EX-10.54
INDEMNIFICATION LIMITATION AGREEMENT
BY AND AMONG
NU SKIN ENTERPRISES, INC.,
NU SKIN UNITED STATES, INC.,
NU SKIN INTERNATIONAL, INC.,
BIG PLANET HOLDINGS, INC.,
NU SKIN USA, INC.,
THE MANAGERS,
AND
THE STOCKHOLDERS WHO EXECUTE THE SIGNATURE PAGE HERETO
March 8, 1999
<PAGE>
INDEMNIFICATION LIMITATION AGREEMENT
This Indemnification
Limitation
Agreement (this
"Agreement") is made
and entered into effective as of March 8, 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"), Nathan W. Ricks ("Ricks"), Kevin V. Doman
("Doman"), Richard W.
King ("King"), and each of the stockholders who elects to
become a party to this
Agreement by executing the signature page hereto (each a
"Stockholder" and
together the
"Stockholders").
Ricks, Doman, and King are
collectively referred to as the "Managers" and, individually,
a "Manager." Each
of Nu Skin Enterprises, Nu Skin United States, Big Planet Holdings,
Nu Skin USA,
Big Planet, the
Managers, and the
Stockholders
is individually referred to
herein as a "Party" and together as the "Parties."
RECITALS
A. WHEREAS, Nu Skin Enterprises, Nu Skin United States, and Nu Skin
USA
have entered into that certain Asset Purchase Agreement of even date
herewith
and attached hereto as
Exhibit "A" (the "Asset Purchase Agreement") providing
for the purchase by Nu
Skin Enterprises
and Nu Skin United
States of certain
assets of Nu Skin USA, with a portion of the purchase price for certain of such
assets to be deposited
into an escrow account
(the "Escrow")
pursuant to the
terms of the Escrow
Agreement dated of even date herewith and in the form
attached hereto as
Exhibit "B" (the "Escrow Agreement"), which Asset Purchase
Agreement further provides for the indemnification of Nu Skin
Enterprises and Nu
Skin United States in connection with the transactions described
therein;
B. WHEREAS,
Nu Skin International and Nu Skin USA have entered
into
that certain Termination Agreement of even date herewith
and attached hereto as
Exhibit "C" (the
"Termination
Agreement") providing
for the termination of
certain licenses and agreements previously entered into by and between Nu
Skin
USA and various other parties in consideration for the payment of a
termination
fee;
C. WHEREAS,
Nu Skin Enterprises and the Stockholders contemplate
entering into a stock purchase, merger, or similar agreement
related to Nu Skin
Canada, Inc. (the "Canada Stock Purchase Agreement"), providing for
the purchase
by Nu Skin Enterprises of the issued and outstanding shares of capital stock of
Nu Skin Canada,
Inc. or for the merger
of Nu Skin Canada,
Inc. with Nu Skin
Enterprises (or a
newly-organized
subsidiary
of Nu Skin Enterprises), and
further providing for the indemnification of Nu Skin Enterprises in
connection
with the transactions contemplated in the Canada Stock Purchase
Agreement;
D. WHEREAS,
Nu Skin Enterprises and the Stockholders contemplate
entering into a stock purchase, merger, or similar agreement
related to Nu Skin
Mexico S.A. de C.V., a Mexico corporation domesticated in Delaware under the
name Nu Skin Mexico, Inc. (the "Mexico Stock Purchase Agreement"),
providing for
the purchase by Nu
Skin Enterprises
of the issued and
outstanding
shares of
capital stock of Nu Skin Mexico, Inc. or for the merger of Nu Skin
Mexico, Inc.
