SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number 001-12421
Nu Skin Enterprises, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 87-0565309
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
75 West Center Street, Provo, Utah 84601
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(Address of Principal Executive Offices) (Zip Code)
(801) 345-6100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____
As of July 15, 1998, 15,090,652 shares of the Company's Class A Common
Stock, $.001 par value per share, and 70,280,759 shares of the Company's Class B
Common Stock, $.001 par value per share, were outstanding.
<PAGE>
NU SKIN ENTERPRISES, INC.
1998 FORM 10-Q QUARTERLY REPORT - SECOND QUARTER
TABLE OF CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets.................................2
Consolidated Statements of Income...........................3
Consolidated Statements of Cash Flows.......................4
Notes to Consolidated Financial Statements ..........5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................9
Part II. Other Information
Item 1. Legal Proceedings..............................................14
Item 2. Changes in Securities..........................................14
Item 3. Defaults upon Senior Securities................................14
Item 4. Submission of Matters to a Vote of Security Holders............14
Item 5. Other Information..............................................15
Item 6. Exhibits and Reports on Form 8-K...............................15
Signatures..............................................................16
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Nu Skin Enterprises, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents $ 156,226 $ 174,300
Accounts receivable 10,192 11,074
Related parties receivable 20,193 23,008
Inventories, net 80,615 69,491
Prepaid expenses and other 48,764 38,716
--------- ---------
315,990 316,589
Property and equipment, net 35,917 27,146
Other assets, net 109,715 61,269
--------- ---------
Total assets $ 461,622 $ 405,004
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 12,023 $ 23,259
Accrued expenses 127,627 140,615
Related parties payable 26,098 10,038
Current portion of long-term debt 10,304 --
Notes payable to stockholders, current portion -- 19,457
--------- ---------
176,052 193,369
--------- ---------
Long-term debt, less current portion 129,600 --
Notes payable to stockholders, less current portion -- 116,743
Minority interest -- (15,753)
Commitments and contingencies
Stockholders' equity
Preferred stock - 25,000,000 shares authorized, $.001 par value,
none and 1,941,331 shares issued and outstanding -- 2
Class A common stock - 500,000,000 shares authorized, $.001
par value, 15,086,136 and 11,758,011 shares issued and
outstanding 15 12
Class B common stock - 100,000,000 shares authorized, $.001
par value, 70,280,759 shares issued and outstanding 70 70
Additional paid-in capital 93,949 115,053
Retained earnings 111,647 33,541
Deferred compensation (7,566) (9,455)
Accumulated other comprehensive income (42,145) (28,578)
--------- ---------
155,970 110,645
--------- ---------
Total liabilities and stockholders' equity $ 461,622 $ 405,004
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
Nu Skin Enterprises, Inc.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share amounts)
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<TABLE>
<CAPTION>
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $209,051 $245,934 $436,914 $470,119
Cost of sales 44,602 50,637 90,291 95,864
Cost of sales - amortization of inventory
step-up (Note 2) 12,960 -- 12,960 --
-------- -------- -------- --------
Gross profit 151,489 195,297 333,663 374,255
-------- -------- -------- --------
Operating expenses
Distributor incentives 75,271 92,732 158,398 175,680
Selling, general and administrative 46,630 51,428 94,701 104,688
Distributor stock expense -- 4,477 -- 8,954
-------- -------- -------- --------
Total operating expenses 121,901 148,637 253,099 289,322
Operating income 29,588 46,660 80,564 84,933
Other income (expense), net 5,309 1,421 7,494 4,958
-------- -------- -------- --------
Income before provision for income taxes
and minority interest 34,897 48,081 88,058 89,891
Provision for income taxes 12,912 13,687 29,317 25,718
Minority interest -- 4,394 3,081 8,437
-------- -------- -------- --------
Net income $ 21,985 $ 30,000 $ 55,660 $ 55,736
======== ======== ======== ========
Net income per share (Note 4):
Basic $ .26 $ .36 $ .67 $ .67
Diluted $ .25 $ .34 $ .64 $ .64
Weighted average common shares outstanding :
Basic 83,842 83,420 82,928 83,420
Diluted 87,303 87,368 86,812 87,362
Pro forma data: $ 48,081 $ 88,058 $ 89,891
Income before pro forma provision for
income taxes and minority interest
Pro forma provision for income taxes (Note 3) 18,271 32,475 34,150
Pro forma minority interest 2,724 1,947 5,231
-------- -------- --------
Pro forma net income $ 27,086 $ 53,636 $ 50,510
======== ======== ========
Pro forma net income per share (Note 4):
Basic $ .32 $ 65 $ .61
Diluted $ .31 $ 62 $ .58
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
Nu Skin Enterprises, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
June 30, June 30,
1998 1997
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 55,660 $ 55,736
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,066 3,655
Amortization of deferred compensation 1,889 11,762
Amortization of inventory step-up 12,960 --
Income applicable to minority interest 3,081 8,437
Changes in operating assets and liabilities:
Accounts receivable 882 (162)
Related parties receivable 2,815 (5,684)
Inventories, net (2,484) (12,502)
Prepaid expenses and other (10,048) (15,624)
Other assets (9,170) (3,171)
Accounts payable (11,236) (909)
Accrued expenses (15,988) (8,520)
Related parties payable 16,060 (9,997)
--------- ---------
Net cash provided by operating activities 50,487 23,021
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (12,127) (5,950)
Payments for lease deposits (1,634) (167)
Receipt of refundable lease deposits 786 129
--------- ---------
Net cash used in investing activities (12,975) (5,988)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (41,634) --
Proceeds from long-term debt 181,538 --
Payment to stockholders for notes payable (180,000) (71,487)
Proceds from capital contributions -- 29,845
Dividends paid -- (29,341)
--------- ---------
Net cash used in financing activities (40,096) (70,983)
--------- ---------
Effect of exchange rate changes on cash (15,490) 3,038
--------- ---------
Net decrease in cash and cash equivalents (18,074) (50,912)
Cash and cash equivalents, beginning of period 174,300 214,823
--------- ---------
Cash and cash equivalents, end of period $ 156,226 $ 163,911
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
Nu Skin Enterprises, Inc.
Notes to Consolidated Financial Statements
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1. THE COMPANY
Nu Skin Enterprises, Inc. (the "Company"), is a network marketing company
involved in the distribution and sale of premium quality, innovative
personal care and nutritional products. The Company distributes Nu Skin
brand products in markets throughout the world excluding North America. The
Company's operations throughout the world are divided into three regions:
North Asia, which consists of Japan and South Korea; Southeast Asia, which
consists of Taiwan, Thailand, Hong Kong (including Macau), the Philippines,
Australia, and New Zealand; and Other Markets, which consists of the United
Kingdom, Austria, Belgium, France, Germany, Italy, Ireland, Poland,
Portugal, Spain, the Netherlands (the Company's subsidiaries operating in
these countries are collectively referred to as the "Subsidiaries") and
sales to and licence fees from the Company's North American private
affiliates.
The Company was incorporated on September 4, 1996 as a holding company and
acquired certain of the Subsidiaries (the "Initial Subsidiaries") through a
reorganization (the "Reorganization") which occurred November 20, 1996.
Prior to the Reorganization, each of the Initial Subsidiaries elected to be
treated as an S corporation. In connection with the Reorganization, the
Initial Subsidiaries' S corporation status was terminated on November 19,
1996, and the Company declared a distribution to the stockholders that
included all of the Initial Subsidiaries' previously earned and
undistributed taxable S corporation earnings totaling $86.5 million (the "S
Distribution Notes").
On November 27, 1996 the Company completed its initial public offerings of
4,750,000 shares of Class A Common Stock and received net proceeds of $98.8
million (the "Underwritten Offerings").
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
the accompanying unaudited consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, considered
necessary for a fair statement of the Company's financial information as of
June 30, 1998 and December 31, 1997 and for the three and six-month periods
ended June 30, 1998 and 1997. The results of operations of any interim
period are not necessarily indicative of the results of operations to be
expected for the fiscal year. For further information, refer to the
consolidated financial statements and accompanying footnotes included in
the Company's annual report on Form 10-K for the year ended December 31,
1997.
2. ACQUISITION OF NU SKIN INTERNATIONAL, INC. ("NSI") AND CERTAIN AFFILIATES
On March 27, 1998, the Company completed the acquisition (the "NSI
Acquisition") of the capital stock of NSI, NSI affiliates in Europe, South
America, Australia and New Zealand and certain other NSI affiliates (the
"Acquired Entities") for $70 million in preferred stock and long-term notes
payable to the stockholders of the Acquired Entities ("NSI Stockholders")
totaling approximately $10.1 million. In addition, contingent upon NSI and
the Company meeting specific earnings growth targets, the Company will pay
up to $25 million in cash per year over the next four years to the NSI
Stockholders. Also, as part of the NSI Acquisition, the Company assumed
approximately $169.9 million in S Distribution Notes. As of June 30, 1998,
the S Distribution Notes and long-term notes payable to the NSI
Stockholders had been paid in full. The contingent consideration paid, if
any, will be accounted for as an adjustment to the purchase price and
allocated to the Acquired Entities' assets and liabilities.
The NSI Acquisition was accounted for by the purchase method of accounting,
except for that portion of the Acquired Entities under common control of a
group of stockholders, which portion was accounted for in a manner similar
to a pooling of interests. The common control group is comprised of the NSI
Stockholders who are immediate family members. The minority interest, which
is
5
<PAGE>
Nu Skin Enterprises, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
comprised of the NSI Stockholders who are not immediate family members, was
acquired during the NSI Acquisition.
In connection with the NSI Acquisition, the Company recorded inventory
step-up of $21.6 million and intangible assets of $32.4 million. The
Company recorded amortization of inventory step-up totaling $13.0 million,
and amortization of intangible assets totaling $0.5 million, respectively,
for the three-month period ended June 30, 1998.
On May 5, 1998, the stockholders of the Company approved the automatic
conversion of the preferred stock issued in the NSI Acquisition into
2,986,663 shares of Class A Common Stock.
3. INCOME TAXES
As a result of the NSI Acquisition described in Note 2, the Acquired
Entities are no longer treated as S corporations for U.S. Federal income
tax purposes. The combined statements of income include a pro forma
presentation for income taxes, including the effect on minority interest,
which would have been recorded if the Acquired Entities had been taxed as C
corporations rather than as S corporations for the six-month period ended
June 30, 1998 and for the three and six-month periods ended June 30, 1997.
4. NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of
common shares and common share equivalents outstanding during the periods
presented. Additionally, diluted earnings per share data gives effect to
all dilutive potential common shares that were outstanding during the
periods presented, including the convertible preferred stock issued in the
NSI Acquisition as if such shares had been converted to Class A Common
Stock.
5. FINANCIAL INSTRUMENTS
The Company's Subsidiaries enter into significant transactions with each
other and third parties which may not be denominated in the respective
Subsidiaries' functional currencies. The Company seeks to reduce its
exposure to fluctuations in foreign exchange rates by creating offsetting
positions through the use of foreign currency exchange contracts and
through intercompany loans of foreign currency. The Company does not use
such financial instruments for trading or speculative purposes. The Company
regularly monitors its foreign currency risks and periodically takes
measures to reduce the impact of foreign exchange fluctuations on the
Company's operating results. Gains and losses on foreign currency forward
contracts and intercompany loans of foreign currency are recorded as other
income and expense in the consolidated statements of income.
At June 30, 1998 and December 31, 1997, the Company held foreign currency
forward contracts with notional amounts totaling approximately $29.9
million and $51.0 million, respectively, to hedge foreign currency items.
The realized and unrealized net gains on these contracts were $1.5 million
and $3.4 million for the three and six-month periods ended June 30, 1998.
These contracts have maturities through December 1998.
At June 30, 1998 and 1997, the intercompany loan from Nu Skin Japan to Nu
Skin Hong Kong totaled approximately $54.9 million and $43.9 million,
respectively. The Company recorded unrealized exchange gains totaling $1.9
million and $2.8 million, resulting from the intercompany loan for the
three and six-month periods ended June 30, 1998, respectively. At June 30,
1998, the intercompany loan from Nu Skin Japan to the Company totaled
approximately $67.0 million. The Company recorded unrealized exchange gains
totaling $2.0 million, resulting from the intercompany
6
<PAGE>
Nu Skin Enterprises, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
loan for the three and six-month periods ended June 30, 1998. There was no
loan at June 30, 1997 from Nu Skin Japan to the Company.
6. NEW ACCOUNTING STANDARDS
Reporting Comprehensive Income
During the first quarter of 1998 the Company adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources, and it includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners.
The components of comprehensive income, net of related tax, for the three
and six-month periods ended June 30, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income $ 21,985 $ 30,000 $ 55,660 $ 55,736
Other comprehensive income, net of tax:
Foreign currency translation adjustments (9,114) (2,772) (13,567) 197
-------- -------- -------- --------
Comprehensive income $ 12,871 $ 27,228 $ 42,093 $ 55,933
======== ======== ======== ========
</TABLE>
Accumulated other comprehensive income is comprised solely of foreign
currency translation adjustments.
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 ("SOP 98-1"), Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. The statement is
effective for fiscal years beginning after December 15, 1998. Earlier
application is encouraged in fiscal years for which annual financial
statements have not been issued. The statement defines which costs of
computer software developed or obtained for internal use are capital and
which costs are expensed. The Company adopted SOP 98-1 effective January
1998. The adoption of SOP 98-1 does not materially affect the Company's
consolidated financial statements.
Reporting on the Costs of Start-Up Activities
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of
Start-Up Activities. The statement is effective for fiscal years beginning
after December 15, 1998. The statement requires costs of start-up
activities and organization costs to be expensed as incurred. The Company
will adopt SOP 98-5 for calendar year 1999. The adoption of SOP 98-5 will
not materially affect the Company's consolidated financial statements.
Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for
Derivative Instruments and Hedging Activities. The statement requires
companies to recognize all derivatives as either assets or liabilities,
with the instruments measured at fair value. The accounting for changes in
fair value, gains or losses, depends on the intended use of the derivative
and its resulting designation. The statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. The Company will
adopt SFAS 133 by January 1, 2000. The Company is currently evaluating the
impact the adoption of SFAS 133 will have on the Company's consolidated
financial statements.
7
<PAGE>
Nu Skin Enterprises, Inc.
Notes to Consolidated Financial Statements
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7. LONG-TERM DEBT
On May 8, 1998, the Company and its Japanese subsidiary Nu Skin Japan Co.,
Ltd. entered into a $180 million credit facility with a syndicate of
financial institutions for which ABN-AMRO, N.V. acted as agent. This credit
facility was used to satisfy Company liabilities which were assumed as part
of the NSI Acquisition. The Company borrowed $110 million and Nu Skin Japan
Co., Ltd. borrowed the Japanese Yen equivalent of $70 million denominated
in local currency. The balance on the credit facility was $139.9 at June
30, 1998.
