PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of [ ], is executed by NU SKIN
ENTERPRISES, INC., a Delaware corporation ("NSE"), in favor of ABN AMRO BANK
N.V., acting as agent (in such capacity and each successor thereto acting in
such capacity, "Agent") for the financial institutions which are from time to
time parties to the Credit Agreement referred to in Recital A below
(collectively, "Lenders").
RECITALS
A. Pursuant to a Credit Agreement, dated as of May 8, 1998 (as amended
from time to time, the "Credit Agreement"), among NSE, Nu Skin Japan Co., Ltd.
("NSJ"), Lenders and Agent, Lenders have agreed to extend certain credit
facilities to NSE and NSJ (collectively, "Borrowers") upon the terms and subject
to the conditions set forth therein.
B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of this Agreement, duly executed by NSE.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, NSE hereby agrees with Agent, for the ratable benefit of Lenders
and Agent, as follows:
1. Definitions and Interpretation.
(a) Definitions. When used in this Agreement, the following
terms shall have the following respective meanings:
"Agent" shall have the meaning given to that term in
the introductory paragraph hereof.
"Collateral" shall have the meaning given to that
term in Paragraph 2 hereof.
"Credit Agreement" shall have the meaning given to
that term in Recital A hereof.
"Domestic Subsidiary" shall mean, at any time, each
Subsidiary of NSE (a) which is created or organized in the
United States or under the law of the United States or any
state thereof or any territory thereof, (b) which was included
as a member of NSE's affiliated group in NSE's most recent
consolidated United States federal income tax return, or (c)
the earnings of which were includible in the taxable income of
NSE or any other Domestic Subsidiary (to the extent of NSE's
or such other Domestic Subsidiary's ownership interest of such
Subsidiary) in NSE's most recent consolidated United States
federal income tax return.
"Equity Securities" of any Person shall mean (a) all
common stock, preferred stock, participations, shares,
partnership interests or other equity interests in and of such
Person (regardless of how designated and whether or not voting
or non-voting) and (b) all warrants, options and other rights
to acquire any of the foregoing.
"Foreign Subsidiary" shall mean each Subsidiary of
NSE which is not a Domestic Subsidiary, including, as of the
date of this Agreement, the Subsidiaries of NSE set forth in
Attachment 1 hereto.
"Foreign Subsidiary Non-Voting Shares" shall mean,
with respect to any Foreign Subsidiary, Equity Securities
issued by such Foreign Subsidiary which are not Foreign
Subsidiary Voting Shares.
"Foreign Subsidiary Voting Shares" shall mean, with
respect to any Foreign Subsidiary, Equity Securities issued by
such Foreign Subsidiary [having voting power to elect the
members of the Board of Directors (or comparable body) of such
Foreign Subsidiary].
"Lenders" shall have the meaning given to that term
in the introductory paragraph hereof.
"Maximum Percentage" shall mean, with respect to the
Foreign Subsidiary Voting Shares of any Foreign Subsidiary,
the maximum percentage of such shares that can be pledged to
Agent hereunder without increasing the gross income of NSE
pursuant to Sections 951 or 956(c) of the IRC.
"NSE" shall have the meaning given to that term in
the introductory paragraph hereof.
"Obligations" shall mean and include all loans,
advances, debts, liabilities, and obligations, howsoever
arising, owed by NSE to Agent or any Lender of every kind and
description (whether or not evidenced by any note or
instrument and whether or not for the payment of money)
individual or joint and several, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of the Credit Documents,
including all interest, fees, charges, expenses, attorneys'
fees and accountants' fees chargeable to NSE or payable by NSE
thereunder.
"Pledged Shares" shall mean collectively the Foreign
Subsidiary Voting Shares and Foreign Subsidiary Non-Voting
Shares pledged to Agent pursuant to Paragraph 2 hereof.
"Subsidiary" of any Person shall mean (a) any
corporation of which more than 50% of the issued and
outstanding Equity Securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the
time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other
Subsidiaries, (b) any partnership, joint venture, limited
liability company or other association of which more than 50%
of the equity interest having the power to vote, direct or
control the management of such partnership, joint venture or
other association is at the time owned and controlled by such
Person, by such Person and one or more of the other
Subsidiaries or by one or more of such Person's other
Subsidiaries or (c) any other Person included in the Financial
Statements of such Person on a consolidated basis. (All
references in this Agreement and the other Credit Documents to
NSE and its Subsidiaries shall, unless otherwise indicated,
include NSJ and its Subsidiaries.)
"Taxes" shall have the meaning given to such term in
Subparagraph 8(g).
"UCC" shall mean the Uniform Commercial Code as in
effect in the State of California from time to time.