with Nu Skin Enterprises (or a newly-organized subsidiary of Nu Skin
Enterprises),
and further
providing for the indemnification of Nu Skin
Enterprises in connection with the transactions contemplated in the
Mexico Stock
Purchase Agreement;
<PAGE>
E. WHEREAS,
Nu Skin Enterprises and the Stockholders contemplate
entering into a stock purchase, merger, or similar agreement
related to Nu Skin
Guatemala S.A., a Guatemala corporation domesticated in Delaware under the
name
Nu Skin Guatemala,
Inc. (the "Guatemala Stock Purchase Agreement"), providing
for the purchase by Nu Skin Enterprises of the issued and
outstanding shares
of
capital stock of Nu Skin Guatemala, Inc. or for the merger of Nu
Skin Guatemala,
Inc. with Nu
Skin Enterprises (or a newly-organized subsidiary of Nu Skin
Enterprises),
and further
providing for the indemnification of Nu Skin
Enterprises in connection with the transactions contemplated in the Guatemala
Stock Purchase Agreement;
F. WHEREAS,
Nu Skin Enterprises and a subsidiary to be formed by
Nu
Skin Enterprises
are currently negotiating and intend, following the date
hereof, to enter into
an Agreement
and Plan of Merger
with Big Planet (the
"Merger Agreement")
providing for the merger of Big Planet
with and into Big
Planet Holdings,
Inc., a subsidiary of Nu Skin Enterprises ("Big Planet
Holdings") in exchange
for merger
consideration
that in part will
consist of
cash in the amount of
approximately
$14,500,000 and a promissory note (the "Nu
Skin Enterprises
Note") in the
original principal amount of approximately
$14,500,000 payable to
Nu Skin USA as the holder of the Preferred Stock of Big
Planet;
G. WHEREAS, the Asset
Purchase Agreement,
the Termination
Agreement,
the Canada Stock Purchase Agreement, the Mexico Stock Purchase
Agreement,
and
the Guatemala
Stock Purchase Agreement (collectively, the "Transaction
Agreements") each
contain certain
indemnification
obligations in favor
of Nu
Skin Enterprises, Nu
Skin United States, or their respective affiliates who are
parties to the respective Transaction Agreements including Nu Skin
International
(the "Affiliate
Parties"),
and the Parties now desire to agree to certain
restrictions and limitations on such indemnification
obligations;
H. WHEREAS,
Nu Skin International, Inc., a Utah corporation and
subsidiary of Nu Skin Enterprises ("Nu Skin International"), is liable for any
judgment that may be entered against the Nu Skin party defendants named in the
lawsuit captioned
Capone v. Nu Skin Canada, Inc, et al., Civil No.
93-C-2855,
pending in the United States District Court, District of Utah, Central
Division
(the "Capone
Lawsuit"), but,
pursuant to an
Assumption
of Liabilities and
Indemnification
Agreement dated effective December 31, 1997, (the
"Assumption
Agreement"), entered
into by and between Nu Skin International, Inc. and 252nd
Shelf Corporation
(now known as Nu Skin USA), Nu Skin USA has agreed to
indemnify and
reimburse Nu Skin
International
for fifty percent
(50%) of any
amount that Nu Skin
International may
become liable for in the Capone Lawsuit;
and
I. WHEREAS, Nu Skin Enterprises, Nu Skin International, and Nu Skin
USA
intend that Nu Skin
International can be
reimbursed out of the Escrow pursuant
to the Escrow Agreement and may set off against the Nu Skin
Enterprises Note and
seek indemnification from Nu Skin USA and the Stockholders to the
extent Nu Skin
International is entitled to reimbursement pursuant to the
Assumption Agreement,
for Nu Skin USA's fifty percent (50%) of any amount Nu
Skin International
may
become liable for in connection with the Capone Lawsuit.
NOW, THEREFORE,
in consideration of
the foregoing
premises, and the
mutual covenants and
obligations set forth
below, and as an
inducement for Nu
Skin Enterprises
and the Affiliate Parties to enter into the Transaction
Agreements, the Parties agree as follows:
1.
Limits on Indemnification Claims.
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1.1 Limits on Indemnification Claims Brought Against Nu Skin USA
Under
the Transaction
Agreements and the Merger Agreement. Except for claims brought
by Nu Skin
Enterprises, Nu Skin
United States,
Big Planet
Holdings, or the
Affiliate Parties
relating to (i) the Stockholders' title to and right to
transfer their
respective shares of
capital stock of Nu Skin Canada, Inc., Nu
Skin Mexico, Inc., Nu
Skin Guatemala,
Inc., and Big Planet,
Inc. and Nu Skin
USA's title to and right to transfer the assets to be transferred to Nu Skin
Enterprises, Nu Skin
United States, or their respective affiliates pursuant to
the Asset Purchase
Agreement or Big Planet's title to its assets, (ii) claims
for indemnification
based on fraud, or (iii) any indemnification claim for the
individual tax
liabilities or obligations of any stockholder of Nu Skin USA,
Nu
Skin Canada, Inc., Nu
Skin Mexico S.A. de C.V., (Nu Skin Mexico, Inc.), or Nu
Skin Guatemala S.A., (Nu Skin Guatemala, Inc.), no claim for
indemnification may
be made against
the entities referred to in clause 1.1 (iii) above or the
Stockholders under the Transaction Agreements or the Merger
Agreement by Nu Skin
Enterprises, Nu Skin International, Nu Skin United States, Big Planet
Holdings,
or the Affiliate
Parties 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 Transaction Agreements and the Merger
Agreement exceeds the
greater of (a) $100,000 or (b) $1,000,000 minus Nu Skin USA's Net
Liabilities
(as that term is defined in the Asset Purchase Agreement). The indemnification
obligations owing to
Nu Skin Enterprises,
Nu Skin International, Big Planet
Holdings, Nu Skin United States, and the Affiliate Parties under
the Transaction
Agreements and the
Merger Agreement
(except for those
specifically
excluded
above in this Section 1.1) shall be effective only until the dollar amount
paid
in respect of
indemnification claims
brought under and
pursuant to any of the
Transaction Agreements and/or the Merger Agreement aggregates to an
amount equal
to $17,500,000;
provided, however, that notwithstanding the above provisions of
this Section 1.1, (a) all corporate tax liabilities or tax obligations of Nu
Skin USA, Big Planet,
Inc., Nu Skin Canada,
Inc., Nu Skin Mexico
S.A. de C.V.