The U.S. portion of the credit facility bears interest at either a base
rate as specified in the credit facility or the London Inter-Bank Offer
rate plus an applicable margin, in the borrower's discretion. The Japanese
portion of the credit facility bears interest at either a base rate as
specified in the credit facility or the Tokyo Inter-Bank Offer rate plus an
applicable margin, in the borrower's discretion. The maturity date for the
credit facility is three years from the borrowing date, with a possible
extension of the maturity date upon approval of the then outstanding
lenders. Interest expense on the credit facility totaled $1.2 million for
the three and six-month periods ended June 30, 1998.
8. SUBSEQUENT EVENT
On July 20, 1998, the Board of Directors authorized the Company to request
the holders of the Class B Common Stock to convert up to 15 million shares
of Class B Common Stock to Class A Common Stock. The Company anticipates
that upon approval from the stockholders of the Company this conversion
will occur during the third quarter of 1998.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1998 compared to 1997
Revenue decreased 15.0% and 7.1% to $209.1 million and $436.9 million
from $245.9 million and $470.1 million for the three and six-month periods ended
June 30, 1998, respectively, compared with the same periods in 1997. The
decrease in revenue resulted primarily from significant devaluation of the yen
and other Asian currencies, an increasing competitive environment in Taiwan and
the economic downturn in South Korea and Thailand. Revenue in North and
Southeast Asia were also positively impacted by a price increase throughout Asia
that occurred in the second quarter 1997.
Revenue in North Asia, which consists of Japan and South Korea,
decreased to $148.0 million and $305.0 million from $167.8 million and $324.4
million for the three and six-month periods ended June 30, 1998, respectively,
compared with the same periods in 1997. Economic challenges, currency
devaluation and unfavorable media and consumer group attention toward foreign
companies in South Korea resulted in a significant decline in South Korean
revenue for the three and six-month periods ended June 30, 1998 compared to the
same periods in 1997. Revenue in Japan increased 0.5% and 14.8% for the three
and six-month periods ended June 30, 1998 due to the continued growth of the
personal care and IDN product lines as well as the increase in active
distributors in that market. This increase in growth in U.S. dollars was
negatively affected by a 15% devaluation of the yen from the second quarter of
1997 to the second quarter of 1998. In local currency, revenue in Japan
increased by 12.6% and 14.8% for the three and six-month periods ended June 30,
1998, respectively, compared to the same periods in 1997.
Revenue in Southeast Asia, which consists of Taiwan, Thailand, Hong
Kong, the Philippines, Australia and New Zealand, totaled $39.5 million and
$85.6 million for the three and six-month periods ended June 30, 1998, a
decrease of 38.8% and 28.8%, respectively, from revenue of $64.5 million and
$120.2 million during the three and six-month periods ended June 30, 1997. The
Company's operations in Taiwan have continued to suffer the impact of increased
competition and relatively soft nutritional product revenue. In addition, the
Company's operations in Thailand have been impacted negatively by Thailand's
economic challenges and currency devaluation.
The declines in North and Southeast Asia were partially offset by
aggregate revenue increases in the Company's other markets, which include the
United Kingdom, Germany, Italy, the Netherlands, France, Belgium, Spain,
Portugal, Ireland, Austria and sales to and license fees from the Company's
North American private affiliates. Aggregate revenue in these markets increased
to $21.6 million and $46.3 million from $13.7 million and $25.5 million, an
increase of 57.7% and 81.6%, for the three and six-month periods ended June 30,
1998, respectively, compared to the same periods in 1997. These increases were
primarily due to significantly increased sales to the Company's North American
private affiliates resulting from the successful convention held in the first
quarter of 1998 in the United States, which attracted over 13,000 distributors
and strong revenue results from sales to and license fees from these affiliates.
Gross profit as a percentage of revenue was 72.5% and 79.4% for the
three months ended June 30, 1998 and 1997, respectively, and was 76.4% and 79.6%
for the six months ended June 30, 1998 and 1997, respectively. The amortization
of the step-up of inventory from the NSI Acquisition increased cost of sales by
$13.0 million in the second quarter of 1998. Without this non-recurring charge,
gross profit would have been 78.7% and 79.3% for the three and six-month periods
ended June 30, 1998, respectively, a slight decrease from 1997 gross margins.
The remaining balance of $8.6 million of inventory step-up will be fully
amortized in the third quarter of 1998. The Company purchases goods in U.S.
dollars and recognizes revenue in local currency and is consequently subjected
to exchange rate risks in its gross margins. The negative pressure on gross
margins, due primarily to weakened currencies throughout the Company's Asian
markets, was offset by gross margin improvement as a result of price increases
throughout Asia which occurred during the second quarter of 1997. In addition,
increased local manufacturing efforts have been designed to improve and
stabilize gross margins.
Distributor incentives as a percentage of revenue decreased to 36.0%
and 36.3% for the three and six-month periods ended June 30, 1998 from 37.7% and
37.4% for the three and six-month periods ended June 30, 1997, respectively. The
primary reason for this decrease was increased revenue from sales to and license
fees from North America which is not subject to incentives being paid by the
Company.
9
<PAGE>
Selling, general and administrative expenses as a percentage of
revenue increased to 22.3% for the three month period ended June 30, 1998 from
20.9% for the three month period ended June 30, 1997. This increase was due to
U.S. dollar based selling, general and administrative expenses, acquired from
the NSI Acquisition. Selling, general and administrative expenses as a
percentage of revenue decreased from 22.3% to 21.7% for the six month periods
ended June 30, 1998 and 1997, respectively. In dollar terms, selling, general
and administrative expenses decreased from $51.4 million and $104.7 million to
$46.6 million and $94.7 million for the three and six-month periods ended June
30, 1998, respectively, compared with the same periods in 1997.
Distributor stock expense of $4.5 million and $9.0 million for the
three and six-month periods ended June 30, 1997, respectively, reflects the
one-time grant of the distributor stock options at an exercise price of 25% of
the initial public offering price in connection with the Underwritten Offerings
completed on November 27, 1996. This non-cash expense is non-recurring and was
only recorded in the fourth quarter of 1996 and in each of the four quarters in
1997.
Operating income decreased 36.6% and 5.1% to $29.6 million and $80.6
million from $46.7 million and $84.9 million for the three and six-month periods
ended June 30, 1998, respectively, compared with the same periods in 1997.
Operating margin decreased to 14.2% from 19.0% for the three months ended June
30, 1998 compared with the same period in 1997. This operating income and margin
decrease was caused primarily by the decrease in U.S. dollar revenue and by the
non-recurring amortization of inventory step-up recorded in the second quarter
of 1998. Operating margin remained nearly constant at approximately 18% for the
six-month periods ended June 30, 1998 and 1997.
Other income increased by $3.9 million and $2.5 million for the three
and six-month periods ended June 30, 1998, respectively, compared with the same
periods in 1997. The increase was primarily caused by the strong hedging gains
from forward contracts and intercompany loans, as the Japanese yen weakened
during the quarter.
Provision for income taxes decreased to $12.9 million from $13.7
million for the three months ended June 30, 1998 compared with the same period
in 1997 due to decreased income that was offset by the increase in the effective
tax rate from 28.5% to 37.0% for the same periods. Provision for income taxes
increased to $29.3 million from $25.7 million for the six months ended June 30,
1998 compared with the same period in 1997 due to a slight decrease in income
that was offset by the increase in the effective tax rate to 33.3% from 28.6%.
The pro forma provision for income taxes presents income taxes as if the
Acquired Entities had been taxed as C corporations rather than as S corporations
for the three months ended March 31, 1997 and for the six-month periods ended
June 30, 1998 and 1997. On a pro forma basis, the effective tax rate for the
three and six-month periods ended June 30, 1997 was 38.0% and was 36.9% for the
six-months ended June 30, 1998.
Minority interest relates to the earnings of the Acquired Entities
which are not under common control. The minority interest owed at March 26, 1998
was purchased as part of the NSI Acquisition. Accordingly, minority interest
does not continue after the NSI Acquisition.
Net income decreased by $8.0 million to $22.0 million from $30.0
million for the three months ended June 30, 1998 compared with the same period
in 1997 due primarily to the amortization of inventory step-up offset by the
increases in other income. Net income for the six-month periods ended June 30,
1998 and 1997 remained constant at $55.7 million. Net income as a percentage of
revenue decreased to 10.5% for the three months ended June 30, 1998 as compared
to 12.2% for the same period in 1997 and increased from 11.9% to 12.7% for the
six months ended June 30, 1998 compared to the same period in 1997.
Liquidity and Capital Resources
Historically, the Company's principal needs for funds have been for
distributor incentives, working capital (principally inventory purchases),
capital expenditures and the development of new markets. The Company has
generally relied entirely on cash flow from operations to meet its business
objectives without incurring long-term debt to unrelated third parties to fund
operating activities.
The Company generates significant cash flow from operations due to
favorable gross margins and minimal capital requirements. Additionally, the
Company does not extend credit to distributors, but requires payment prior to
shipping products. This process eliminates the need for accounts receivable from
10
<PAGE>
distributors. During the first quarter of each year, the Company pays
significant accrued income taxes in many foreign jurisdictions including Japan.
These large cash payments generally more than offset significant cash generated
in the first quarter. During the six months ended June 30, 1998, the Company
generated $50.5 million from operations compared to $23.5 million generated
during the six months ended June 30, 1997. This increase in cash generated from
operations is primarily due to reduced inventory levels and related party
activity.
As of June 30, 1998, working capital was $139.9 million compared to
$123.2 million as of December 31, 1997. This increase is largely due to the
step-up in inventory relating to the NSI Acquisition. Cash and cash equivalents
at June 30, 1998 were $156.2 million compared to $174.3 million at December 31,
1997.
Capital expenditures, primarily for equipment, computer systems and
software, office furniture and leasehold improvements, were $12.1 million and
$6.0 million for the six months ended June 30, 1998 and 1997, respectively. In
addition, the Company anticipates additional capital expenditures in 1998 of
$15.0 million to further enhance its infrastructure, including computer systems
and software, warehousing facilities and walk-in distributor centers in order to
accommodate future growth. The Company is currently reviewing its own and its
principal vendors' computer systems and software to evaluate and address the
"Year 2000" issue. The Company believes that the capital required to modify its
systems will not be material to the Company. The Company, however, cannot
predict or evaluate foreign governments' preparation for the "Year 2000" issue
and the resulting impact it may have on the economy or on the Company's
business.
In March 1998, the Company completed its acquisition of the Acquired
Entities for $70 million in preferred stock and long-term notes payable to the
NSI Stockholders totaling approximately $10.1 million. In addition, contingent
upon NSI and the Company meeting certain earnings growth targets, the Company
may pay up to $25 million in cash per year over the next four years. Also, as
part of the NSI Acquisition, the Company assumed approximately $169.9 million in
S Distribution Notes due in equal monthly installments over the next seven
years. As of June 30, 1998, the S Distribution Notes and long-term notes payable
to the NSI Stockholders had been paid in full. The contingent consideration
paid, if any, will be accounted for as an adjustment to the purchase price and
allocated to the Acquired Entities' assets and liabilities.
In May 1998, the Company and its Japanese subsidiary Nu Skin Japan
Co., Ltd. entered into a $180 million credit facility with a syndicate of
financial institutions for which ABN-AMRO, N.V. acted as agent. This credit
facility was used to satisfy Company liabilities which were assumed as part of
the NSI Acquisition. The Company borrowed $110 million and Nu Skin Japan Co.,
Ltd. borrowed the Japanese Yen equivalent of $70 million denominated in local
currency. During the three months ended June 30, 1998, the Company paid $41.6
million of the $180.0 million credit facility. The U.S. portion of the credit
facility bears interest at either a base rate as specified in the credit
facility or the London Inter-Bank Offer rate plus an applicable margin, in the
borrower's discretion. The Japanese portion of the credit facility bears
interest at either a base rate as specified in the credit facility or the Tokyo
Inter-Bank Offer rate plus an applicable margin, in the borrower's discretion.
The maturity date for the credit facility is three years from the borrowing
date, with a possible extension of the maturity date upon approval of the then
outstanding lenders. The credit facility provides that the amounts borrowed are
to be used for general corporate purposes. The credit facility also contains
other terms and conditions and affirmative and negative financial covenants
customary for credit facilities of this type.
Under its operating agreements with other Nu Skin affiliated
companies, the Company incurs related party payables and receivables. The
Company had related party payables of $26.1 million and $10.0 million at June
30, 1998 and December 31, 1997, respectively. In addition, the Company had
related party receivables of $20.2 million and $23.0 million, respectively, at
those dates. Related party balances outstanding in excess of 60 days bear
interest at a rate of 2% above the U.S. prime rate. As of June 30, 1998, no
material related party payables or receivables had been outstanding for more
than 60 days.
Management considers the Company to be liquid and able to meet its
obligations on both a short and long-term basis. Management currently believes
existing cash balances together with future cash flows from operations will be
adequate to fund cash needs relating to the implementation of the Company's
strategic plans.
11
<PAGE>
Seasonality and Cyclicality
The direct selling industry is impacted by certain seasonal trends
such as major cultural events and vacation patterns. For example, Japan, Taiwan,
Hong Kong, South Korea and Thailand celebrate their respective local New Year in
the Company's first quarter. Management believes that direct selling in Japan
and Europe is also generally negatively impacted during August, when many
individuals traditionally take vacations.
Generally, the Company has experienced rapid revenue growth in each
new market from the commencement of operations. In Japan, Taiwan and Hong Kong,
the initial rapid growth was followed by a short period of stable or declining
revenue followed by renewed growth fueled by new product introductions, an
increase in the number of active distributors and increased distributor
productivity. In South Korea, the Company experienced a significant decline in
its 1997 revenue from revenue in 1996 and is experiencing additional declines in
1998. Revenue in Thailand also decreased significantly after the commencement of
operations in March 1997. Management believes that the revenue declines in South
Korea and Thailand were partly due to normal business cycles in new markets but
were primarily due to volatile economic conditions in those markets. See
"--Outlook." In addition, the Company may experience variations on a quarterly
basis in its results of operations, as new products are introduced and new
markets are opened. No assurance can be given that the Company's revenue growth
rate in new markets where Nu Skin operations have not commenced will follow this
pattern.
Currency Fluctuation and Exchange Rate Information
The Company's revenue and most of its expenses are recognized
primarily outside of the United States except for inventory purchases which are
primarily transacted in U.S. dollars from vendors in the United States. Each
entity's local currency is considered the functional currency. All revenue and
expenses are translated at weighted average exchange rates for the periods
reported. Therefore, the Company's reported sales and earnings will be
positively impacted by a weakening of the U.S. dollar and will be negatively
impacted by a strengthening of the U.S. dollar.
Given the uncertainty of exchange rate fluctuations, the Company
cannot estimate the effect of these fluctuations on its future business, product
pricing, results of operations or financial condition. However, because nearly
all of the Company's revenue is realized in local currencies and the majority of
its cost of sales is denominated in U.S. dollars, the Company's gross profits
will be positively affected by a weakening in the U.S. dollar and will be
negatively affected by a strengthening in the U.S. dollar. The Company reduces
its exposure to fluctuations in foreign exchange rates by creating offsetting
positions through the use of foreign currency exchange contracts. The Company
does not use such financial instruments for trading or speculative purposes. The
Company regularly monitors its foreign currency risks and periodically takes
measures to reduce the impact of foreign exchange fluctuations on the Company's
operating results.
