NU SKIN ENTERPRISES, INC.
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (the “ Agreement
”) is made as of October 22, 2003 (the “ Effective
Date ”) by and between Nu Skin Enterprises, Inc., a
Delaware corporation (the “ Company ”) and the
Stockholder (as defined below).
Overview
This
Agreement is intended to benefit all stockholders of the Company by
providing for orderly sales of the Company’s stock in the
public market. This Agreement generally creates a blanket
prohibition on the stockholder or related entities making any sales
of the Company’s stock or taking any actions that are
economically similar to a sale, either directly or indirectly. This
Agreement then lists exceptions to this general rule, which are the
types of sales, transfers and other economically similar actions
that a Stockholder is permitted to take, provided that various
requirements are met. Generally, sales to the Company, donations to
independent religious charities, limited pledges to secure loans,
estate planning transfers and the satisfaction of existing options
granted to independent parties are the only transactions allowed
during the first two years of this Agreement. Thereafter, private
and open market sales are allowed within volume limitations
described in Section 2 and subject to compliance with securities
laws. Definitions and cross-references appear in Section
24.
Background Information
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A.
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The Stockholder is a party to
that certain Amended and Restated Stockholders Agreement dated as
of November 28, 1997, as amended by Amendment No. 1 dated as
of March 8, 1999, and Amendment No. 2 dated as of May 13,
1999, to the Amended and Restated Stockholders Agreement
(collectively referred to hereinafter as the “ Original
Stockholders Agreement ”).
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B.
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The Company has agreed, pursuant
to a certain Stock Repurchase Agreement dated of even date herewith
(the “ Purchase Agreement ”), to purchase shares
of the Class A Common Stock and Class B Common Stock (the “
Purchased Shares ”) from certain stockholders of the
Company, including the Stockholder, and it is a condition to the
closing of the transactions contemplated by the Purchase Agreement
that the Stockholder and the Company execute and deliver this
Agreement, which describes certain of the rights and obligations of
the Stockholder with respect to any shares of the Company’s
stock, other than (i) the Purchased Shares, (ii) shares sold
contemporaneously with the transactions under the Purchase
Agreement to a group of private investors and (iii) shares
purchased in the open market (the “ Lock-Up Shares
”), that are now held or hereafter acquired by the
Stockholder.
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C.
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The Company and the Stockholder
desire to terminate all rights and obligations with respect to the
Stockholder and the Stockholder’s Affiliated Entities (as
defined below) under the Original Stockholders Agreement pursuant
to Section 11 thereof and enter into this Agreement on the terms
and conditions as provided below.
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ACCORDINGLY , in consideration of the foregoing information
and the mutual agreements herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
Two-Year Prohibition on Sales or Transfers . The
Stockholder, including the Stockholder’s Affiliated Entities,
hereby agrees that for a period of two (2) years from the Effective
Date (the “ Lock-Up Period ”), the Stockholder
will not offer, sell, contract to sell, pledge, give, donate,
transfer or otherwise dispose of, directly or indirectly, any
Lock-Up Shares or securities or rights convertible into or
exchangeable or exercisable for any Lock-Up Shares, enter into a
transaction which would have the same effect, or enter into any
swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic or voting consequences of ownership of
such securities, whether any such aforementioned transaction is to
be settled by delivery of the Lock-Up Shares or such other
securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, or
to enter into any such transaction, swap, hedge or other
arrangement (the “ Lock-Up Agreement
”).
2.
Post-Lock-Up Restrictions on Sales—Volume Limitations
. After the expiration of the Lock-Up Period, the aggregate number
of Lock-Up Shares that may be sold or otherwise Transferred (as
defined below) by the Stockholder (taking into account sales and
other Transfers (a) directly from the Stockholder, (b) by the
Stockholder’s Affiliated Entities and (c) by any holder of
Lock-Up Shares previously sold or otherwise Transferred to such
holder by the Stockholder after the Effective Date(but taking into
account only Lock-Up Shares transferred to the holder by the
Stockholder)) shall not exceed 300,000 Lock-Up Shares (as adjusted
for any stock split, combination or the like) within any fiscal
quarter of the Company and shall not exceed 125,000 Lock-Up
Shares (as adjusted for any stock split, combination or the like)
in any 30-day period (the “ Volume Limitations
”).
3.
Allowable Sales During Lock-Up Period and Thereafter .
Notwithstanding the terms of Section 1 above, during the
Lock-Up Period the Stockholder may:
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(a)
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Transfer
Lock-Up Shares to the Company or its designee.
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(b)
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Make a bona fide
charitable donation to a non-profit, religious organization or
institution that is independent of the Stockholder (a “
Charitable Donee ”).
