December 31, 1997, a copy of which is set forth in Section
3.07(a) of the Disclosure Schedule.
"Reference Balance Sheet Date" means December 31, 1997.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Release" means disposing, discharging, injecting, spilling,
leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and
the like into or upon any land or water or air or otherwise entering into the
Environment.
"Remedial Action" means any investigation, assessment, monitoring,
treatment, excavation, removal, remediation or cleanup of Hazardous Materials in
the Environment.
"Retained Entities" means Nu Skin USA, Nu Skin Mexico S.A. de
C.V., a Mexican corporation, domesticated in Delaware under the name Nu Skin
Mexico, Inc., Nu Skin Guatemala, S.A., a Guatemalan corporation, domesticated in
Delaware under the name Nu Skin Guatemala, Inc., Nu Skin Canada, Inc., Nu Skin
Puerto Rico, Inc., Scrub Oak, Ltd., Aspen Investments, Ltd., Global Airwaves,
Inc. and Mountain Pictures.
"S Distribution Notes" has the meaning specified in the recitals
to this Agreement.
"Series A Preferred Stock" has the meaning specified in the
recitals to this Agreement.
"Series A Preferred Shares" has the meaning specified in the
recitals to this Agreement.
"Series A Preferred Share Certificates" has the meaning specified
in Section 2.02.
"Special Committee" has the meaning specified in the recitals to
this Agreement.
"Stock Acquisitions" has the meaning specified in the recitals to
this Agreement.
"Stockholders" has the meaning specified in the recitals to this
Agreement.
"Stockholders' Accountants" means Xxxxx Xxxxxxxx LLP, independent
accountants of the Stockholders.
"Stockholders' Contingent Payment Notice" has the meaning
specified in Section 2.04(g).
"Stockholders' Escrow Agreement" has the meaning specified in
Section 8.04.
"Stockholders' Representative" has the meaning specified in
Section 2.12.
"Tangible Personal Property" has the meaning specified in Section
3.17(a).
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs duties, tariffs, and
similar charges.
"Third Party Claims" has the meaning specified in Section 8.02(c).
"Upward Adjustment" has the meaning specified in Section
2.08(c)(ii).
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied consistently
throughout the periods involved.
"Vendors" means any and all vendors who are unaffiliated with the
Stockholders or the Acquired Entities and who supply raw materials, components,
spare parts, supplies, goods, merchandise or services to the Acquired Entities.
ARTICLE II
ACQUISITION AND TRANSFER
SECTION 2.01. Acquisition and Transfer of Nu Skin Shares. Upon
the terms and subject to the conditions of this Agreement, at the Closing (as
defined) each Stockholder shall assign, transfer, convey and deliver to NSAP and
NSAP shall acquire and accept for delivery from each Stockholder the number of
Nu Skin Shares as set forth beside such Stockholder's name on Schedule A hereto
under the heading "Nu Skin Shares to be Acquired" and deliver one or more
certificates representing such Nu Skin Shares (the "Nu Skin Share Certificates")
to NSAP as provided in Section 2.06 below.
SECTION 2.02. Consideration for Transfer of Nu Skin Shares. As
consideration for the transfer of Nu Skin Shares by the Stockholders, NSAP
shall, upon the terms and subject to the conditions of this Agreement (i)
indirectly assume, by virtue of the Stock Acquisitions, the obligations of the
Acquired Entities, including those reflected by the S Distribution Notes,
subject to the other provisions of this Agreement; provided, however, that in no
event shall the aggregate principal amount of the S Distribution Notes which
shall be indirectly assumed by NSAP exceed $180 million, (ii) to the extent the
S Distribution Notes do not, in aggregate principal amount, equal or exceed $180
million, issue to each Stockholder, in cash or in the form of promissory notes,
the difference between (x) $180,000,000 and (y) the aggregate principal amount
of the S Distribution Notes, multiplied by each Stockholder's proportional
ownership interest in the NSI Shares (iii) issue to each Stockholder the number
of NSAP's Series A Preferred Shares as calculated pursuant to Section 2.03 and
deliver one or more certificates representing such Series A Preferred Shares
(the "Series A Preferred Share Certificates") to the Stockholders as provided in
Section 2.07 below and (iv) make certain Contingent Payments (as defined) to the
Stockholders subject to the terms and conditions described in Section 2.04. The
consideration for the transfer of Nu Skin Shares by each Stockholder to NSAP as
described in this Section 2.02 shall be deemed to be in full satisfaction of all
rights pertaining to such Nu Skin Shares, subject to any adjustments made
pursuant to Section 2.08.
SECTION 2.03. Calculation of Aggregate Number of Series A
Preferred Shares. (a) Subject to Section 2.08, each Stockholder shall receive
such number of the Series A Preferred Shares as shall be calculated by dividing
(x) U.S. $70,000,000 by (y) the average of the closing price per share of NSAP
Class A Common Stock (the "NSAP Common Stock") reported on the New York Stock
Exchange for the 20 consecutive trading days ending on the trading day that is
five trading days prior to the Closing Date (the "Average NSAP Common Stock
Price at Closing") multiplied by their proportional interest in the NSI Shares.
(b) Series A Preferred Share Certificates for fractional
interests in Series A Preferred Shares shall not be issued, and to the extent
that a Stockholder would receive a fraction
of a Series A Preferred Share (after determining the aggregate number of Series
A Preferred Shares which such Stockholder would be entitled to receive
hereunder), such Stockholder shall receive the highest integral number of Series
A Preferred Shares to which such Stockholder would be entitled to pursuant to
Section 2.03(a) hereof. In lieu of any fraction of a Series A Preferred Share,
such Stockholder shall receive the cash value of any such fraction which shall
be determined to the nearest cent ($0.01) by multiplying the Average NSAP Common
Stock Price at Closing by such fraction. Any such cash payment shall be paid to
the Stockholders on the Closing Date.
SECTION 2.04. Contingent Payments. (a) If (and only if) NSAP, on
a consolidated basis, and NSI achieve certain yearly cumulative EBITDA targets
for any of the four fiscal years ended December 31, 1998, 1999, 2000 and 2001
(the "Contingent Payment Years"), measured annually, NSAP shall pay to the
Stockholders, by April 1, or as soon thereafter as practicable, in the following
year (the "Contingent Payment Date"), an additional contingent payment amount
(the "Contingent Payment") determined as provided in Section 2.04(d) below which
shall not exceed the maximum Contingent Payment amount (the "Maximum Cumulative
Contingent Payment Amount") for each such year as set forth in the table in
Section 2.04(c) below. Contingent Payments will be payable to the Stockholders
with respect to any particular Contingent Payment Year only if (i) the actual
cumulative EBITDA of NSAP (the "Actual NSAP Cumulative EBITDA") during such
Contingent Payment Year meets or exceeds the minimum target cumulative EBITDA of
NSAP (the "Minimum Target NSAP Cumulative EBITDA") for such year as set forth in
the table in Section 2.04(b) below, (ii) the actual cumulative EBITDA of NSI
(the "Actual NSI Cumulative EBITDA") during such Contingent Payment Year meets
or exceeds the minimum target cumulative target EBITDA for NSI (the "Minimum
Target NSI Cumulative EBITDA") for such year as set forth in the table in
Section 2.04(b) below and (iii) NSI or NSAP have actual current or accumulated
earnings and profits for tax purposes as defined in Section 316 of the Code in
such year (but in no event shall the Contingent Payment payable to the
Stockholders with respect to any Contingent Payment Year exceed the amount of
such earnings and profits). Notwithstanding the foregoing, in no event shall the
aggregate amount of all Contingent Payments payable over the four Contingent
Payment Years exceed $100,000,000.
(b) The parties agree and confirm that the NSAP Cumulative EBITDA
Targets for the years indicated below are as follows:
Minimum Target NSAP
Year Cumulative EBITDA
-------- ---------------------
1998 $ 222,480,000
1999 $ 462,758,000
2000 $ 722,259,000
2001 $1,002,520,000
(c) The parties agree and confirm that the NSI Cumulative EBITDA
Targets and the Maximum Cumulative Contingent Payment Amounts for each the years
indicated below are as follows:
Year Minimum Target NSI Maximum Target NSI Maximum Cumulative Contingent
Cumulative EBITDA Cumulative EBITDA Payment Amount
------------------ ------------------- -----------------------------
1998 $ 59,400,000 $ 64,800,000 up to $ 25,000,000
1999 $124,740,000 $142,560,000 up to $ 50,000,000
2000 $196,614,000 $235,872,000 up to $ 75,000,000
2001 $275,675,000 $347,846,000 up to $100,000,000
(d) If the foregoing conditions are met, the Contingent Payment
payable to the Stockholders for each of the Contingent Payment Years shall be
based upon the following formulae, subject to the limitations set forth in this
Section 2.04:
(i) Contingent Payment Year 1998:
$8,250,000 + [(Actual NSI Cumulative EBITDA - 59,400,000) x $16,750,000]
-------------------------------------------
$5,400,000
(ii) Contingent Payment Year 1999:
$16,500,000 + [(Actual NSI Cumulative EBITDA - $124,740,000) x $33,500,000] - Contingent Payments
--------------------------------------------- made for 1998
$17,820,000
(iii) Contingent Payment Year 2000:
$24,750,000 + [(Actual NSI Cumulative EBITDA - $196,614,000) x $50,250,000] - Contingent Payments
--------------------------------------------- made for 1998
$39,258,000 and 1999
(iv) Contingent Payment Year 2001:
$33,000,000 + [(Actual NSI Cumulative EBITDA - $275,675,000) x $67,000,000] - Contingent Payments
--------------------------------------------- made for 1998,
$72,171,000 1999 and 2000
NSAP shall cause the Contingent Payment earned in any Contingent
Payment Year, if any, to be paid on the Contingent Payment Date to the
Stockholders by wire transfer in immediately available funds to an account to be
designated in writing by the Stockholder at least two Business
Days prior to the Contingent Payment Date and in amounts to each Stockholder in
proportion to their respective ownership percentage of the Nu Skin Shares.
(e) For purposes of this Section 2.04, The term "EBITDA" shall
mean (i) for the purpose of calculating the EBITDA of NSAP in respect of any
Contingent Payment Year, NSAP's earnings before income taxes, depreciation and
amortization, and before taking into account any extraordinary one-time or
non-recurring adjustments, and (ii) for the purpose of calculating the EBITDA of
NSI in respect of any Contingent Payment Year, NSI's earnings before income
taxes, depreciation and amortization, as such may be calculated using
methodologies and principles similar to those employed by NSI in connection with
conducting its operations and reporting its financial results for 1997; by way
of illustration, but not limitation, such methodologies and principles shall
include NSI bearing any Distributor commissions in excess of 42% of
commissionable product sales, maintaining gross margins of below 60% from sales
of products to Nu Skin affiliates and allocating selling, general and
administrative expenses in a manner similar to those employed during 1997
(taking into account such personnel modifications as shall be reasonable and
necessary under the circumstances). In addition to the foregoing, the parties
hereby agree that the NSI and NSAP EBITDA targets specified in Sections 2.04(b),
2.04(c) and 2.04(d) shall be calculated on a pro forma basis assuming for
purposes of these calculations that the Closing had occurred on December 31,
1997.
(f) Within 60 days after December 31 of each Contingent Payment
Year, or as soon thereafter as practicable, NSAP will obtain from Price
Waterhouse LLP (or such other firm of independent certified public accountants
as shall at the time be retained to audit the books and accounts of NSAP) a
written Contingent Payment Agreed Upon Procedures Report (the "Contingent
Payment Report") setting forth the EBITDA of NSAP and NSI for such year and
stating that such EBITDA numbers were determined in accordance with Section
2.04(e) and setting forth the computation of the Contingent Payment, if any, due
on the Contingent Payment Date, and stating that the amount of such Contingent
Payment has been determined in accordance with the provisions of this Section
2.04. NSAP shall deliver a copy of such Contingent Payment Report to the
Stockholders within five days of the receipt of such report.
(g) If the Stockholders wish to dispute the amount of any
Contingent Payment due then, within 20 days of the receipt of the Contingent
Payment Report, the Stockholders' Representative must deliver to NSAP written
notice (the "Stockholders' Contingent Payment Notice") stating the dollar amount
of the Contingent Payment in dispute for the Contingent Payment Year and setting
forth, in reasonable detail, the basis for such dispute. The failure of the
Stockholders' Representative to deliver the Stockholders' Contingent Payment
Notice within the specified time period shall be deemed to constitute acceptance
by the Stockholders of the information and calculations set forth in the
Contingent Payment Report for such Contingent Payment Year. The Stockholders may
dispute amounts reflected on the Contingent Payment Report only on the basis
that the amounts were not arrived at in accordance with the terms of this
Agreement.
(h) In the event that the Stockholders dispute the amount of the
Contingent Payment for any Contingent Payment Year, NSAP and the Stockholders
shall attempt to reconcile their differences and any resolution by them as to
any disputed amount shall be final, binding and conclusive on the parties
hereto. If NSAP and the Stockholders are unable to reach a resolution within 15
Business Days of the delivery by the Stockholders' Representative of the
Stockholders' Contingent Payment Notice indicating a dispute, NSAP and the
Stockholders' Representative shall submit the items remaining in dispute for
resolution to such independent accounting firm of national reputation as may be
mutually acceptable to NSAP and the Stockholders' Representative, which shall,
within 90 Business Days of such submission, report in writing to NSAP and the
Stockholders as to the resolution of such dispute, and such report shall be
final, binding and conclusive on NSAP and the Stockholders. The fees and
disbursements of the independent accounting firm shall be allocated between the
Stockholders and NSAP in the same proportion that the aggregate amount of the
disputed items submitted to the independent accounting firm which are
unsuccessfully disputed by each party (as determined by the independent
accounting firm) bears to the total amount of disputed items so submitted.
SECTION 2.05. Closing. The acquisition and delivery of the Nu
Skin Shares contemplated by this Agreement shall take place at a closing (the
"Closing") to be held at the offices of NSAP, Xxx Xx Xxxx Xxxxx, 00 Xxxx Xxxxxx,
Xxxxx, Xxxx at 10:00 A.M. Mountain Standard Time on the later to occur of (i)
March 20, 1998 and (ii) the fifth Business Day following the later to occur of
(A) expiration or termination of all applicable waiting periods under the HSR
Act and (B) satisfaction or waiver of all other conditions to the obligations of
the parties set forth in Article VII, or at such other place or at such other
time or on such other date as the Stockholders and NSAP may mutually agree upon
in writing (the day on which the Closing takes place being the "Closing Date").