Outlook
Management currently anticipates annual revenue and earnings growth
overall in 1998. This growth is expected to result in part from improved margins
resulting from the recent NSI Acquisition as well as from anticipated growth in
Japan and Taiwan. Further, expansion into new markets, specifically Brazil, is
expected to contribute to growth in revenue and earnings. Additionally, the
Company intends to continue pursuing strategic initiatives to minimize the
impact of fluctuating currencies and economies in Asia by diversifying its
markets, moving more of its manufacturing to local markets, implementing
enhancements to its sales compensation plan and seeking cost reductions from
vendors. The Company's anticipated revenue and earnings growth, however, could
be adversely affected by continued fluctuations in Asian currencies,
particularly the yen, and the economic downturn in its Asian markets.
Revenue in the third quarter of 1998 is anticipated to be down
sequentially and from the third quarter of 1997 primarily due to the impact of
currency translation. In the fourth quarter of 1998, however, management
anticipates that nearly all markets will record sequential revenue gains. These
revenue gains are expected to be led by Japan where current plans include a
major convention and the introduction of a new water purification product line
as well as other nutritional and personal care products. Additionally, the
Company has announced plans for operations in Brazil to commence in the fourth
quarter. The Company also plans to re-introduce locally manufactured LifePak in
Taiwan in the third quarter of 1998 that will be sold
12
<PAGE>
at 20 percent less than the current product with no gross margin erosion.
Management anticipates that this repositioning of LifePak will place the Company
in a much more competitive posture in Taiwan's nutrition industry.
Reported operating margins are expected to be negatively impacted in
the third quarter of 1998 due to the remaining charge of $8.6 million for
amortization of inventory step-up. This charge is a non-cash, non-recurring
expense that will not continue beyond the third quarter of 1998. Operating
margins in the fourth quarter of 1998 are expected to improve in relation to the
anticipated revenue growth in the fourth quarter of 1998.
The Company has significant forward contracts and other hedging
vehicles on foreign currencies, principally the Japanese yen. It is impossible
to predict the impact on other income due to a strengthening or weakening of the
Japanese yen. If the yen strengthens, the Company's reported revenue and
operating profits will be positively impacted, but the impact on earnings will
be offset, to a degree, by other income losses. If the yen weakens, the
Company's reported revenue and operating profits will be negatively impacted,
but the impact on earnings will be offset, to a degree, by other income gains.
Note Regarding Forward-Looking Statements
Certain statements made above in the Liquidity and Capital Resources
section and the Outlook section are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). These forward-looking statements involve risks and uncertainties and are
based on certain assumptions that may not be realized. Actual results and
outcomes may differ materially from those discussed or anticipated. The
forward-looking statements and associated risks described in this filing relate
to (i) the anticipation of significant cash flow from operations, (ii) the
Company's expectation that it will be able to rely entirely on cash flow from
operations to fund its business objectives without incurring long-term debt to
unrelated third parties, (iii) the Company's expectation that it will be able to
successfully address any issues relating to the Year 2000 issue, and to the
extent necessary, modify computer systems without incurring material capital
expenditures, (iv) management's belief that the Company is liquid and able to
meet its obligations both on a short and long-term basis, (v) the anticipation
of growth in annual revenue and earnings overall in 1998 as a result of the NSI
Acquisition, growth in Japan and Taiwan, expansion in Brazil and other new
markets, (vi) management's belief that revenue in the third quarter will be down
due to the impact of currency devaluation, (vii) management's belief that nearly
all of its markets will record sequential revenue gains in the fourth quarter,
(viii) expected revenue gains in Japan arising from the convention planned for
the fourth quarter and the introduction of a new water filtration system, (ix)
the planned expansion into Brazil, (x) the expectation that the re-introduction
of a locally-manufactured LifePak in Taiwan will improve the Company's
competitive position in Taiwan's nutrition industry without affecting margins,
(xi) the Company's intentions to pursue strategic initiatives to minimize the
impact of fluctuating foreign currencies and economies in Asia by diversifying
its markets, moving more of its manufacturing to local markets, implementing
enhancements to its sales compensation plan and seeking cost reductions from
vendors, (xii) the Company's plan to implement forward contracts and other
hedging strategies to manage foreign currency risks, and (xiii) the expected
improvement in operating margins in the fourth quarter in relation to the
anticipated revenue growth.
Important factors and risks that might cause actual results to differ
from those anticipated include, but are not limited to: (a) lower than expected
revenue, revenue growth and cash flow from operations because of adverse
economic, business or political conditions, increased competition, adverse
publicity in the Company's markets, particularly Japan and Taiwan, or the
Company's inability, for any reason, to open new markets such as Brazil,
introduce new products, implement its marketing and local sourcing initiatives
and other strategic plans as well as the potential negative effect of
distributor actions such as decreased selling efforts or increased turnover; (b)
variations in operating results including revenue, gross profit and earnings
caused by continued fluctuations in foreign currency values; (c) the Company's
inability to favorably implement forward contracts and other hedging strategies
to manage foreign currency risk; (d) difficulties in integrating the NSI
operations with the Company's operations; (e) the inability of the Company to
successfully establish manufacturing facilities in foreign markets at lower
costs while maintaining the quality and marketing position of its products; (f)
unanticipated problems or circumstances, including any regulatory and other
legal issues, that may prevent or delay the Company from expanding into new
markets, particularly Brazil, or introducing new products; (g) the inability of
the Company to gain market acceptance of new products, including the Company's
proposed home water filtration product in Japan, which
13
<PAGE>
represents a new market segment, and the locally manufactured LifePak in Taiwan;
(h) increased expenditures required to address the Year 2000 issue if the
Company's technology requirements change or unforseen problems are discovered;
(i) risks that the Company's and its vendors' plans to remedy "Year 2000" issues
may be inadequate which could result in disruptions of the Company's business;
(j) increased government regulation of direct selling activities and products in
existing and future markets such as the PRC's recent restrictions on direct
selling; (k) management's inability to effectively manage the Company's growth;
(l) the Company's inability to renegotiate or adjust vendor relationships
favorable to the Company; (m) risks inherent in the importation, regulation and
sale of personal care and nutritional products in the Company's markets
including product liability issues; (n) the Company's reliance on and the
concentration of outside manufacturers; (o) taxation and transfer pricing
issues, including the Company's inability to fully use its foreign tax credits;
and (p) seasonal and cyclical trends. For a more detailed discussion of risks
and uncertainties related to the Company's business, please refer to the
Company's Form 10-K for the year ended December 31, 1997, and any amendments
thereto, and other documents filed by the Company with the Securities and
Exchange Commission.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nu Skin International, Inc. ("NSI"), a recently acquired subsidiary of
the Company, is a party to an action entitled Natalie Capone on behalf of
Herself and All Others Similarly Situated v. Nu Skin Canada, Inc., Nu Skin
International, Inc., Blake Roney, et. al. which was filed with the United States
District Court for the District of Utah, Central Division (the "Court") in March
1993. This litigation was previously reported in the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1998. Ms. Capone filed a
class action complaint against NSI and certain affiliated parties (the
"Defendants"). The complaint alleges violations of the anti-fraud provisions of
the Securities Act of 1933 and the Securities Exchange Act of 1934, common law
fraud and violations of the Utah Consumer Sales Practices Act. The plaintiff
also sought injunctive relief, disgorgement by Defendants, and restitution to
plaintiff of all earnings, profits, compensation and benefits obtained by
Defendants. In June 1997 the Court denied NSI's motion for summary judgement but
also denied the plaintiff's motion to certify a similarly situated class of
distributors. In May 1998, the Court, upon reconsideration, granted the
plaintiff's motion to certify a similarly situated class of distributors based
on more limited claims under the Securities Act of 1933 and the Utah
Anti-pyramid statute. The case continues in discovery. The Company's potential
liability associated with this case is limited to the impact an adverse decision
may have upon the business of its privately-owned affiliates in the U.S. and
Canada and is also limited by certain indemnities provided to the Company in
connection with the NSI Acquisition.
ITEM 2. CHANGES IN SECURITIES
Conversion of Preferred Stock
On May 5, 1998, the stockholders of the Company approved the automatic
conversion of the preferred stock issued in the NSI Acquisition into 2,986,663
shares of Class A Common Stock. The issuance of shares of Class A Common Stock
upon conversion of the preferred stock was made in reliance upon the exemptions
provided by Section 3(a)(9) and Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May 5, 1998.
At the Annual Meeting, Blake M. Roney, Steven J. Lund, Sandra N. Tillotson,
Keith R. Halls, Brooke B. Roney, Max L. Pinegar, E.J.
14
<PAGE>
"Jake" Garn, Paula Hawkins and Daniel W. Campbell were elected to serve as
directors of the Company until the next annual meeting of stockholders or until
their successors are duly elected. Each director was elected by a plurality of
votes in accordance with the Delaware General Corporation Law. There was no
solicitation in opposition to management's director nominees. The following
chart reflects the vote tabulation with respect to each director nominee. The
figures reported reflect votes cast by holders of the Company's Class A Common
Stock and Class B Common Stock. Each share of Class A Common Stock entitles its
holder to one vote, and each share of Class B Common Stock entitles its holder
to ten votes.
Name of Director
Nominee Votes For Votes Withheld
------------------- ----------- --------------
Blake M. Roney 702,807,587 30,305
Steven J. Lund 702,807,587 28,394
Sandra N. Tillotson 702,807,587 28,394
Keith R. Halls 702,807,587 28,394
Brooke B. Roney 702,807,587 28,394
Max L. Pinegar 694,136,020 8,699,961
E.J. "Jake" Garn 702,807,587 28,394
Paula Hawkins 702,807,587 28,394
Daniel W. Campbell 702,807,587 28,394
The stockholders also approved an amendment to the Company's
Certificate of Incorporation that changed the name of the Company to Nu Skin
Enterprises, Inc. with 710,737,545 votes voted in favor of the amendment, 1,859
votes cast against, and 2,988,616 abstentions. The stockholders also approved
the automatic conversion of the preferred stock issued in the NSI Acquisition
into 2,986,663 shares of Class A Common Stock with 706,153,182 votes being cast
for, 42,054 votes being cast against, and 2,979,295 votes abstaining. In
addition, the stockholders ratified the appointment of PricewaterhouseCoopers
LLP as the Company's independent public accountants, with 710, 748,431 votes
being cast for, 5,131 votes being cast against, as well as 2,974,428 votes
abstaining.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Regulation S-K
Number Description
3.1 Amendment to the Company's Certificate of Incorporation
10.1 Credit Agreement - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.2 Form of Note - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.3 Subsidiary Guaranty - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.4 Pledge Agreement - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.5 NSE Guaranty - dated May 8, 1998 with ABN AMRO, N.V., as agent
27.1 Financial Data Schedule - Six Months Ended June 30, 1998
27.2 Financial Data Schedule - Year Ended December 31, 1997 - Restated
27.3 Financial Data Schedule - Nine Months Ended June 30, 1997 - Restated
27.4 Financial Data Schedule - Six Months Ended June 30, 1997 - Restated
27.5 Financial Data Schedule - Three Months Ended March 31, 1997 - Restated
27.6 Financial Data Schedule - Year Ended December 31, 1996 - Restated
15
<PAGE>
(b) Reports on Form 8-K. The Company filed an amendment to a Current
Report on Form 8-K/A dated April 28, 1998 providing financial statements, pro
forma financial information and exhibits reflecting the NSI Acquisition.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on this
12th day of August, 1998.
NU SKIN ENTERPRISES, INC.
By: /s/ Corey B. Lindley
Corey B. Lindley
Its: Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
3.1 Amendment to the Company's Certificate of Incorporation
10.1 Credit Agreement - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.2 Form of Note - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.3 Subsidiary Guaranty - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.4 Pledge Agreement - dated May 8, 1998 with ABN AMRO, N.V., as agent
10.5 NSE Guaranty - dated May 8, 1998 with ABN AMRO, N.V., as agent
27.1 Financial Data Schedule - Six Months Ended June 30, 1998
27.2 Financial Data Schedule - Year Ended December 31, 1997 - Restated
27.3 Financial Data Schedule - Nine Months Ended June 30, 1997 - Restated
27.4 Financial Data Schedule - Six Months Ended June 30, 1997 - Restated
27.5 Financial Data Schedule - Three Months Ended March 31, 1997 - Restated
27.6 Financial Data Schedule - Year Ended December 31, 1996 - Restated
17
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Nu Skin Asia Pacific, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, Does
Hereby Certify:
First: That the Board of Directors of Nu Skin Asia Pacific, Inc. duly
adopted a resolution setting forth a proposed amendment of the Certificate of
Incorporation of the corporation, declaring the proposed amendment to be
advisable and in the best interest of the corporation and its stockholders, and
directing that the proposed amendment be considered at the next annual meeting
of the stockholders of the corporation. The resolution setting forth the
proposed amendment is as follows:
Resolved, that Paragraph 1. of the Certificate of Incorporation of the
Corporation is hereby amended, subject to stockholder approval, to read in
its entirety as follows:
"1. The name of the corporation is Nu Skin Enterprises, Inc. (the
"Corporation")."
Second: That thereafter, pursuant to resolution of its Board of
Directors and upon the vote of its stockholders at the 1998 Annual Meeting
of Stockholders, the necessary number of shares as required by statute were
voted in favor of the amendment.
Third: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by Steven J. Lund, President and Chief Executive Officer, and attested by
Keith R. Halls, Secretary, this ____ day of May 1998.
NU SKIN ASIA PACIFIC, INC.
