EX-10.46
CONTRIBUTION AND DISTRIBUTION AGREEMENT
THIS CONTRIBUTION AND DISTRIBUTION AGREEMENT (the "Agreement") is
made
and entered into effective as of December 31, 1997 (the
"Effective
Date"), by
and between NU SKIN INTERNATIONAL, INC., a Utah corporation
("NSI"), and 252nd
Shelf Corporation,
a recently formed
Delaware corporation and a wholly-owned
subsidiary of NSI,
which is in the process of changing its name to Nu Skin USA,
Inc. ("NUSA").
Recitals
A. NSI has determined it is appropriate and desirable to separate NSI
into two companies by
contributing
certain assets to, and providing for an
assumption of
certain liabilities by, NUSA, and by distributing to the
stockholders of NSI all of the outstanding shares of NUSA. These transactions
are are intended to qualify as a reorganization and distribution under
Sections
368(a)(1)(D) and 355 of the Code (as defined).
B. The assets to be contributed to NUSA are to include those
associated
with the sale and distribution of Nu Skin products within the
United States.
C. The separation
and contribution described above are intended to
permit NSI to combine its global business operations (i.e.,
distribution
rights
for areas outside of the United States) with Nu Skin Asia Pacific, Inc.
("NSAP"). NSI
understands
that NSAP will not
consider an acquisition of NSI's
United States business
operations, so the
transactions
described herein are
necessary to facilitate a possible sale of NSI's global
business operations to
NSAP. It is anticipated that the acquisition by NSAP, if
consummated,
will be
structured as a transfer of all outstanding shares of NSI and the
other Acquired
Entities (as defined) to NSAP (the "Stock Acquisitions"), intended to qualify,
at least in part, as a tax-free exchange under Section 351 of the
Code.
D. NSI and NUSA have determined that it is appropriate and
desirable to
set forth in this Agreement the agreement and understanding
between the
parties
with respect
to the subject matter hereof, to provide for the corporate
transactions
required to
effect the above-referenced
separation
and
reorganization, and to establish the terms of such contribution,
assumption and
distribution.
Agreement
NOW, THEREFORE, in
consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree
as follows:
<PAGE>
ARTICLE I.
DEFINITIONS
Section 1.1
General Definitions. Capitalized terms as used in this
Agreement and not defined elsewhere herein shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of
the terms defined):
"Acquired Entities"
shall mean NSI and all
other affiliated
Nu Skin
entities around the world, including Nu Skin International Management Group,
Inc., but excluding NUSA, Scrub Oak, Ltd., Aspen
Investments,
Ltd. and the Nu
Skin affiliates operating in Canada, Mexico, Guatemala and Puerto
Rico.
"Assumption" shall
mean the assumption by NUSA of the NUSA Assumed
Liabilities.
"Assumption of
Liabilities
and Indemnification Agreement" or
"Indemnification
Agreement" shall
mean the Assumption of Liabilities and
Indemnification
Agreement in the form
attached hereto as Exhibit A, to be
executed by NSI and NUSA concurrently with the execution of this
Agreement and
dated as of the Effective Date.
"Benefits Agreement"
shall mean the Employee Benefits Allocation
Agreement in the form
attached hereto as Exhibit B to be
executed by NSI
and
NUSA and dated as of the Effective Date. The Benefits Agreement relates to the
NUSA Employees
who are to
become employees of NUSA in connection wtih the
Contribution,
Assumption and Distribution, and NUSA's obligations with
respect
to the accrued and ongoing benefits payable to the NUSA
employees.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any
successor legislation.
"Contribution" shall
mean NSI's contribution of the NUSA Acquired
Assets to NUSA.
"Conveyancing and
Assumption
Instruments" shall
mean,
collectively,
such instruments
of transfer,
assignment
and assumption as may be mutually
agreed upon by NSI and NUSA to effect the transfer of the NUSA
Acquired Assets
to NUSA and the assumption of the NUSA Assumed Liabilities by NUSA
in the manner
contemplated by this Agreement and the other Transaction
Documents.
"Distribution" shall
mean the distribution
of all NUSA Shares to
the
NSI Stockholders as provided in Section 2.4 hereof.
"Effective Date" shall mean December 31, 1997.
