EX-10.38
ASSUMPTION OF LIABILITIES AND
INDEMNIFICATION AGREEMENT
This Assumption of Liabilities and Indemnification Agreement (the
"Agreement") is made and entered into effective as of the 31st day of December,
1997 (the "Effective Date"), by and between Nu Skin International, Inc., a Utah
corporation ("NSI") and 252nd Shelf Corporation, a Delaware corporation which is
in the process of changing its name to Nu Skin USA, Inc. ("NUSA").
Recitals
A. Immediately prior to the Effective Date, NUSA was a wholly-owned
subsidiary of NSI.
B. NSI's integrated business is being divided into two separate
businesses and entities as of the Effective Date, pursuant to the terms of a
Contribution and Distribution Agreement entered into between NSI and NUSA as of
the Effective Date (the "Contribution and Distribution Agreement"). The
separation and reorganization is being accomplished through a contribution of
specified NSI assets to NUSA and a distribution of the outstanding capital stock
of NUSA to NSI's stockholders.
C. As part of such separation and reorganization, NSI and NUSA have
agreed to an allocation of liabilities arising from the historical operation of
NSI's business. The allocation is intended to generally have the liabilities
follow the entity holding the assets and continuing the business to which such
liabilities relate or from which they arise.
D. The parties hereto have determined that the allocation of
liabilities between NSI and NUSA is to be as provided in this Agreement.
Agreement
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants of the parties contained herein, the parties hereby agree as
follows:
1. DEFINITIONS. Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings ascribed to them in the
Contribution and Distribution Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Benefits Agreement" shall mean that certain Employee Benefits
Allocation Agreement entered into by NSI and NUSA as of the Effective Date.
"Claim" shall mean: (a) A suit, proceeding or investigation by or
before any court or governmental or regulatory agency or body or a written
demand for payment of a Liability or cause of action, asserted against NSI, NUSA
or both by a Claimant; or (b) a written demand or assertion by or on behalf of a
Claimant that a cause of action giving rise or relating to a Liability exists
against NSI or NUSA.
"Claimant" shall mean any person or entity asserting a Claim.
"Effective Date" shall mean December 31, 1997.
"Indemnified Claim" shall mean any Liability or Claim as to which an
Indemnifying Party has agreed to indemnify an Indemnified Party.
"Indemnified Loss" shall mean a cost, expense or loss incurred in
connection with an Indemnified Claim, for which an Indemnified Party receives or
is entitled to receive a payment from an Indemnifying Party.
"Indemnified Party" shall mean a party or other person or entity
entitled to be indemnified from any Indemnified Claims and Indemnified Losses
pursuant to the terms of this Agreement.
"Indemnifying Party" shall mean a party indemnifying another party from
any Indemnified Claims and Indemnified Losses pursuant to the terms of this
Agreement.
"Jointly Shared Liabilities" shall mean Liabilities of NSI that are to
be jointly shared, assumed and paid by NSI and NUSA as provided in this
Agreement, as identified on the Listing of Liabilities or pursuant to the terms
of this Agreement.
"Liabilities" of any party hereto shall mean all losses, debts,
liabilities, damages, obligations, claims, demands, judgments or settlements of
any nature or kind owed by such party, whether accrued or contingent, and
including all penalties, costs and expenses (legal, accounting or otherwise)
associated therewith, but excluding "Taxes" as such term is defined in the Tax
Sharing and Indemnification Agreement.
"Listing of Liabilities" shall mean the listing of Liabilities attached
hereto as Exhibit A, which lists certain NUSA Assumed Liabilities, NSI Retained
Liabilities and Jointly Shared Liabilities.
"NSI Continuing Business" shall mean the business to be conducted by
NSI immediately after giving effect to the transactions contemplated by the
Contribution and Distribution Agreement, utilizing the NSI Retained Assets, and
including: the business of marketing and distributing of Nu Skin products;
managing and licensing the Nu Skin Global Compensation Plan; licensing of the
right to use the Nu Skin trademarks and 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
conducted by NSI prior to the Effective Date, other than the NUSA Acquired
Business.