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Credit Agreement shall have the respective
meanings given to those terms in the Credit Agreement, and all terms
defined in the UCC shall have the respective meanings given to those
terms in the UCC.
(b) Other Interpretive Provisions. The rules of construction
set forth in Section I of the Credit Agreement shall, to the extent not
inconsistent with the terms of this Agreement, apply to this Agreement
and are hereby incorporated by reference.
2. Pledge. As security for the Obligations, NSE hereby pledges and assigns to
Agent (for the ratable benefit of Lenders and Agent) and grants to Agent (for
the ratable benefit of Lenders and Agent) a security interest in all right,
title and interest of NSE in and to the property described in subparagraphs (a)
- (d) below, whether now owned or hereafter acquired (collectively and
severally, the "Collateral"):
(a) Sixty-six percent (or, if the Maximum Percentage shall
change after the date hereof, the Maximum Percentage) of all Foreign
Subsidiary Voting Shares of each Foreign Subsidiary owned directly by
NSE (including the Foreign Subsidiary Voting Shares described in
Attachment 1 hereto), whether certificated or uncertificated;
(b) All of the Foreign Subsidiary Non-Voting Shares of each
Foreign Subsidiary owned directly by NSE (including the Foreign
Subsidiary Non-Voting Shares described in Attachment 1 hereto), whether
certificated or uncertificated;
(c) All dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any of the property
described in subparagraph (a) or (b) above; and
(d) All proceeds of the foregoing.
3. Representations and Warranties. NSE represents and warrants to Lenders and
Agent as follows:
(a) NSE is the record legal and beneficial owner of the
Collateral (or, in the case of after-acquired Collateral, at the time
NSE acquires rights in the Collateral, will be the record legal and
beneficial owner thereof). No other Person has (or, in the case of
after-acquired Collateral, at the time NSE acquires rights therein,
will have) any right, title, claim or interest (by way of Lien,
purchase option or otherwise) in, against or to the Collateral.
(b) Agent has (or in the case of after-acquired Collateral, at
the time NSE acquires rights therein, will have) a first priority
perfected security interest in the Collateral.
(c) All Pledged Shares have been (or in the case of
after-acquired Pledged Shares, at the time NSE acquires rights therein,
will have been) duly authorized, validly issued and fully paid and are
(or in the case of after-acquired Pledged Shares, at the time NSE
acquires rights therein, will be) non-assessable.
(d) NSE has delivered to Agent, together with all necessary
stock powers, endorsements, assignments and other necessary instruments
of transfer, the originals of all Pledged Shares, other certificated
securities, other Collateral and all certificates, instruments and
other writings evidencing the same.
(e) Set forth in Attachment 1 hereto is a true, complete and
accurate list, as of the date of this Agreement, of all Foreign
Subsidiaries and all Foreign Subsidiary Voting Shares and all Foreign
Subsidiary Non-Voting Shares.
4. Covenants. NSE hereby agrees as follows:
(a) NSE, at NSE's expense, shall promptly procure, execute and
deliver to Agent all documents, instruments and agreements and perform
all acts which are necessary or desirable, or which Agent may request,
to establish, maintain, preserve, protect and perfect the Collateral,
the Lien granted to Agent therein and the first priority of such Lien
or to enable Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the
generality of the preceding sentence, NSE shall (i) procure, execute
and deliver to Agent all stock powers, endorsements, assignments,
financing statements and other instruments of transfer requested by
Agent, (ii) deliver to Agent promptly upon receipt the originals of all
Pledged Shares, other certificated securities, other Collateral and all
certificates, instruments and other writings evidencing the same and
(iii) cause the Lien of Agent to be recorded or registered in the books
of any financial intermediary or clearing corporation requested by
Agent.
(b) NSE shall pay promptly when due all taxes and other
Governmental Charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(c) NSE shall appear in and defend any action or proceeding
which may affect its title to or Agent's interest in the Collateral.
(d) NSE shall not surrender or lose possession of (other than
to Agent), sell, encumber, lease, rent, option, or otherwise dispose of
or transfer any Collateral or right or interest therein except as
permitted in the Credit Agreement, and, notwithstanding any provision
of the Credit Agreement, NSE shall keep the Collateral free of all
Liens.
5. Voting Rights and Dividends Prior to Default. Unless an Event of Default has
occurred and is continuing:
(a) NSE may exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the Pledged Shares or
any part thereof; provided, however, that NSE shall not exercise or
refrain from exercising any such rights where the consequence of such
action or inaction would be (i) to impair any Collateral, the Lien
granted to Agent therein, the first priority of such Lien or Agent's
rights and remedies hereunder with respect to any Collateral or (ii)
otherwise inconsistent with the terms of this Agreement and the other
Credit Documents.