<PAGE>
"Intercompany Agreements" shall mean the Intercompany Agreements in
the
form attached
hereto as Exhibit C,
to be executed
by NSI, NUSA and certain
affiliated entities
and dated as of the Effective Date. The Intercompany
Agreements relate to
the provision of rights, licenses and services to NUSA
in
connection with NUSA's conduct of the NUSA Acquired Business,
including: access
to the NSI
distribution network;
management
services to be
provided to NUSA;
licensing of the
right to use the Nu
Skin trademarks
and trade names; and
agreements relating to
licensing, sales, and
pricing of products to be offered
by NUSA through the NUSA Acquired Business.
"Lease Agreement"
shall mean the Lease
Agreement in the form attached
hereto as Exhibit
D, to be executed by NSI and NUSA and certain affiliated
entities and dated as of the Effective Date.
"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.
"NSAP" shall mean Nu Skin Asia Pacific, Inc., a Delaware
corporation.
"NSI Board" shall mean
the Board of Directors of NSI.
"NSI Common Stock" or "NSI Shares" shall mean the 1,000,000
currently
outstanding shares of NSI Common Stock, $0.01 par value per
share.
"NSI Continuing
Business" shall mean the business to be
conducted by
NSI immediately
after giving
effect to the
Distribution,
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
Contribution,
Assumption and
Distribution, 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, all as further described in the
Assumption of Liabilities and Indemnification Agreement.
<PAGE>
"NSI Stockholders"
shall mean Blake M. Roney, Nedra Dee Roney, Sandie
N. Tillotson,
R. Craig Bryson,
Craig S. Tillotson,
Kirk V. Roney,
Brooke R.
Roney, Steven J. Lund and Keith R. Halls.
"NUSA Acquired Assets"
shall mean,
collectively, those
assets of NSI
which are to be
transferred to and
acquired by NUSA
pursuant to the terms
of
this Agreement, as identified in Exhibit E attached hereto.
"NUSA Acquired
Business" shall mean the business to be conducted by
NUSA immediately
after giving effect to the Contribution, Assumption and
Distribution,
utilizing the NUSA Acquired Assets, including the marketing and
distribution of Nu
Skin products
in the United States as permitted by the
Intercompany Agreements.
"NUSA Assumed
Liabilities" shall
mean each of the
Liabilities of NSI
that are to be
assumed by NUSA as of the Effective Date, including NUSA's
portion of
Liabilities
that will be jointly
assumed by NSI and
NUSA, all as
provided in the Assumption of Liabilities and Indemnification
Agreement.
"NUSA Board" shall mean the Board of Directors of NUSA.
"NUSA Common Stock" or "NUSA Shares" shall mean the ten (10)
currently
outstanding shares of
NUSA Common
Stock, $100 par value per share.
Upon the
filing of the NUSA Restated Certificate with the Delaware
Secretary of State, a
100,000 for 1 stock split will be implemented, thereby increasing the number
of
NUSA Shares outstanding to 1,000,000.
"NUSA Employees"
shall mean all
individuals who immediately prior to
the Effective
Date were employed by NSI and who,
after giving
effect to the
Contribution,
Assumption and Distribution, are intended to be employed by
NUSA,
as referenced in the Benefits Agreement.
"NUSA Restated
Certificate"
shall mean the
Restated Certificate
of
Incorporation of NUSA, in the form attached hereto as Exhibit
F.
"NUSA Stockholders"
shall, immediately after giving effect to the
Distribution, mean
Blake M. Roney, Nedra
Dee Roney, Sandie N.
Tillotson,
R.
Craig Bryson, Craig S. Tillotson, Kirk V. Roney, Brooke B. Roney,
Steven J. Lund
and Keith R. Halls, and any permitted designees thereof.
"Stock Acquisitions"
has the meaning set forth in the Recitals to this
Agreement.
"Tax Sharing and Indemnification Agreement" shall mean the Tax
Sharing
and Indemnification
Agreement to be
executed by NSI and NUSA concurrently with
the execution of this Agreement, in the form attached hereto as
Exhibit G.
<PAGE>
"Transaction
Documents" shall
mean this Agreement, the Benefits
Agreement, the
Conveyancing
and Assumption Instruments, the Assumption of
Liabilities and
Indemnification
Agreement, the
Intercompany
Agreements, the
Lease Agreement and the Tax Sharing and Indemnification
Agreement.
Section 1.2
Exhibits, Etc. References to an "Exhibit" or to a
"Schedule" are, unless otherwise specified, to one of the Exhibits or
Schedules
attached to this Agreement, and references to a "Section" are,
unless otherwise
specified, to one of the Sections of this Agreement.
ARTICLE II.