"NSI Employees" shall mean all individuals who immediately prior to the
Effective Date were employed by NSI and who, after giving effect to the
transactions contemplated by the Contribution and Distribution Agreement, are
intended to remain employed by NSI or in the NSI Continuing Business.
"NSI Retained Assets" shall mean, collectively, all assets of NSI,
other than the NUSA Acquired Assets.
"NSI Retained Liabilities" shall mean each of the Liabilities of NSI
other than the NUSA Assumed Liabilities and the NUSA portion of the Jointly
Shared Liabilities. The NSI Retained Liabilities shall include each of those
Liabilities identified as such on the Listing of Liabilities or pursuant to the
terms of this Agreement.
"NUSA Acquired Assets" shall mean, collectively, those assets of NSI
transferred to and acquired by NUSA pursuant to the terms of the Contribution
and Distribution Agreement, as identified in Exhibit E attached thereto.
"NUSA Acquired Business" shall mean the business to be conducted by
NUSA immediately after giving effect to the transactions contemplated by the
Contribution and Distribution Agreement, utilizing the NUSA Acquired Assets, and
including the marketing and distribution of Nu Skin products in the United
States as permitted by the Intercompany Agreements (as defined in the
Contribution and Distribution Agreement).
"NUSA Assumed Liabilities" shall mean each of the Liabilities of NSI
that are to be assumed by NUSA as of the Effective Date as provided in this
Agreement and identified as NUSA Assumed Liabilities in the Listing of
Liabilities or pursuant to the terms of this Agreement.
"NUSA Employees" shall mean all individuals who immediately prior to
the Effective Date were employed by NSI and who, after giving effect to the
transactions contemplated by the Contribution and Distribution Agreement, are
intended to be employed by NUSA, as identified in the Benefits Agreement.
"Settlement Payment" shall mean a payment made by a party hereto to the
other party pursuant to and in exercise of its rights under Section 4.10 hereof.
"Tax Sharing and Indemnification Agreement" shall mean that certain Tax
Sharing and Indemnification Agreement entered into by NSI and NUSA as of the
Effective Date.
2. ASSUMPTION AND ALLOCATION OF LIABILITIES.
2.1 NSI Retained Liabilities. Except as may be otherwise
specifically provided herein, NSI shall retain, assume, pay, perform
and discharge all of the NSI Retained Liabilities.
2.2 NUSA Assumed Liabilities. Except as otherwise specifically
provided herein, from and after the Effective Date, NUSA shall assume,
pay, perform and discharge the NUSA Assumed Liabilities. In addition to
those items specifically referenced as NUSA Assumed Liabilities on the
Listing of Liabilities, NUSA Assumed Liabilities shall include the
following:
(a) Liabilities that result from a Claim arising out of
the operation of the NUSA Acquired Business, whether
based on events occurring prior to or after the
Effective Date; and
(b) Liabilities that arise out of or relate to any
activity undertaken by, or any failure to act by,
NUSA after the Effective Date.
2.3 Jointly Shared Liabilities. From and after the Effective
Date, NSI shall assume, pay, perform and discharge 50%, and NUSA shall
assume, pay, perform and discharge 50% of the Jointly Shared
Liabilities, unless a different allocation of any particular Jointly
Assumed Liabilities is specified in the Listing of Liabilities. In
addition to those Liabilities identified as Jointly Shared Liabilities
in the Listing of Liabilities, Jointly Shared Liabilities shall include
the following:
(a) Liabilities arising from Claims based on events
occurring prior to the Effective Date and which: (i)
are not identified in the Listing of Liabilities as
either NSI Retained Liabilities or as NUSA Assumed
Liabilities, and (ii) arise, in more than a de
minimis way, from the businesses or operations of
both the NSI Continuing Business and the NUSA
Acquired Business.