SECTION 2.06. Closing Deliveries by the Stockholders. At the
Closing, the Stockholders shall deliver or cause to be delivered to NSAP:
(a) the Nu Skin Share Certificates evidencing the Nu Skin Shares
duly endorsed in blank, or accompanied by stock powers duly executed in
blank, in form satisfactory to NSAP and with all required stock transfer
tax stamps affixed;
(b) a receipt for the Series A Preferred Shares;
(c) a true and complete copy of the NSI Contribution and
Distribution Agreement, the NSI Tax Sharing and Indemnification
Agreement and the NSI Indemnity Agreement;
(d) a true and complete copy of the intercompany agreements
between NSI and the Retained Entities;
(e) a true and complete copy of the Stockholders' Escrow
Agreement; and
(f) the opinions, certificates and other documents required to be
delivered pursuant to Section 7.02.
SECTION 2.07. Closing Deliveries by NSAP. At the Closing, NSAP
shall deliver to the Stockholders:
(a) the Series A Preferred Share Certificates, registered in the
name of each Stockholder and representing the Series A Preferred Shares
to be issued to such Stockholder, which shall be in substantially the
form of Exhibit A attached hereto;
(b) cash in the amount of any fractional share amount due each
Stockholder, if any;
(c) cash or promissory notes in the amount, if any, determined in
accordance with Section 2.02; and
(d) the opinions, certificates and other documents required to be
delivered pursuant to Section 7.01.
SECTION 2.08. Adjustment of Consideration for Nu Skin Shares. The
parties hereto agree that combined net asset value of the Acquired Entities
reflected on the Reference Balance Sheet shall be not less than $83.7 million
(excluding the aggregate principal amount of the S Distribution Notes). In the
event the actual net asset value (the "Actual Net Asset Value") reflected on the
Reference Balance Sheet is reduced after the date hereof below $83.7 million as
a result of adjustments made in connection with the audit of the Reference
Balance Sheet by the Stockholders' accountants, the parties agree that Series A
Preferred Shares payable to the Stockholders hereunder shall be reduced on a pro
rata basis by an amount equal to $83.7 million less the Actual Net Asset Value
divided by the Average NSAP Common Stock Price at Closing. In addition to the
foregoing, the consideration to be paid to the Stockholders for the Nu Skin
Shares shall be subject to adjustment after the Closing as follows:
(a) Closing Balance Sheet. As promptly as practicable, but in any
event within ninety calendar days following the Closing Date, the Stockholders
shall deliver to NSAP the Closing Balance Sheet, which shall fairly present the
combined financial position of the Acquired Entities at the Closing Date in
conformity with U.S. GAAP applied on a basis consistent with the preparation of
the Reference Balance Sheet. Subject to Section 2.08(b) below, the Closing
Balance Sheet delivered by the Stockholders to NSAP shall be deemed to be and
shall be final, binding and conclusive on the parties hereto.
(b) Disputes. NSAP may dispute any amounts reflected on the
Closing Balance Sheet to the extent the net effect of such disputed amounts in
the aggregate would affect the Net Asset reflected on the Closing Balance Sheet
by more than $1,000,000, but only on the basis that the amounts reflected on the
Closing Balance Sheet were not arrived at in accordance with U.S. GAAP applied
on a basis consistent with the preparation of the Reference Balance Sheet;
provided, however, that NSAP shall have notified the Stockholders'
Representative in writing of each disputed item, specifying the amount thereof
in dispute and setting forth, in reasonable detail, the basis for such dispute,
within 30 Business Days of the Stockholders' delivery of the Closing Balance
Sheet to NSAP. In the event of such a dispute, the Stockholders' Accountants and
NSAP's Accountants shall attempt to reconcile their differences, and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive on the parties hereto. If the Stockholders' Accountants and NSAP's
Accountants are unable to reach a resolution with such effect within twenty
Business Days after receipt by NSAP and NSAP's Accountants of the Stockholders'
Representative's written notice of dispute, the Stockholders' Accountants and
NSAP shall submit the items remaining in dispute for resolution to an
independent accounting firm of international reputation mutually acceptable to
NSAP and the Stockholders (the "Independent Accounting Firm"), which shall,
within 90 Business Days after such submission, determine and report to NSAP and
the Stockholders upon such remaining disputed items, and such report shall be
final, binding and conclusive on the Stockholders and NSAP. The fees and
disbursements of the Independent Accounting Firm shall be allocated between the
Stockholders and NSAP in the same proportion that the aggregate amount of such
remaining disputed items so submitted to the Independent Accounting Firm that is
unsuccessfully disputed by each such party (as finally determined by the
Independent Accounting Firm) bears to the total amount of such remaining
disputed items so submitted. In acting under this Agreement, NSAP's Accountants,
the Stockholders' Accountants and the Independent Accounting Firm shall be
entitled to the privileges and immunities of arbitrators.
(c) Adjustment of Consideration. The Closing Balance Sheet shall
be deemed final for the purposes of this Section 2.08 upon the earlier of (A)
the failure of NSAP to notify the Stockholders' Representative of a dispute
within 30 Business Days of the Stockholders' delivery of the Closing Balance
Sheet to NSAP, (B) the resolution of all disputes, pursuant to Section 2.08(b),
by NSAP's Accountants and the Stockholders' Accountants and (C) the resolution
of all disputes, pursuant to Section 2.08(b), by the Independent Accounting
Firm. Within 10 Business Days after the Closing Balance Sheet being deemed
final, an adjustment to the consideration given to the Stockholders for the Nu
Skin Shares shall be made as follows:
(i) in the event that the net asset value reflected on the
Reference Balance Sheet exceeds the net asset value reflected on the
Closing Balance Sheet, then the consideration issued to the Stockholders
for the Nu Skin Shares shall be adjusted downward in an amount equal to
such excess (the "Downward Adjustment"). NSAP shall deliver written
notice to each Stockholder specifying each Stockholder's pro rata share
of such Downward Adjustment, and each Stockholder shall, within 10
Business Days of his receipt of such
notice remit to NSAP the number of shares of NSAP Common Stock equal to
his pro rata share of such Downward Adjustment to be calculated by
dividing the Downward Adjustment by the average of the closing price per
share of NSAP Common Stock on the New York Stock Exchange for the 20
consecutive trading days ending on the date five days prior to the date
of such remittance; and
(ii) in the event that the net asset value reflected on the
Closing Balance Sheet exceeds the net asset value reflected on the
Reference Balance Sheet, then the consideration issued to the
Stockholders for the Nu Skin Shares shall be adjusted upward in an
amount equal to such excess (the "Upward Adjustment") and NSAP shall,
within 10 Business Days of such determination, pay the Upward Adjustment
by issuing to the Stockholders NSAP Common Stock in an amount to be
calculated by dividing the Upward Adjustment by the Average NSAP Common
Stock Price at Closing. Each Stockholder will receive a pro rata number
of such shares of NSAP Common Stock that is in proportion to the number
of NSI Shares originally transferred by such Stockholder pursuant to
Section 2.01.
SECTION 2.09. Conversion and Optional Redemption of Series A
Preferred Stock/Common Stock. (a) The Series A Preferred Shares shall, subject
to the approval of the Stockholders of NSAP, be converted into NSAP Common Stock
in accordance with, and subject to, the terms and conditions set forth in the
certificate of designation (the "Certificate of Designation") to be filed with
the Secretary of State of the State of Delaware in respect of such Series A
Preferred Shares, substantially in the form of Exhibit B hereto. NSAP shall use
its best efforts to obtain such approval from its Stockholders at its Annual
Meeting of Stockholders to be held in April 1998. If the conversion of the
Preferred Shares into NSAP Common Stock has not been approved by September 30,
1998, then at any time thereafter, NSAP shall have the right, exercisable at its
sole discretion, to redeem the Series A Preferred Shares issued to each
Stockholder, in whole but not in part, in the manner and upon the terms and
conditions set forth in the Certificate of Designation.
(b) In the event that the Series A Preferred Shares are converted
into NSAP Common Stock in accordance with, and subject to, the terms and
conditions set forth in the Certificate of Designation, NSAP shall have the
right to redeem such NSAP Common Stock, in whole but not in part, at the
following redemption price (the "Common Stock Redemption Price") based on the
Average NSAP Common Stock Price at Closing during the 12-month periods beginning
on the date the Series A Preferred Shares are converted into NSAP Common Stock
for each of the years set forth below:
Common Stock
Year Redemption Price
------ ------------------
1998 100%
1999 120%
2000 140%
2001 160%
2002 180%
2003 200%
NSAP's right of redemption shall commence immediately following
the issuance of such NSAP Common Stock and shall expire on the sixth anniversary
of the date the Series A Preferred Shares were converted into NSAP Common Stock.
Notwithstanding the foregoing, NSAP's right to redeem the NSAP Common Stock
issued to the Stockholders is conditioned upon (i) the Common Stock Redemption
Price being no more than 100% of the average of the closing price per share of
NSAP Common Stock on the New York Stock Exchange for the 20 consecutive trading
days ending on the trading date that is five trading days prior to the date of
such redemption and (ii) NSAP receiving the written consent of at least
two-thirds (2/3) of the independent members of its Board of Directors. Payments
by NSAP to the Stockholders under this Section 2.09(b) shall be made by check or
wire transfer in immediately available funds to an account specified in writing
to NSAP by each such Stockholder no later than two Business Days after the
Redemption Date; provided, however, that in no event shall the failure by a
Stockholder to specify such an account relieve NSAP of its payment obligation
under this Section 2.09(b).
(c) In the event that NSAP elects to exercise its right of
redemption under Sections 2.09(a) or 2.09(b), NSAP shall deliver to each
Stockholder a written notice (the "Notice of Redemption") which specifies the
number of Series A Preferred Shares or NSAP Common Stock, as the case may be, to
be redeemed from such Stockholder, the Common Stock Redemption Price or the
redemption price for the Preferred Shares, as applicable, and the date of such
redemption (the "Redemption Date"), which shall be not less than 20 days after
the date on which such Notice of Redemption is given. On the Redemption Date,
the Stockholders shall each deliver the specified number of Series A Preferred
Shares or the NSAP Common Stock, as the case may be, to NSAP against payment of
the amount due to such Stockholders pursuant to Sections 2.09(a) and 2.09(b)
above.
SECTION 2.10. Tax Free Transaction. The parties intend that the
Stock Acquisitions contemplated by this Agreement qualify, in part, for United
States federal income tax purposes as tax-free exchanges under Section 351 of
the Code.
SECTION 2.11. Termination of "S" Corporation Status. As a result
of the Stock Acquisitions, the Acquired Entities will cease to qualify as "S"
corporations within the meaning of Section 1361(a) of the Code and will become
"C" corporations within the meaning of Section
1361(a)(2) of the Code, which will join in filing consolidated federal income
tax returns with NSAP as the common parent.
SECTION 2.12. Appointment of Stockholders' Representative. The
Stockholders hereby appoint each of Xxxxx X. Halls and Xxxxxx X. Xxxx (each such
person, whether acting singly or in concert, and any successor or successors
being the "Stockholders' Representative") as their legal representative and
Attorney-in-Fact (i) to do any and all things and execute all documents and
papers, in each Stockholder's name, place and stead, in any way such Stockholder
could do if personally present, in connection with this Agreement and the
transactions contemplated hereby, including, without limitation, to (i) amend,
cancel or extend, or waive the terms of this Agreement, the Stockholders' Escrow
Agreement or any other ancillary documents or agreements prepared in connection
with this Agreement, (ii) provide the notices of dispute and adjustments to the
consideration pursuant to Section 2.08, (iii) accept and deliver shares,
promissory notes or cash in the amount of any fractional share amount due to
each Stockholder, on behalf of such Stockholders, (iv) act on behalf of the
Stockholders with respect to claims (including the settlement thereof) made by
NSAP or the Stockholders for indemnification pursuant to Articles VIII and X and
with respect to any actions to be taken by the Stockholders pursuant to the
terms of the Stockholders' Escrow Agreement and (vi) accept, on behalf of the
Stockholders, all notices required to be delivered to the Stockholders under
this Agreement. In the event that one or both of the Stockholders'
Representatives becomes unable or unwilling to continue in his capacity as
Stockholders' Representative, the Stockholders shall appoint a successor
Stockholders' Representative by written notice to NSAP. All references herein to
"Stockholders' Representative" shall include any such successor Stockholders'
Representative. The Stockholders hereby consent to the taking of any and all
actions and the making of any decisions required or permitted to be taken by the
Stockholders' Representative under this Agreement or the Stockholders' Escrow
Agreement. The Stockholders shall be bound by all actions taken by the
Stockholders' Representative in his capacity thereof. NSAP shall be entitled to
rely, as being binding upon each of the Stockholders, any document or other
paper believed by it to be the genuine and correct and to have been signed or
sent by the Stockholders' Representative, and NSAP shall not be liable to the
Stockholders for any action taken or omitted to be taken by it in such reliance.
Copies of any notice given by NSAP to the Stockholders' Representative shall be
provided to each of those persons specified in Section 11.02.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
As an inducement to NSAP to enter into this Agreement, the
Stockholders hereby represent and warrant to NSAP as follows:
SECTION 3.01. Organization, Authority and Qualification of the
Acquired Entities; Execution and Delivery. (a) Each of the Acquired Entities (i)
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdictions of incorporation (both foreign and
domestic, as the case may be) (ii) has all the necessary power and authority to
own, operate or lease the properties and assets now owned, operated or leased by
such Acquired Entity and to carry on the business as it has been and is
currently conducted by such Acquired Entity.
(b) Each of the Acquired Entities is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary or desirable, except where the failure to be so licensed
or qualified would not result in a Material Adverse Effect on such Acquired
Entity. Section 3.01(b) of the Disclosure Schedule sets forth all of the
jurisdictions in which each Acquired Entity is so licensed or qualified.
(c) All corporate actions taken by the Acquired Entities have been duly
authorized, and the Acquired Entities have not taken any action that in any
respect conflicts with, constitutes a default under or results in a violation of
any provision of their respective Certificates of Incorporation or By-laws (or
similar organizational documents). True and correct copies of the Certificates
of Incorporation and By-laws (or similar organizational documents) of the
Acquired Entities, each as in effect on the date hereof, have been delivered by
the Stockholders to NSAP.
SECTION 3.02. Due Execution and Delivery by the Stockholders.
This Agreement has been duly executed and delivered by each of the Stockholders,
and (assuming due authorization, execution and delivery by NSAP) this Agreement
constitutes a legal, valid and binding obligation of the Stockholders
enforceable against the Stockholders in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought.