(b) NSE may receive and retain all dividends and interest paid
in cash in respect of the Pledged Shares, except for any such dividends
and interest paid in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital
surplus or paid-in-surplus. NSE shall promptly deliver to Agent to hold
as Collateral all dividends and interest which NSE is not entitled to
receive and retain pursuant to the preceding sentence, in the same form
as so received (with any necessary endorsement), and, until so
delivered, shall hold such dividends and interest in trust for the
benefit of Agent, segregated from the other property or funds of NSE.
6. Authorized Action by Agent. NSE hereby irrevocably appoints Agent as its
attorney-in-fact and agrees that Agent may perform (but Agent shall not be
obligated to and shall incur no liability to NSE or any third party for failure
so to do) any act which NSE is obligated by this Agreement to perform, and to
exercise such rights and powers as NSE might exercise with respect to the
Collateral, including, without limitation, the right to (a) collect by legal
proceedings or otherwise and endorse, receive and receipt for all dividends,
interest, payments, proceeds and other sums and property now or hereafter
payable on or on account of the Collateral; (b) enter into any extension,
reorganization, deposit, merger, consolidation or other agreement pertaining to,
or deposit, surrender, accept, hold or apply other property in exchange for the
Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make
any compromise or settlement, and take any action it deems advisable, with
respect to the Collateral; (e) pay any Indebtedness of NSE relating to the
Collateral; and (f) execute UCC financing statements and other documents,
instruments and agreements required hereunder; provided, however, that Agent may
exercise such powers only after the occurrence and during the continuance of an
Event of Default. NSE agrees to reimburse Agent upon demand for all reasonable
and documented costs and expenses, including reasonable and documented
attorneys' fees, Agent may incur while acting as NSE's attorney-in-fact
hereunder, all of which costs and expenses are included in the Obligations. NSE
agrees that such care as Agent gives to the safekeeping of its own property of
like kind shall constitute reasonable care of the Collateral when in Agent's
possession; provided, however, that Agent shall not be required to make any
presentment, demand or protest, or give any notice and need not take any action
to preserve any rights against any prior party or any other Person in connection
with the Obligations or with respect to the Collateral.
7. Events of Default.
(a) Event of Default. NSE shall be deemed in default under
this Agreement upon the occurrence and during the continuance of an
Event of Default, as that term is defined in the Credit Agreement.
(b) Voting Rights and Dividends. Upon the occurrence and
during the continuance of an Event of Default:
(i) All rights of NSE to exercise the voting and
other consensual rights which it would otherwise be entitled
to exercise pursuant to subparagraph 5(a) hereof and to
receive the dividends and interest payments which it would
otherwise be authorized to receive and retain pursuant to
subparagraph 5(a) hereof shall cease and all such rights shall
thereupon become vested in Agent which shall thereupon have
the sole right, but not the obligation, to exercise such
voting and other consensual rights and to receive and hold as
Collateral such dividends and interest payments.
(ii) NSE shall promptly deliver to Agent to hold as
Collateral all dividends and interest received by NSE after
the occurrence and during the continuance of any Event of
Default, in the same form as so received (with any necessary
endorsement), and, until so delivered, shall hold such
dividends and interest in trust for the benefit of Agent,
segregated from the other property or funds of NSE.
(c) Other Rights and Remedies. In addition to all other rights
and remedies granted to Agent by this Agreement, the Credit Agreement,
the other Credit Documents, the UCC and other applicable Governmental
Rules, Agent may, upon the occurrence and during the continuance of any
Event of Default, exercise any one or more of the following rights and
remedies: (i) collect, receive, appropriate or realize upon the
Collateral or otherwise foreclose or enforce Agent's security interests
in any or all Collateral in any manner permitted by applicable
Governmental Rules or in this Agreement; (ii) notify any or all issuers
of or transfer or paying agents for the Collateral or any applicable
clearing corporation, financial intermediary or other Person to
register the Collateral in the name of Agent or its nominee and/or to
pay all dividends, interest and other amounts payable in respect of the
Collateral directly to Agent; (iii) sell or otherwise dispose of any or
all Collateral at one or more public or private sales, whether or not
such Collateral is present at the place of sale, for cash or credit or
future delivery, on such terms and in such manner as Agent may
determine; and (iv) require NSE to assemble all records and information
relating to the Collateral and make it available to Agent at a place to
be designated by Agent. In any case where notice of any sale or
disposition of any Collateral is required, NSE hereby agrees that seven
(7) days notice of such sale or disposition is reasonable.
(d) Securities Laws.