(b) Liabilities not identified as either NSI Retained
Liabilities or NUSA Acquired Liabilities in the
Listing of Liabilities, which result from Claims for
indemnification (and the advancement of expenses in
connection with a proceeding as to which such a Claim
may later be asserted) arising out of facts or
circumstances existing on or events occurring on or
prior to the Effective Date, made against NSI
pursuant to any law or any provision in any
certificate of incorporation, bylaws or agreement, by
any director, officer, employee or agent of NSI whose
duties involved, in more than a de minimis way, both
the NSI Continuing Business and the NUSA Acquired
Business.
2.4 Intent of Assumption and Allocation. In applying Sections
2.1, 2.2 and 2.3, the parties intend that Liabilities not specifically
identified in the Listing of Liabilities but incurred (or based on
facts existing) prior to the Effective Date ("Unidentified Existing
Liabilities") be allocated by a fair and reasonable application of the
principle that: (i) NSI shall be solely responsible for Liabilities
arising from or relating to the NSI Retained Assets or the conduct of
the NSI Continuing Business and in which the NUSA Acquired Assets and
NUSA Acquired Business had no more than a de minimis role; and (ii)
NUSA shall be solely responsible for Liabilities arising from or
relating to the NUSA Acquired Assets or the conduct of the NUSA
Acquired Business and in which the NSI Retained Assets and NSI
Continuing Business had no more than a de minimis role. Unidentified
Existing Liabilities in which both (i) the NSI Retained Assets or NSI
Continuing Business and (ii) the NUSA Acquired Assets or NUSA Acquired
Business have more than a de minimis role shall be shared by NSI and
NUSA in accordance with the provisions of Section 2.3, as Jointly
Shared Liabilities.
2.5 Liability Insurance Coverage. If any Liabilities to which
this Section 2 applies are covered by any liability insurance carried
by NSI for periods prior to the Effective Date, NSI and NUSA shall each
have access to such insurance within the aggregate limits thereof, in
proportion to their respective obligations pursuant to this Section 2.
Any insurance recoveries covering Liabilities to be assumed and
allocated pursuant to Section 2.3 shall be shared by the parties in the
proportions provided in Section 2.3
2.6 Actions to Effect Assignment and Assumption of NUSA
Assumed Liabilities.
(a) NSI and NUSA shall use their reasonable best efforts
to cause all rights and obligations of NSI in respect
of the NUSA Assumed Liabilities to be assigned to and
assumed by NUSA effective as of the Effective Date,
or as promptly thereafter as practicable.
(b) From and after the Effective Date, NSI and NUSA shall
use their reasonable best efforts to obtain from each
obligee to which the NUSA Assumed Liabilities are
owed a full release of NSI from any liability or
obligation in respect of such NUSA Assumed
Liabilities, effective as of the Effective Date or as
of the earliest possible date.
(c) Each of NSI and NUSA shall cooperate with the other
and execute such instruments and documents as may be
necessary or reasonably requested by the other party
in connection with the assignment, assumption and
release of any NUSA Assumed Liabilities as
contemplated herein.
(d) If and to the extent that NSI and NUSA are unable to
obtain the assignment, assumption and release of any
NUSA Assumed Liabilities as contemplated herein, as
between NSI and NUSA, effective as of the Effective
Date, NUSA agrees to pay and perform as and when due
all Liabilities and obligations of NSI in respect of
such NUSA Assumed Liabilities, whether arising prior
to, on or after the Effective Date, and, in the event
that for any reason NUSA does not make any such
payment or perform any such obligation as and when
due or NSI makes any such payment or performs any
such obligation, NUSA shall promptly reimburse NSI
for all costs and expenses incurred by NSI in
connection therewith.
3. INDEMNIFICATION.
3.1 By NSI. NSI shall indemnify and hold harmless NUSA, and
each officer, director, employee and agent of NUSA, from and against
any and all Liabilities and Claims which NSI has agreed to assume, pay,
perform and discharge pursuant to the terms of this Agreement
including: (i) all NSI Retained Liabilities; (ii) NSI's proportionate
share of all Jointly Shared Liabilities; (iii) all Claims relating to
or arising from such Liabilities; and (iv) all costs, expenses and
obligations arising from, relating to or incurred in connection with
such Liabilities and Claims.