SECTION 3.03. Capital Stock of Acquired Entities; Stockholders'
Ownership of Nu Skin Shares. (a) The authorized capital stock of each of the
Acquired Entities is as set forth on Schedule A attached hereto. As of the date
hereof, all of the Nu Skin Shares are validly issued, fully paid and
nonassessable and none of the issued and outstanding Nu Skin Shares was issued
in violation of any preemptive rights. Except as set forth in this Agreement,
there are no options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating to the capital
stock of the Acquired Entities or obligating the Stockholders or the Acquired
Entities to issue or sell any shares of capital stock of, or any other interest
in, such Acquired Entities. There are no outstanding contractual obligations of
any of the Acquired Entities to repurchase, redeem or otherwise acquire any of
their respective shares or to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person.
(b) As of the date hereof, each Stockholder is, and as of the
Closing Date each Stockholder shall be, the record and beneficial owner of and
have good and valid title to such Stockholder's respective Nu Skin Shares as set
forth on Schedule A hereto as being owned by such Stockholder, free and clear of
all Encumbrances (except as provided in the Stockholders Agreement or
restrictions on transfer imposed by applicable securities laws). Upon
consummation of the transactions contemplated by this Agreement and registration
of the Nu Skin Shares in the name of NSAP, NSAP will own all the issued and
outstanding capital stock of the Acquired Entities free and clear of all
Encumbrances. Upon consummation of the transactions contemplated by this
Agreement, the Nu Skin Shares will be fully paid and nonassessable. There are no
voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the Nu
Skin Shares, except for those voting trusts, stockholder agreements, proxies or
other agreements whose terms do not and will not prevent the consummation of the
Stock Acquisition or the transactions described herein or whose terms shall have
been amended or modified so as to not prevent the consummation of the Stock
Acquisition or the transactions described herein.
(c) The stock registers of the Acquired Entities accurately
record: (i) the name and address of each Person owning the respective shares of
such Acquired Entities and (ii) the certificate number of each certificate
evidencing shares issued by such Acquired Entities, the number of shares
evidenced by each such certificate, the date of issuance thereof and, in the
case of cancellation, the date of cancellation.
SECTION 3.04. Corporate Books and Records. The minute books of
the Acquired Entities contain accurate records of all meetings and accurately
reflect all other actions taken by the stockholders, Boards of Directors and all
committees of the Boards of Directors of such Acquired Entities. Complete and
accurate copies of all such minute books and of the stock registers of the
Acquired Entities have been provided by the Stockholders to NSAP.
SECTION 3.05. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement by the Stockholders and the consummation of the transactions
contemplated herein in the manner contemplated hereby do not and will not (a)
violate, conflict with or result in the breach of any provision of the charter
or by-laws (or similar organizational documents) of any Acquired Entity, (b)
conflict with or violate (or cause an event which could have a Material Adverse
Effect as a result of) any Law or Governmental Order applicable to the
Stockholders, any Acquired Entity, or any of their respective assets, properties
or businesses, or (c) conflict with, result in any breach of, constitute a
default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the Nu Skin Shares or on any of the assets
or properties of the Stockholders or any Acquired Entity pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the Stockholders
or the Acquired Entities are a party or by which any of the Nu Skin Shares or
any of such assets or properties are bound or affected. Except as set forth in
Section 3.05 of the Disclosure Schedule, no material amounts will become payable
by any Acquired Entity to any former or current directors or officers of any
Acquired Entity as a result of or in connection with the transactions
contemplated by this Agreement.
SECTION 3.06. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Stockholders does not and will
not require any consent, approval, authorization or other order of, action by,
filing with or notification to any Governmental Authority or third party, except
(a) as described in Section 3.06 of the Disclosure Schedule and (b) the
notification requirements of the HSR Act.
SECTION 3.07. Financial Information, Books and Records,
Projections and Operating Data. (a) True and complete copies of (i) the audited
combined balance sheet of the Acquired Entities for each of the three fiscal
years ended as of December 31, 1997, and the related audited statement of
income, retained earnings, stockholders' equity and changes in financial
position of the Acquired Entities, together with all related notes and schedules
thereto, accompanied by the reports thereon of the Stockholders' Accountants,
and (ii) the unaudited Reference Balance Sheet (collectively referred to herein
as the "Financial Statements") have been delivered (or, in the case of the
audited balance sheet and statement, will be delivered when available) by the
Stockholders to NSAP. The Financial Statements, (including the Reference Balance
Sheet) (i) were prepared in accordance with the books of account and other
financial records of the Acquired Entities, (ii) present fairly the combined
financial condition and results of operations of such Acquired Entities as of
the dates thereof or for the periods covered thereby, (iii) have been prepared
in accordance with U.S. GAAP applied on a basis consistent with the past
practices of such Acquired Entities and (iv) include all adjustments (consisting
only of normal recurring accruals) that are necessary for a fair presentation of
the financial condition of such Acquired Entities and the results of the
operations of such Acquired Entities as of the dates thereof or for the periods
covered thereby.
(b) The books of account and other financial records of each
Acquired Entity: (i) reflect all items of income and expense and all assets and
Liabilities required to be reflected therein in accordance with U.S. GAAP
applied on a basis consistent with the past practices of such Acquired Entity,
(ii) are in all material respects complete and correct, and do not contain or
reflect any material inaccuracies or discrepancies and (iii) have been
maintained in accordance with good business and accounting practices.
SECTION 3.08. No Undisclosed Liabilities. There are no
Liabilities of the Acquired Entities, other than Liabilities (i) reflected and
reserved against on the Reference Balance Sheet, (ii) disclosed in Section 3.08
of the Disclosure Schedule or (iii) incurred since the date of this Agreement in
the ordinary course of the business, consistent with the past practice, of the
Acquired Entities and which do not and will not have a Material Adverse Effect
on such Acquired Entities. Reserves are reflected on the Reference Balance Sheet
against all Liabilities of the Acquired Entities in amounts that have been
established on a basis consistent with the past practices of the Acquired
Entities and in accordance with U.S. GAAP.
SECTION 3.09. Acquired Assets. Except as disclosed in Section
3.09 of the Disclosure Schedule, each asset of the Acquired Entities (including,
without limitation, the benefit of any licenses, leases or other agreements or
arrangements) acquired since the Reference Balance Sheet Date has been acquired
for consideration not more than the fair market value of such asset at the date
of such acquisition.
SECTION 3.10. Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since the Reference Balance Sheet Date, except
as disclosed in Section 3.10 of the Disclosure Schedule, the business of each
Acquired Entity has been conducted in the ordinary course and consistent with
past practice. As amplification and not limitation of the foregoing, except as
disclosed in Section 3.10 of the Disclosure Schedule, since the Reference
Balance Sheet Date, each Acquired Entity has not:
(i) permitted or allowed any of the assets or properties (whether
tangible or intangible) of the Acquired Entity to be subjected to any
Encumbrance, other than Permitted Encumbrances and Encumbrances that
will be released at or prior to the Closing;
(ii) except in the ordinary course of business consistent with
past practice, discharged or otherwise obtained the release of any
Encumbrance or paid or otherwise discharged any Liability, other than
current liabilities reflected on the Reference Balance Sheet and current
liabilities incurred in the ordinary course of business consistent with
past practice since the Reference Balance Sheet Date;
(iii) made any loan to, guaranteed any Indebtedness of or
otherwise incurred any Indebtedness on behalf of any Person;
(iv) failed to pay any creditor any amount owed to such creditor
when due;
(v) redeemed any of the capital stock or declared, made or paid
any dividends or distributions (whether in cash, securities or other
property) to the holders of capital stock of the Acquired Entity;
(vi) made any material changes in the customary methods of
operations of the Acquired Entity, including, without limitation,
practices and policies relating to manufacturing, purchasing,
Inventories, marketing, selling and pricing;
(vii) made any capital expenditure or commitment for any capital
expenditure in excess of $100,000 individually or $250,000 in the
aggregate, other than as described in Section 3.10 of the Disclosure
Schedule;
(viii) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible
assets), other than the sale of Inventories in the ordinary course of
business consistent with past practice;
(ix) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, the Acquired Entity;
(x) written down or written up (or failed to write down or write
up in accordance with U.S. GAAP consistent with past practice) the value
of any Inventories or receivables or revalued any assets of the Acquired
Entity other than in the ordinary course of business consistent with
past practice and in accordance with U.S. GAAP;
(xi) amended, terminated, canceled or compromised any material
claims of the Acquired Entity or waived any other rights of substantial
value to the Acquired Entity;
(xii) failed to maintain the Assets held by it in accordance with
good business practice and in good operating condition and repair;
(xiii) allowed any Permit or Environmental Permit that was issued
or relates to the Acquired Entity or otherwise relates to any Asset to
lapse or terminate or failed to renew any such Permit or Environmental
Permit or any insurance policy that is scheduled to terminate or expire
within 45 calendar days of the Closing Date;
(xiv) incurred any Indebtedness, excluding purchases of products
from NSI, in excess of $100,000 individually or $250,000 in the
aggregate;
(xv) disclosed any secret or confidential Intellectual Property
(except by way of issuance of a patent or to professional advisors) or
permitted to lapse or go abandoned any Intellectual Property (or any
registration or grant thereof or any application relating thereto) to
which, or under which, the Acquired Entity has any right, title,
interest or license;
(xvi) made any express or deemed election or settled or
compromised any Liability, with respect to Taxes of the Acquired Entity;
(xvii) suffered any casualty loss or damage with respect to any
of the Assets which in the aggregate have a replacement cost of more
than $250,000, whether or not such loss or damage shall have been
covered by insurance;
(xviii) suffered any Material Adverse Effect; or
(xix) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.10 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 3.10, except as expressly contemplated by this
Agreement.
SECTION 3.11. Litigation. Except as set forth in Section 3.11 of
the Disclosure Schedule (which, with respect to each Action disclosed therein,
sets forth: the parties, nature of the proceeding, date and method commenced,
amount of damages or other relief sought and, if applicable, paid or granted),
there are no Actions by or against any Acquired Entity (or by or against the
Stockholders or any Affiliate thereof and relating to any Acquired Entity ), or
affecting any of the Assets, pending before any Governmental Authority (or, to
the best knowledge of the Stockholders after due inquiry, threatened to be
brought by or before any Governmental Authority). None of the matters disclosed
in Section 3.11 of the Disclosure Schedule has or has had a Material Adverse
Effect or could affect the legality, validity or enforceability of this
Agreement or the consummation of the transactions contemplated hereby. Except as
set forth in Section 3.11 of the Disclosure Schedule, none of the Assets of any
Acquired Entity is subject to any Governmental Order (nor, to the best knowledge
of the Stockholders after due inquiry, are there any such Governmental Orders
threatened to be imposed by any Governmental Authority) which has or has had a
Material Adverse Effect.
SECTION 3.12 Compliance with Laws. Except as set forth in Section
3.12 of the Disclosure Schedule, each Acquired Entity has, at all times since
its formation, conducted and continues to conduct its business in accordance
with all Laws and Governmental Orders applicable to such Acquired Entity or any
of the Assets or the Business, and such Acquired Entity is not in violation of
any such Law or Governmental Order.
SECTION 3.13. Environmental and Safety Matters. Except as
disclosed in Section 3.13 of the Disclosure Schedule, each of the Acquired
Entities is in compliance with all applicable Environmental Laws and with the
provisions of all federal, state, local and foreign laws relating to pollution,
protection of the environment or occupational safety and health applicable to it
or to the Real Property or to the use, operation or occupancy thereof
(collectively, the "Permits"). None of the Acquired Entities has engaged in any
activity in
material violation of any applicable Environmental Law or provision of any
federal, state or local law relating to pollution, protection of the environment
or occupational safety and health. None of the Acquired Entities have any
material liability, absolute or contingent, under any applicable Environmental
Law or federal, state or local law relating to pollution, protection of the
environment or occupational safety and health.
SECTION 3.14. Material Contracts. (a) the following contracts and
agreements (including, without limitation, oral and informal arrangements) of
each Acquired Entity (together with all contracts, agreements, leases and
subleases concerning the management or operation of any Real Property
(including, without limitation, brokerage contracts) described in Section 3.16
of this Agreement) to which such Acquired Entity is a party and all agreements
relating to Intellectual Property described in Section 3.15 of this Agreement,
are herein referred to as the "Material Contracts"):
(i) each contract and agreement for the purchase of Inventory,
spare parts, other materials or personal property with any supplier or
for the furnishing of services to any Acquired Entity under the terms of
which such Acquired Entity: (A) is likely to pay or otherwise give
consideration of more than $250,000 in the aggregate during the calendar
year ending December 31, 1998, (B) is likely to pay or otherwise give
consideration of more than $500,000 in the aggregate over the remaining
term of such contract or (C) cannot be canceled by the Acquired Entity
without penalty or further payment and without more than 30 days'
notice;
(ii) each contract and agreement for the sale of Inventory or
other personal property or for the furnishing of services by the
Acquired Entity which: (A) is likely to involve consideration of more
than $250,000 in the aggregate during the calendar year ending December
31, 1998, (B) is likely to involve consideration of more than $500,000
in the aggregate over the remaining term of the contract or (C) cannot
be canceled by the Acquired Entity without penalty or further payment
and without more than 30 days' notice;
(iii) all broker, Distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research,
marketing consulting and advertising contracts and agreements to which
any Acquired Entity is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which any
Acquired Entity is a party and which are not cancelable without penalty
or further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to Indebtedness of any
Acquired Entity ;
(vi) all contracts and agreements with any Governmental Authority
to which any Acquired Entity is a party;
(vii) all contracts and agreements that limit or purport to limit
the ability of any Acquired Entity to compete in any line of business or
with any Person or in any geographic area or during any period of time;
(viii) all contracts and agreements providing for benefits under
any Plan of any Acquired Entity; and
(ix) all other contracts and agreements whether or not made in
the ordinary course of business, which are material to any Acquired
Entity.
For purposes of this Section 3.14 and Sections 3.15 and 3.16, the
term "lease" shall include any and all leases, subleases, sale/leaseback
agreements or similar arrangements.
(b) Except as disclosed in Section 3.14(b) of the Disclosure
Schedule, each Material Contract: (i) is valid and binding on the respective
parties thereto and is in full force and effect and (ii) as a result of the
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth in Section 3.06 of the Disclosure Schedule
are not obtained, shall not be terminated or result in a penalty or other
adverse consequence. None of the Acquired Entities are in breach of, or default
under, any Material Contract.
(c) Except as disclosed in Section 3.14(c) of the Disclosure
Schedule, no other party to any Material Contract is in breach thereof or
default thereunder.