By:
Steven J. Lund
President and Chief Executive Officer
ATTEST:
Keith R. Halls
Secretary
<PAGE>
CREDIT AGREEMENT
among
NU SKIN ENTERPRISES, INC.
and
NU SKIN JAPAN CO., LTD.
and
THE LENDERS NAMED HEREIN
and
ABN AMRO BANK N.V.,
as Agent for Lenders
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
and
NATIONSBANK, N.A.,
as Co-Agents
May 8, 1998
<PAGE>
TABLE OF CONTENTS
SECTION I. INTERPRETATION..........................................1
1.01. Definitions.................................................1
1.02. GAAP.......................................................21
1.03. Headings...................................................21
1.04. Plural Terms...............................................21
1.05. Governing Law..............................................21
1.06. English Language...........................................21
1.07. Construction...............................................21
1.08. Entire Agreement...........................................21
1.09. Calculation of Interest and Fees...........................22
1.10. References.................................................22
1.11. Other Interpretive Provisions..............................22
SECTION II. CREDIT FACILITIES......................................23
2.01. U.S. Facility..............................................23
2.02. Japanese Facility..........................................26
2.03. Maturity Date Extension....................................28
2.04. Fees.......................................................31
2.05. Prepayments................................................31
2.06. Other Payment Terms........................................32
2.07. Loan Accounts; Notes.......................................34
2.08. Loan Funding...............................................35
2.09. Pro Rata Treatment.........................................36
2.10. Change of Circumstances....................................37
2.11. Taxes on Payments..........................................39
2.12. Funding Loss Indemnification...............................41
2.13. Security...................................................42
2.14. Replacement of Lenders.....................................43
SECTION III. CONDITIONS PRECEDENT...................................44
3.01. Initial Closing Date Conditions Precedent..................44
3.02. Second Closing Date Conditions Precedent...................44
3.03. Conditions Precedent to Each Credit Event..................44
3.04. Covenant to Deliver........................................45
<PAGE>
SECTION IV. REPRESENTATIONS AND WARRANTIES.........................45
4.01. Borrowers' Representations and Warranties..................45
4.02. Reaffirmation..............................................49
SECTION V. COVENANTS..............................................50
5.01. Affirmative Covenants......................................50
5.02. Negative Covenants.........................................53
5.03. Financial Covenants........................................60
SECTION VI. DEFAULT................................................61
6.01. Events of Default..........................................61
6.02. Remedies...................................................63
SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS..................64
7.01. Appointment, Powers and Immunities.........................64
7.02. Reliance by Agent..........................................64
7.03. Defaults...................................................64
7.04. Indemnification............................................65
7.05. Non-Reliance...............................................65
7.06. Resignation or Removal of Agent............................65
7.07. Agent in its Individual Capacity...........................66
SECTION VIII. MISCELLANEOUS..........................................66
8.01. Notices....................................................66
8.02. Expenses...................................................68
8.03. Indemnification............................................68
8.04. Waivers; Amendments........................................69
8.05. Successors and Assigns.....................................69
8.06. Setoff; Security Interest..................................73
8.07. No Third Party Rights......................................73
8.08. Partial Invalidity.........................................73
8.09. Jury Trial.................................................74
8.10. Counterparts...............................................74
8.11. Borrowers' Liabilities.....................................74
8.12. Confidentiality............................................74
8.13. Consent to Jurisdiction....................................74
<PAGE>
SCHEDULES
I Lenders
II Pricing Grid
3.01 Initial Closing Date Conditions Precedent
* 4.01(e) Authorizations
* 4.01(g) Litigation
* 4.01(o) Subsidiaries
* 5.02(a) Existing Indebtedness
* 5.02(b) Existing Liens
* 5.02(d) Potential Acquisitions
* 5.02(e) Existing Investments
EXHIBITS
* A Notice of U.S. Borrowing (2.01(b))
* B Notice of U.S. Borrowing Conversion (2.01(d))
* C Notice of U.S. Borrowing Interest Period Selection (2.01(e))
* D Notice of Japanese Borrowing (2.02(b))
* E Notice of Japanese Borrowing Interest Period Selection (2.02(d))
* F Extension Request (2.03)
* G Form of Note (2.07(b))
* H Subsidiary Guaranty (2.13(a))
* I Pledge Agreement (2.13(a))
* J NSE Guaranty (2.13(a))
* K Assignment Agreement (8.05(c))
* L Solvency Certificate (Schedule 3.01)
* Schedules and exibits omitted. The omitted schedules and exibits from this
filing will be provided upon request
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 8, 1998, is entered into by and
among:
(1) NU SKIN ENTERPRISES, INC., a Delaware corporation formerly
named Nu Skin Asia Pacific, Inc. ("NSE");
(2) NU SKIN JAPAN CO., LTD., a Japanese corporation ("NSJ");
(3) Each of the financial institutions from time to time listed
in Schedule I hereto, as amended from time to time (such financial
institutions to be referred to herein collectively as "Lenders");
(4) ABN AMRO BANK N.V., as agent for Lenders (in such capacity,
"Agent"); and
(5) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION and
NATIONSBANK, N.A., as co-agents (collectively, in such capacity, the
"Co-Agents").
RECITALS
A. NSE and NSJ (collectively, "Borrowers") have requested Lenders to
provide certain credit facilities to Borrowers.
B. Lenders are willing to provide such credit facilities upon the terms
and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION I. INTERPRETATION
1.01. Definitions. Unless otherwise indicated in this Agreement or any other
Credit Document, each term set forth below, when used in this Agreement or any
other Credit Document, shall have the respective meaning given to that term
below or in the provision of this Agreement or other document, instrument or
agreement referenced below.
"ABN AMRO" shall mean ABN AMRO Bank N.V.
"Acquired Entities" shall mean NSI and the other Persons
acquired by NSE pursuant to the NSI Acquisition Agreement.
<PAGE>
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, five percent
(5%) or more of any class of Equity Securities of such Person or (b)
each Person that controls, is controlled by or is under common control
with such Person or any Affiliate of such Person; provided, however,
that in no case shall Agent or any Lender be deemed to be an Affiliate
of either Borrower or any of its Subsidiaries for purposes of this
Agreement. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" shall have the meaning given to that term in clause
(4) of the introductory paragraph hereof.
"Agent's Fee Letter" shall mean the letter agreement dated as
of March 13, 1998 among Borrowers and Agent.
"Agreement" shall mean this Credit Agreement.
"Applicable Lending Office" shall mean:
(a) With respect to any U.S. Lender and the U.S.
Borrowing, (i) in the case of any Base Rate Portion, such
Lender's U.S. Lending Office, and (ii) in the case of any
LIBOR Portion, such Lender's Euro-Dollar Lending Office; and
(b) With respect to any Japanese Lender and the
Japanese Borrowing, such Lender's Japanese Lending Office.
"Applicable Margin" shall mean, with respect to any Portion of
any Borrowing at any time, the per annum margin which is determined
pursuant to the Pricing Grid and added to the Base Rate, LIBO Rate or
TIBO Rate, as the case may be, for such Portion; provided, however,
that each Applicable Margin determined pursuant to the Pricing Grid
shall be increased by two percent (2.00%) per annum on the date an
Event of Default occurs and shall continue at such increased rate
unless and until such Event of Default is cured or waived in accordance
with this Agreement. The Applicable Margins shall be determined as
provided in the Pricing Grid and may change for each Pricing Period.
"Assignee Lender" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Assignment" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Assignment Agreement" shall have the meaning given to that
term in Subparagraph 8.05(c).
"Assignment Effective Date" shall have, with respect to each
Assignment Agreement, the meaning set forth therein.
<PAGE>
"Assignor Lender" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Base Rate" shall mean, on any day, the greater of (a) the
Prime Rate in effect on such date and (b) the Federal Funds Rate for
such day plus one-half percent (0.50%).
"Base Rate Portion" shall mean, at any time, a Portion of the
U.S. Borrowing or a U.S. Loan, as the case may be, which then bears
interest at a rate specified in clause (i) of Subparagraph 2.01(c).
"Borrowers" shall have the meaning given to that term in
Recital A.
"Borrowing" shall mean the U.S. Borrowing or the Japanese
Borrowing.
"Business Day" shall mean any day on which commercial banks
are not authorized or required to close in San Francisco, California,
New York, New York or Salt Lake City, Utah and (a) if such Business Day
is related to a LIBOR Portion of the U.S. Borrowing, dealings in Dollar
deposits are carried out in the London interbank market and commercial
banks are open for business in London or (b) if such Business Day is
related to the Japanese Borrowing, dealings in Yen deposits are carried
out in the Tokyo interbank market and commercial banks are open for
business in Tokyo.
"Capital" shall mean, with respect to either Borrower at any
time, the sum, determined on a consolidated basis in accordance with
GAAP, of the Indebtedness and net worth of such Borrower and its
Subsidiaries at such time.
"Capital Adequacy Requirement" shall have the meaning given to
that term in Subparagraph 2.10(d).
"Capital Asset" shall mean, with respect to any Person, any
tangible fixed or capital asset owned or leased (in the case of a
Capital Lease) by such Person, or any expense incurred by such Person
that is required by GAAP to be reported as a non-current asset on such
Person's balance sheet.
"Capital Expenditures" shall mean, with respect to any Person
and any period, all amounts expended by such Person during such period
for the acquisition of Capital Assets (including all amounts paid or
accrued on Capital Leases and other Indebtedness incurred or assumed to
acquire Capital Assets).
"Capital Leases" shall mean any and all lease obligations
that, in accordance with GAAP, are required to be capitalized on the
books of a lessee.
<PAGE>
"Change of Control" shall mean
(a) With respect to NSE, (i) the acquisition after
the date hereof by any person or group of persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of
1934 (as amended, the "Exchange Act")) of (A) beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Exchange Act) of
forty percent (40%) or more of the outstanding Equity
Securities of NSE entitled to vote for members of the board of
directors (excluding any such acquisition (1) by Persons who
are shareholders of NSE on the date of this Agreement, (2)
resulting from the conversion by the current holders of NSE
preferred shares of such shares into NSE common shares and (3)
resulting from the conversion by the current holders of NSE
Class B common shares of such shares into NSE Class A common
shares), or (B) all or substantially all of the assets of NSE;
or (ii) during any period of twelve (12) consecutive calendar
months, individuals who are directors of NSE on the first day
of such period ("Initial Directors") and any directors of NSE
who are specifically approved by two-thirds of the Initial
Directors and previously-approved Directors shall cease to
constitute a majority of the Board of Directors of Borrower
before the end of such period;
(b) With respect to (i) NSJ, Nu Skin Hong Kong, Inc.,
Nu Skin Taiwan, Inc. or Nu Skin Korea, Inc. or (ii) any
Domestic Subsidiary of NSE that is a Material Subsidiary, NSE
shall cease to own directly or indirectly one hundred percent
(100%) of the Equity Securities of such Subsidiary; or
(c) With respect to any Foreign Subsidiary of NSE
that is a Material Subsidiary, NSE shall cease to own directly
or indirectly fifty-one percent (51%) or more of the Equity
Securities of such Subsidiary.
"Change of Law" shall have the meaning given to that term in
Subparagraph 2.10(b).
"Closing Date" shall mean the U.S. Closing Date or the
Japanese Closing Date.
"Co-Agents" shall have the meaning given to that term in
clause (5) of the introductory paragraph hereof.
"Collateral" shall mean all property in which Agent or any
Lender has a Lien to secure the Obligations.
"Commitment Fees" shall mean collectively the U.S. Commitment
Fees and the Japanese Commitment Fees.
"Commitments" shall mean, collectively, the U.S. Commitments
and the Japanese Commitments.
"Commitment Termination Date" shall mean May 29, 1998.
<PAGE>
"Compliance Certificate" shall have the meaning given to that
term in Subparagraph 5.01(a).
"Contingent Obligation" shall mean, with respect to any
Person, (a) any Guaranty Obligation of that Person; and (b) any direct
or indirect obligation or liability, contingent or otherwise, of that
Person (i) in respect of any Surety Instrument issued for the account
of that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments, (ii) as a partner or joint
venturer in any partnership or joint venture, (iii) to purchase any
materials, supplies or other property from, or to obtain the services
of, another Person if the relevant contract or other related document
or obligation requires that payment for such materials, supplies or
other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever
made or tendered, or such services are ever performed or tendered, or
(iv) in respect to any Rate Contract that is not entered into in
connection with a bona fide hedging operation that provides offsetting
benefits to such Person. The amount of any Contingent Obligation shall
(subject, in the case of Guaranty Obligations, to the last sentence of
the definition of "Guaranty Obligation") be deemed equal to the maximum
reasonably anticipated liability in respect thereof, and shall, with
respect to item (b)(iv) of this definition be marked to market on a
current basis.
"Contractual Obligation" of any Person shall mean, any
indenture, note, lease, loan agreement, security, deed of trust,
mortgage, security agreement, guaranty, instrument, contract, agreement
or other form of contractual obligation or undertaking to which such
Person is a party or by which such Person or any of its property is
bound.
"Credit Documents" shall mean and include this Agreement, the
Notes ,the Security Documents and the Agent's Fee Letter; all other
documents, instruments and agreements delivered to Agent or any Lender
pursuant to Section III; and all other documents, instruments and
agreements delivered by either Borrower or any of its Subsidiaries to
Agent or any Lender in connection with this Agreement on or after the
date of this Agreement.
<PAGE>
"Credit Event" shall mean the making of any Loan; the
conversion of any Portion of the U.S. Borrowing into a LIBOR Portion;
the selection of a new Interest Period for any LIBOR Portion of the
U.S. Borrowing; or the selection of a new Interest Period exceeding one
(1) month for the Japanese Borrowing.
"Debt/EBITDA Ratio" shall mean, with respect to either
Borrower for any period, the ratio, determined on a consolidated basis
in accordance with GAAP, of:
(a) The total Indebtedness of such Borrower and its
Subsidiaries on the last day of such period (excluding, in the
case of NSJ, Indebtedness of NSJ and its Subsidiaries to NSE
and NSE's other Subsidiaries);
to
(b) The EBITDA of such Borrower and its Subsidiaries
for such period.
"Default" shall mean an Event of Default or any event or
circumstance not yet constituting an Event of Default which, with the
giving of any notice or the lapse of any period of time or both, would
become an Event of Default.
"Defaulting Lender" shall mean a Lender which has failed to
fund its portion of any Borrowing which it is required to fund under
this Agreement and has continued in such failure for three (3) Business
Days after written notice from Agent.
"Dollar Equivalent" shall mean , as to any amount denominated
in Yen as of any date of determination, the equivalent amount in
Dollars as determined by Agent on the basis of the Telegraphic Transfer
Mid Rate quoted by Bank of Tokyo Mitsubishi at or about 10:00 a.m.
(Tokyo time) on such date.
"Dollars" and "$" shall mean the lawful currency of the United
States of America and, in relation to any payment under this Agreement,
same day or immediately available funds.
"Domestic Lending Office" shall mean, with respect to any U.S.
Lender and the U.S. Borrowing, (a) initially, its office designated as
such in Part B of Schedule I (or, in the case of any U.S. Lender which
becomes a U.S. Lender by an assignment pursuant to Subparagraph
8.05(c), its office designated as such in the applicable Assignment
Agreement) and (b) subsequently, such other office or offices as such
U.S. Lender may designate to Agent as the office at which such Lender's
Base Rate Portion will thereafter be maintained and for the account of
which all payments of principal of, and interest on, such Lender's Base
Rate Portion will thereafter be made.
"Domestic Subsidiary" shall mean, at any time, each Subsidiary
of NSE (a) which is created or organized in the United States or under
the law of the United States or any state thereof or any territory
thereof, (b) which was included as a member of NSE's affiliated group
in NSE's most recent consolidated United States federal income tax
return, or (c) the earnings of which were includible in the taxable
income of NSE or any other Domestic Subsidiary (to the extent of NSE's
and/or such other Domestic Subsidiary's ownership interest of such
Subsidiary) in NSE's most recent consolidated United States federal
income tax return.
<PAGE>
"EBITDA" shall mean, with respect to either Borrower for any
period, the sum, determined on a consolidated basis in accordance with
GAAP, of the following:
(a) The net income or net loss of such Borrower and
its Subsidiaries for such period before provision for income
taxes;
plus
(b) The sum (to the extent deducted in calculating
net income or loss in clause (a) above) of (i) all Interest
Expenses of such Borrower and its Subsidiaries accruing during
such period and (ii) all depreciation and amortization
expenses of such Borrower and its Subsidiaries accruing during
such period.