3.2 By NUSA. NUSA shall indemnify and hold harmless NSI, and
each officer, director, employee and agent of NSI, from and against any
and all Liabilities and Claims which NUSA has agreed to assume, pay,
perform and discharge pursuant to the terms of this Agreement,
including: (i) all NUSA Assumed Liabilities; (ii) NUSA's proportionate
share of all Jointly Shared Liabilities; (iii) all Claims relating to
or arising from such Liabilities; and (iv) all costs, expenses and
obligations arising from, relating to or incurred in connection with
such Liabilities and Claims.
3.3 Payment Terms. All payments to be made by an Indemnifying
Party pursuant to its obligations under this Section 3 shall be made
within ten (10) business days of receipt of notice from the Indemnified
Party that an Indemnified Loss has been incurred by the Indemnified
Party and stating the amount of such Indemnified Loss and the basis for
the indemnification obligation, unless the Indemnifying Party contests
the obligation to indemnify the Indemnified Party with respect to a
claimed Indemnified Loss, as set forth in Section 3.9 below.
3.4 Taxes and Employee Benefits. Concurrently with the
execution of this Agreement, the parties are executing the Tax Sharing
and Indemnification Agreement and the Benefits Agreement. Obligations
relating to allocations of Liabilities for taxes, as well as the effect
of taxes on a party in respect of an Indemnified Loss, shall be
governed by the Tax Sharing and Indemnification Agreement. Obligations
with respect to accrued and ongoing benefits payable to the NSI
Employees and NUSA Employees will be as set forth in the Benefits
Agreement.
3.5 Insurance. The indemnification provisions of this
Agreement are not to be construed to be insurance coverage and do not
amend or affect in any manner any insurance policies purchased by NSI
prior to the Effective Date. Each party shall use its best efforts to
collect on insurance as to which it is the insured party, without
regard to whether it is the Indemnified Party or the Indemnifying Party
hereunder with respect to the subject of the insurance claim. If either
party receives insurance proceeds relating to an Indemnified Loss after
the receiving party has received a payment from the other party with
respect to such Indemnified Loss, the receiving party shall promptly
remit to the paying party a portion of such insurance proceeds equal to
the paying party's proportion of the Indemnified Loss. If an
Indemnified Party receives insurance proceeds relating to an
Indemnified Loss prior to receipt of payment from the Indemnifying
Party, then the amount of the Indemnified Loss to be paid by the
Indemnifying Party shall be appropriately reduced.
3.6 Effect of Other Reductions of Indemnified Loss. If the
amount of any Indemnified Loss shall at any time prior or subsequent to
indemnification pursuant to this Agreement be reduced by recovery,
settlement or otherwise, the amount of the Indemnified Loss paid or to
be paid by the Indemnifying Party shall be adjusted by an amount equal
to the Indemnifying Party's share of such reduction (determined in the
same proportion as parties' assumption and allocation of such
Liabilities as provided in Section 2 hereof), less any expenses
reasonably incurred in connection therewith, and in the event the
Indemnifying Party has previously paid the Indemnified Loss, the amount
of the Indemnifying Party's share of the reduction shall promptly be
repaid by the Indemnified Party to the Indemnifying Party.
3.7 Waiver of Subrogation. Each party hereby waives any right
of subrogation it may have with respect to any Indemnified Loss.
3.8 In Event of Unenforceability. To the extent that any
party's undertakings as an Indemnifying Party set forth in this Section
3 may be unenforceable, such party shall contribute the maximum amount
it is permitted to contribute under applicable law to the payment and
satisfaction of Indemnified Losses incurred by an Indemnified Party.
3.9 Disputes Relating to Claims for Indemnification.
(a) If an Indemnifying Party contests its obligation to
indemnify an Indemnified Party with respect to any
claimed Indemnified Losses, the Indemnifying Party
may deliver a written objection to the claim within
ten (10) business days following receipt of the
notice provided by the Indemnified Party as described
in Section 3.3 above.