(i) NSE acknowledges and recognizes that Agent may be
unable to effect a public sale of all or a part of the Pledged
Shares and may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire the Pledged
Shares for their own account, for investment and not with a
view to the distribution or resale thereof. NSE acknowledges
that any such private sales may be at prices and on terms less
favorable to Agent than those of public sales, and agrees that
such private sales shall be deemed to have been made in a
commercially reasonable manner and that Agent has no
obligation to delay sale of any Pledged Shares to permit the
issuer thereof to register it for public sale under the
Securities Act of 1933, as amended, or under any state
securities law.
(ii) Upon the occurrence and during the continuance
of an Event of Default and at Agent's request, NSE shall, and
shall cause all issuers of Collateral and all officers and
directors thereof and all other necessary Persons to, execute
and deliver all documents, instruments and agreements and
perform all other acts necessary or, in the opinion of Agent,
advisable to sell the Collateral in any public or private
sale, including any acts requested by Agent to (A) register
any Collateral under the Securities Act of 1933, (B) qualify
any Collateral under any state securities or "Blue Sky" laws
or (C) otherwise permit any such sale to be made in full
compliance with all applicable Governmental Rules.
8. Miscellaneous.
(a) Notices. Except as otherwise specified herein, all
notices, requests, demands, consents, instructions or other
communications to or upon NSE or Agent under this Agreement shall be
given as provided in Paragraph 8.01 of the Credit Agreement.
(b) Waivers; Amendments. Any term, covenant, agreement or
condition of this Agreement may be amended or waived only as provided
in the Credit Agreement. No failure or delay by Agent or any Lender in
exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such
right preclude any other further exercise thereof or of any other
right. Unless otherwise specified in any such waiver or consent, a
waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
(c) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Agent, Lenders, NSE and their
respective successors and assigns; provided, however, that NSE may not
assign or transfer any of its rights and obligations under this
Agreement without the prior written consent of Agent and Lenders, and,
provided, further, that Agent or any Lender may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. All references in this Agreement to
any Person shall be deemed to include all permitted successors and
assigns of such Person.
(d) Cumulative Rights, etc. The rights, powers and remedies of
Agent and Lenders under this Agreement shall be in addition to all
rights, powers and remedies given to Agent and Lenders by virtue of any
applicable law, rule or regulation of any Governmental Authority, the
Credit Agreement, any other Credit Document or any other agreement, all
of which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Agent's or any
Lender's rights hereunder. NSE waives any right to require Agent or any
Lender to proceed against any Person or to exhaust any Collateral or to
pursue any remedy in Agent's or such Lender's power.
(e) Partial Invalidity. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this
Agreement nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
(f) Cumulative Rights, etc. The rights, powers and remedies of
Agent and Lenders under this Agreement shall be in addition to all
rights, powers and remedies given to Agent and Lenders by virtue of any
applicable Governmental Rule, the Credit Agreement, any other Credit
Document or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively or
concurrently without impairing Agent's rights hereunder. NSE waives any
right to require Agent or any Lender to proceed against any Person or
to exhaust any Collateral or to pursue any remedy in Agent's or such
Lender's power.
(g) Payments Free of Taxes. All payments made by NSE under
this Agreement shall be made free and clear of, and without deduction
or withholding for or on account of, all present and future income,
stamp, documentary and other taxes and duties, and all other levies,
imposts, charges, fees, deductions and withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority (except net income taxes and franchise taxes in lieu of net
income taxes imposed on Agent or any Lender by its jurisdiction of
incorporation or the jurisdiction in which its Applicable Lending
Office is located) (all such non-excluded taxes, duties, levies,
imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld
from any amounts payable to Agent or any Lender hereunder, the amounts
so payable to Agent or such Lender shall be increased to the extent
necessary to yield to Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement or the other Credit Documents,
as applicable. Whenever any Taxes are payable by NSE, as promptly as
possible thereafter, NSE shall send to Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an
original official receipt received by NSE showing payment thereof. If
NSE fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to Agent the required receipts or other required
documentary evidence, NSE shall indemnify Agent and Lenders for any
taxes (including interest or penalties) that may become payable by
Agent or any Lender as a result of any such failure. The obligations of
NSE under this Subparagraph 8(g) shall survive the payment and
performance of the Obligations and the termination of this Agreement.
Nothing contained in this Subparagraph 8(g) shall require Agent or any
Lender to make available any of its tax returns (or any other
information relating to its taxes which it deems to be confidential).
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
[The signature page follows.]
IN WITNESS WHEREOF, NSE has caused this Agreement to be executed as of
the day and year first above written.
NU SKIN ENTERPRISES, INC.
By: _________________________
Name: ____________________
Title: _____________________
ATTACHMENT 1
TO PLEDGE AGREEMENT
INITIAL PLEDGED SHARES
Classes of Voting Issued and Shares Shares
Foreign Jurisdiction Equity Or Outstanding Owned by Pledged to
Subsidiary Of Organization Securities Non-Voting Shares NSE Agent
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