"Eligible Assignee" shall mean a commercial bank having a
combined capital and surplus of at least $100,000,000 that is acting
through a branch or agency located in (a) the United States, in the
case of a potential Assignee Lender that is to become a U.S. Lender or
(b) Japan, in the case of a potential Assignee Lender that is to become
a Japanese Lender.
"Employee Benefit Plan" shall mean any employee benefit plan
within the meaning of section 3(3) of ERISA maintained or contributed
to by NSE or any ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" shall mean the all Governmental Rules
relating to the protection of human health and the environment,
including all Governmental Rules pertaining to the reporting,
licensing, permitting, transportation, storage, disposal, investigation
or remediation of emissions, discharges, releases, or threatened
releases of Hazardous Materials into the air, surface water,
groundwater, or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or
handling of Hazardous Materials.
"Equity Securities" of any Person shall mean (a) all common
stock, preferred stock, participations, shares, partnership interests
or other equity interests in and of such Person (regardless of how
designated and whether or not voting or non-voting) and (b) all
warrants, options and other rights to acquire any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended or supplemented,
including any rules or regulations issued in connection therewith.
"ERISA Affiliate" shall mean any Person which is treated as a
single employer with NSE under Section 414 of the IRC.
"Euro-Dollar Lending Office" shall mean, with respect to any
U.S. Lender and the U.S. Borrowing, (a) initially, such Lender's office
designated as such in Part B of Schedule I (or, in the case of any U.S.
Lender which becomes a U.S. Lender by an assignment pursuant to
Subparagraph 8.05(c), its office designated as such in the applicable
Assignment Agreement) and (b) subsequently, such other office or
offices as such Lender may designate to Agent as the office at which
such Lender's LIBOR Portions will thereafter be maintained and for the
account of which all payments of principal of, and interest on, such
Lender's LIBOR Portions will thereafter be made.
<PAGE>
"Event of Default" shall have the meaning given to that term
in Paragraph 6.01.
"Extension Request" shall have the meaning given to that term
in Paragraph 2.03.
"Facility" shall mean the U.S. Facility or Japanese Facility.
"Federal Funds Rate" shall mean, for any day, the rate per
annum set forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the Federal
Reserve Board (including any such successor publication, "H.15 (519)")
for such day opposite the caption "Federal Funds (Effective)". If on
any relevant day, such rate is not yet published in H.15 (519), the
rate for such day shall be the rate set forth in the daily statistical
release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the
Federal Reserve Bank of New York (including any such successor
publication, the "Composite 3:30 p.m. Quotations") for such day under
the caption "Federal Funds Effective Rate". If on any relevant day,
such rate is not yet published in either H.15 (519) or the Composite
3:30 p.m. Quotations, the rate for such day shall be the arithmetic
means, as determined by Agent, of the rates quoted to Agent for such
day by three (3) Federal funds brokers of recognized standing selected
by Agent for overnight federal funds transactions.
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
"Financial Statements" shall mean, with respect to any
accounting period for any Person, statements of income, shareholders'
equity and cash flows of such Person for such period, and a balance
sheet of such Person as of the end of such period, setting forth in
each case in comparative form figures for the corresponding period in
the preceding fiscal year if such period is less than a full fiscal
year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" shall mean, with respect to
either Borrower for any period, the ratio, determined on a consolidated
basis in accordance with GAAP, of:
(a) EBITDA of such Borrower and its Subsidiaries for
such period;
to
(b) The sum of (i) all Interest Expenses of such
Borrower and its Subsidiaries for such period, plus (ii) the
current portion of the long-term Indebtedness of such Borrower
and its Subsidiaries for such period (excluding, in the case
of NSJ, long-term Indebtedness of NSJ and its Subsidiaries to
NSE and NSE's other Subsidiaries), plus, in the case of NSE
and its Subsidiaries only, (iii) all dividends paid by NSE and
its Subsidiaries (other than dividends paid to NSE) during
such period and (iv) the amount of the NSI Contingent Payments
paid by NSE during such period.
<PAGE>
"Foreign Plan" shall mean any employee benefit plan maintained
by NSE, NSJ or any of their Subsidiaries which is mandated or governed
by any Governmental Rule of any Governmental Authority other than the
United States.
"Foreign Subsidiary" shall mean each Subsidiary of NSE which
is not a Domestic Subsidiary.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to
time, consistently applied.
"Governmental Authority" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof,
any department, agency, authority or bureau of any of the foregoing, or
any other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, the Comptroller of the
Currency, any central bank or any comparable authority.
"Governmental Charges" shall mean, with respect to any Person,
all levies, assessments, fees, claims or other charges imposed by any
Governmental Authority upon such Person or any of its property or
otherwise payable by such Person.
"Governmental Rule" shall mean any law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive,
guidelines, policy or similar form of decision of any Governmental
Authority.
"Guaranty" shall mean the Subsidiary Guaranty or NSE Guaranty.
"Guaranty Obligation" shall mean, with respect to any Person,
any direct or indirect liability of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation
(the "primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person, whether or not contingent, (a)
to purchase, repurchase or otherwise acquire such primary obligations
or any property constituting direct or indirect security therefor, or
(b) to advance or provide funds (i) for the payment or discharge of any
such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, or (c) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (d) otherwise to assure or
hold harmless the holder of any such primary obligation against loss in
respect thereof. The amount of any Guaranty Obligation shall be deemed
equal to the stated or determinable amount of the primary obligation in
respect of which such Guaranty Obligation is made or, if not stated or
if indeterminable, the maximum reasonably anticipated liability in
respect thereof.
<PAGE>
"Hazardous Materials" shall mean all pollutants, contaminants
and other materials, substances and wastes which are hazardous, toxic,
caustic, harmful or dangerous to human health or the environment,
including petroleum and petroleum and petroleum products and
byproducts, radioactive materials, asbestos and polychlorinated
biphenyls.
"Indebtedness" of any Person shall mean, without duplication:
(a) All obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments and all
other obligations of such Person for borrowed money (including
obligations to repurchase receivables and other assets sold
with recourse);
(b) All obligations of such Person for the deferred
purchase price of property or services (including obligations
under letters of credit and other credit facilities which
secure or finance such purchase price, obligations under
"synthetic" leases and, in the case of NSE, the obligation of
NSE to make the NSI Contingent Payments);
(c) All obligations of such Person under conditional
sale or other title retention agreements with respect to
property acquired by such Person (to the extent of the value
of such property if the rights and remedies of the seller or
lender under such agreement in the event of default are
limited solely to repossession or sale of such property);
(d) All obligations of such Person as lessee under or
with respect to Capital Leases;
(e) All obligations of such Person, contingent or
otherwise, under or with respect to Surety Instruments;
(f) All obligations of such Person, contingent or
otherwise, under or with respect to Rate Contracts;
(g) All Guaranty Obligations of such Person with
respect to the obligations of other Persons of the types
described in clauses (a) - (f) above and all other Contingent
Obligations of such Person; and
(h) All obligations of other Persons of the types
described in clauses (a) - (f) above to the extent secured by
(or for which any holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien in
any property (including accounts and contract rights) of such
Person, even though such Person has not assumed or become
liable for the payment of such obligations.
"Initial Closing Date" shall mean the earlier of the U.S.
Closing Date and the Japanese Closing Date. (If the U.S. Closing Date
and the Japanese Closing Date are the same date, the Initial Closing
Date and the Second Closing Date shall be the same date.)
<PAGE>
"Interest Expenses" shall mean, with respect to any Person for
any period, the sum, determined on a consolidated basis in accordance
with GAAP, of (a) all interest paid, accrued or scheduled for payment
on the Indebtedness of such Person during such period (including
interest attributable to Capital Leases) plus (b) all fees in respect
of outstanding letters of credit paid, accrued or scheduled for payment
by such Person during such period.
"Interest Period" shall mean:
(a) With respect to any LIBOR Portion, the time
period selected by NSE pursuant to Subparagraph 2.01(b) or
Subparagraph 2.01(d) which commences on the U.S. Closing Date
or the effective date of any conversion and ends on the last
day of such time period, and thereafter, each subsequent time
period selected by NSE pursuant to Subparagraph 2.01(e) which
commences on the last day of the immediately preceding time
period and ends on the last day of that time period; and
(b) With respect to the Japanese Borrowing, the time
period selected by NSJ pursuant to Subparagraph 2.02(b) which
commences on the Japanese Closing Date and ends on the last
day of such time period, and thereafter, each subsequent time
period selected by NSJ pursuant to Subparagraph 2.02(d) which
commences on the last day of the immediately preceding time
period and ends on the last day of that time period.
"Investment" of any Person shall mean any loan or advance of
funds by such Person to any other Person (other than advances to
employees of such Person for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business),
any purchase or other acquisition of any Equity Securities or
Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person
(including any Guaranty Obligations of such Person and any indebtedness
of such Person of the type described in clause (h) of the definition of
"Indebtedness" on behalf of any other Person); provided, however, that
Investments shall not include (a) accounts receivable or other
indebtedness owed by customers of such Person which are current assets
and arose from sales of inventory in the ordinary course of such
Person's business or (b) prepaid expenses of such Person incurred and
prepaid in the ordinary course of business.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Japanese Borrowing" shall mean the borrowing consisting of
the Japanese Loans made by the Japanese Lenders on the Japanese Closing
Date. Any reference to the Japanese Borrowing shall include the
Japanese Loans.
"Japanese Closing Date" shall mean the date designated by NSJ
in the Notice of Japanese Borrowing as the date on which the Japanese
Borrowing is to occur.
<PAGE>
"Japanese Commitment" shall mean, with respect to each Lender,
the Yen Equivalent on the day four (4) Business Days prior to the
Japanese Closing Date of the Dollar amount set forth under the caption
"Japanese Commitment" opposite such Lender's name on Part A of Schedule
I, or, if changed, such Dollar amount as may be set forth for such
Lender in the Register.
"Japanese Commitment Fees" shall have the meaning given to
that term in Subparagraph 2.04(b).
"Japanese Facility" shall mean the Japanese Yen facility
provided to NSJ pursuant to Paragraph 2.02.
"Japanese Lender" shall mean (a) prior to the Japanese Closing
Date, a Lender having a Japanese Commitment and (b) thereafter, a
Lender having a Japanese Loan.
"Japanese Lending Office" shall mean, with respect to any
Japanese Lender and the Japanese Borrowing, (a) initially, such
Lender's office designated as such in Part B of Schedule I (or, in the
case of any Japanese Lender which becomes a Japanese Lender by an
assignment pursuant to Subparagraph 8.05(c), its office designated as
such in the applicable Assignment Agreement) and (b) subsequently, such
other office or offices as such Lender may designate to Agent as the
office at which such Lender's Japanese Loan will thereafter be
maintained and for the account of which all payments of principal of,
and interest on, such Lender's Japanese Loan will thereafter be made.
"Japanese Loan" shall have the meaning given to that term in
Subparagraph 2.02(a).
"Lenders" shall have the meaning given to that term in clause
(3) of the introductory paragraph hereof.
"Leverage Ratio" shall mean, with respect to either Borrower
at any time, the ratio, determined on a consolidated basis in
accordance with GAAP, of:
(a) The total Indebtedness of such Borrower and its
Subsidiaries at such time (excluding, in the case of NSJ,
Indebtedness of NSJ and its Subsidiaries to NSE and NSE's
other Subsidiaries);
to
(b) The total Capital of such Borrower and its
Subsidiaries at such time.
"LIBO Rate" shall mean, with respect to any Interest Period
for any LIBOR Portion of the U.S. Borrowing, a rate per annum equal to
the quotient (rounded upward if necessary to the nearest 1/100 of one
percent) of (a) the arithmetic mean (rounded upward if necessary to the
nearest 1/16 of one percent) of the rates per annum appearing on
Telerate Page 3750 (or any successor publication) on the second
Business Day prior to the first day of such Interest Period at or about
<PAGE>
11:00 A.M. (London time) (for delivery on the first day of such
Interest Period) for a term comparable to such Interest Period, divided
by (b) one minus the Reserve Requirement for such Portion in effect
from time to time. If for any reason rates are not available as
provided in clause (a) of the preceding sentence, the rate to be used
in clause (a) shall be, at the Agent's discretion, (i) the rate per
annum at which Dollar deposits are offered to Agent in the London
interbank market or (ii) the rate at which Dollar deposits are offered
to Agent in, or by Agent to major banks in, any offshore interbank
market selected by Agent, in each case on the second Business Day prior
to the commencement of such Interest Period at or about 10:00 A.M. (New
York time) (for delivery on the first day of such Interest Period) for
a term comparable to such Interest Period and in an amount
approximately equal to the amount of the Portion to be made or funded
by Agent as part of the U.S. Borrowing. The LIBO Rate shall be adjusted
automatically as to all LIBOR Portions of the U.S. Borrowing then
outstanding as of the effective date of any change in the Reserve
Requirement.
"LIBOR Portion" shall mean, at any time, a Portion of the U.S.
Borrowing or a U.S. Loan, as the case may be, which then bears interest
at a rate specified in clause (ii) of Subparagraph 2.01(c).
"Lien" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, charge or other encumbrance in, of,
or on such property or the income therefrom, including, without
limitation, the interest of a vendor or lessor under a conditional sale
agreement, Capital Lease or other title retention agreement, or any
agreement to provide any of the foregoing, and the filing of any
financing statement or similar instrument under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Loan" shall mean a U.S. Loan or Japanese Loan.
"Loan Account" shall have the meaning given to that term in
Subparagraph 2.07(a).
"Margin Stock" shall have the meaning given to that term in
Regulation U issued by the Federal Reserve Board, as amended from time
to time, and any successor regulation thereto.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations or financial or other condition
of either Borrower and its Subsidiaries, taken as a whole; (b) the
ability of either Borrower to pay or perform the Obligations in
accordance with the terms of this Agreement and the other Credit
Documents; (c) the rights and remedies of Agent or any Lender under
this Agreement, the other Credit Documents or any related document,
instrument or agreement; or (d) the value of the Collateral, Agent's or
any Lender's security interest in the Collateral or the perfection or
priority of such security interests.
<PAGE>
"Material Domestic Subsidiary" shall mean each Domestic
Subsidiary of NSE that also is a Material Subsidiary.
"Material Foreign Subsidiary" shall mean each Foreign
Subsidiary of NSE that also is a Material Subsidiary.
"Material Subsidiaries" shall mean, at any time, (a) NSJ; NSI;
Nu Skin Hong Kong, Inc., a Utah corporation; Nu Skin Taiwan, Inc., a
Utah corporation; and Nu Skin Korea, Inc., a South Korean corporation;
and (b) each other Subsidiary of NSE which had revenues during the
immediately preceding fiscal year equal to or greater than three
percent (3.0%) of the consolidated total revenues of NSE and all of its
Subsidiaries during such year.