(b) In the event an Indemnifying Party gives such notice
of objection to an Indemnified Party, the parties
shall attempt in good faith to agree upon the rights
of the respective parties with respect to the
disputed Indemnified Claim, consistent with the terms
of this Agreement. If no such agreement can be
reached after good faith negotiation, either the
claiming Indemnified Party or the Indemnifying Party
may demand arbitration of the matter. The Indemnified
Party and the Indemnifying Party shall each select
one arbitrator, and the two arbitrators so selected
shall select a third arbitrator. The decision of the
arbitrators so selected as to the validity and amount
of any Indemnified Claim shall be binding and
conclusive upon the parties to this Agreement.
(c) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any
such arbitration shall be held in Utah County, Utah
under the rules then in effect of the American
Arbitration Association. In any arbitration hereunder
in which the amount of any Indemnified Losses to
which an Indemnified Party is entitled is at issue,
the fees and expenses payable to the arbitrators, to
the American Arbitration Association and to the
parties' attorneys, shall be allocated between the
Indemnified Party and the Indemnifying Party in the
same proportion that the aggregate amount of the
disputed Indemnified Losses submitted to arbitration
which are unsuccessfully disputed or claimed by each
party (as determined by the arbitrators) bears to the
total amount of the disputed Losses so submitted.
4. CONTROL OF CLAIMS.
4.1 NSI Retained Liabilities. Subject to the restrictions and
provisions set forth in this Section 4, NSI shall have full control
over any action taken with respect to NSI Retained Liabilities and all
related Claims and Indemnified Losses.
4.2 NUSA Assumed Liabilities. Subject to the restrictions and
provisions set forth in this Xxxxxxx 0, XXXX shall have full control
over any action taken with respect to NUSA Acquired Liabilities and all
related Claims and Indemnified Losses.
4.3 Jointly Shared Liabilities. Subject to the restrictions
and provisions set forth in this Section 4, NSI shall have full control
over any action taken with respect to Jointly Shared Liabilities and
related Claims.
4.4 Specified Claims. Claims identified on the Listing of
Liabilities as being subject to control other than as provided herein
shall be controlled as provided in the Listing of Liabilities.
4.5 Rights Arising From Control of Claims.
(a) A party entitled to control a Claim shall have the
right, without limitation, to select counsel, to
settle the Claim on any terms it deems advisable and
in its discretion (except as otherwise specifically
provided herein, and except that an Indemnified Party
may not settle a Claim for which an Indemnifying
Party shall be responsible without the consent of the
Indemnifying Party, except as provided in Section
4.10), to appeal any adverse decision rendered in any
court, to discontinue any action, and otherwise to
make any decision with respect thereto as it in its
discretion deems advisable, provided however, that
with respect to any such Claim with a value, or
potential value, of $250,000 or more, the party
controlling the claim shall obtain the prior written
consent of the other party hereto to the selection of
counsel, which consent shall not be unreasonably
withheld.
(b) Notwithstanding anything to the contrary herein, if
there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate
in the judgment of an Indemnified Party for the same
counsel to represent both such Indemnified Party and
the Indemnifying Party, 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
Indemnifying Party. In the event an Indemnifying
Party exercises the right to undertake the defense of
a Claim as provided herein, the Indemnified Party
shall cooperate with the Indemnifying Party in such
defense and make available to the Indemnifying Party,
at the Indemnifying Party's 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 Indemnifying Party.
Similarly, in the event the Indemnified Party is,
directly or indirectly, conducting the defense
against a Claim, the Indemnifying Party shall
cooperate with the Indemnified Party in such defense
and make available to the Indemnified Party, at the
Indemnifying Party's expense, all such witnesses,
records, materials and information in the
Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is
reasonably required by the Indemnified Party.