(d) Except as disclosed in Section 3.14(d) of the Disclosure
Schedule, there is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of any
of the Acquired Entities.
SECTION 3.15. Intellectual Property. (a) Except as otherwise
described in Section 3.15(a)(i) of the Disclosure Schedule, in each case where a
registration or patent or application for registration or patent is held by
assignment, the assignment has been duly recorded with the State, national or
foreign Trademark Office from which the original registration issued or before
which the application for registration is pending. Except as disclosed in
Section 3.15(a)(ii) of the Disclosure Schedule, to the best of the Stockholders'
knowledge the rights of the Acquired Entities in or to such Intellectual
Property do not conflict with or infringe on the rights of any other Person, and
neither the Stockholders nor any of the Acquired Entities have received any
claim or written notice from any Person, to such effect.
(b) Except as disclosed in Section 3.15(b) of the Disclosure
Schedule: (i) all the Owned Intellectual Property is owned by the Acquired
Entities free and clear of any Encumbrance and (ii) no Actions have been made or
asserted or are pending (nor, to the best knowledge of the Stockholders after
due inquiry, has any such Action been threatened) against the Acquired Entities
either (A) based upon or challenging or seeking to deny or restrict the use by
such Acquired Entities of any of the Owned Intellectual Property or (B) alleging
that any services provided, or products manufactured or sold by the Acquired
Entities are being provided, manufactured or sold in violation of any patents or
trademarks, or any other rights of any Person. To the best knowledge of the
Stockholders after due inquiry, no Person is using any patents, copyrights,
trademarks, service marks, trade names, trade secrets or similar property that
are confusingly similar to the Owned Intellectual Property or that infringe upon
the Owned Intellectual Property or upon the rights of the Acquired Entities
therein. Except as disclosed in Section 3.15(b) of the Disclosure Schedule,
neither the Stockholders nor the Acquired Entities have granted any license or
other right to any other Person with respect to the Owned Intellectual Property.
The consummation of the transactions contemplated by this Agreement will not
result in the termination or impairment of any of the Owned Intellectual
Property.
(c) With respect to all Licensed Intellectual Property and Owned
Intellectual Property, the registered user provisions of all nations requiring
such registrations have been complied with.
(d) The Stockholders have all the licenses and sublicenses for
Licensed Intellectual Property used in the operation of the Business and any and
all ancillary documents pertaining thereto (including, but not limited to, all
amendments, consents and evidence of commencement dates and expiration dates).
With respect to each of such licenses and sublicenses:
(i) such license or sublicense, together with all ancillary
documents referenced in the first sentence of this Section 3.15(d), is
valid and binding and in full force and effect and represents the entire
agreement between the respective licensor and licensee with respect to
the subject matter of such license or sublicense;
(ii) except as otherwise set forth in Section 3.15(d)(ii) of the
Disclosure Schedule, such license or sublicense will not cease to be
valid and binding and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this Agreement constitute a breach
or default under such license or sublicense or otherwise give the
licensor or sublicensor a right to terminate such license or sublicense;
(iii) except as otherwise disclosed in Section 3.15(d)(iii) of
the Disclosure Schedule, with respect to each such license or
sublicense: (A) neither the Stockholders
nor any Acquired Entity has received any notice of termination or
cancellation under such license or sublicense and no licensor or
sublicensor has any right of termination or cancellation under such
license or sublicense except in connection with the default of an
Acquired Entity thereunder, (B) neither the Stockholders nor any
Acquired Entity has received any notice of a breach or default under
such license or sublicense, which breach or default has not been cured,
and (C) neither the Stockholders nor any Acquired Entity has granted to
any other Person any rights, adverse or otherwise, under such license or
sublicense;
(iv) neither the Stockholders nor any Acquired Entity, nor (to
the best knowledge of the Stockholders after due inquiry) any other
party to such license or sublicense is in breach or default in any
material respect, and, to the best knowledge of the Stockholders after
due inquiry, no event has occurred that, with notice or lapse of time
would constitute such a breach or default or permit termination,
modification or acceleration under such license or sublicense;
(v) no Actions have been made or asserted or are pending (nor, to
the best knowledge of the Stockholders after due inquiry, has any such
Action been threatened) against any Acquired Entity either (A) based
upon or challenging or seeking to deny or restrict the use by such
Acquired Entity of any of the Licensed Intellectual Property or (B)
alleging that any Licensed Intellectual Property is being licensed,
sublicensed or used in violation of any patents or trademarks, or any
other rights of any Person; and
(vi) to the best knowledge of the Stockholders after due inquiry,
no Person is using any patents, copyrights, trademarks, service marks,
trade names, trade secrets or similar property that are confusingly
similar to the Licensed Intellectual Property or that infringe upon the
Licensed Intellectual Property or upon the rights of any Acquired Entity
therein.
(e) Except as set forth in Section 3.15(e) of the Disclosure
Schedule, the Stockholders are not aware of any reason that would prevent any
pending applications to register trademarks, service marks or copyrights or any
pending patent applications from being granted.
(f) The Intellectual Property described in this Section 3.15 of
this Agreement constitutes all the Intellectual Property used or held or
intended to be used by any Acquired Entity or forming a part of, used, held or
intended to be used in, and all such Intellectual Property necessary in the
conduct of, the Business of the Acquired Entities and there are no other items
of Intellectual Property that are material to any Acquired Entity.
SECTION 3.16. Real Property. (a) Section 3.16(a)(i) of the
Disclosure Schedule lists: the street address of each parcel of Owned Real
Property. Section 3.16(a)(ii) of the
Disclosure Schedule lists the street address of each parcel of Leased Real
Property, the identity of the lessor and lessee thereof and the lease agreement
applicable thereto.
(b) Except as described in Section 3.16(b) of the Disclosure
Schedule, there is no material violation of any Law (including, without
limitation, any building, planning or zoning law) relating to any of the Real
Property. The Acquired Entities are in peaceful and undisturbed possession of
each parcel of Real Property and there are no contractual or legal restrictions
that preclude or restrict the ability to use the premises for the purposes for
which they are currently being used. All existing water, sewer, steam, gas,
electricity, telephone and other utilities required for the construction, use,
occupancy, operation and maintenance of the Real Property are adequate for the
conduct of the business of the Acquired Entities as it has been and currently is
conducted. There are no material latent defects or material adverse physical
conditions affecting the Real Property or any of the facilities, buildings,
structures, erections, improvements, fixtures, fixed assets and personalty of a
permanent nature annexed, affixed or attached to, located on or forming part of
the Real Property.
(c) The Stockholders have, or have caused to be, delivered to
NSAP true and complete copies of all leases and subleases listed in Section
3.16(a)(ii) of the Disclosure Schedule and any and all ancillary documents
pertaining thereto (including, but not limited to, all amendments, consents for
alterations and documents recording variations and evidence of commencement
dates and expiration dates). With respect to each of such leases and subleases:
(i) such lease or sublease is legal, valid, binding, enforceable
and in full force and effect and represents the entire agreement between
the respective landlord and tenant with respect to such property;
(ii) except as otherwise set forth in Section 3.16(c) of the
Disclosure Schedule, such lease or sublease will not cease to be legal,
valid, binding, enforceable and in full force and effect on terms
identical to those currently in effect as a result of the consummation
of the transactions contemplated by this Agreement, nor will the
consummation of the transactions contemplated by this Agreement
constitute a breach or default under such lease or sublease or otherwise
give the landlord a right to terminate such lease or sublease; and
(iii) none of the Acquired Entities nor (to the best knowledge of
the Stockholders) any other party to such lease or sublease, is in
breach or default in any material respect, and, to the best knowledge of
the Stockholders, no event has occurred that, with notice or lapse of
time would constitute such a breach or default or permit termination,
modification or acceleration under such lease or sublease.
(d) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the best knowledge of the Stockholders,
threatened against the Real Property of the Acquired Entities.
(e) All the Real Property of the Acquired Entities is occupied
under a valid and current certificate of occupancy or similar permit, the
transactions contemplated by this Agreement will not require the issuance of any
new or amended certificate of occupancy and, to the best knowledge of the
Stockholders, there are no facts that would prevent the Real Property from being
occupied by the Acquired Entities after the Closing in the same manner as
occupied by the Acquired Entities immediately prior to the Closing.
(f) All improvements on the Real Property constructed by or on
behalf of the Acquired Entities, or to the best knowledge of the Stockholders,
constructed by or on behalf of any other Person were constructed in compliance
with all applicable Laws (including, but not limited to, any building, planning
or zoning Laws) affecting such Real Property.
(g) No improvements on the Real Property and none of the current
uses and conditions thereof violate any applicable deed restrictions or other
applicable covenants, restrictions, agreements, existing site plan approvals,
zoning or subdivision regulations or urban redevelopment plans as modified by
any duly issued variances, and no permits, licenses or certificates pertaining
to the ownership or operation of all improvements on the Real Property, other
than those which are transferable with the Real Property, are required by any
Governmental Authority having jurisdiction over the Real Property.
(h) The Acquired Entities have the full right to exercise any
renewal options contained in the leases and subleases pertaining to the Leased
Real Property on the terms and conditions contained therein and upon due
exercise would be entitled to enjoy the use of each Leased Real Property for the
full term of such renewal options.
SECTION 3.17. Tangible Personal Property. (a) The Stockholders
have, or have caused to be, delivered to NSAP true and complete copies of all
leases and subleases for machinery, equipment, tools, supplies, furniture,
fixtures, personalty, vehicles, rolling stock and other tangible personal
property (the "Tangible Personal Property") used by the Acquired Entities or
owned or leased by the Acquired Entities and any and all material ancillary
documents pertaining thereto (including, but not limited to, all amendments,
consents and evidence of commencement dates and expiration dates). With respect
to each of such leases and subleases:
(i) such lease or sublease, together with all ancillary documents
delivered pursuant to the first sentence of this Section 3.17, is legal,
valid, binding, enforceable and in full force and effect and represents
the entire agreement between the respective lessor and lessee with
respect to such property;
(ii) except as set forth in Section 3.17 of the Disclosure
Schedule, such lease or sublease will not cease to be legal, valid,
binding, enforceable and in full force and effect on terms identical to
those currently in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this Agreement constitute a breach
or default under such lease or sublease or otherwise give the lessor a
right to terminate such lease or sublease; and
(iii) none of the Acquired Entities nor (to the best knowledge of
the Stockholders) any other party to such lease or sublease, is in
breach or default in any material respect, and, to the best knowledge of
the Stockholders, no event has occurred that, with notice or lapse of
time would constitute such a breach or default or permit termination,
modification or acceleration under such lease or sublease.
(b) The Acquired Entities have the full right to exercise any
renewal options contained in the leases and subleases pertaining to the Tangible
Personal Property on the terms and conditions contained therein and upon due
exercise would be entitled to enjoy the use of each item of leased Tangible
Personal Property for the full term of such renewal options.
SECTION 3.18. Assets. (a) Except as disclosed in Section 3.18 of
the Disclosure Schedule, the Acquired Entities own, lease or have the legal
right to use all the properties and assets, including, without limitation, the
Owned Intellectual Property, the Licensed Intellectual Property, the Real
Property and the Tangible Personal Property, used or intended to be used in the
conduct of the respective businesses of the Acquired Entities or otherwise
owned, leased or used by the Acquired Entities and, with respect to contract
rights, are parties to and enjoy the right to the benefits of all contracts,
agreements and other arrangements used or intended to be used by such Acquired
Entities in or relating to the conduct of their respective businesses (all such
properties, assets and contract rights being the "Assets"). The Acquired
Entities have good and marketable title to, or, in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Encumbrances, except (i) as disclosed in Section 3.13,
3.14, 3.15, 3.16 or 3.17 of the Disclosure Schedule and (ii) Permitted
Encumbrances.
(b) The Assets constitute all the properties, assets and rights
forming a part of, used, held or intended to be used in, and all such
properties, assets and rights as are necessary in the conduct of, the Businesses
of the Acquired Entities. At all times since the Reference Balance Sheet Date,
the Acquired Entities have caused the Assets to be maintained in accordance with
good business practice, and all the Assets are in good operating condition and
repair and are suitable for the purposes for which they are used and intended.
(c) Following the consummation of the transactions contemplated
by this Agreement, the Acquired Entities will continue to own, pursuant to good
and marketable title, or lease, under valid and subsisting leases, or otherwise
retain its respective interest in the
Assets without incurring any penalty or other adverse consequence, including,
without limitation, any increase in rentals, royalties, or licenses or other
fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement. Immediately following the Closing,
the Acquired Entities shall own and possess all documents, books, records,
agreements and financial data of any sort used by them in the conduct of their
business or otherwise.
SECTION 3.19. Suppliers. Listed in Section 3.19 of the Disclosure
Schedule are the names and addresses of all the third party suppliers from which
the Acquired Entities ordered raw materials, supplies, merchandise and other
goods for the Acquired Entities. Except as disclosed in Section 3.19 of the
Disclosure Schedule, neither the Stockholders nor the Acquired Entities has
received any notice or has any reason to believe that any such supplier will not
sell raw materials, supplies, merchandise and other goods to the Acquired
Entities at any time after the Closing Date on terms and conditions
substantially similar to those used in its current sales to the Acquired
Entities subject only to general and customary price increases.
SECTION 3.20. Employee Benefit Matters. (a) Compliance with
Applicable Law. Each of (i) the employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and all bonus, stock option, stock purchase, restricted stock,
incentive, deferred compensation, retiree medical or life insurance,
supplemental retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance or other contracts or
agreements, whether legally enforceable or not, to which any Acquired Entity is
a party, with respect to which any Acquired Entity has any obligation or which
are maintained, contributed to or sponsored by any Acquired Entity for the
benefit of any current or former employee, officer or director of any Acquired
Entity, (ii) each employee benefit plan for which any Acquired Entity could
incur liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated, (iii) any plan in respect of which any Acquired Entity
could incur liability under Section 4212(c) of ERISA and (iv) any contracts,
arrangements or understandings between the Stockholders or any of the Acquired
Entities and any employee of any Acquired Entity, including, without limitation,
any contracts, arrangements or understandings relating to the sale of any
Acquired Entity (collectively, the "Plans") is now and always has been operated
in all material respects in accordance with the requirements of all applicable
Law, including, without limitation, ERISA and the Code, and all persons who
participate in the operation of such Plans and all Plan "fiduciaries" (within
the meaning of Section 3(21) of ERISA) have always acted in all material
respects in accordance with the provisions of all applicable Law, including,
without limitation, ERISA and the Code. The Acquired Entities have performed all
obligations required to be performed by them under, are not in any respect in
default under or in violation of, and have no knowledge of any default or
violation by any party to, any Plan. No legal action, suit or claim is pending
or threatened with respect to any Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could give rise to any such
action, suit or claim.