"maturity" shall mean, with respect to any Loan, interest, fee
or other amount payable by either Borrower under this Agreement or the
other Credit Documents, the date such Loan, interest, fee or other
amount becomes due, whether upon the stated maturity or due date, upon
acceleration or otherwise.
"Maturity Date" shall mean March 31, 2001 (or, if extended
pursuant to Paragraph 2.03, the date to which so extended).
"Multiemployer Plan" shall mean any multiemployer plan within
the meaning of section 3(37) of ERISA maintained or contributed to by
NSE or any ERISA Affiliate.
"Net Proceeds" shall mean, with respect to any sale or
issuance of any Equity Security by any Person, the aggregate
consideration received by such Person from such sale or issuance less
the sum of the actual amount of the reasonable fees and commissions
payable to Persons other than such Person or any Affiliate of such
Person, the reasonable legal expenses and the other reasonable costs
and expenses directly related to such sale or issuance that are to be
paid by such Person.
"Note" shall have the meaning given to that term in
Subparagraph 2.07(b).
"Notice of Borrowing" shall mean the Notice of U.S. Borrowing
or Notice of Japanese Borrowing.
"Notice of Interest Period Selection" shall mean a Notice of
U.S. Borrowing Interest Period Selection or Japanese Borrowing Interest
Period Selection
"Notice of Japanese Borrowing" shall have the meaning given to
that term in Subparagraph 2.02(b).
"Notice of Japanese Borrowing Interest Period Selection" shall
have the meaning given to that term in Subparagraph 2.02(d).
"Notice of U.S. Borrowing" shall have the meaning given to
that term in Subparagraph 2.01(b).
"Notice of U.S. Borrowing Conversion" shall have the meaning
given to that term in Subparagraph 2.01(d).
<PAGE>
"Notice of U.S. Borrowing Interest Period Selection" shall
have the meaning given to that term in Subparagraph 2.01(e).
"NSE" shall have the meaning given to that term in clause (1)
of the introductory paragraph hereof.
"NSE Guaranty" shall have the meaning given to that term in
Subparagraph 2.13(a).
"NSI" shall mean Nu Skin International, Inc., a Utah
corporation.
"NSI Acquisition" shall mean the acquisition by NSE of all of
the issued and outstanding common stock of the Acquired Entities
pursuant to the NSI Acquisition Agreement.
"NSI Acquisition Agreement" shall mean the Stock Acquisition
Agreement dated as of February 27, 1998 among NSE and the stockholders
of the Acquired Entities.
"NSI Acquisition Documents" shall mean the NSI Acquisition
Agreement; the Contribution and Distribution Agreement dated as of
December 31, 1997 between NSI and NSUSA; the Tax Sharing and
Indemnification Agreement dated as of December 31, 1997 among NSI,
NSUSA and the shareholders of NSI and NSUSA; the Assumption of
Liabilities and Indemnification Agreement dated as of December 31, 1997
between NSI and NSUSA; and all other documents, instruments and
agreements delivered to or by NSI in connection with the NSI
Acquisition.
"NSI Contingent Payments" shall mean the portion of the
consideration for the NSI Acquisition payable by NSE to the
stockholders of the Acquired Entities pursuant to Section 2.04 of the
NSI Acquisition Agreement that is contingent upon certain performance
tests for NSE and NSI.
"NSJ" shall have the meaning given to that term in clause (2)
of the introductory paragraph hereof.
"NSUSA" shall mean Nu Skin USA, Inc., a Delaware corporation.
"Obligations" shall mean and include all loans, advances,
debts, liabilities, and obligations, howsoever arising, owed by either
Borrower individually or both Borrowers jointly and severally to Agent
or any Lender of every kind and description (whether or not evidenced
by any note or instrument and whether or not for the payment of money),
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of this Agreement
or any of the other Credit Documents, including all interest, fees,
charges, expenses, attorneys' fees and accountants' fees chargeable to
Borrowers or payable by Borrowers thereunder.
"Original Dollar Equivalent" shall mean, as to the Japanese
Borrowing, any Japanese Loan or any principal portion thereof, the
Dollar Equivalent on the Japanese Closing Date of the Yen amount of
such Borrowing, Loan or portion.
<PAGE>
"Overnight Rate" shall mean, for any amount payable in Yen on
any day, the per annum interest rate at which overnight deposits in Yen
in an amount approximately equal to such amount would be offered for
such day by ABN AMRO's Japanese Lending Office to major banks in the
Tokyo interbank market.
"Participant" shall have the meaning given to that term in
Subparagraph 8.05(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Permitted Indebtedness" shall have the meaning given to that
term in Subparagraph 5.02(a).
"Permitted Liens" shall have the meaning given to that term in
Subparagraph 5.02(b).
"Person" shall mean and include an individual, a partnership,
a corporation (including a business trust), a joint stock company, an
unincorporated association, a limited liability company, a joint
venture, a trust or other entity or a Governmental Authority.
"Pledge Agreement" shall have the meaning given to that term
in Subparagraph 2.13(a).
"Portion" shall mean a portion of the principal amount of a
Borrowing or a Loan. Each Borrowing shall consist of one or more
Portions, and each Loan comprising such Borrowing shall consist of the
same number of Portions, with each such Loan Portion corresponding pro
rata to a Borrowing Portion. Any reference to a Portion of either
Borrowing shall include the corresponding Portion of each Loan
comprising such Borrowing.
"Pricing Grid" shall mean Schedule II.
"Pricing Period" shall mean (a) the period commencing on the
date of this Agreement and ending on September 30, 1998 and (b) each
consecutive calendar quarter thereafter which commences on the day
following the last day of the immediately preceding calendar quarter
and ends on the last day of that calendar quarter.
"Prime Rate" shall mean the per annum rate publicly announced
by ABN AMRO from time to time at its Chicago office. The Prime Rate is
determined by ABN AMRO from time to time as a means of pricing credit
extensions to some customers and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of
interest charged by ABN AMRO at any given time for any particular class
of customers or credit extensions. Any change in the Base Rate
resulting from a change in the Prime Rate shall become effective on the
Business Day on which each change in the Prime Rate occurs.
"Proportionate Share" shall mean:
<PAGE>
(a) With respect to any U.S. Lender and the U.S.
Borrowing at any time, the ratio (expressed as a percentage
rounded to the eighth digit to the right of the decimal point)
of (i) such Lender's U.S. Commitment to the Total U.S.
Commitment at any time on or prior to the U.S. Closing Date or
(ii) the principal amount of such Lender's U.S. Loan to the
aggregate principal amount of the U.S. Borrowing at any time
after the U.S. Closing Date;
(b) With respect to any Japanese Lender and Japanese
Borrowing at any time, the ratio (expressed as a percentage
rounded to the eighth digit to the right of the decimal point)
of (i) such Lender's Japanese Commitment to the Total Japanese
Commitment at any time on or prior to the Japanese Closing
Date or (ii) the principal amount of such Lender's Japanese
Loan to the aggregate principal amount of the Japanese
Borrowing at any time after the Japanese Closing Date; and
(c) With respect to any Lender at any time without
reference to a particular Borrowing, the ratio (expressed as a
percentage rounded to the eighth digit to the right of the
decimal point) of (i) the sum of such Lender's U.S. Commitment
and the Dollar Equivalent of such Lender's Japanese Commitment
to the sum of the Total U.S. Commitment and the Dollar
Equivalent of the Total Japanese Commitment at any time on or
prior to the Initial Closing Date, (ii) the weighted average
of the sums determined for such Lender pursuant to clauses (a)
and (b) above during the period between the Initial Closing
Date and the Second Closing Date or (iii) the sum of the
principal amount of such Lender's U.S. Loan and the Original
Dollar Equivalent of the principal amount of such Lender's
Japanese Loan to the sum of the aggregate principal amount of
the U.S. Borrowing and the Original Dollar Equivalent of the
aggregate principal amount of the Japanese Borrowing at any
time after the Second Closing Date.
"Rate Contracts" shall mean swap agreements (as that term is
defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as
amended) and any other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Register" shall have the meaning given to that term in
Subparagraph 8.05(d).
"Reportable Event" shall have the meaning given to that term
in ERISA and applicable regulations thereunder.
"Required Lenders" shall mean, at any time, Lenders whose
Proportionate Shares equal or exceed fifty-one percent (51%).
"Requirement of Law" applicable to any Person shall mean (a)
the Articles or Certificate of Incorporation and By-laws, Partnership
Agreement or other organizational or governing documents of such
Person, (b) any Governmental Rule applicable to such Person, (c) any
license, permit, approval or other authorization granted by any
Governmental Authority to or for the benefit of such Person or (d) any
judgment, decision or determination of any Governmental Authority or
arbitrator, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
<PAGE>
"Reserve Requirement" shall mean (a) with respect to any day
in an Interest Period for a LIBOR Portion of the U.S. Borrowing, the
aggregate of the reserve requirement rates (expressed as a decimal) in
effect on such day for eurodollar funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of the Federal Reserve
Board) maintained by a member bank of the Federal Reserve System or (b)
with respect to any day in an Interest Period for any Portion of the
Japanese Borrowing, the aggregate of the reserve requirement rates, if
any (expressed as a decimal), in effect on such day for Yen funding in
Tokyo maintained by commercial banks in Tokyo. As used herein, the term
"reserve requirement" shall include, without limitation, any basic,
supplemental or emergency reserve requirements imposed on any Lender by
any Governmental Authority.
"Scheduled Payment Date" shall mean March 31, 1999, March 31,
2000 and the Maturity Date (or, if the Maturity Date is extended
pursuant to Paragraph 2.03, March 31, 1999, March 31, 2000, March 31,
2001, March 31, 2002 and the Maturity Date, as so extended).
"Second Closing Date" shall mean the later of the U.S. Closing
Date and the Japanese Closing Date. (If the U.S. Closing Date and the
Japanese Closing Date are the same date, the Initial Closing Date and
the Second Closing Date shall be the same date.)
"Security Documents" shall mean and include the Pledge
Agreement, the Guaranties and all other instruments, agreements,
certificates, opinions and documents (including Uniform Commercial Code
financing statements and fixture filings and landlord waivers)
delivered to Agent or any Lender in connection with any Collateral or
to secure the Obligations.
"Solvent" shall mean, with respect to any Person on any date,
that on such date (a) the fair value of the property of such Person is
greater than the fair value of the liabilities (including contingent,
subordinated, matured and unliquidated liabilities) of such Person, (b)
the present fair saleable value of the assets of such Person is greater
than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (c) such
Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature and (d) such Person is not engaged or about to
engage in business or transactions for which such Person's property
would constitute an unreasonably small capital.
"Subsidiary" of any Person shall mean (a) any corporation of
which more than 50% of the issued and outstanding Equity Securities
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency) is
at the time directly or indirectly owned or controlled by such Person,
by such Person and one or more of its other Subsidiaries or by one or
<PAGE>
more of such Person's other Subsidiaries, (b) any partnership, joint
venture, limited liability company or other association of which more
than 50% of the equity interest having the power to vote, direct or
control the management of such partnership, joint venture or other
association is at the time owned and controlled by such Person, by such
Person and one or more of the other Subsidiaries or by one or more of
such Person's other Subsidiaries or (c) any other Person included in
the Financial Statements of such Person on a consolidated basis. (All
references in this Agreement and the other Credit Documents to
Subsidiaries of NSE shall, unless otherwise indicated, include NSJ and
its Subsidiaries.)
"Subsidiary Guaranty" shall have the meaning given to that
term in Subparagraph 2.13(a).
"Surety Instruments" shall mean all letters of credit
(including standby and commercial), banker's acceptances, bank
guaranties, shipside bonds, surety bonds and similar instruments.
"Tangible Net Worth" shall mean, with respect to NSE or NSJ at
any time, the remainder at such time, determined on a consolidated
basis in accordance with GAAP, of (a) the total assets of such Borrower
and its Subsidiaries at such time, minus (b) the sum (without
limitation and without duplication of deductions) of (i) the total
liabilities of such Borrower and its Subsidiaries at such time, (ii)
all reserves of such Borrower and its Subsidiaries at such time for
anticipated losses and expenses (to the extent not deducted in
calculating total assets in clause (a) above) and (iii) all intangible
assets of such Borrower and its Subsidiaries at such time (to the
extent included in calculating total assets in clause (a) above),
including goodwill (including any amounts, however designated on the
balance sheet, representing the cost of acquisition of businesses and
investments in excess of underlying tangible assets), trademarks,
trademark rights, trade name rights, copyrights, patents, patent
rights, licenses, unamortized debt discount, marketing expenses,
organizational expenses, non-compete agreements and deferred research
and development.
"Taxes" shall have the meaning given to such term in
Subparagraph 2.11(a).
"TIBO Rate" shall mean, with respect to any Interest Period
for any Portion of the Japanese Borrowing, a rate per annum equal to
the quotient (rounded upward if necessary to the nearest 1/100 of one
percent) of (a) the rate per annum appearing on the Reuter Screen TIBM
Page (All Banks Average) (or any successor publication) on the second
Business Day prior to the first day of such Interest Period at or about
11:00 A.M. (Tokyo time) (for delivery on the first day of such Interest
Period) in an amount substantially equal to the corresponding Portion
of Agent's Japanese Loan and for a term comparable to such Interest
Period, divided by (b) one minus the Reserve Requirement for such
Portion in effect from time to time. If for any reason rates are not
available as provided in clause (a) of the preceding sentence, the rate
to be used in clause (a) shall be, at the Agent's discretion, (i) the
rate per annum at which Yen deposits are offered to Agent in the Tokyo
interbank market or (ii) the rate at which Yen deposits are offered to
Agent in, or by Agent to major banks in, any offshore interbank market
selected by Agent, in each case on the second Business Day prior to the
commencement of such Interest Period at or about 11:00 A.M. (Tokyo
time) (for delivery on the first day of such Interest Period) for a
term comparable to such Interest Period and in an amount approximately
equal to the amount of the Portion to be made or funded by Agent as
part of the Japanese Borrowing. The TIBO Rate shall be adjusted
automatically as to all Portions of the Japanese Borrowing then
outstanding as of the effective date of any change in the Reserve
Requirement.
<PAGE>
"Total Commitment" shall mean One-Hundred Eighty Million
Dollars ($180,000,000).
"Total Japanese Commitment" shall mean the Yen Equivalent on
the day four (4) Business Days prior to the Japanese Closing Date of
Seventy Million Dollars ($70,000,000).
"Total U.S. Commitment" shall mean One-Hundred Ten Million
Dollars ($110,000,000).
"Type" shall mean, with respect to any Loan, Borrowing or
Portion at any time, the classification of such Loan, Borrowing or
Portion by the type of interest rate it then bears, whether an interest
rate based upon the Base Rate, the LIBO Rate or the TIBO Rate.
"U.S. Borrowing" shall mean the borrowing consisting of the
U.S. Loans made by the U.S. Lenders on the U.S. Closing Date. Any
reference to the U.S. Borrowing shall include the U.S. Loans.
"U.S. Closing Date" shall mean the date designated by NSE in
the Notice of U.S. Borrowing as the date on which the U.S. Borrowing is
to occur.
