FIRST AMENDMENT TO INDEMNIFICATION LIMITATION AGREEMENT
This First Amendment to Indemnification Limitation Agreement (the
"First Amendment") is entered into effective as of May 3, 1999, by and among Nu
Skin Enterprises, Inc., a Delaware corporation ("Nu Skin Enterprises"), Nu Skin
United States, Inc., a Delaware corporation ("Nu Skin United States"), Nu Skin
International, Inc., a Utah corporation ("Nu Skin International"), Big Planet
Holdings, Inc., a Delaware corporation ("Big Planet Holdings"), Nu Skin USA,
Inc., a Delaware corporation ("Nu Skin USA"), Xxxxxx X. Xxxxx, an individual
("Xxxxx"), Xxxxx X. Xxxxx, an individual ("Xxxxx"), Xxxxxxx X. Xxxx, an
individual ("King"), and each of the stockholders who elected to become a party
to the Indemnification Limitation Agreement (as that term is defined in Recital
B below) by executing the signature page thereto (individually, a "Stockholder"
and, collectively, the "Stockholders"). Ricks, Doman, and King are,
collectively, referred to herein as the "Managers". Each of Nu Skin Enterprises,
Nu Skin United States, Nu Skin International, Big Planet Holdings, Nu Skin USA,
the Mangers, and the Stockholders is, individually, referred to herein as a
"Party" and, collectively, as the "Parties." Capitalized terms used in this
First Amendment but not defined herein are deemed to have the meanings ascribed
to them in the Indemnification Limitation Agreement.
RECITALS
A. WHEREAS, Nu Skin Enterprises, Nu Skin United States, and Nu Skin USA
entered into an Asset Purchase Agreement dated effective as of March 8, 1999
(the "Asset Purchase Agreement");
B. WHEREAS, in connection with the transactions contemplated by the
Asset Purchase Agreement, the Parties entered into an Indemnification Limitation
Agreement dated effective as of March 8, 1999 (the "Indemnification Limitation
Agreement");
C. WHEREAS, in connection with the transactions contemplated by the
Asset Purchase Agreement, Nu Skin Enterprises, Nu Skin USA, the Stockholders,
and U.S. Bank National Association, a national banking association, entered into
an Escrow Agreement dated effective as of March 8, 1999 (the "Escrow
Agreement");
D. WHEREAS, as set forth in Section 8.12 of the Escrow Agreement, each
of the Stockholders appointed each of Xxxxx X. Halls and Xxxxxx X. Xxxx as their
legal representatives and attorneys-in-fact, and authorized each such
Stockholder Representative (as that term is defined in the Escrow Agreement) to,
among other things, execute all documents, instruments, and papers in such
Stockholder's name, place, and stead to, among other things, amend any of the
ancillary documents, instruments, and agreements prepared and entered into in
connection with the Escrow (as that term is defined in the Escrow Agreement) or
the Escrow Agreement;
E. WHEREAS, the Parties now desire to amend Section 1.1(a) of the
Indemnification Limitation Agreement to increase the basket amount provided for
therein, to add a new clause (iv), to add a new clause (c), to provide for
Stockholder indemnification for Big Planet, Inc. Corporate Tax Liability, and to
clarify certain matters related to indemnification;
F. WHEREAS, the Parties also desire to amend Section 1.2 of the
Indemnification Limitation Agreement in its entirety, as set forth herein;
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G. WHEREAS, the Parties further desire to amend Section 1.2.2 of the
Indemnification Limitation Agreement to correct a typographical error contained
therein and further desire to amend the Indemnification Limitation Agreement to
add a new Section 7.16, as set forth herein;
H. WHEREAS, the Parties also desire to amend the Indemnification
Limitation Agreement to add a basket for Year 2000 indemnification claims, as
provided by a new Section 1.3 to the Indemnification Limitation Agreement, as
set forth herein;
I. WHEREAS, Exhibit "D" to the Indemnification Limitation Agreement is
superceded and replaced in its entirety with Exhibit "D" attached to this First
Amendment; and
J. WHEREAS, after the effective date of this First Amendment, the
Parties anticipate entering into an Amended and Restated Indemnification
Limitation Agreement, which shall reflect the terms of the Indemnification
Limitation Agreement, as amended by this First Amendment.
NOW, THEREFORE, in consideration of the mutual premises and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Amendments of Section 1.1. The Parties hereby agree to amend Section 1.1 of
the Indemnification Limitation Agreement as follows:
1.1 Change in Basket Amount to $250,000. The reference to "$100,000" in
Section 1.1(a) shall be replaced with "$250,000."