(b) Qualification of Certain Plans. Each Plan which is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
has received a favorable determination letter from the IRS that it is so
qualified and each trust established in connection with any Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and,
to the knowledge of each Acquired Entity, no fact or event has occurred since
the date of such determination letter from the IRS to adversely affect the
qualified status of any such Plan or the exempt status of any such trust. Each
trust maintained or contributed to by any Acquired Entity which is intended to
be qualified as a voluntary employees' beneficiary association and which is
intended to be exempt from federal income taxation under Section 501(c)(9) of
the Code has received a favorable determination letter from the IRS that it is
so qualified and so exempt, and no fact or event has occurred since the date of
such determination by the IRS to adversely affect such qualified or exempt
status.
(c) Plan Contributions and Funding. All contributions, premiums
or payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any government entity and, to the knowledge of each Acquired Entity, no fact or
event exists which could give rise to any such challenge or disallowance. No
Acquired Entity maintains or contributes to nor has it ever maintained or
contributed to a Plan which is subject to Title IV of ERISA.
(d) Americans With Disability Act. Except as set forth in Section
3.20(d) of the Disclosure Schedule, the Acquired Entities are, where applicable,
in compliance with the requirements of the Americans With Disabilities Act.
(e) WARN Act. The Acquired Entities are, where applicable, in
compliance with the requirements of the Workers Adjustment and Retraining
Notification Act ("WARN") and have no liabilities pursuant to WARN.
(f) Foreign Plans. With respect to any scheme or arrangement
mandated by a government other than the United States (a "Foreign Government
Scheme or Arrangement") and with respect to each Plan that is not subject to
United States law (a "Foreign Plan"):
(i) any employer and employee contributions required by law or by
the terms of any Foreign Government Scheme or Arrangement or any Foreign
Plan have been made, or, if applicable, accrued, in accordance with the
country-specific accounting practices;
(ii) the fair market value of the assets of each funded Foreign
Plan, the liability of each insurer for any Foreign Plan funded through
insurance or the book reserve established for any Foreign Plan, together
with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations, as of the date
hereof, with respect to all current and former participants in such
Foreign Plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Foreign Plan;
and
(iii) each Foreign Plan required to be registered has been
registered and has been maintained in good standing with applicable
regulatory authorities.
SECTION 3.21. Labor Matters. Except as set forth in Section 3.21
of the Disclosure Schedule, (a) the Acquired Entities are currently, and have at
all times since their formation been, in compliance with all applicable Laws
relating to the employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of taxes and other sums as
required by the appropriate Governmental Authority and have withheld and paid to
the appropriate Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Acquired Entities and are not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing; (b) the
Acquired Entities have paid in full to all their respective employees or
adequately accrued for in accordance with U.S. GAAP all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees; (c) there is no claim with respect to payment of wages, salary
or overtime pay that has been asserted or is now pending or threatened before
any Governmental Authority with respect to any Persons currently or formerly
employed by any Acquired Entity; (d) there is no charge or proceeding with
respect to a violation of any occupational safety or health standards that has
been asserted or is now pending or threatened with respect to any Acquired
Entity; (e) there is no charge of discrimination in employment or employment
practices, for any reason, including, without limitation, age, gender, race,
religion or other legally protected category, which has been asserted or is now
pending or threatened before the United States Equal Employment Opportunity
Commission, or any other Governmental Authority in any jurisdiction in which any
Acquired Entity has employed or currently employs any Person; and (f) to the
best knowledge of the Stockholders and the Acquired Entities no basis exists for
asserting any claims pursuant to subsections (a) - (e) above..
SECTION 3.22. Taxes (a) (i) All returns and reports in respect of
Taxes required to be filed with respect to the Acquired Entities have been
timely filed; (ii) all Taxes required to be shown on such returns and reports or
otherwise due have been timely paid; (iii) all such returns and reports (insofar
as they relate to the activities or income of the Acquired Entities) are true,
correct and complete in all material respects; (iv) no adjustment relating to
such returns has been proposed formally or informally by any Tax authority and,
to the best knowledge of the Stockholders and the Acquired Entities, no basis
exists for any such adjustment; (v) there are no pending or, to the best
knowledge of the Stockholders, threatened actions or proceedings for the
assessment or collection of Taxes against the Acquired Entities or; (vi) no
consent under Section 341(f) of the Code has been filed with respect to the
Acquired Entities; (vii) there are no
Tax liens on any assets of the Acquired Entities; (viii) neither the
Stockholders nor any Affiliate of the Stockholders is a party to any agreement
or arrangement that would result, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code; (ix) no acceleration of the vesting schedule for any property that is
substantially unvested within the meaning of the regulations under Section 83 of
the Code will occur in connection with the transactions contemplated by this
Agreement; (x) no Acquired Entity has been at any time a member of any
partnership or joint venture or the holder of a beneficial interest in any trust
for any period for which the statute of limitations for any Tax has not expired;
(xii) no Acquired Entity has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code; and (xiii)
no Acquired Entity is subject to any accumulated earnings tax penalty or
personal holding company tax.
(b) Except as disclosed with reasonable specificity in Section 3.22 of
the Disclosure Schedule: (i) there are no outstanding waivers or agreements
extending the statute of limitations for any period with respect to any Tax to
which any Acquired Entity may be subject; (ii) no Acquired Entity (A) has or is
projected to have an amount includible in its income for the current taxable
year under Section 951 of the Code, (B) has been a passive foreign investment
company within the meaning of Section 1296 of the Code, (C) has an unrecaptured
overall foreign loss within the meaning of Section 904(f) of the Code or (D) has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code; (iii) no Acquired Entity has any (A) income
reportable for a period ending after the Closing Date but attributable to a
transaction (e.g., an installment sale) occurring in or a change in accounting
method made for a period ending on or prior to the Closing Date which resulted
in a deferred reporting of income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction), or (B)
deferred gain or loss arising out of any deferred intercompany transaction; (iv)
there are no requests for information currently outstanding that could affect
the Taxes of any Acquired Entity; (v) there are no proposed reassessments of any
property owned by any Acquired Entity or other proposals that could increase the
amount of any Tax to which any Acquired Entity would be subject; (vi) no
Acquired Entity is obligated under any agreement with respect to industrial
development bonds or similar obligations, with respect to which the
excludibility from gross income of the holder for federal income tax purposes
could be affected by the transactions contemplated hereunder; and (vii) no power
of attorney that is currently in force has been granted with respect to any
matter relating to Taxes that could affect any Acquired Entity.
(c) For purposes of determining whether the conditions to Closing
have been satisfied (but not for purposes of the Stockholders' indemnification
of NSAP pursuant to Section 10.01(a)), the representations in Section 3.22(a)
shall apply only with respect to items which could have a Material Adverse
Effect on the Acquired Entities.
(d) On the Reference Balance Sheet, reserves and allowances have
been provided, and on the Closing Balance Sheet reserves and allowances will be
provided, in each case adequate to satisfy all Liabilities for Taxes relating to
the Acquired Entities for periods through the Closing Date (without regard to
the materiality thereof).
SECTION 3.23. Insurance. (a) With respect to each insurance
policy (including policies providing property, casualty, liability, workers'
compensation, and bond and surety arrangements) under which the Acquired
Entities have been an insured, a named insured or otherwise the principal
beneficiary of coverage at any time within the past 12 months): (i) the policy
is legal, valid, binding and enforceable in accordance with its terms and,
except for policies that have expired under their terms in the ordinary course,
is in full force and effect; (ii) no Acquired Entity is in breach or default
(including any breach or default with respect to the payment of premiums or the
giving of notice), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default under the policy; and (iii) no
party to the policy has repudiated, or given notice of an intent to repudiate,
any provision thereof.
(b) No insurance policy covering the Acquired Entities will cease to be
legal, valid, binding, enforceable in accordance with its terms and in full
force and effect on terms identical to those in effect as of the date hereof as
a result of the consummation of the transactions contemplated by this Agreement.
SECTION 3.24. Nu Skin USA Intercompany Agreements. The
intercompany agreements entered into between NSI and Nu Skin USA are in full
force and effect, are similar in form to those intercompany agreements described
in Section 5.09 of this Agreement and provide, among other things, that Nu Skin
USA has the right to sell Nu Skin personal care and nutritional products in the
United States.
SECTION 3.25. Full Disclosure. (a) The Stockholders are not aware
of any facts pertaining to any of the Acquired Entities which are reasonably
likely to have a Material Adverse Effect on any of the Acquired Entities and
which have not been disclosed in this Agreement, the Disclosure Schedule or the
Financial Statements.
(b) No representation or warranty of the Stockholders in this Agreement,
nor any statement or certificate furnished or to be furnished to NSAP pursuant
to this Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
SECTION 3.26. Brokers. Except for Xxxxxxxxx, Xxxxxx & Xxxxxxxx
and Xxxxxxx Xxxxx & Co., no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Stockholders.
SECTION 3.27. Securities Laws. The Stockholders acknowledge that
the Preferred Shares have not been registered under the Securities Act of 1933,
as amended (the "Act"), and cannot be resold unless they are registered under
the Act or unless an exemption from registration is available. The Stockholders
are acquiring the Preferred Shares for themselves for investment purposes only
and not with a view toward distribution.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSAP
As an inducement to the Stockholders to enter into this
Agreement, NSAP hereby represents and warrants to the Stockholders as follows:
SECTION 4.01. Organization and Authority of NSAP; Series A
Preferred Stock Issuance. NSAP is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
necessary corporate power and authority to enter into this Agreement, to carry
out its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by NSAP, the performance by
NSAP of its obligations hereunder and the consummation by NSAP of the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of NSAP. This Agreement has been duly executed and delivered
by NSAP, and (assuming due authorization, execution and delivery by the
Stockholders) this Agreement constitutes a legal, valid and binding obligation
of NSAP enforceable against NSAP in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought. The Series A Cumulative Preferred Stock has been duly authorized and
when the Series A Preferred Shares are duly executed and delivered in accordance
with this Agreement, such Series A Preferred Shares will have been validly
issued, fully paid and nonassessable and all corporate action required to be
taken for the authorization, issuance and delivery of such Series A Preferred
Shares has been, or by the Closing will have been taken. Upon conversion of the
Series A Preferred Shares, if applicable, in accordance with and subject to the
terms of the Certificate of Designation, the Nu Skin Common Stock issued to the
Stockholders will be duly and validly issued, fully paid and nonassessable, free
and clear of all Encumbrances, except as provided for in this Agreement or in
the Certificate of Designation.
SECTION 4.02. No Conflict. Assuming compliance with the
notification requirements of the HSR Act and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.03, except as may result from any facts or
circumstances relating solely to the Stockholders, the execution, delivery and
performance of this Agreement by NSAP do not and will not (a) violate, conflict
with or result in the breach of any provision of the Certificate of
Incorporation or By-laws of NSAP, (b) conflict with or violate any Law or
Governmental Order applicable to NSAP or (c) conflict with, or result in any
breach of, constitute a default (or event which with the giving of notice or
lapse or time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation, or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of NSAP pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which NSAP is a party or
by which any of such assets or properties are bound or affected which would have
a material adverse effect on the ability of NSAP to consummate the transactions
contemplated by this Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by NSAP do not require any consent,
approval, authorization or other order of, action by, filing with, or
notification to, any Governmental Authority, except (a) as described in a
writing given to the Stockholders by NSAP on the date of this Agreement and (b)
the notification requirements of the HSR Act.
SECTION 4.04. Investment Purpose. NSAP is acquiring the Nu Skin
Shares solely for the purpose of investment and not with a view to, or for offer
or sale in connection with, any distribution thereof.
SECTION 4.05. Litigation. Except as disclosed in a writing given
to the Stockholders by NSAP on the date of this Agreement, no claim, action,
proceeding or investigation is pending or, to the best knowledge of NSAP,
threatened, which seeks to delay or prevent the consummation of, or which would
be reasonably likely to materially adversely affect NSAP's ability to
consummate, the transactions contemplated by this Agreement.
SECTION 4.06. Absence of Certain Changes. Except as reported in
NSAP's forms, reports, statements and other documents required to be filed with
(i) the Securities Exchange Commission including, without limitation, (A) all
Annual Reports on Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C) all
proxy statements relating to meetings of the stockholders, (D) all Current
Reports on Form 8-K, (E) all other reports and registration statements and (F)
all amendments to all such reports and registration statements and (ii) all
forms, reports, statements and other documents required to be filed with any
other applicable federal or state regulatory authorities, NSAP is not aware of
any facts pertaining to NSAP which are reasonably likely to have a Material
Adverse Effect on NSAP.
SECTION 4.07. Opinion of Financial Advisor to Special Committee.
The Special Committee of the Board of Directors of NSAP has received an opinion
from its financial advisor, Xxxxxxxxx, Xxxxxx & Xxxxxxxx, dated the date of this
Agreement, to the effect that, as of such date, the consideration to be paid by
NSAP for the Nu Skin Shares is fair to NSAP from a financial point of view.
SECTION 4.08. Brokers. Except for Xxxxxxxxx, Lufkin & Xxxxxxxx
and Xxxxxxx Xxxxx & Co., no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of NSAP. NSAP shall be solely responsible for payment of the fees and
expenses of Xxxxxxxxx, Lufkin & Xxxxxxxx and Xxxxxxx Xxxxx & Co.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) The
Stockholders covenant and agree that, except as described in Section 5.01(a) of
the Disclosure Schedule, between the date hereof and the time of the Closing,
they shall cause the Acquired Entities to conduct their businesses in the
ordinary course and consistent with such Acquired Entities' prior practices.
Without limiting the generality of the foregoing, except as described in Section
5.01(a) of the Disclosure Schedule, the Stockholders shall cause the Acquired
Entities to (i) continue their advertising and promotional activities, and
pricing and purchasing policies, in accordance with past practice; (ii) use
their best efforts to (A) preserve intact their business organizations, (B) keep
available to NSAP the services of the employees of the Acquired Entities, (C)
continue in full force and effect without material modification all existing
policies or binders of insurance currently maintained in respect of the Acquired
Entities and (D) preserve their current relationships with their Distributors,
suppliers and other persons with which they have significant business
relationships; and (iii) not engage in any practice, take any action, fail to
take any action or enter into any transaction which could cause any
representation or warranty of the Stockholders to be untrue or result in a
breach of any covenant made by the Stockholders in this Agreement.