4.6 Legal Action. If either party is served with any judicial
or administrative process concerning any Claim, the defense of which
such party believes should be conducted by the other party, such party
shall: (a) take all steps necessary or appropriate to preserve both
parties' legal rights and remedies; (b) notify the other party of the
pendency of the action; and (c) request that the other party assume
conduct of the defense and that the other party use its reasonable best
efforts to have itself substituted as a party to the action. Unless and
until the parties agree to a transfer of control of a particular
action, the party originally notified or served shall have full control
over, and responsibility for, the conduct of the proceedings, and shall
be solely liable for any default. If both parties are served with
judicial or administrative process concerning any Claim covered by this
Agreement, each party shall use its reasonable best efforts to reach
agreement with the other as to which party should control the conduct
of the proceedings. Pending such agreement, each party shall have full
control over, and responsibility for, preserving its legal rights and
remedies, and shall be solely responsible for any default entered
against it.
4.7 Other Actions. If either party receives from a Claimant
any demand, not related to judicial or administrative action, for
payment against which such party believes it is entitled to be
indemnified pursuant to this Agreement, the Indemnified Party shall
promptly forward such demand to the Indemnifying Party with a request
that the Indemnifying Party assume control of the Claim and acknowledge
its obligation to indemnify the Indemnified Party with respect to such
Claim. The Indemnifying Party shall respond to such a request from the
Indemnified Party within 30 days.
4.8 Consultation and Cooperation. NSI and NUSA agree to
cooperate fully with each other in connection with all Claims as to
which either such party may claim a right to indemnification hereunder,
in order to minimize the effects of such Claims on the businesses of
both parties. NUSA shall consult and cooperate with NSI's counsel
concerning any action taken with respect to Claims relating to Jointly
Assumed Liabilities.
4.9 Costs of Defense. Costs of defense of Claims relating to
Jointly Assumed Liabilities shall be by each party in proportion to its
assumption and agreement to pay and discharge such Claims as provided
in this Agreement. NSI shall provide to NUSA a monthly accounting of
expenses (other than counsel fees directly billed to each party as
provided above) incurred in connection with defense of Claims relating
to Jointly Assumed Liabilities, and NUSA shall promptly pay to NSI its
share of such expenses, determined in the proportion that Jointly
Shared Liabilities are assumed and allocated as provided herein.
4.10 Settlement Rights. If either party hereto or any Claimant
proposes settlement or compromise of any Claim subject to an
indemnification obligation hereunder, each party shall use all
reasonable efforts to agree on such settlement, considering
minimization of the Liability resulting from such Claim and the adverse
effects on the businesses of both parties. If the parties cannot agree,
the party favoring acceptance of the proposal shall have the right to
pay to the other party a Settlement Payment equal to its proportionate
share of the dollar value of the proposal in full satisfaction of its
assumption and agreement to pay and discharge the Claim as provided in
this Agreement. The party receiving the Settlement Payment shall
thereafter solely control the further defense and disposition of the
Claim, shall be totally liable for all Liability resulting therefrom
and shall indemnify and hold harmless the party making the Settlement
Payment from any and all Liability over and above the amount of the
Settlement Payment. The party receiving the Settlement Payment shall
have no obligation or duty to reimburse or refund any part of the
Settlement Payment, regardless of the ultimate resolution of the Claim.
4.11 Resolution of Disputes. In the event of any controversy
or dispute between the parties hereto arising out of or in connection
with this Agreement, the parties shall attempt, promptly and in good
faith, to resolve any such dispute. If the parties are unable to
resolve any such dispute within a reasonable time (not to exceed 90
days), all unresolved disputes arising under this Agreement shall be
submitted to mandatory and binding arbitration in Utah County, Utah
under the then applicable rules of the America Arbitration Association
or any successor organization, consistent with the procedures set forth
in Section 3.9 above.
5. MISCELLANEOUS PROVISIONS.
5.1 Notice. All notices, requests, demands and other
communications required or permitted to be given or made under this
Agreement shall be in writing and shall be deemed to have been given
(i) on the date of personal delivery or (ii) provided such notice,
request, demand or communication is actually received by the party to
which it is addressed in the ordinary course of delivery, on the date
of (A) deposit in the United States mail, postage prepaid, by
registered or certified mail, return receipt requested, (B)
transmission by telegram, cable, telex or facsimile transmission, or
(C) delivery to a nationally-recognized overnight courier service, in
each case, addressed as follows, or to such other person or entity as
either party shall designate by notice to the other in accordance
herewith:
If to NSI:
Nu Skin International, Inc.