1.2 Addition of New Clause (iv). The first sentence of Section 1.1 is
amended to delete the word "or" that appears immediately prior to the "(iii)"
and to add a new clause (iv) reading in its entirety as set forth below, which
new clause (iv) will be inserted following the words "or Nu Skin Guatemala S.A.
(Nu Skin Guatemala, Inc.)," but before the words "no claim for indemnification":
"or (iv) any adjustment to the consideration under the Merger
Agreement, the Agreement and Plan of Merger dated as of May 3,
1999, between and among Nu Skin Enterprises, NSC Sub, Inc.,
NSG Sub, Inc., NSM Sub, Inc., NFB Sub, Inc., Nu Skin Canada,
Inc., Nu Skin Guatemala, Inc., Nu Skin Mexico, Inc., Nu Family
Benefits Insurance Brokerage, Inc., and certain individual
stockholders (the "Affiliate Merger Agreement"), or the Asset
Purchase Agreement dated effective as of March 8, 1999, by and
among Nu Skin Enterprises, Nu Skin United States, Inc., and Nu
Skin USA, Inc.,"
1.3 Addition of New Clause (c). Line 24 of Section 1.1 is amended to
delete the word "and" that immediately precedes clause (b), and to add a new
clause (c) reading in its entirety as set forth below, which new clause (c) will
be inserted immediately following the words "said $17,500,000 cap" but before ";
provided further, however,":
", and (c) any claims related to the Stockholders' title to
and right to transfer their respective shares of capital stock
(as set forth in clause (i) above) or any claims for
indemnification based on fraud (as set forth in clause (ii)
above) are excluded from said $17,500,000 cap;"
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1.4 Amendment of Line 31. Line 31 of Section 1.1 is amended to add the
words "or big Planet, Inc.'s" after the words "all of Nu Skin USA's" but before
the words "Corporate Tax Liability", such that line 31 of Section 1.1 reads as
follows:
"all of Nu Skin USA's or Big Planet, Inc.'s Corporate Tax
Liability and liability related to the Xxxxxx Lawsuit
proportionately based . . .."
1.5 Addition of New Sentence. A new sentence is added at the end of
Section 1.1 reading in its entirety as follows:
"Neither any downward adjustments to the Merger Consideration
provided for by Section 3.8 of the Merger Agreement or Section 2.5 of the
Affiliate Merger Agreement, nor any downward adjustment to the consideration
pursuant to the Asset Purchase Agreement, shall be subject to the basket or cap
set forth hereinabove."
Except as so amended, Section 1.1 of the Indemnification
Limitation Agreement shall remain in full force and effect as
originally executed and shall not otherwise be deemed to be
amended, altered, or modified by this First Amendment.
2. Amendment of Section 1.2. The Parties hereby agree to amend Section 1.2 of
the Indemnification Limitation Agreement in its entirety to read as follows:
"1.2 Limits on Indemnification Claims Brought Against the Managers
Under the Merger
Agreement.
1.2.1 Relevant Merger Agreement Provisions. As set forth in
the Merger Agreement, (a) the vesting of all shares of Big Planet Common
underlying the restricted stock award held by King will be accelerated and
deemed exercised, and King will be paid the redemption price calculated in
accordance with Section 2.2.1 of the Merger Agreement, (b) the vesting of all
shares of Big Planet Common underlying the restricted stock award held by Xxxxx
will be accelerated and deemed exercised, and Xxxxx will be paid the redemption
price calculated in accordance with Section 2.3.2 of the Merger Agreement, and
(c) the vesting of all of the options held by Xxxxx to acquire shares of Big
Planet Common will be accelerated and deemed exercised, and Xxxxx will be paid
the redemption price calculated in accordance with Section 2.3 of the Merger
Agreement. As set forth in the Merger Agreement and in Section 1.2.2 below
(subject to the maximum indemnification obligations of the Managers set forth in
Section 1.2.2 below), each of the Managers is jointly and severally liable on a
pro rata basis with Nu Skin USA to Big Planet Holdings and Nu Skin Enterprises
and has agreed to indemnify Big Planet Holdings and Nu Skin Enterprises for any
such indemnification claims for which they may become liable under the Merger
Agreement. The Parties hereby understand, agree, and acknowledge that the
exclusive remedy of Big Planet Holdings and Nu Skin Enterprises to satisfy any
indemnification obligation of any Manager under the Merger Agreement shall be by
Big Planet Holdings and Nu Skin Enterprises offsetting, in their sole
discretion, against any shares of Nu Skin Enterprises capital stock owned by him
and/or any cash incentives and/or equity incentives awarded or owing to such
Manager from time to time (determined in accordance with Exhibit "G" attached to
the Merger Agreement), up to the maximum indemnification obligation of each
Manager set forth in Section 1.2.2 below.