(b) Except as described in Section 5.01(b) of the Disclosure
Schedule, the Stockholders covenant and agree that, prior to the Closing,
without the prior written consent of NSAP, none of the Acquired Entities will do
any of the things enumerated in the second sentence of Section 3.10 (including,
without limitation, clauses (i) through (xviii) thereof).
(c) For the period from the date hereof through the time of the
Closing, the Stockholders covenant and agree to cause the Acquired Entities to
maintain the level, mix and
quality of the Inventories consistent with those generally maintained by the
Acquired Entities prior to the date hereof.
SECTION 5.02. Confidentiality. The Stockholders agree to, and
shall cause their agents, representatives and Affiliates to: (i) treat and hold
as confidential (and not disclose or provide access to any Person to) all
information relating to trade secrets (including, but not limited to,
information relating to the Nu Skin Global Compensation Plan), processes, patent
and trademark applications, product development, price, Distributor and supplier
lists, pricing and marketing plans, policies and strategies, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
Acquired Entities, (ii) in the event that the Stockholders or any such agent,
representative, Affiliate, employee, officer or director becomes legally
compelled to disclose any such information, provide NSAP with prompt written
notice of such requirement so that NSAP or the Acquired Entities may seek a
protective order or other remedy or waive compliance with this Section 5.02 and
(iii) in the event that such protective order or other remedy is not obtained,
or NSAP waives compliance with this Section 5.02 furnish only that portion of
such confidential information which is legally required to be provided and
exercise its best efforts to obtain assurances that confidential treatment will
be accorded such information. The Stockholders agree and acknowledge that
remedies at law for any breach of their obligations under this Section 5.02 are
inadequate and that in addition thereto NSAP shall be entitled to seek equitable
relief, including injunction and specific performance, in the event of any such
breach.
SECTION 5.03. Regulatory and Other Authorizations; Notices and
Consents. (a) The Stockholders shall use their best efforts to obtain (or cause
the Acquired Entities to obtain) all authorizations, consents, orders and
approvals of all Governmental Authorities and officials that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with NSAP in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. Each party hereto agrees to make an appropriate filing, if necessary,
pursuant to the HSR Act with respect to the transactions contemplated by this
Agreement within five Business Days of the date hereof and to supply as promptly
as practicable to the appropriate Governmental Authorities any additional
information and documentary material that may be requested pursuant to the HSR
Act.
(b) The Stockholders shall or shall cause the Acquired Entities
to give promptly such notices to third parties and use their best efforts to
obtain such third party consents and estoppel certificates as NSAP may in its
sole and absolute discretion deem necessary or desirable in connection with the
transactions contemplated by this Agreement.
(c) NSAP shall cooperate and use all reasonable efforts to assist
the Stockholders in giving such notices and obtaining such consents and estoppel
certificates; provided, however, that NSAP shall have no obligation to give any
guarantee or other consideration
of any nature in connection with any such notice, consent or estoppel
certificate or to consent to any change in the terms of any agreement or
arrangement which NSAP in its sole and absolute discretion may deem adverse to
the interests of NSAP or the Acquired Entities.
(d) The Stockholders know of no reason why all the consents,
approvals and authorizations necessary for the consummation of the transactions
contemplated hereby will not be received.
(e) The Stockholders and NSAP agree that, in the event any
consent, approval or authorization necessary or desirable to preserve for the
Acquired Entities any right or benefit under any lease, license, contract,
commitment or other agreement or arrangement to which any Acquired Entity is a
party is not obtained prior to the Closing, the Stockholders will, subsequent to
the Closing, cooperate with NSAP and such Acquired Entity in attempting to
obtain such consent, approval or authorization as promptly thereafter as
practicable. If such consent, approval or authorization cannot be obtained, the
Stockholders shall use their best efforts to provide the Acquired Entity with
the rights and benefits of the affected lease, license, contract, commitment or
other agreement or arrangement for the term of such lease, license, contract or
other agreement or arrangement, and, if the Stockholders provide such rights and
benefits, the Acquired Entity shall assume the obligations and burdens
thereunder.
SECTION 5.04. Use of Intellectual Property. The Stockholders
acknowledge that from and after the Closing, the names "Nu Skin", "Interior
Design Nutritional", "IDN", all product names incorporating or relying on the
foregoing names and all similar or related names, marks and logos (all of such
names, marks and logos being the "Nu Skin Names") shall be owned by NSI, that
neither the Stockholders nor any of their Affiliates shall have any rights in
the Nu Skin Names, except for those provided in the trademark/trade name
licensing agreements currently in place between NSI and Nu Skin Guatemala, Inc.,
Nu Skin Guatemala, S.A., Nu Skin Mexico, Inc., Nu Skin Mexico S.A. de C.V., Nu
Skin Puerto Rico, Inc., Nu Skin Canada, Inc. and Nu Skin USA, and that neither
the Stockholders nor any of its Affiliates will contest the ownership or
validity of any rights of NSAP or the Acquired Entities in or to the Nu Skin
Names.
SECTION 5.05. Release of Indemnity Obligations. The Stockholders
covenant and agree, on or prior to the Closing, to execute and deliver to the
Acquired Entities, for the benefit of the Acquired Entities, a general release
and discharge, substantially in the form of Exhibit C attached hereto, releasing
and discharging the Acquired Entities from any and all obligations, excluding
those set forth in Section 5.05 of the Disclosure Schedule, to indemnify the
Stockholders or otherwise hold it harmless pursuant to any agreement or other
arrangement entered into prior to the Closing.
SECTION 5.06. No Actions Inconsistent with Tax Free Status. NSAP
and the Stockholders will not take any action with respect to the capital stock,
assets or liabilities of
the Acquired Entities or with respect to the Series A Preferred Shares that
would cause the Stock Acquisitions to fail to qualify as exchanges under Section
351 of the Code. NSAP agrees to deliver to Price Waterhouse L.L.P. effective as
of the Closing Date, a certificate substantially in compliance with IRS
published guidelines advance ruling guidelines, with customary exceptions and
modifications thereto, to enable such firm to deliver the opinion contemplated
by Section 7.01 hereof.
SECTION 5.07. Negotiations to Acquire Retained Entities. After
the Closing, if NSAP's Board of Directors decides that it is interested in
acquiring the Retained Entities, the parties agree to engage in good faith
negotiations to determine a fair purchase price for the Retained Entities. If
the parties are unable to agree upon the purchase price for the Retained
Entities, neither party will be obligated to consummate the sale.
SECTION 5.08. Modification of Stockholders' Salaries. The
Stockholders agree that from and after the Closing, the salaries received by the
Stockholders for services rendered by them to the Acquired Entities will be (i)
modified to be commensurate with their duties, (ii) in the aggregate of a size
commensurate with those previously agreed to by the parties to this Agreement
and (iii) equivalent to those paid by public companies of similar size, and
operating in the same industry, as NSAP and the Acquired Entities.
SECTION 5.09. Intercompany Agreements. Prior to the Closing the
Stockholders shall cause NSI to enter into new intercompany agreements
(including distribution agreements, trademark/trade name license agreements,
licensing and sales agreements and management services agreements) with the
Retained Entities on terms and conditions substantially similar to those
currently in place between NSI and the subsidiaries of NSAP.
SECTION 5.10. Further Action. Each of the parties hereto shall
use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 5.11. Non-Competition. (a) Except as contemplated by this
Agreement and the Intercompany Agreements and except as set forth in Section
5.11 of the Disclosure Schedule, for a period of five (5) years after the
Closing (the "Restricted Period"), the Stockholders shall not engage, directly
or indirectly, in any business anywhere in the world that is engaged in
multi-level marketing or direct sales or manufactures, produces or supplies
products of the kind manufactured, produced or supplied by the Company or the
Acquired Entities as of the Closing Date or, without the prior written consent
of the Company, directly or indirectly, own an interest in, manage, operate,
join, control, lend money or render financial or other assistance to or
participate in or be connected with, as an officer, employee, partner,
stockholder, consultant or
otherwise, any Person that competes with the Company or the Acquired Entities
for distributors to engage in multi-level marketing or direct sales or in
manufacturing, producing or supplying products of the kind manufactured,
produced or supplied by the Company or the Acquired Entities as of the Closing;
provided, however, that, for the purposes of this Section 5.11, ownership of
securities of any competitor which are listed on any national securities
exchange or traded actively in the national over-the-counter market shall not be
deemed to be in violation of this Section 5.11 so long as the Person owning such
securities has no other connection or relationship with such competitor.
(b) As a separate and independent covenant, the Stockholders
agree with the Company that, for a period of five (5) years following the
Closing, except as contemplated by this Agreement and the Intercompany
Agreements, the Stockholders will not in any way, directly or indirectly, for
the purpose of conducting or engaging in any multi-level marketing or direct
sales business or business that manufactures, produces or supplies products of
the kind manufactured, produced or supplied by the Company or the Acquired
Entities as of the Closing, call upon, solicit, advise or otherwise do, or
attempt to do, business with any Distributors of the Company or the Acquired
Entities, or take away or interfere or attempt to interfere with any custom,
trade, business or patronage of the Company or the Acquired Entities, or
interfere with or attempt to interfere with any officers, assistant manager
level or higher employees, representatives or agents of the Company or the
Acquired Entities, or induce or attempt to induce any of them to leave the
employ of the Company or the Acquired Entities or violate the terms of their
contracts, or any employment arrangements, with the Company or the Acquired
Entities.
(c) The Restricted Period shall be extended by the length of any
period during which the Stockholders are in breach of the terms of this Section
5.11.
(d) The Stockholders acknowledge that the covenants of the
Stockholders set forth in this Section 5.11 are an essential element of this
Agreement and that, but for the agreement of the Stockholders to comply with
these covenants, the Company would not have entered into this Agreement. The
Stockholders acknowledge that this Section 5.11 constitutes an independent
covenant and shall not be affected by performance or nonperformance of any other
provision of this Agreement by the Company. The Stockholders have independently
consulted with their counsel and after such consultation agree that the
covenants set forth in this Section 5.11 are reasonable and proper.
SECTION 5.12. Continuation of Business During Contingent Payment
Years. NSAP covenants and agrees that during the Contingent Payment Years,
except as otherwise agreed by the Stockholders' Representative, it will not
institute or take actions that prevent NSI from conducting and expanding
business in the ordinary course, consistent with NSI's past practices, if it
reasonably believes such actions would have a Material Adverse Effect on NSI's
ability to achieve the cumulative EBITDA numbers that would permit the payment
of the Maximum Contingent
Payment Amount; provided, however, nothing contained in this Section 5.12 shall
prevent the officers and directors of the Company from taking any action which
they reasonably believe to be necessary in order to operate within the confines
of the Business Judgement Rule as the same may be in effect from time to time.
SECTION 5.13. Retention of Sufficient NSAP Common Stock. In the
event that the Series A Preferred Shares are converted into NSAP Common Stock in
accordance with the Certificate of Designation, the Stockholders covenant and
agree to retain title to and interest in a sufficient number of shares of NSAP
Common Stock to satisfy their redemption obligations pursuant to Section
2.09(b).
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Continuation of Benefits. The parties hereto
agree that (i) to the extent permitted by Law, all employees of the Acquired
Entities shall continue to participate after the Closing in the same Plans in
which such employees participated prior to the Closing and (ii) the parties
hereto agree to cooperate in taking all necessary actions to effect such
continuity.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Stockholders. The
obligations of the Stockholders to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of NSAP contained in this Agreement shall have
been true and correct when made and shall be true and correct in all material
respects as of the Closing, with the same force and effect as if made as of the
Closing Date, other than such representations and warranties as are made as of
another date, which shall be true and correct as of such date (provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
7.01(a) has been satisfied with respect to such portion of such representation
or warranty, such portion of such representation or warranty as so qualified
must be true and correct in all respects), and the covenants and agreements
contained in this Agreement to be complied with by NSAP on or before the Closing
shall have been complied with in all material
respects, and the Stockholders shall have received a certificate from NSAP to
such effect signed by a duly authorized officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Nu Skin Shares contemplated hereby
shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against any of the
Stockholders, the Acquired Entities or NSAP, seeking to restrain or materially
and adversely alter the transactions contemplated by this Agreement which, in
the reasonable, good faith determination of the Stockholders' Representative, is
likely to render it impossible or unlawful to consummate such transactions or
which could have a Material Adverse Effect or otherwise render inadvisable, in
the reasonable, good faith determination of the Stockholders' Representative,
the consummation of the transactions contemplated hereby; provided, however,
that the provisions of this Section 7.01(c) shall not apply if the Stockholders
have directly or indirectly solicited or encouraged any such Action;
(d) Tax Opinion. The Stockholders, Nu Skin USA and NSAP shall
have received a tax opinion of Price Waterhouse L.L.P. to the effect that the
transactions contemplated by the NSI Contribution and Distribution Agreement
constitute a reorganization under Sections 368(a)(1)(D) and 355 of the Code and
the transactions contemplated by this Agreement shall qualify, in part, as tax
free exchanges under Section 351 of the Code; and
(e) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which, individually or in the
aggregate, have, or could have, a Material Adverse Effect.