"U.S. Commitment" shall mean, with respect to each Lender, the
Dollar amount set forth under the caption "U.S. Commitment" opposite
such Lender's name on Part A of Schedule I, or, if changed, such Dollar
amount as may be set forth for such Lender in the Register.
"U.S. Commitment Fees" shall have the meaning given to that
term in Subparagraph 2.04(b).
"U.S. Facility" shall mean the U.S. Dollar facility provided
to NSE pursuant to Paragraph 2.01.
"U.S. Lender" shall mean (a) prior to the U.S. Closing Date, a
Lender having a U.S. Commitment and (b) thereafter, a Lender having a
U.S. Loan.
"U.S. Loan" shall have the meaning given to that term in
Subparagraph 2.01(a).
"Yen" and "(Y)" shall mean the lawful currency of Japan and,
in relation to any payment under this Agreement, same day or
immediately available funds.
<PAGE>
"Yen Equivalent" shall mean, as to any amount denominated in
Dollars as of any date of determination, the equivalent amount in Yen
as determined by Agent on the basis of the Telegraphic Transfer Mid
Rate quoted by Bank of Tokyo Mitsubishi at or about 10:00 a.m. (Tokyo
time) on such date.
1.02. . Unless otherwise indicated in this Agreement or any other Credit
Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP
changes during the term of this Agreement such that any covenants contained
herein would then be calculated in a different manner or with different
components, Borrowers, Lenders and Agent agree to negotiate in good faith to
amend this Agreement in such respects as are necessary to conform those
covenants as criteria for evaluating Borrower's financial condition to
substantially the same criteria as were effective prior to such change in GAAP;
provided, however, that, until Borrowers, Lenders and Agent so amend this
Agreement, all such covenants shall be calculated in accordance with GAAP as in
effect immediately prior to such change.
1.03. Headings. Headings in this Agreement and each of the other Credit
Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.04. Plural Terms. All terms defined in this Agreement or any other Credit
Document in the singular form shall have comparable meanings when used in the
plural form and vice versa.
1.05. Governing Law. Unless otherwise expressly provided in any Credit Document,
this Agreement and each of the other Credit Documents shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
1.06. . This Agreement and the other Credit Documents are executed and shall be
construed in the English language. All instruments, agreements, certificates,
opinions and other documents to be furnished or communications to be given or
made under this Agreement or any other Credit Document shall be in the English
language, except that NSJ may deliver the Japanese language version of (a) any
NSJ corporate document initially prepared in the ordinary course of its business
in the Japanese language or (b) any certificate or other document prepared by a
Japanese Governmental Authority in the Japanese language, provided that, in each
such case, the Japanese language version of such document is delivered along
with an English language translation thereof which shall be binding upon
Borrowers.
1.07. Construction. This Agreement is the result of negotiations among, and has
been reviewed by, Borrowers, each Lender, Agent and their respective counsel.
Accordingly, this Agreement shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against either
Borrower, any Lender or Agent.
1.08. Entire Agreement. This Agreement and each of the other Credit Documents,
taken together, constitute and contain the entire agreement of Borrowers,
Lenders and Agent and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof (excluding the Agent's Fee
Letter but including the commitment letter dated as of March 13, 1998 among
Borrowers and ABN AMRO).
<PAGE>
1.09. Calculation of Interest and Fees. All calculations of interest and fees
under this Agreement and the other Credit Documents for any period (a) shall
include the first day of such period and exclude the last day of such period and
(b) shall be calculated on the basis of a year of 360 days for actual days
elapsed, except that during any period any Loan or Portion bears interest based
upon the Prime Rate, such interest shall be calculated on the basis of a year of
365 or 366 days, as appropriate, for actual days elapsed.
1.10. References.
(a) References in this Agreement to "Recitals," "Sections,"
"Paragraphs," "Subparagraphs," "Exhibits" and "Schedules" are to
recitals, sections, paragraphs, subparagraphs, exhibits and schedules
therein and thereto unless otherwise indicated.
(b) References in this Agreement or any other Credit Document
to any document, instrument or agreement (i) shall include all
exhibits, schedules and other attachments thereto, (ii) shall include
all documents, instruments or agreements issued or executed in
replacement thereof if such replacement is permitted hereby, and (iii)
shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to
time and in effect at any given time if such amendment, modification or
supplement is permitted hereby.
(c) References in this Agreement or any other Credit Document
to any Governmental Rule (i) shall include any successor Governmental
Rule, (ii) shall include all rules and regulations promulgated under
such Governmental Rule (or any successor Governmental Rule), and (iii)
shall mean such Governmental Rule (or successor Governmental Rule) and
such rules and regulations, as amended, modified, codified or reenacted
from time to time and in effect at any given time.
(d) References in this Agreement or any other Credit Document
to any Person in a particular capacity (i) shall include any permitted
successors to and assigns of such Person in that capacity and (ii)
shall exclude such Person individually or in any other capacity.
1.11. Other Interpretive Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement or any other
Credit Document shall refer to this Agreement or such other Credit Document, as
the case may be, as a whole and not to any particular provision of this
Agreement or such other Credit Document, as the case may be. The words "include"
and "including" and words of similar import when used in this Agreement or any
other Credit Document shall not be construed to be limiting or exclusive. In the
event of any inconsistency between the terms of this Agreement and the terms of
any other Credit Document, the terms of this Agreement shall govern.
<PAGE>
SECTION II. CREDIT FACILITIES.
2.01. U.S. Facility.
(a) Availability. Subject to the terms and conditions of this
Agreement, each U.S. Lender severally agrees to advance to NSE in a
single advance on or prior to the Commitment Termination Date a term
loan in Dollars under this Paragraph 2.01 (individually, a "U.S.
Loan"); provided, however, that:
(i) The principal amount of the U.S. Loan made by
each U.S. Lender shall not exceed its U.S. Commitment on such
date; and
(ii) The aggregate principal amount of the U.S.
Borrowing shall not exceed the Total U.S. Commitment.
The U.S. Loans shall be made on a pro rata basis by U.S. Lenders in
accordance with their respective U.S. Commitments. NSE may not reborrow
the principal amount of a U.S. Loan after repayment or prepayment
thereof.
(b) Notice of Borrowing. NSE shall request the U.S. Borrowing
by delivering to Agent an irrevocable written notice in the form of
Exhibit A, appropriately completed (a "Notice of U.S. Borrowing"),
which specifies, among other things:
(i) The principal amount of the U.S. Borrowing, which
shall be in the minimum amount of $10,000,000 or an integral
multiple of $1,000,000 in excess thereof;
(ii) (A) The Portion of the U.S. Borrowing which is
to be a Base Rate Portion and (B) the Portion(s) of the U.S.
Borrowing which is (are) to be a LIBOR Portion(s);
(iii) If any Portion of the U.S. Borrowing is
initially to be a LIBOR Portion, the initial Interest Period
selected by NSE for each such Portion in accordance with
Subparagraph 2.02(e); and
(iv) The U.S. Closing Date, which shall be a Business
Day not later than the Commitment Termination Date;
NSE shall give the Notice of U.S. Borrowing to Agent at least three (3)
Business Days before the U.S. Closing Date if any Portion of the U.S.
Borrowing is initially to be a LIBOR Portion and at least one (1)
Business Day before the U.S. Closing Date if the only Portion of the
U.S. Borrowing is initially to be a Base Rate Portion. The Notice of
U.S. Borrowing shall be delivered by first-class mail or facsimile to
Agent at the office or facsimile number and during the hours specified
in Paragraph 8.01; provided, however, that NSE shall promptly deliver
to Agent the original of the Notice of U.S. Borrowing if initially
delivered by facsimile. Agent shall promptly notify each U.S. Lender of
the contents of the Notice of U.S. Borrowing.
<PAGE>
(c) Interest Rates. NSE shall pay interest on the unpaid
principal amount of each U.S. Loan from the date of such U.S. Loan
until the maturity thereof, at the following rates per annum:
(i) During such periods as any Portion of such U.S.
Loan is a Base Rate Portion, at a rate per annum on such
Portion equal to the Base Rate plus the Applicable Margin
therefor, such rate to change from time to time as the
Applicable Margin or Base Rate shall change; and
(ii) During such periods as any Portion of such U.S.
Loan is a LIBOR Portion, at a rate per annum on such Portion
equal at all times during each Interest Period for such
Portion to the LIBO Rate for such Interest Period plus the
Applicable Margin therefor, such rate to change from time to
time as the Applicable Margin shall change.
Each Base Rate Portion of the U.S. Borrowing shall be in a minimum
amount of $5,000,000 or an integral multiple of $500,000 in excess
thereof and each LIBOR Portion of the U.S. Borrowing shall be in a
minimum amount of $10,000,000 or an integral multiple of $1,000,000 in
excess thereof. The number of LIBOR Portions in the U.S. Borrowing
shall not exceed four (4) at any time.
(d) Conversion of Portions. NSE may convert any Portion of the
U.S. Borrowing from one Type of Portion to another Type; provided,
however, that any conversion of a LIBOR Portion into a Base Rate
Portion shall be made on, and only on, the last day of an Interest
Period for such LIBOR Portion. NSE shall request such a conversion by
an irrevocable written notice to Agent in the form of Exhibit B,
appropriately completed (a "Notice of U.S. Borrowing Conversion"),
which specifies, among other things:
(i) The Portion of the U.S. Borrowing which is to be
converted;
(ii) The amount and Type of each Portion of the U.S.
Borrowing into which it is to be converted;
(iii) If any Portion of the U.S. Borrowing is to be
converted into a LIBOR Portion, the initial Interest Period
selected by NSE for such Portion in accordance with
Subparagraph 2.01(e); and
(iv) The date of the requested conversion, which
shall be a Business Day.
NSE shall give each Notice of U.S. Borrowing Conversion to Agent at
least three (3) Business Days before the date of the requested
conversion. Each Notice of U.S. Borrowing Conversion shall be delivered
by first-class mail or facsimile to Agent at the office or to the
facsimile number and during the hours specified in Paragraph 8.01;
provided, however, that NSE shall promptly deliver to Agent the
original of any Notice of U.S. Borrowing Conversion initially delivered
by facsimile. Agent shall promptly notify each U.S. Lender of the
contents of each Notice of U.S. Borrowing Conversion.
<PAGE>
(e) LIBOR Portion Interest Periods.
(i) The initial and each subsequent Interest Period
selected by NSE for a LIBOR Portion of the U.S. Borrowing
shall be one (1), two (2), three (3) or six (6) months;
provided, however, that (A) any Interest Period which would
otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day unless such next
Business Day falls in another calendar month, in which case
such Interest Period shall end on the immediately preceding
Business Day; (B) any Interest Period which begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month; (C) no Interest Period shall
end after a Scheduled Payment Date unless, after giving effect
to such Interest Period, the aggregate principal amount of the
Base Rate Portion and all LIBOR Portions having Interest
Periods ending on or prior to such Scheduled Payment Date
equals or exceeds the principal payment due on such Scheduled
Payment Date; and (D) no Interest Period shall end after the
Maturity Date.
(ii) NSE shall notify Agent by an irrevocable written
notice in the form of Exhibit C, appropriately completed (a
"Notice of U.S. Borrowing Interest Period Selection"), at
least three (3) Business Days prior to the last day of each
Interest Period for each LIBOR Portion of the U.S. Borrowing
of the Interest Period selected by NSE for the next succeeding
Interest Period for such Portion. Each Notice of U.S.
Borrowing Interest Period Selection shall be given to Agent by
first-class mail or facsimile to the office or the facsimile
number and during the hours specified in Paragraph 8.01;
provided, however, that NSE shall promptly deliver to Agent
the original of any Notice of U.S. Borrowing Interest Period
Selection initially delivered by facsimile. If NSE fails to
notify Agent of the next Interest Period for any LIBOR Portion
of the U.S. Borrowing in accordance with this Subparagraph
2.01(e), such Portion shall automatically convert to a Base
Rate Portion on the last day of the current Interest Period
therefor.
(f) Scheduled Payments. Unless the Maturity Date is extended
pursuant to Paragraph 2.03, NSE shall repay the principal amount of the
U.S. Borrowing in three (3) annual installments on the following dates
and in the following amounts:
March 31, 1999 27.77778% of the original principal amount of the U.S.
Borrowing;
March 31, 2000 27.77778% of the original principal amount of the U.S.
Borrowing;
Maturity Date 44.44444% of the original principal amount of the U.S.
Borrowing;
<PAGE>
Provided, however, that the principal payment due on the Maturity Date
shall be in the amount necessary to pay all remaining unpaid principal
on the U.S. Borrowing. NSE shall pay accrued interest on the unpaid
principal amount of each U.S. Loan in arrears (i) in the case of a Base
Rate Portion, on the last day in each March, June, September and
December (commencing with the first such day after the U.S. Closing
Date), (ii) in the case of a LIBOR Portion, on the last day of each
Interest Period (and if any such Interest Period is equal to or longer
than three (3) months, every three (3) months); and (iii) in the case
of all U.S. Loans, upon prepayment (to the extent thereof) and at
maturity.
(g) Purpose. NSE shall use the proceeds of the U.S. Borrowing
for general corporate purposes.
2.02. Japanese Facility.
(a) Availability. Subject to the terms and conditions of this
Agreement, each Japanese Lender severally agrees to advance to NSJ in a
single advance on or prior to the Commitment Termination Date a term
loan in Yen under this Paragraph 2.02 (individually, a "Japanese
Loan"); provided, however, that:
(i) The principal amount of the Japanese Loan made by
each Japanese Lender shall not exceed its Japanese Commitment
on such date; and
(ii) The aggregate principal amount of the Japanese
Borrowing shall not exceed the Total Japanese Commitment.
The Japanese Loans shall be made on a pro rata basis by Japanese
Lenders in accordance with their respective Japanese Commitments. NSJ
may not reborrow the principal amount of a Japanese Loan after
repayment or prepayment thereof.
(b) Notice of Borrowing. NSJ shall request the Japanese
Borrowing by delivering to Agent an irrevocable written notice in the
form of Exhibit D, appropriately completed (a "Notice of Japanese
Borrowing"), which specifies, among other things:
(i) The principal amount of the Japanese Borrowing,
which shall be in the minimum amount of (Y)1,000,000,000 or an
integral multiple of (Y)1,000,000,000 in excess thereof;
(ii) The Portions into which the Japanese Borrowing
is to be divided if the Japanese Borrowing is initially to
consist of more than one Portion;
(iii) The initial Interest Period selected by NSJ for
each Portion of the Japanese Borrowing in accordance with
Subparagraph 2.02(d); and
(iv) The Japanese Closing Date, which shall be a
Business Day not later than the Commitment Termination Date.
<PAGE>
NSJ shall give the Notice of Japanese Borrowing to Agent at least four
(4) Business Days before the Japanese Closing Date. The Notice of
Japanese Borrowing shall be delivered by first-class mail or facsimile
to Agent at the office or facsimile number and during the hours
specified in Paragraph 8.01; provided, however, that NSJ shall promptly
deliver to Agent the original of the Notice of Japanese Borrowing if
initially delivered by facsimile. Agent shall promptly notify each
Japanese Lender of the contents of the Notice of Japanese Borrowing.