1.2.2 Managers' Indemnification Obligations. Except for
indemnification claims brought by Big Planet Holdings or Nu Skin Enterprises
relating to or based on (i) common law fraud or (ii) the Managers' title to and
right to transfer their respective shares of capital stock or options of Big
Planet, Inc.
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pursuant to the Merger Agreement, no claim for indemnification may be made
against any Manager under the Merger Agreement by Big Planet Holdings or Nu Skin
Enterprises with respect to an individual claim of liability or damage, unless,
and then only to the extent that, the aggregate of all amounts claimed under the
Merger Agreement exceeds $250,000 (the "Big Planet Indemnification Amount");
provided, however, that in the event the Big Planet Indemnification Amount
exceeds $250,000, such excess amount shall be divided into two (2) amounts, one
equal to eighty-six percent (86%) of such excess (the "Nu Skin USA Excess
Amount") and the other equal to fourteen percent (14%) of such excess (the
"Managers' Excess Amount"), and Nu Skin USA shall be responsible for the Nu Skin
USA Excess Amount and the Managers, as a group, shall be responsible for the
Managers' Excess Amount, and with respect to the Managers' Excess Amount, each
of the Managers shall share in the Manager's Excess Amount pro rata in
accordance with their respective Manager Allocation Percentage (set forth on
Exhibit "D" attached hereto) up to the following maximum Manager indemnification
obligations: (a) King--$407,802, (b) Xxxxx--$152,955, and (c) Xxxxx--$951,537;
provided further, however, that when the Managers have each provided
indemnification in an amount equal to such respective Manager's maximum pro rata
indemnification obligation (as set forth above), none of the Managers shall have
any additional indemnification obligation, and any obligation to provide
additional indemnification shall become the sole obligation and responsibility
of Nu Skin USA; provided further, however, that any downward adjustment to the
Merger Consideration provided for by Section 3.8 of the Merger Agreement or
Section 2.5 of the Affiliate Merger Agreement shall not be subject to the basket
or cap set forth hereinabove nor shall any indemnification claims relating to or
based on the matters set forth in clauses (i) and (ii) of this Section 1.2.2
above. Each Manager's pro rata indemnification obligation will be satisfied
exclusively from shares of Nu Skin Enterprises capital stock owned by him and/or
any cash incentives and/or equity incentives awarded or owing to such Manager
from time to time (determined in accordance with Exhibit "G" attached to the
Merger Agreement).
1.2.2.1 If the Big Planet Indemnification Amount
exceeds $250,000 and Nu Skin Enterprises desires to offset all
or any portion of a Manager's pro rata indemnification
obligation (determined as provided above) against cash
incentives earned by or payable from time to time to the
Manager pursuant to Exhibit "G" attached to the Merger
Agreement, each Manager's pro rata share of such Manager's
Excess Amount shall be determined by multiplying such
Manager's Allocation Percentage by the Manager's Excess
Amount.
1.2.2.2 If the Big Planet Indemnification Amount
exceeds $250,000 and Nu Skin Enterprises desires to offset all
or any portion of a Manager's pro rata indemnification
obligation (determined as provided above) against shares of Nu
Skin Enterprises capital stock or equity incentives, then the
number of shares to be forfeited pursuant hereto shall be
determined as follows: the portion of each such Manager's pro
rata indemnification obligation to be funded in shares of or
equity incentives for shares of Nu Skin Enterprises capital
stock shall be divided by the lower of: (x) $22.79688 or (y)
the average of (i) $22.79688 and (ii) the average closing
price of the Nu Skin Enterprises Class A Common as reported on
the New York Stock Exchange for the twenty (20) trading day
period ending on the trading day immediately prior to the
Closing Date (as that term is defined in the Merger
Agreement). The result of such calculation is the number of
shares of or equity incentives for shares of Nu Skin
Enterprises Class A Common that each such Manager shall
forfeit in order to settle his pro rata share of the Manager's
Excess Amount.