SECTION 7.02. Conditions to Obligations of NSAP. The obligations
of NSAP to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Stockholders contained in this Agreement
shall have been true and correct when made and shall be true and correct in all
material respects as of the Closing, with the same force and effect as if made
as of the Closing Date, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 7.02(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by the Stockholders
on or before the Closing shall have been complied with in
all material respects, and NSAP shall have received a certificate of the
Stockholders to such effect signed by a duly authorized representative of such
individuals;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Nu Skin Shares contemplated hereby
shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Stockholders, the Acquired Entities or NSAP, seeking to restrain or
materially and adversely alter the transactions contemplated by this Agreement
which NSAP believes, pursuant to its reasonable, good faith determination, is
likely to render it impossible or unlawful to consummate such transactions or
which could have a Material Adverse Effect or otherwise render inadvisable, in
the reasonable, good faith determination of NSAP, the consummation of the
transactions contemplated by this Agreement; provided, however, that the
provisions of this Section 7.02(c) shall not apply if NSAP has directly or
indirectly solicited or encouraged any such Action;
(d) Consents and Approvals. NSAP and the Stockholders shall have
received, each in form and substance satisfactory to NSAP in its sole and
absolute discretion, all authorizations, consents, orders and approvals of all
Governmental Authorities and officials and all third party consents and estoppel
certificates which NSAP in its sole and absolute discretion deems necessary or
desirable for the consummation of the transactions contemplated by this
Agreement;
(e) Good Standing; Qualification to Do Business. NSAP shall have
received good standing certificates (and the equivalent foreign governmental
certification) for the Acquired Entities from the secretary of state (or
equivalent domestic or foreign governmental office or agency) of each
jurisdiction in which each such entity is incorporated or organized and from the
secretary of state or equivalent authority in each other jurisdiction in which
the properties owned or leased by any of the Acquired Entities, or the operation
of its business in such jurisdiction, requires the Acquired Entities to qualify
to do business as a foreign corporation;
(f) Release of Indemnity Obligations. NSAP shall have received
the general release and discharge from the Stockholders referred to in Section
5.05;
(g) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which, individually or in the
aggregate, have, or could have, a Material Adverse Effect;
(h) NSI Tax Sharing and Indemnification Agreement, NSI Indemnity
Agreement. NSAP shall have received a true and correct copy of the NSI Tax
Sharing and Indemnification
Agreement and NSI Indemnity Agreement entered into in connection with the NSI
Contribution and Distribution Agreement;
(i) Option Agreement to Purchase Big Planet. NSI shall have
entered into an option agreement pursuant to which NSI shall have been granted
the option to acquire Big Planet, Inc. (the "Big Planet Option") at an option
price based upon the fair market value of Big Planet, Inc. at the time of
purchase less ten percent. The Big Planet Option shall become exercisable at any
time during the period commencing six months after Big Planet begins to provide
products and/or services and terminate two years thereafter;
(j) Stockholders' Escrow Agreement. NSAP shall have received a
true and correct copy of the Stockholders' Escrow Agreement entered into
pursuant to Section 8.04 of this Agreement, substantially in the form of Exhibit
D attached hereto.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. The
representations and warranties of the Stockholders contained in this Agreement,
the indemnification provisions of this Article VIII and all statements contained
in this Agreement, the Exhibits to this Agreement, the Disclosure Schedule and
any certificate, Financial Statement, Interim Financial Statement or report or
other document delivered pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement (collectively, the "Acquisition
Documents"), shall survive the Closing until the fourth anniversary of the
Closing Date; provided, however, that the representations and warranties and
indemnification provisions relating to tax matters shall survive as provided in
Section 10.05. Neither the period of survival nor the liability of the
Stockholders with respect to the Stockholders' representations and warranties
shall be reduced by any investigation made at any time by or on behalf of NSAP.
If written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by NSAP to the Stockholders, then the
relevant representations and warranties shall survive as to such claim, until
such claim has been finally resolved.
SECTION 8.02. Indemnification by the Stockholders. (a) NSAP, its
Affiliates and their successors and assigns, and the officers, directors,
employees and agents of NSAP, its Affiliates and their successors and assigns
(each an "Indemnified Party") shall be indemnified and held harmless by the
Stockholders for any and all Liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by them (including, without limitation, any Action brought or otherwise
initiated by any of them) (hereinafter a "Loss"), arising out of or resulting
from:
(i) the breach of any representation or warranty made by the
Stockholders contained in the Acquisition Documents; or
(ii) the breach of any covenant or agreement by the Stockholders
contained in the Acquisition Documents; or
(iii) Liabilities of the Acquired Entities not reflected on the
Reference Balance Sheet, whether arising before or after the Closing
Date, arising from or relating to the ownership or actions or inactions
of the Acquired Entities or the conduct of their respective businesses
prior to the Closing; or
(iv) any and all Losses suffered or incurred by NSAP or the
Acquired Entities by reason of or in connection with any claim or cause
of action of any third party to the extent arising out of any action,
inaction, event, condition, liability or obligation of the Stockholders
occurring or existing prior to the Closing;
(v) any and all Losses suffered or incurred by NSAP as a result
of the failure of the Stockholders or the Acquired Companies to obtain
prior to the Closing the consent of all third-parties who are parties to
contracts with the Acquired Companies, the terms of which such contracts
require the consent of such third-parties to the transactions
contemplated by this Agreement; or
(vi) (A) any and all Remedial Actions after the Closing relating
to any Release of Hazardous Materials into the Environment or on or
about the Real Property prior to the Closing to the extent any such
Remedial Action is required under any Environmental Law or by any
Governmental Authority or is necessary to prevent or xxxxx a significant
risk to human health or the environment; (B) any and all Environmental
Claims arising at any time that relate to the business or the operation
of the Acquired Entities prior to the Closing; or (C) any and all
noncompliances with or violations of any applicable Environmental Law or
Environmental Permit by the Acquired Entities prior to the Closing.
(b) Except for Losses arising out of a breach of the
representations contained in Section 3.03, no claim may be made against the
Stockholders for indemnification pursuant to this Section 8.02 with respect to
an individual claim of liability or damage, unless, and then only to the extent
that, the aggregate of all such Losses of the Indemnified Parties exceeds
$1,000,000 (the "Designated Amount"). The indemnification obligations under this
Section 8.02 (excluding those arising out of a breach of the representations
contained in Section 3.03) shall be effective only until (i) the dollar amount
paid in respect of Losses indemnified against under this Section 8.02 aggregates
to an amount equal to $150,000,000, or (ii) the indemnification assets
identified in Section 8.04 are exhausted, whichever occurs first. To the extent
that the Stockholders' undertakings set forth in this Section 8.02 may be
unenforceable, the Stockholders shall
contribute the maximum amount that they are permitted to contribute under
applicable law to the payment and satisfaction of all Losses incurred by NSAP or
the Acquired Entities.
(c) An Indemnified Party shall give the Stockholders notice of
any matter which an Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. To the extent an Indemnified Party is making a claim against the
Preferred Shares or NSAP Common Stock held pursuant to the Escrow Agreement, the
Indemnified Party shall provide the notice contemplated by Section 6(b) of the
Escrow Agreement. The obligations and Liabilities of the Stockholders under this
Article VIII with respect to Losses arising from claims of any third party which
are subject to the indemnification provided for in this Article VIII ("Third
Party Claims") shall be governed by and contingent upon the following additional
terms and conditions: if an Indemnified Party shall receive notice of any Third
Party Claim, the Indemnified Party shall give the Stockholders notice of such
Third Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
release the Stockholders from any of its obligations under this Article VIII
except to the extent the Stockholders are materially prejudiced by such failure
and shall not relieve the Stockholders from any other obligation or Liability
that they may have to any Indemnified Party otherwise than under this Article
VIII. If the Stockholders acknowledge in writing their obligation to indemnify
the Indemnified Party hereunder against any Losses that may result from such
Third Party Claim, then the Stockholders shall be entitled to assume and control
the defense of such Third Party Claim at their expense and through counsel of
their choice if they give notice of their intention to do so to the Indemnified
Party within five days of the receipt of such notice from the Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
Indemnified Party, in its sole and absolute discretion, for the same counsel to
represent both the Indemnified Party and the Stockholders, then the Indemnified
Party shall be entitled to retain its own counsel, in each jurisdiction for
which the Indemnified Party determines counsel is required, at the expense of
the Stockholders. In the event the Stockholders exercise the right to undertake
any such defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Stockholders in such defense and make
available to the Stockholders, at the Stockholders' expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Stockholders. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, the Stockholders shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the Stockholders'
expense, all such witnesses, records, materials and information in the
Stockholders' possession or under the Stockholders' control relating thereto as
is reasonably required by the Indemnified Party. No such Third Party Claim may
be settled by the Stockholders without the prior written consent of the
Indemnified Party.
SECTION 8.03. Tax Matters Anything in this Article VIII (except
for the specific reference to Tax matters in Section 8.01) to the contrary
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by Article X.
SECTION 8.04. Satisfaction of Indemnification Claims. Any amounts
owed by the Stockholders to an Indemnified Party pursuant to this Article VIII
will be paid by the Stockholders, on a joint and several basis (except for
liabilities arising from a violation of the representations contained in Section
3.03 or the covenants contained in Section 5.11, which such liabilities shall be
borne by each Stockholder individually), from the following assets in the
following order: (i) by reducing the Contingent Payments (if any) payable to the
Stockholders under the terms of this Agreement, (ii) by payments made by the
Retained Entities to NSAP and (iii) by the Stockholders' remittance to NSAP of
NSAP Common Stock or the Series A Preferred Shares (valued at a price per share
equal to the average of the Closing price per share of NSAP Common Stock on the
New York Stock Exchange for the 20 consecutive trading days ending 5 days prior
to the date of such remittance) previously issued to them under this Agreement
or acquired otherwise and held pursuant to the Stockholders' Escrow Agreement
(as defined); provided, however, that all claims shall be satisfied against
these assets in the order in which they are enumerated above in that no
Indemnified Party may make a claim against any of the assets enumerated in
clause (ii) or (iii) until the assets enumerated in the preceding clause or
clauses, as the case may be, shall have been exhausted. To satisfy any amounts
due under subsection (iii) of the immediately preceding sentence, the
Stockholders hereby agree to enter into an escrow agreement (the "Stockholders'
Escrow Agreement") with NSAP pursuant to which the Stockholders will
collectively, according to their percentage ownership interest in the NSI
Shares, place an aggregate amount of NSAP Common Stock equal to U.S. $70,000,000
(to be calculated according the Average NSAP Common Stock Price at Closing) into
an escrow account and that such NSAP Common Stock may not be sold or otherwise
transferred by the Stockholders prior to the expiration of the indemnification
provisions under Article VIII of this Agreement.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by NSAP if, between the date hereof and the time scheduled
for the Closing: (i) an event or condition occurs that has resulted in or that
may be expected to result in a Material Adverse Effect, (ii) any material
representation or warranty of the Stockholders contained in this Agreement shall
not have been true and correct when made, (iii) the Stockholders shall not have
complied with any material covenant or agreement to be complied with by it and
contained in this Agreement; or (iv) any of the Stockholders or the Acquired
Entities make a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Stockholders or the Acquired Entities seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding
up or reorganization, arrangement, adjustment, protection, relief or composition
of their debts under any Law relating to bankruptcy, insolvency or
reorganization; or
(b) by the Stockholders if, between the date hereof and the time
scheduled for the Closing: (i) an event or condition occurs that has resulted in
or that may be expected to result in a Material Adverse Effect, (ii) any
material representation or warranty of NSAP contained in this Agreement shall
not have been true and correct when made, (iii) NSAP shall not have complied
with any material covenant or agreement to be complied with by it and contained
in this Agreement; or (iv) NSAP makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against NSAP seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or
(c) by either the Stockholders or NSAP if the Closing shall not
have occurred by June 30, 1998; provided, however, that the right to terminate
this Agreement under this Section 9.01(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur on or
prior to such date; or
(d) by either NSAP or the Stockholders in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or
(e) by the mutual written consent of the Stockholders and NSAP.
SECTION 9.02. Effect of Termination. In the event of termination
of this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except as set forth in Sections 5.02, 9.02(b) and 10.01.
SECTION 9.03. Waiver. Either NSAP or the Stockholders, through
the Stockholders' Representative, may (a) extend the time for the performance of
any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered by the other party pursuant hereto or (c)
waive compliance with any of the agreements or conditions of the other party
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party to be bound thereby. Any waiver
of any term or condition shall not be construed as a waiver of any subsequent
breach or a subsequent waiver of the same term or condition, or a waiver of any
other term or condition, of this Agreement. The failure of any party to assert
any of its rights hereunder shall not constitute a waiver of any of such rights.
ARTICLE X
TAX MATTERS
SECTION 10.01. Indemnity. (a) The Stockholders agree to indemnify
and hold harmless NSAP and the Acquired Entities against the following Taxes
and, except as otherwise provided in Section 10.02, against any loss, damage,
liability or expense, including reasonable fees for attorneys and other outside
consultants, incurred in contesting or otherwise in connection with any such
Taxes: (i) Taxes imposed on the Acquired Entities with respect to taxable
periods of such Person ending on or before the Closing Date; (ii) with respect
to taxable periods beginning before the Closing Date and ending after the
Closing Date, Taxes imposed on the Acquired Entities which are allocable,
pursuant to Section 10.01(b), to the portion of such period ending on the
Closing Date; (iii) Taxes imposed on any member of any affiliated group with
which any of the Acquired Entities file or have filed a Return on a consolidated
or combined basis for a taxable period ending on or before the Closing Date and
(iv) Taxes imposed on NSAP or the Acquired Entities as a result of any breach of
warranty or misrepresentation under Section 3.22. NSAP shall be responsible for
(and will indemnify and hold the Stockholders harmless from) Taxes and
associated expenses not allocated to the Stockholders pursuant to the first
sentence hereof.
(b) In the case of Taxes that are payable with respect to a
taxable period that begins before the Closing Date and ends after the Closing
Date, the portion of any such Tax that is allocable to the portion of the period
ending on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with any
sale or other transfer or assignment of property (real or personal,
tangible or intangible) (other than conveyances pursuant to this
Agreement, as provided under Section 10.04), deemed equal to the amount
which would be payable if the taxable year ended with the Closing Date;
and
(ii) in the case of Taxes imposed on a periodic basis with
respect to the assets of the Acquired Entities, or otherwise measured by
the level of any item, deemed to be the amount of such Taxes for the
entire period (or, in the case of such Taxes determined on an arrears
basis, the amount of such Taxes for the immediately preceding period),
multiplied by a fraction the numerator of which is the number of
calendar days in the period ending on the Closing Date and the
denominator of which is the number of calendar days in the entire
period.
SECTION 10.02. Contests. (a) After the Closing, NSAP shall
promptly notify the Stockholders in writing of any written notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding with
respect to Taxes of NSAP or of any of the Acquired Entities which, if determined
adversely to the taxpayer, would be grounds for indemnification under this
Article X; provided, however, that a failure to give such notice will not affect
NSAP's right to indemnification under this Article X except to the extent, if
any, that, but for such failure, the Stockholders could have avoided all or a
portion of the Tax liability in question.
(b) In the case of an audit or administrative or judicial
proceeding with respect to Taxes that relates to periods ending on or before the
Closing Date, provided that the Stockholders acknowledge in writing their
liability under this Agreement to hold NSAP and the Acquired Entity harmless
against the full amount of any adjustment which may be made as a result of such
audit or proceeding that relates to periods ending on or before the Closing Date
(or, in the case of any taxable year that includes the Closing Date, against an
adjustment allocable under Section 10.01(b) to the portion of such year ending
on or before the Closing Date), the Stockholders shall have the right at their
expense to participate in and control the conduct of such audit or proceeding
but only to the extent that such audit or proceeding relates solely to a
potential adjustment for which the Stockholders have acknowledged their
liability; NSAP also may participate in any such audit or proceeding and, if the
Stockholders do not assume the defense of any such audit or proceeding, NSAP may
defend the same in such manner as it may deem appropriate, including, but not
limited to, settling such audit or proceeding after giving five days' prior
written notice to the Stockholders setting forth the terms and conditions of
settlement. In the event that issues relating to a potential adjustment for
which the Stockholders have acknowledged their liability are required to be
dealt with in the same proceeding as separate issues relating to a potential
adjustment for which NSAP would be liable, NSAP shall have the right, at its
expense, to control the audit or proceeding with respect to the latter issues.