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(c)
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Grant and
maintain a bona fide lien or security interest in, pledge,
hypothecate or encumber (collectively, a “ Pledge
”) any Lock-Up Shares beneficially owned by him, her or it to
a nationally or internationally recognized financial institution
with assets of not less than $10 billion (an “
Institution ”) in connection with a loan to the
Stockholder; provided, however , that (i) the
Stockholder (treating the Stockholder and all Stockholder’s
Affiliated Entities in the aggregate as one entity) shall not
Pledge Lock-Up Shares to secure loans in the aggregate in excess of
Ten Million Dollars ($10,000,000); (ii) the Stockholder gives
the Company’s Secretary 5 days’ prior written notice
that he, she or it intends to Pledge Lock-Up Shares to an
Institution pursuant to this Section 3(c); and (iii) the
Institution agrees in writing at or prior to the time of such
Pledge that the Company shall receive timely notice of any margin
call or event of default and shall have the right to satisfy any
margin call or cure any event of default by the Stockholder in
connection with any loan to which the Pledge relates by purchasing
any or all Lock-Up Shares Pledged at a price equal to 50% of the
then-current market value (as calculated using the average closing
sales price of the Company’s Common Stock for the 15
immediately previous trading days) on the date of the margin call
or event of default, such election by the Company to be shown by
written notice to the Institution and payment within 5 business
days of notice being received by the Company, with transfer of the
Lock-Up Shares to the Company to be completed immediately upon
receipt of such payment. In the event that the Company’s
payment for the Lock-Up Shares exceeds the amount owed to the
Institution by the Stockholder, any excess amount shall be paid
promptly by the Institution to the Stockholder. In the event that
both the Company and the Stockholder attempt to make payment to
satisfy any margin call or event of default, the first to make full
payment shall be deemed to have completed such purchase or cure (as
the case may be), and any payments received by the Institution from
the other party shall be promptly returned. This paragraph may not
be relied upon for any non- bona fide loan or other form of
indirect or disguised sale.
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The
Stockholder hereby appoints and constitutes each of Blake M. Roney
and M. Truman Hunt, with full power of substitution, as
attorneys-in-fact (each an “ Attorney-in–Fact
”) to act in the Stockholder’s name, place and stead,
to transfer and convey to the Company all Lock-Up Shares purchased
by the Company pursuant to this Section 3(c) and to execute
and deliver all stock powers, endorse all stock certificates and
execute and deliver any and all instruments, documents and
agreements necessary to transfer all Lock-Up Shares purchased by
the Company pursuant to this Section 3(c). The foregoing power of
attorney is coupled with an interest and is irrevocable. The
Stockholder agrees to indemnify and hold the Company and each
Attorney-in-Fact, or their appointees, harmless from and against
any and all liabilities, claims, damages and expenses (including
attorney’s fees and court costs) incurred by the Company or
an Attorney-in-Fact, or their appointees, in connection with the
exercise by the Company of its rights hereunder.
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(d)
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Transfer Lock-Up Shares
to one of the Stockholder’s Affiliated Entities, so long as
such Stockholder’s Affiliated Entity agrees in an additional
written instrument delivered to the Company to be subject to the
terms and conditions of this Agreement.
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(e)
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In the event that the
Stockholder is subject, on the Effective Date, to any legally
binding, written “put” or “call” option
(the “Option”), the Stockholder shall furnish a copy of
such written Option to the Chief Financial Officer or General
Counsel of the Company prior to or at the time of signing this
Agreement. In such event, the provisions of this Agreement shall
not prevent the Stockholder from honoring his or her
“put” rights or “call” obligations pursuant
to such Option and the Company will, upon request, furnish any
reasonably required written waiver of the applicability of this
Agreement to the extent necessary to allow the Stockholder to meet
his or her obligation.
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4.
Allowable Sales After the Lock-Up Period . In addition to
the sales or other Transfers allowed pursuant to Section 3 above,
following the Lock-Up Period, the Stockholder (treating the
Stockholder and all Stockholder’s Affiliated Entities in the
aggregate as one entity) may:
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(a)
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Sell or otherwise
Transfer Lock-Up Shares in compliance with the Volume Limitations
in the public market;
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(b)
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Sell or
otherwise Transfer Lock-Up Shares in compliance with the
Company’s Right of First Refusal described below;
or
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(c)
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Sell or
otherwise Transfer Lock-Up Shares in a private placement
transaction to any other person or entity; provided that
such transferee agrees in a written instrument delivered to the
Company to hold such Lock-Up Shares subject to the terms and
conditions of this Agreement and provided further that any
sale or other Transfer of such Lock-Up Shares thereafter shall be
aggregated with sales or other Transfers by the selling or
Transferring Stockholder for purposes of complying with the Volume
Limitations.
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5. Company Right to Purchase Additional
Shares from Stockholder . During the Lock-Up Period, the
Company shall have the right to purchase, on substantially the same
terms and conditions as set forth in the Purchase Agreement, a
number of Lock-Up Shares held by the Stockholder (treating the
Stockholder and all Stockholder’s Affiliated Entities in the
aggregate as one entity) equal to up to thirty percent (30%) of the
aggregate number of shares of the Company’s stock sold by the
Stockholder to the Company and contemporaneously to a group of
private investors; provided, however , that (a) in no event
shall the Stockholder be required to sell more Lock-Up Shares than
the Stockholder then owns or controls, (b) the Stockholder shall
not be required to sell any Lock-Up Shares that are subject to an
Option, (c) the price paid shall be equal to the lesser of (i) 94%
of the average closing sales price of the Company’s stock for
the immediately preceding 15 trading days or (ii) 94% of the
closing sale price of the Company’s stock on the date the
Company gives notice to the Stockholder that the Company is
exercising its right to purchase, and (d) in no event shall the
purchase price be less than $11.75 per share. The Company shall
provide at least 10 days’ prior written notice to the
Stockholder signing below of its election to exercise its right of
purchase, setting forth the date on which the Company proposes to
make such purchase (the “ Repurchase Date ”) and
the number of Lock-Up Shares the Company proposes to purchase
(“ Repurchase Shares ”). On the Repurchase Date,
the Stockholder shall have the irrevocable obligation to sell and
deliver to the Company the Repurchase Shares, and the Company shall
have the irrevocable obligation to purchase the Repurchase Shares
and pay the Stockholder.
6. Company Right of First Refusal for
One Year Following the Lock-Up Period . For a period of one (1)
year following the expiration of the Lock-Up Period, the Company
shall have the right to purchase, on substantially the same terms
and conditions as set forth in the Purchase Agreement, all or any
portion of