The Parties hereby specifically acknowledge, understand, and agree that Nu Skin
USA will be obligated for all indemnification obligations once each of the
Managers has provided indemnification in an amount equal to such Manager's
maximum pro rata indemnification obligation (as set forth above) and that any
such remaining portion of the Big Planet Indemnification Amount shall be
allocated to and paid by Nu Skin
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USA pursuant to and in accordance with Section 1.1 above. The indemnification
obligations of the Managers to Big Planet Holdings and Nu Skin Enterprises under
the Merger Agreement and this Section 1.2.2 shall be effective only until each
Manager has provided indemnification in the maximum amounts set forth above in
this Section 1.2.2 (regardless of whether such indemnification is provided in
the form of the forfeiture of cash incentives, shares of Nu Skin Enterprises
Class A Common, equity incentives for shares of Nu Skin Enterprises Class A
Common, or a combination thereof). To the extent that indemnification
obligations in favor of Big Planet Holdings or Nu Skin Enterprises under the
Merger Agreement may be unenforceable, Nu Skin USA and each of the Managers (on
a pro rata basis with respect to the Managers, as set forth above) shall
contribute the maximum amount of indemnification (regardless of whether such
indemnification is provided in the form of the forfeiture of cash incentives,
shares of Nu Skin Enterprises Class A Common, equity incentives for shares of Nu
Skin Enterprises Class A Common, or a combination thereof), determined as set
forth above, as they are permitted to contribute under applicable law and in
accordance with this Section 1.2.2 to the payment and satisfaction of all
indemnification claims brought under and pursuant to the Merger Agreement by Big
Planet Holdings or Nu Skin Enterprises. Amounts owing to Big Planet Holdings or
Nu Skin Enterprises under the Merger Agreement shall not be reduced or offset by
the value of any tax benefits accruing to Big Planet Holdings or Nu Skin
Enterprises as a result of any claim for indemnification or by the amount of any
insurance proceeds received by Big Planet Holdings or Nu Skin Enterprises in
connection with any claim for indemnification."
3. Addition of New Section 1.3. The Parties hereby agree to amend the
Indemnification Limitation Agreement to add a new Section 1.3, which reads in
its entirety as follows:
"1.3 Year 2000 Indemnification Claims; Year 2000 Basket. Year 2000
indemnification claims shall not be subject to the $250,000 baskets provided for
in Sections 1.1 and 1.2.2 above, but rather shall be subject to the Year 2000
Basket (as that term is defined in the Merger Agreement); provided, however,
that Year 2000 indemnification claims shall nevertheless be subject to the
$17,500,000 cap set forth in Section 1.1 above. If the aggregate Year 2000
indemnification claims exceed the Year 2000 Basket, such excess shall be divided
into two (2) amounts, as set forth in Section 1.2.2 above, one equal to
eighty-six percent (86%) of such excess (which amount shall be deemed to be the
Nu Skin USA Excess Amount, as that term is defined in Section 1.2.2 above) and
the other equal to fourteen percent (14%) of such excess (which amount shall be
deemed to be the Managers' Excess Amount, as that term is defined in Section
1.2.2 above), and Nu Skin USA and each of the Managers shall share in such
excess amount as provided in and in accordance with the provisions of Section
1.2.2 above."
4.3. Addition of New Section 1.4. The Parties hereby agree to amend the
Indemnification Limitation Agreement to add a new Section 1.4, which reads in
its entirety as follows:
"1.4 Netscape Litigation Claims; Netscape Litigation Basket. The
Parties understand and acknowledge that a lawsuit has been filed against Big
Planet, Inc. captioned Netscape Communications Corporation v. Big Planet, Inc.,
et al. and pending in the United States District Court, Northern District of
California (San Xxxx Division), Case No. C-99-20144 (JW) (PVT)(ARB) (the
"Netscape Litigation"). No claim for indemnification may be made against Big
Planet, Inc. by Nu Skin Enterprises or Big Planet Holdings in connection with
any judgment or any costs or expenses, including attorneys' fees (both before,
during, and after trial) incurred by Nu Skin Enterprises or Big Planet Holdings
in connection with the Netscape Litigation ("Netscape Litigation Claims")
unless, and then only to the extent that, the aggregate of all such Netscape
Litigation Claims exceeds $200,000 (the "Netscape Litigation Basket"). Netscape
Litigation Claims shall not be subject to the $250,000 baskets provided for in
Sections 1.1 and 1.2.2 above, but rather shall be subject to the Netscape
Litigation Basket; provided, however, that Netscape
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Litigation Claims shall nevertheless be subject to the $17,500,000 cap set forth
in Section 1.1 above. If the aggregate Netscape Litigation Claims exceed the
Netscape Litigation Basket, such excess shall be divided into two (2) amounts,
as set forth in Section 1.2.2 above, one equal to eighty-six percent (86%) of
such excess (which amount shall be deemed to be the Nu Skin USA Excess Amount,
as that term is defined in Section 1.2.2 above) and the other equal to fourteen
percent (14%) of such excess (which amount shall be deemed to be the Managers'
Excess Amount, as that term is defined in Section 1.2.2 above), and Nu Skin USA
and each of the Managers shall share in such excess amount as provided in and in
accordance with the provisions of Section 1.2.2 above."