CONTRIBUTION, ASSUMPTION, DISTRIBUTION AND RELATED TRANSACTIONS
Section 2.1 General Description of Transactions.
(a) Pursuant to the terms of this Agreement, the Contribution,
Assumption and
Distribution
will be consummated as of the
Effective
Date, subject to such
actions as are to be
taken after the
Effective
Date, as provided herein. Pursuant to the terms and
conditions of this
Agreement, NSI's
entire right,
title and interest in
and to the NUSA
Acquired Assets will
be transferred to NUSA, NUSA will assume the NUSA
Assumed Liabilities
and will indemnify NSI from such Liabilities, and
the NUSA Shares will
be distributed
to the NSI
Stockholders.
These
transactions will
result in the separation of NSI's current assets and
business into
two entities, with NSI continuing to hold the NSI
Retained Assets and to
conduct the NSI Continuing Business, and with
NUSA acquiring
the NUSA Acquired Assets, assuming the NUSA Assumed
Liabilities, and being
entitled to conduct the NUSA Acquired Business.
The reorganization
and separation
contemplated
by this Agreement
as
described above (the "Reorganization") are being effected to
facilitate
the potential Stock Acquisitions, in a transaction intended to
qualify,
in part, for United
States federal
income tax purposes as
a tax-free
exchange under
Section 351 of the Code, while retaining the NUSA
Acquired Business
for the benefit of the NSI Stockholders. The
Reorganization
is intended
to qualify as a reorganization and
disposition within the meaning of Sections 368(a)(1)(D) and 355 of the
Code.
(b) To facilitate the transactions described above, each of
NSI and NUSA will,
concurrently with the
execution of this
Agreement
(or promptly thereafter, as requested by the other party),
execute and
deliver all
of the other Transaction Documents (and/or, where
applicable, cause its respective subsidiaries or affiliates to do
so).
Section 2.2 The Contribution.
(a) Concurrently
with the execution of
this Agreement,
NSI
agrees to, and does hereby, transfer, assign, and contribute to the
capital of NUSA, NSI's
entire right, title
and interest in and to all
of the NUSA Acquired Assets, subject to the NUSA Assumed
Liabilities.
<PAGE>
(b) Concurrently
with the execution of
this Agreement,
NSI
shall deliver, or
undertake to deliver,
to NUSA possession of
all of
the NUSA Acquired Assets.
(c) To the extent
that NSI has established and maintains
separate cash management systems, and maintains separate bank
accounts,
lock boxes, cash balances and other investments with respect to the
NSI
Continuing Business and the NUSA Acquired Business, from and after the
date hereof, NSI shall
be entitled to all such accounts, lock boxes,
balances and
investments related to
the NSI Continuing
Business and
NUSA shall be entitled to all such accounts, lock boxes, balances and
investments related to
the NUSA Acquired Business. Following the date
hereof, (i) NSI shall,
and shall cause its
affiliates
to, remit to
NUSA, no less
frequently
than weekly, any amounts (net of returned
checks and
similar items) received by any of them on or after
the
Distribution which constitute NUSA Acquired Assets and (ii) NUSA
shall,
and shall cause its
affiliates to,
remit to NSI, no less
frequently
than weekly,
any amounts (net of
returned checks and
similar items)
received by any of
them on or after the date hereof which constitute
NSI Retained Assets.
Section 2.3 The Assumption and Related Matters.
(a) In consideration
for the transfer to NUSA of the NUSA
Acquired Assets,
NUSA agrees to, and does hereby, assume the NUSA
Assumed Liabilities
and indemnify NSI from obligations relating
thereto, in
accordance
with the terms of this Agreement and the
Assumption of Liabilities and Indemnification Agreement.
(b) 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.
(c) From and after the Effective Date, NSI and NUSA shall use
their reasonable best
efforts to obtain from each holder or obligee of
such NUSA Assumed
Liabilities a full release of NSI from any liability
or obligation in respect of such NUSA Assumed Liabilities,
effective as
of the date hereof or as of the earliest possible date.
(d) 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
contemplated by this Section 2.3.
(e) 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
by this Section 2.3, as between NSI
and
NUSA, effective
as of the Effectuve 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 date
hereof, 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.
<PAGE>
(f) Concurrently with the execution of this Agreement, the Tax
Sharing and
Indemnification
Agreement will be executed by the parties
named therein in order to implement an allocation of Liabilities for
Taxes as provided therein.
Section 2.4
Distribution of NUSA Shares. Upon the Effective Date, and
concurrently with the Contribution