(Nu Skin Mexico,
Inc.), or Nu Skin
Guatemala S.A. (Nu
Skin Guatemala,
Inc.)
(each, a "Corporate Tax Liability") and (b) all liability of Nu
Skin USA related
to the Capone Lawsuit, are excluded from said $17,500,000 cap;
provided further,
however, that
each Stockholder hereby agrees, in the event Nu Skin USA
distributes the
Termination
Fee (as such term is
defined in the
Termination
Agreement) and the
Class A Purchase Price (as such term is defined in the Asset
Purchase Agreement),
including any
remaining portion of
the Escrow Amount (as
that term is defined in the Escrow Agreement) to the Stockholders or makes any
other distributions to the Stockholders, including liquidating distributions,
that each Stockholder
will severally
indemnify Nu Skin
Enterprises,
Nu Skin
International, Nu Skin
United States, Big
Planet Holdings,
and the Affiliate
Parties for all of Nu Skin USA's Corporate Tax Liability and
liability related
to the Capone Lawsuit proportionately based on their relative share
ownership of
Nu Skin USA. The liability of such Stockholders under the
immediately
preceding
sentence shall be
limited to the amount
of the distributions
of cash and/or
property (including any merger consideration received by Nu Skin USA under
the
Merger Agreement) received by or paid on behalf of such Stockholder
from Nu Skin
USA following March 1,
1999. Notwithstanding
the foregoing, neither Nu Skin
Enterprises, Nu Skin
International, Nu Skin
United States, Big Planet Holdings
nor the Affiliate Parties will pursue any claim against the
Stockholders for any
Corporate Tax Liability or any liability related to the Capone
Lawsuit until the
Nu Skin Enterprises
Note shall have been
set off in full and the Escrow Amount
shall have been disbursed in full to Nu Skin Enterprises,
Nu Skin United
States
or Nu Skin
International.
Nothing herein shall release or discharge the
Stockholders or Nu Skin USA for any Corporate Tax Liability or
liability related
to the Capone Lawsuit.
Any Corporate Tax Liability or any liability related to
the Capone Lawsuit
may be paid by
delivery of shares of Nu Skin Enterprises
Class A Common Stock or Class B Common Stock to Nu Skin Enterprises
in an amount
equal to the Corporate Tax Liability or the aggregate liability
under the Capone
Lawsuit, divided by
the average closing price of Nu Skin Enterprise's Class A
Common Stock on the
New York Stock
Exchange for the
twenty (20) trading
days
immediately prior to
the date on which Nu Skin Enterprises gives notice of such
Corporate Tax Liability or liability related to the Capone Lawsuit
to the entity
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responsible for the
same. To the extent
that indemnification
obligations
in
favor of Nu Skin Enterprises, Nu Skin United States, Nu Skin
International, Big
Planet Holdings, or
the Affiliate Parties
under the Transaction
Agreements or
the Merger Agreement
may be unenforceable, Nu Skin USA and the Stockholders
shall contribute the
maximum amount that they are permitted to contribute under
applicable law to the payment and satisfaction of all indemnification claims
brought under and pursuant to the Transaction Agreements or the
Merger Agreement
by Nu Skin
Enterprises, Nu Skin
International,
Big Planet Holdings,
Nu Skin
United States, or the Affiliate Parties. Amounts owing to Nu Skin
Enterprises,
Nu Skin International,
Big Planet
Holdings, Nu Skin United States, or the
Affiliate Parties under the Transaction Agreements or the Merger
Agreement shall
not be reduced or off set by the value of any tax benefits accruing to Nu Skin
Enterprises, Nu Skin International, Big Planet Holdings, Nu Skin
United States,
or the Affiliate Parties as a result of any claim for indemnification or by the
amount of any
insurance proceeds received by Nu Skin Enterprises, Nu Skin
International, Big
Planet Holdings,
Nu Skin United
States, or the Affiliate
Parties in connection with any claim for indemnification.
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)
certain options held by Ricks to acquire 3,806,147 shares
of the Big Planet
Common will be
converted into or
exchanged for options to
purchase shares of Nu Skin Enterprises Class A Common (the