5. Addition of New Section 7.16. The Parties hereby agree to amend the
Indemnification Limitation Agreement to add a new Section 7.16, which reads in
its entirety as follows:
"7.16 No Impact on Signing Shareholders Indemnification Obligation. The
parties understand and acknowledge that a Stock Acquisition Agreement dated as
of February 27, 1998 (the "Stock Acquisition Agreement") was entered into by and
among Nu Skin Asia Pacific, Inc., a Delaware corporation, and the persons listed
on the signature page thereto (collectively, the "Signing Shareholders"), which
Stock Acquisition Agreement, among other things, provides that the Signing
Shareholders will indemnify Nu Skin Asia Pacific, Inc. and certain other persons
and entities identified therein (the "Signing Shareholders Indemnification
Obligation"). Notwithstanding the provisions of this Agreement, neither the
Signing Shareholders Indemnification Obligation, nor any of the Signing
Shareholders' obligations or responsibilities to provide indemnification for any
Loss (as that term is defined in the Stock Acquisition Agreement) under the
Stock Acquisition Agreement is intended to be amended, modified, altered,
restricted, capped, limited, or abrogated in any way by this Agreement or any
provision or term hereof."
6. No Other Amendments. Except as specifically provided in this First Amendment,
the Indemnification Limitation Agreement shall remain in full force and effect
as originally executed and shall not otherwise be deemed to be amended, altered,
or modified.
7. Miscellaneous. The above Recitals and all Exhibits attached hereto are deemed
to be incorporated herein by reference and made a part hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have caused this First Amendment to
Indemnification Limitation Agreement to be duly executed as of the day and year
first above written.
NU SKIN ENTERPRISES, INC.
By: /s/ Xxxxxx Xxxx /s/ Xxxxx X. Xxxxxxxxx*
Title: Vice President Xxxxx X. Xxxxxxxxx
1565 East 3300 South
NU SKIN INTERNATIONAL, INC. Xxxx Xxxx Xxxx, Xxxx 00000
By: /s/ Xxxxxx Xxxx /s/ R. Xxxxx Xxxxxxxxx*
Title: Vice President R. Xxxxx Xxxxxx
3800 Sherwood Drive
NU SKIN USA, INC. Xxxxx, Xxxx 00000
By: Xxxxxx X. Xxxx /s/ Xxxxxx X. Xxxx*
Title: Xxxxxx X. Xxxx
0000 Xxxxx Xxxxx
XXXXXXXXXXXX: Xxxxx, Xxxx 00000
/s/ Xxxxx X. Xxxxx* /s/ Xxxx X. Xxxxx
Xxxxx X. Xxxxx Xxxx X. Xxxxx
0000 Xxxxxxxx Xxxxx 000 Xxxx Xxxx
Xxxxx, Xxxx 00000 Xxxxxx, Xxxxxxx 00000
/s/ Xxxxx Xxx Xxxxx* /s/ Xxxxxx X. Xxxxx*
c/o Xxx X. Xxxxxx, Esq. Xxxxxx X. Xxxxx
00000 Xxxxx Xxxxxxxx Xxxx Xxxxx, #000 0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000 Xxxxx, Xxxx 00000
/s/ Xxxxxx X. Xxxxxxxxx* /s/ Xxxxx X. Halls*
Xxxxxx X. Xxxxxxxxx Xxxxx X. Halls
0000 Xxxx Xxxxxxxxxx Xxxxx 00 Xxxx Xxxxxx Xxxxxx
Xxxxx, Xxxx 00000 Xxxxx, Xxxx 00000
/s/ Xxxx Xxxx Xxxxxxx Halls /s/ Xxxx X. Xxxxx*
Xxxx Xxxx Xxxxxxx Halls x/x Xxxxxxx X. Xxxxxxxx, Xxx.
0000 Xxxx 0000 Xxxxx 0000 Xxxxx Xxxxxxxxxx Xxxxxx, #000
Xxxx, Xxxx 00000 Xxxxx, Xxxx 00000
By: /s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
Attorney-in-Fact
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