(c) With respect to issues relating to a potential adjustment for
which both the Stockholders (as evidenced by its acknowledgment under this
Section 10.02) and NSAP or the Acquired Entities could be liable, (i) each party
may participate in the audit or proceeding, and (ii) the audit or proceeding
shall be controlled by that party which would bear the burden of the greater
portion of the sum of the adjustment and any corresponding adjustments that may
reasonably be anticipated for future Tax periods. The principle set forth in the
immediately preceding sentence shall govern also for purposes of deciding any
issue that must be decided jointly (including, without limitation, choice of
judicial forum) in situations in which separate issues are otherwise controlled
under this Article X by NSAP and the Stockholders.
(d) Neither NSAP nor the Stockholders shall enter into any
compromise or agree to settle any claim pursuant to any Tax audit or proceeding
which would adversely affect the other party for such year or a subsequent year
without the written consent of the other party, which consent may not be
unreasonably withheld. NSAP and the Stockholders agree to cooperate, and NSAP
agrees to cause the Acquired Entities to cooperate, in the defense against or
compromise of any claim in any audit or proceeding.
SECTION 10.03. Time of Payment. Payment by the Stockholders of
any amounts due under this Article X in respect of Taxes shall be made (i) at
least three Business Days before the due date of the applicable estimated or
final Return required to be filed by NSAP on which is required to be reported
income for a period ending after the Closing Date for which the Stockholders are
responsible under Sections 10.01(a) and 10.01(b) without regard to whether the
Return shows overall net income or loss for such period, and (ii) within three
Business Days following an agreement between the Stockholders and NSAP that an
indemnity amount is payable, an assessment of a Tax by a taxing authority, or a
"determination" as defined in Section 1313(a) of the Code. If liability under
this Article X is in respect of costs or expenses other than Taxes, payment by
the Stockholders of any amounts due under this Article X shall be made within
five Business Days after the date when the Stockholders have been notified by
NSAP that the Stockholders have a liability for a determinable amount under this
Article X and are provided with calculations or other materials supporting such
liability.
SECTION 10.04. Conveyance Taxes. The Stockholders shall be liable
for and shall hold NSAP harmless against 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 transactions contemplated by this
Agreement, and shall file such applications and documents as shall permit any
such Tax to be assessed and paid on or prior to the Closing Date in accordance
with any available pre-sale filing procedure. NSAP shall execute and deliver all
instruments and certificates necessary to enable the Stockholders to comply with
the foregoing.
SECTION 10.05. Tax Benefits. NSAP and the Acquired Entities
shall, upon actual realization, refund to the Stockholders any Tax benefit which
they realize for a period or portion thereof beginning after the Closing Date (a
"Post-Closing Date Tax Benefit") that arose in connection with any underlying
adjustment that resulted in a payment by the Stockholders to, or on behalf of,
NSAP or the Acquired Entities under Section 10.01 or a payment made by the
Stockholders to any Tax authority (such as a timing adjustment resulting in a
Tax deduction for the Acquired Entities for a period after the Closing Date),
provided that such payment shall not exceed the related payment actually made by
the Stockholders. A Post-Closing Date Tax Benefit will be considered to be
actually realized for purposes of this Section 10.05 at the time that it is
reflected on a Return of NSAP or the Acquired Entities, provided, however, that
if NSAP and the Acquired Entities make a payment to the Stockholders for such a
Post-Closing Date Tax Benefit that is disallowed or reduced (or NSAP or the
Acquired Entities do not actually realize such Post-Closing Date Tax Benefit),
then the Stockholders shall refund such payment to NSAP and the Acquired
Entities plus interest at the rate for Tax underpayments prescribed in Section
6621(a)(2) of the Code and similar provision under state or local law.
SECTION 10.06. Miscellaneous. (a) The Stockholders and NSAP agree
to treat all payments made by either of them to or for the benefit of the other
(including any payments to the Acquired Entities) under this Article X, under
other indemnity provisions of this Agreement and for any misrepresentations or
breaches of warranties or covenants as adjustments to the Purchase Price or as
capital contributions for Tax purposes and that such treatment shall govern for
purposes hereof except to the extent that the Laws of a particular jurisdiction
provide otherwise, in which case such payments shall be made in an amount
sufficient to indemnify the relevant party on an after-Tax basis.
(b) Notwithstanding any provision in this Agreement to the
contrary, the obligations of the Stockholders to indemnify and hold harmless
NSAP and the Acquired Entities pursuant to this Article X, and the
representations and warranties contained in Section 3.22, shall terminate at the
close of business on the 120th day following the expiration of the applicable
statute of limitations with respect to the Tax liabilities in question (giving
effect to any waiver, mitigation or extension thereof).
(c) From and after the date of this Agreement, the Stockholders
shall not without the prior written consent of NSAP (which may, in its sole and
absolute discretion, withhold such consent) make, or cause or permit to be made,
any Tax election that would affect the Acquired Entities.
(d) NSAP and the Stockholders shall each be entitled to recover
professional fees and related costs that they may reasonably incur to enforce
the provisions of this Article X.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
SECTION 11.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 11.02):
(a) if to the Stockholders:
to the Stockholders' Representative
Nu Skin International, Inc.
Xxx Xx Xxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxx, Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx and Xxxxx X. Halls
with a copy to:
Holland & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000-0000
Telecopy: (000) 000-0000
Attention: P. Xxxxxxxxx Xxxxxxxx, Esq.
(b) if to NSAP:
Nu Skin Asia Pacific, Inc.
Xxx Xx Xxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxx, Xxxx 00000
Telecopy: (000) 000-0000
Attention: M. Xxxxxx Xxxx, Esq.
with a copy to:
Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopy: 000-000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Notices given to the Stockholders' Representative pursuant to
this Section 11.02 shall de deemed to be the delivery of notice to each of the
Stockholders.
SECTION 11.03. Public Announcements. Neither the Stockholders nor
the Acquired Entities shall make, or cause to be made, any press release or
public announcement in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news
media without the prior consent of NSAP and the parties shall cooperate as to
the timing and contents of any such press release or public announcement.
SECTION 11.04. Headings. The descriptive headings contained in
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
between the Stockholders and NSAP with respect to the subject matter hereof.
SECTION 11.07. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
Stockholders and NSAP (which consent may be granted or withheld in the sole
discretion of the Stockholders or NSAP); provided, however, that NSAP may assign
this Agreement to an Affiliate of NSAP without the consent of the Stockholders;
provided further, however that no such assignment shall release NSAP from its
payment and performance obligations herewith.
SECTION 11.08. No Third Party Beneficiaries. Except for the
provisions of Article IX relating to Indemnified Parties, this Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of, a
majority in interest of the Stockholders and NSAP.
SECTION 11.10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF UTAH, EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY
LAW) ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF UTAH.
SECTION 11.11. Counterparts. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 11.12. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
IN WITNESS WHEREOF, the Stockholders and NSAP have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
STOCKHOLDERS:
Xxxxx X. Xxxxx
Xxxxx Xxx Xxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxx Xxxxxx
Xxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxx
Xxxxxx X. Xxxxx
Xxxx X. Xxxxx
Xxxxx X. Halls
NU SKIN ASIA PACIFIC, INC.
By:
Name:
Title:
SCHEDULE A
EXHIBIT A
FORM OF SERIES A PREFERRED SHARE CERTIFICATE
EXHIBIT B
FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT C
FORM OF GENERAL RELEASE AND DISCHARGE
EXHIBIT D
FORM OF STOCKHOLDERS' ESCROW AGREEMENT
EXECUTION COPY
STOCK ACQUISITION AGREEMENT
Between
NU SKIN ASIA PACIFIC, INC.
and
EACH OF THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF
Dated as of February 27, 1998
DISCLOSURE SCHEDULE
EXHIBIT B
FORM OF GENERAL RELEASE AND DISCHARGE
EXHIBIT D
FORM OF STOCKHOLDERS' ESCROW AGREEMENT
Page
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms...........................................3
ARTICLE II
ACQUISITION AND TRANSFER
SECTION 2.01. Acquisition and Transfer of Nu Skin Shares.....................13
SECTION 2.02. Consideration for Transfer of Nu Skin Shares...................13
SECTION 2.03. Calculation of Aggregate Number of Series A Preferred Shares...14
SECTION 2.04. Contingent Payments............................................14
SECTION 2.05. Closing........................................................18
SECTION 2.06. Closing Deliveries by the Stockholders.........................18
SECTION 2.07. Closing Deliveries by NSAP.....................................18
SECTION 2.08. Adjustment of Consideration for Nu Skin Shares.................19
SECTION 2.09. Conversion and Optional Redemption of Series A
Preferred Stock/Common Stock..........................21
SECTION 2.10. Tax Free Transaction...........................................22
SECTION 2.11. Termination of "S" Corporation Status..........................22
SECTION 2.12. Appointment of Stockholders' Representative....................23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
SECTION 3.01. Organization, Authority and Qualification of the Acquired
Entities; Execution and Delivery..................24
SECTION 3.02. Due Execution and Delivery by the Stockholders.................24
SECTION 3.03. Capital Stock of Acquired Entities; Stockholders' Ownership
of Nu Skin Shares.................................24
SECTION 3.04. Corporate Books and Records....................................25
SECTION 3.05. No Conflict....................................................26
SECTION 3.06. Governmental Consents and Approvals............................26
SECTION 3.07. Financial Information, Books and Records, Projections
and Operating Data................................26
SECTION 3.08. No Undisclosed Liabilities.....................................27
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EXHIBIT B
FORM OF GENERAL RELEASE AND DISCHARGE
EXHIBIT D
FORM OF STOCKHOLDERS' ESCROW AGREEMENT
Page
SECTION 3.09. Acquired Assets................................................27
SECTION 3.10. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions.............................27
SECTION 3.11. Litigation.....................................................29
SECTION 3.12 Compliance with Laws...........................................30
SECTION 3.13. Environmental and Safety Matters...............................30
SECTION 3.14. Material Contracts.............................................30
SECTION 3.15. Intellectual Property..........................................32
SECTION 3.16. Real Property..................................................34
SECTION 3.17. Tangible Personal Property.....................................36
SECTION 3.18. Assets.........................................................37
SECTION 3.19. Suppliers......................................................37
SECTION 3.20. Employee Benefit Matters.......................................38
SECTION 3.21. Labor Matters..................................................40
SECTION 3.22. Taxes..........................................................40
SECTION 3.23. Insurance......................................................42
SECTION 3.24. Nu Skin USA Intercompany Agreements............................42
SECTION 3.25. Full Disclosure................................................42
SECTION 3.26. Brokers........................................................42
SECTION 3.27. Securities Laws................................................42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSAP
SECTION 4.01. Organization and Authority of NSAP; Series A
Preferred Stock Issuance.........................43
SECTION 4.02. No Conflict....................................................43
SECTION 4.03. Governmental Consents and Approvals............................44
SECTION 4.04. Investment Purpose.............................................44
SECTION 4.05. Litigation.....................................................44
SECTION 4.06. Absence of Certain Changes......................................44
SECTION 4.07. Opinion of Financial Advisor to Special Committee..............44
SECTION 4.08. Brokers........................................................45
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing.......................45
SECTION 5.02. Confidentiality................................................46
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EXHIBIT B
FORM OF GENERAL RELEASE AND DISCHARGE
EXHIBIT D
FORM OF STOCKHOLDERS' ESCROW AGREEMENT
Page
SECTION 5.03. Regulatory and Other Authorizations; Notices and Consents......46
SECTION 5.04. Use of Intellectual Property...................................47
SECTION 5.05. Release of Indemnity Obligations...............................47
SECTION 5.06. No Actions Inconsistent with Tax Free Status...................48
SECTION 5.07. Negotiations to Acquire Retained Entities......................48
SECTION 5.08. Modification of Stockholders' Salaries.........................48
SECTION 5.09. Intercompany Agreements........................................48
SECTION 5.10. Further Action.................................................48
SECTION 5.11. Non-Competition................................................48
SECTION 5.12. Continuation of Business During Contingent Payment Years.......49
SECTION 5.13. Retention of Sufficient NSAP Common Stock......................50
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Continuation of Benefits.......................................50
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Stockholders..................50
SECTION 7.02. Conditions to Obligations of NSAP..............................51
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties.....................53
SECTION 8.02. Indemnification by the Stockholders............................53
SECTION 8.03. Tax Matters....................................................56
SECTION 8.04. Satisfaction of Indemnification Claims.........................56
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination....................................................57
SECTION 9.02. Effect of Termination..........................................58
SECTION 9.03. Waiver.........................................................58
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EXHIBIT B
FORM OF GENERAL RELEASE AND DISCHARGE
EXHIBIT D
FORM OF STOCKHOLDERS' ESCROW AGREEMENT
Page
ARTICLE X
TAX MATTERS
SECTION 10.01. Indemnity.....................................................58
SECTION 10.02. Contests......................................................59
SECTION 10.03. Time of Payment...............................................60
SECTION 10.04. Conveyance Taxes..............................................60
SECTION 10.05. Tax Benefits..................................................61
SECTION 10.06. Miscellaneous.................................................61
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses......................................................62
SECTION 11.02. Notices.......................................................62
SECTION 11.03. Public Announcements..........................................63
SECTION 11.04. Headings......................................................63
SECTION 11.05. Severability..................................................63
SECTION 11.06. Entire Agreement..............................................64
SECTION 11.07. Assignment....................................................64
SECTION 11.08. No Third Party Beneficiaries..................................64
SECTION 11.09. Amendment.....................................................64
SECTION 11.10. Governing Law.................................................64
SECTION 11.11. Counterparts..................................................64
SECTION 11.12. Specific Performance..........................................64
Schedules
SCHEDULE A STOCKHOLDERS LIST
Exhibits
EXHIBIT A FORM OF SERIES A PREFERRED SHARE CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE OF DESIGNATION
EXHIBIT C FORM OF GENERAL RELEASE AND DISCHARGE
EXHIBIT D FORM OF STOCKHOLDERS' ESCROW AGREEMENT
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