Xxx Xx Xxxx Xxxxx
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Mr. M. Xxxxxx Xxxx
With a copy to:
Holland & Xxxx, LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
If to NUSA:
Nu Skin USA, Inc.
Xxx Xx Xxxx Xxxxx
00 Xxxx Xxxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxxx
With a copy to:
Holland & Xxxx, LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxx
5.2 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Utah applicable
to contracts entered into and to be performed entirely within such
State.
5.3 Severability. The parties agree that each provision to
this Agreement shall be construed independent of any other provision of
this Agreement. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions
hereof. This Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
5.4 Entire Agreement. This Agreement, together with the
Contribution and Distribution Agreement, constitutes the entire
agreement between the parties with respect to the subject matter
hereof. This Agreement supersedes all prior written or contemporaneous
oral agreements related to the subject matter hereof. The Listing of
Liabilities constitutes a part of this Agreement and is incorporated
herein by reference in its entirety.
5.5 Amendment and Modifications. No amendment or other
modification to this Agreement shall be binding upon any party unless
executed in writing by all of the parties hereto.
5.6 Waiver. No waiver by any party of any of the provisions of
this Agreement will be deemed, or will constitute, a waiver of any
other provision, whether similar, nor will any waiver constitute a
continuing waiver. No waiver will be binding unless executed in writing
by the party making the waiver.
5.7 Assignment. Neither party may assign, by operation of law,
merger or otherwise, license, sublicense or otherwise transfer any of
its rights or obligations under this Agreement to any other person or
entity without obtaining the prior written consent of the other party.
5.8 Captions. All captions in this Agreement are intended
solely for the convenience of the parties and none shall be deemed to
affect the meaning and construction of any provision hereof.
5.9 Cumulative Remedies. No right or remedy conferred upon or
reserved to any of the parties under the terms of this Agreement is
intended to be, nor shall it be deemed, exclusive of any other right or
remedy provided herein or by law or equity, but each shall be
cumulative of every other right or remedy.
5.10 Binding Effect of Agreement. Except as otherwise
specifically provided herein, this Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the parties
hereto, and their respective affiliates, successors and assigns.
5.11 No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, shall confer on any person other than the parties
any rights or remedies under or by virtue of this Agreement.
5.12 Counterparts. This Agreement may be executed in
counterparts and each taken together shall constitute one and all the
same document.
IN WITNESS WHEREOF, the parties by their duly authorized officers, have
executed and delivered this Agreement on the date first written above.
NU SKIN INTERNATIONAL, INC.
By: /s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Executive Vice President & Secretary
NU SKIN USA, INC.
By: /s/ Xxxxx Halls
Name: Xxxxx Halls
Title: Vice President
EXHIBIT A
LISTING OF LIABILITIES
I. NSI Retained Liabilities. The NSI Retained Liabilities as defined in
the attached Agreement shall include the following:
A. Those distribution compensation exceptions listed on Schedule
A-1 attached hereto.
B. Legal expenses, losses and Liabilities arising from the
following pending or threatened litigation, claims and legal
ations:
1. Nu Skin v. Leviton Manufacturing Co., Inc., et al.
2. Nu Skin v. Neways, Inc., et al.
3. Lane x. Xxxxxxx Management Group, Salt Lake County,
NSI
4. Xxxxxxx Xxxxx, et al v. NSI
II. NUSA Acquired Liabilities. The following Liabilities shall be
considered NUSA Acquired Liabilities for purposes of the attached
Agreement:
A. The following Liabilities, as referenced in the NSI financial
statements (copies of which are attached hereto as Schedule
A-2):
Estimated
Amount
----------
1. Accounts payable 542,720
2. Related party payables 932,622
3. Accrued commissions 5,799,511
4. Other accrued liabilities
(Gallery of Gifts, payroll and sales tax) 4,170,961
5. Other current liabilities (Deferred income,
funds collected but orders not shipped) 1,876,673
6. Independent warehouse deposits 115,186
----------
Total financial statement liabilities to be transferred 13,437,673
==========
B. Contractual and other obligations:
1. Canada office and warehouse lease agreement
2. Obligation to fund and support Merasoft
3. Obligation to fund and support Big Planet
4. US Olympic Committee agreement
5. Other than the exceptions listed in the Disclosure Schedule, or in Schedule
A-1 attached hereto, the obligation to fund any distributor commission
exceptions granted by NUSA is transferred to NUSA if such exceptions
cumulatively combined with all commissions paid on the sale of Products in
the USA exceed 42%
6. UPS Contract
7. Convention Technology Services Agreement
8. Free-Flow Packaging Contract
9. Obligations under intercompany agreements applicable to U.S. operations,
including support services, license fees, distributor incentives, trademark
royalties and distribution agreement
10. Abravenel Hall contract
11. Salt Lake Fine Arts Division Contract
12. Pinnacle Group (Xxxx Xxxxxx - convention)
13. Vertex Contract
14. Fast Tax Contract
15. Currently the State of Utah is auditing unclaimed distributor checks. If
an obligation results from this audit, it will be the responsibility of
NUSA.
16. Obligations owed to Xxxxx Xxxxxx as described in Section 3.08 of the
Disclosure Schedule attached to the Stock Acquisition Agreement.
17. All existing US convention related obligations (see item III B).
C. Pending or threatened litigation, claims or assessments
1. Splash Product Liability Case
2. Any liabilities relating to the Big Planet operations.
III. Jointly Assumed Liabilities. The following Liabilities shall be treated
as Jointly Assumed Liabilities, for purposes of Section 2.3 of the
attached Agreement:
A. Pending or threatened litigation, claims or assessments
1. Cappone v. NSI, et al Obligation to be split 50/50 between
NUSA and NSI
B. Convention Expenses - NSI has agreed to reimburse a portion of
the net loss (total convention expenses to a maximum of $5
million less convention registration fees). NUSA will bear the
portion of the loss which corresponds with the percentage of
the attendees who are US distributors and NSI will bear the
portion of the loss that corresponds witch the percentage of
total attendees who are not US distributors
SCHEDULE A-1
LIST OF DISTRIBUTOR COMPENSATION
EXCEPTIONS TO BE RETAINED BY NSI
Lang Chou @@####
Xxxxx Xxxx ###-##-####
Xxx Xxxxx ###-##-####
Xxxx Xxxxxxxxx ###-##-####
Xxxxx Xxxxxx ###-##-####
Xxxxx Xxxxxxxxx ###-##-####
CJM - Xxxxxx XxXxxxxxx ##-#######
World Network - Xxxxxxx Xxxx ##-#######
MillerTime - Xxxxxx and Xxxxx Xxxxxx ##-#######
Xxxxxx Xxxxx - ###-##-####
Resource Marketing - Xxxx and Xxxx Xxxxxxx ##-#######
International Enterprises - Xxxx Xxxxxxx ##-#######
Xxxx Xxxx-Xxxxxx ###-##-####
Duel Forces - Xxxxxxxx Duel ##-#######
Samco Marketing - Xxxx Xxxxxx ##-#######
Xxxxx Xxxxxxx ###-##-####
Xxxxxx Xxxxxx ###-######
Xxxxx Xxxxx ###-##-####
Planet Network -- Xxxx Xxxxxxxxx ##-#######
Career Development - Xxx Xxxxx ##-#######
Speaks/Xxxxx Group - Xxxxx Speaks ##-#######
Xxxxx Xxxxxxxxx ###-##-####
Xxxxx Xxxx ###-##-####
Xxxx Xxxxxx ###-##-####
Xxxxxxx Xxxxxx ###-##-####
Winwood Brokerage - Xxxxxxx Xxxxxxx (or Xxx Xxxxxx) ##-#######
Xxxxx Xxxxxxxx - ###-##-####
Xxxxx Xxxxxxx ##-#######
Xxxx Xxxxxxx ###-##-####
Xxxxxxx Xxxxxx ### ## ####