(c) Interest Rates. NSJ shall pay interest on the unpaid
principal amount of each Portion of each Japanese Loan from the date of
such Japanese Loan until the maturity thereof, at a rate per annum on
such Portion equal at all times during each Interest Period for such
Portion to the TIBO Rate for such Interest Period plus the Applicable
Margin therefor, such rate to change from time to time as the
Applicable Margin shall change. Each Portion of the Japanese Borrowing
shall be in the minimum amount of (Y)1,000,000,000 or an integral
multiple of (Y)1,000,000,000 in excess thereof. The number of Portions
in the Japanese Borrowing shall not exceed four (4) at any time.
(d) Japanese Borrowing Interest Periods.
(i) The initial and each subsequent Interest Period
selected by NSJ for a Portion of the Japanese Borrowing shall
be one (1), two (2), three (3) or six (6) months; provided,
however, that (A) any Interest Period which would otherwise
end on a day which is not a Business Day shall be extended to
the next succeeding Business Day unless such next Business Day
falls in another calendar month, in which case such Interest
Period shall end on the immediately preceding Business Day;
(B) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
a calendar month; (C) no Interest Period shall end after a
Scheduled Payment Date unless, after giving effect to such
Interest Period, the aggregate principal amount of and all
Portions having Interest Periods ending on or prior to such
Scheduled Payment Date equals or exceeds the principal payment
due on such Scheduled Payment Date; and (D) no Interest Period
shall end after the Maturity Date.
(ii) NSJ shall notify Agent by an irrevocable written
notice in the form of Exhibit E, appropriately completed (a
"Notice of Japanese Borrowing Interest Period Selection"), at
least four (4) Business Days prior to the last day of each
Interest Period for each Portion of the Japanese Borrowing of
the Interest Period selected by NSJ for the next succeeding
Interest Period for such Portion. Each Notice of Japanese
Borrowing Interest Period Selection shall be given to Agent by
first-class mail or facsimile to the office or the facsimile
number and during the hours specified in Paragraph 8.01;
provided, however, that NSJ shall promptly deliver to Agent
the original of any Notice of Japanese Borrowing Interest
Period Selection initially delivered by facsimile. If NSJ
fails to notify Agent of the next Interest Period for any
Portion of the Japanese Borrowing in accordance with this
Subparagraph 2.02(d), such Portion shall automatically have an
Interest Period of one (1) month following the current
Interest Period.
<PAGE>
(e) Scheduled Payments. Unless the Maturity Date is extended
pursuant to Paragraph 2.03, NSJ shall repay the principal amount of the
Japanese Borrowing in three (3) annual installments on the following
dates and in the following amounts:
March 31, 1999 27.77778% of the original principal amount of the
Japanese Borrowing;
March 31, 2000 27.77778% of the original principal amount of the
Japanese Borrowing;
Maturity Date 44.44444% of the original principal amount of the
Japanese Borrowing;
Provided, however, that the principal payment due on the Maturity Date
shall be in the amount necessary to pay all remaining unpaid principal
on the Japanese Borrowing. NSJ shall pay accrued interest on the unpaid
principal amount of each Japanese Loan in arrears on the last day of
each Interest Period (and if any such Interest Period is equal to or
longer than three (3) months, every three (3) months), upon prepayment
(to the extent thereof) and at maturity.
(f) Purpose. NSJ shall use the proceeds of the Japanese
Borrowing for its general corporate needs.
2.03. Maturity Date Extension.
(a) Extension Requests. On or before the last Business Day
which is sixty (60) days prior to the Maturity Date, Borrowers may
request Lenders to extend the Maturity Date for an additional two-year
period. Borrowers shall request such an extension by appropriately
completing, executing and delivering to Agent a written request in the
form of Exhibit F (an "Extension Request"). The Extension Request shall
be given to Agent by first-class mail or facsimile to the office or the
facsimile number and during the hours specified in Paragraph 8.01;
provided, however, that Borrowers shall promptly deliver to Agent the
original of the Extension Request if initially delivered by facsimile.
Agent shall promptly deliver to each Lender three (3) copies of any
Extension Request received by Agent.
(b) Lender Approval. Borrowers understand that this Paragraph
2.03 is included in this Agreement for Borrowers' convenience in
requesting an extension and acknowledge that neither Agent nor any
Lender has promised (either expressly or implicitly), or has any
obligation or commitment, to extend the Maturity Date at any time. If a
Lender, in its sole and absolute discretion, consents to an Extension
Request, such Lender shall evidence such consent by executing and
returning two (2) copies of the Extension Request to Agent not later
than the last Business Day which is thirty-five (35) days prior to the
Maturity Date. Any failure by any Lender so to execute and return an
Extension Request shall be deemed a denial thereof.
<PAGE>
(c) Notice of Lender Action. If Borrowers deliver an Extension
Request to Agent pursuant to Subparagraph 2.03(a), then not later than
the last Business Day which is thirty (30) days prior to the Maturity
Date, Agent shall notify Borrowers and Lenders in writing of (i) the
Lenders that have consented to such Extension Request by returning to
Agent executed copies of such Extension Request and (ii) the Lenders
that have not. Agent shall deliver to Borrowers with any such notice, a
copy of each executed Extension Request returned to Agent by a Lender.
(d) Effect of Lender Action.
(i) If all Lenders consent to an Extension Request
pursuant to Subparagraph 2.03(b), this Agreement shall be
deemed amended as provided in clause (iv) below and each
Lender shall remain a Lender under this Agreement (as so
amended).
(ii) If none of the Lenders consent to an Extension
Request, the Maturity Date shall remain unchanged.
(iii) If some but not all of the Lenders consent to
an Extension Request,
(A) Each Borrower shall pay to each
applicable non-consenting Lender, on the current
Maturity Date, all amounts payable to such Lender on
such date, and
(B) Subject to such payments, (1) each
non-consenting Lender shall cease to be a Lender
hereunder after such date, (2) this Agreement shall
be deemed amended as provided in clause (iv) below
and (3) each consenting Lender shall continue to be a
Lender under this Agreement (as so amended) after
such date;
Provided, however, that
(y) If any consenting U.S. Lender shall so
request, a non-consenting U.S. Lender shall assign to
such consenting U.S. Lender pursuant to Subparagraph
8.05(c), effective on the current Maturity Date, such
non-consenting U.S. Lender's U.S. Loan, subject to
the payment to such non-consenting U.S. Lender on
such date (I) by such consenting U.S. Lender of a
purchase price for such Loan equal to the outstanding
principal amount thereof on such date and (II) by NSE
of all other amounts payable by NSE to such
non-consenting U.S. Lender on such date; and
(z) If any consenting Japanese Lender shall
so request, a non-consenting Japanese Lender shall
assign to such consenting Japanese Lender pursuant to
Subparagraph 8.05(c), effective on the current
Maturity Date, such non-consenting Japanese Lender's
Japanese Loan, subject to the payment to such
non-consenting Japanese Lender on such date (I) by
such consenting Japanese Lender of a purchase price
for such Loan equal to the outstanding principal
amount thereof on such date and (II) by NSJ of all
other amounts payable by NSJ to such non-consenting
U.S. Lender on such date.
<PAGE>
(iv) If all or some of the Lenders consent to an
Extension Request pursuant to Subparagraph 2.03(b), this
Agreement shall be deemed amended on the current Maturity Date
as follows:
(A) The definition of "Maturity Date" set
forth in Paragraph 1.01 shall be amended to read in
its entirety as follows:
"Maturity Date" shall mean March 31, 2003.
(B) The payment schedule set forth in
Subparagraph 2.01(f) shall be amended to read in its
entirety as follows:
March 31, 1999 27.77778% of the original principal amount
of the U.S. Borrowing;
March 31, 2000 27.77778% of the original principal amount
of the U.S. Borrowing;
March 31, 2001 22.22222% of the original principal amount
of the U.S. Borrowing;
March 31, 2002 11.11111% of the original principal amount
of the U.S. Borrowing;
Maturity Date 11.11111% of the original principal amount
of the U.S. Borrowing;
(C) The payment schedule set forth in
Subparagraph 2.02(e) shall be amended to read in its
entirety as follows:
March 31, 1999 27.77778% of the original principal amount
of the Japanese Borrowing;
March 31, 2000 27.77778% of the original principal amount
of the Japanese Borrowing;
March 31, 2001 22.22222% of the original principal amount
of the Japanese Borrowing;
March 31, 2002 11.11111% of the original principal amount
of the Japanese Borrowing;
Maturity Date 11.11111% of the original principal amount
of the Japanese Borrowing;
<PAGE>
2.04. Fees.
(a) Agent's Fee. Borrowers shall pay to Agent, for its own
account, agent's fees and other compensation in the amounts and at the
times set forth in the Agent's Fee Letter.
(b) Commitment Fees.
(i) NSE shall pay to Agent, for the ratable benefit
of U.S. Lenders as provided in clause (iii) of Subparagraph
2.09(a), commitment fees (the "U.S. Commitment Fees") of
one-fourth of one percent (0.25%) per annum on the unused
Total U.S. Commitment for the period beginning on the date of
this Agreement and ending on the earlier of the U.S. Closing
Date and the Commitment Termination Date. NSE shall pay the
U.S. Commitment Fees in arrears on the earlier of the U.S.
Closing Date and the Commitment Termination Date.
(ii) NSJ shall pay to Agent, for the ratable benefit
of Japanese Lenders as provided in clause (iv) of Subparagraph
2.09(a), commitment fees (the "Japanese Commitment Fees") of
one-fourth of one percent (0.25%) per annum on the unused
Total Japanese Commitment for the period beginning on the date
of this Agreement and ending on the earlier of the Japanese
Closing Date and the Commitment Termination Date. NSJ shall
pay the Japanese Commitment Fees in arrears on the earlier of
the Japanese Closing Date and the Commitment Termination Date.
2.05. Prepayments.
(a) Terms of all Prepayments. Upon the prepayment of any
Portion of either Borrowing (whether such prepayment is an optional
prepayment under Subparagraph 2.05(b) or a mandatory prepayment
required by any provision of this Agreement or the other Credit
Documents, including a prepayment upon acceleration), the Borrower
making such prepayment shall pay to the applicable Lenders (i) all
accrued interest to the date of such prepayment on the amount prepaid
and (ii) if such prepayment is the prepayment of a LIBOR Portion of the
U.S. Borrowing or the prepayment of any Portion of the Japanese
Borrowing on a day other than the last day of an Interest Period for
such Portion, all amounts payable to such Lenders pursuant to Paragraph
2.12.
(b) Optional Prepayments. At its option, NSE may, upon one (1)
Business Day notice to Agent in the case of a Base Rate Portion of the
U.S. Borrowing or three (3) Business Days notice to Agent in the case
of a LIBOR Portion of the U.S. Borrowing, prepay the U.S. Borrowing in
part, in an aggregate principal amount of $5,000,000 or more, or in
whole. At its option, NSJ may, upon four(4) Business Days notice to
Agent, prepay the Japanese Borrowing in part, in an aggregate principal
amount of (Y)1,000,000,000 or more, or in whole.
(c) Application of Prepayments. All prepayments which are
applied to reduce the principal amount of either Borrowing shall reduce
the aggregate principal amount payable by the applicable Borrower on
the then remaining Scheduled Payment Dates in inverse order commencing
with the Maturity Date. Without modifying the order of application of
prepayments set forth in the preceding sentence, all such prepayments
of the U.S. Borrowing shall, to the extent possible, be first applied
to prepay the Base Rate Portion, if any, and then if any funds remain,
to prepay LIBOR Portions.
<PAGE>
2.06. Other Payment Terms.
(a) Place and Manner.
(i) NSE shall make all payments due to each U.S.
Lender or Agent related to U.S. Loans by payments to Agent at
Agent's New York office located at the address specified in
Paragraph 8.01, with each such payment due to a U.S. Lender to
be for the account of such Lender and such Lender's applicable
Domestic Lending Office or Euro-Dollar Lending Office.
(ii) NSJ shall make all payments due to each Japanese
Lender or Agent related to Japanese Loans by payments to Agent
at Agent's Tokyo office located at the address specified in
Paragraph 8.01, with each such payment due to a Japanese
Lender to be for the account of such Lender and such Lender's
Japanese Lending Office.
(iii) Borrowers shall, unless otherwise directed by
Agent, make all other payments due to each Lender or Agent
hereunder by payments to Agent's New York office located at
the address specified in Paragraph 8.01, with each such
payment due to a Lender to be for the account of such Lender
and such Lender's Applicable Lending Office.
(iv) Borrower shall make all payments hereunder in
the lawful currency required by Subparagraph 2.06(c) and in
same day or immediately available funds and without deduction
or offset not later than 11:00 a.m. (New York time, in the
case of any payment to be made to Agent's New York office, or
Tokyo time, in the case of any payment to be made to Agent's
Tokyo office) and on the date due. Agent shall promptly
disburse to each Lender each payment received by Agent for the
account of such Lender.
(b) Date. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included
in the computation of interest or fees, as the case may be.
(c) Currency of Payment.
(i) NSE shall pay principal of, interest on and all
other amounts related to U.S. Loans in Dollars, and NSJ shall
pay principal of, interest on and all other amounts related to
Japanese Loans in Yen. Borrowers shall pay all other amounts
payable under this Agreement and the other Credit Documents in
Dollars. If, for any reason, NSJ is prohibited by any
Governmental Rule from making any required Yen payment
hereunder in Yen, NSJ shall make such payment in Dollars in
the Dollar Equivalent of such Yen amount.
<PAGE>
(ii) If any amounts required to be paid by Borrowers
under this Agreement, any other Credit Document or any order,
judgment or award given or rendered in relation hereto or
thereto has to be converted from the currency (the "first
currency") in which the same is payable hereunder or
thereunder into another currency (the "second currency") for
the purpose of (A) making or filing a claim or proof against
Borrowers with any Governmental Authority, (B) obtaining an
order or judgment in any court or other tribunal or (C)
enforcing any order or judgment given or made in relation
hereto, Borrowers shall, to the fullest extent permitted by
law, indemnify and hold harmless each of the Persons to whom
such amounts are payable from and against any loss suffered as
a result of any discrepancy between (1) the rate of exchange
used for such purpose to convert the amounts in question from
the first currency into the second currency and (2) the rate
or rates of exchange at which such Person may, using
reasonable efforts in the ordinary course of business,
purchase the first currency with the second currency upon
receipt of a sum paid to it in satisfaction, in whole or in
part, of any such order, judgment, claim or proof. The
foregoing indemnity shall constitute a separate obligation of
Borrowers distinct from their other obligations hereunder and
shall survive the giving or making of any judgment or order in
relation to all or any of such obligations. The obligations of
Borrowers under this Subparagraph 2.06(c) shall survive the
payment and performance of the Obligations and the termination
of this Agreement.
(d) Late Payments. If any amount required to be paid by either
Borrower under this Agreement or the other Credit Documents (including,
without limitation, principal or interest payable on any Loan, any fees
or any other amount) remains unpaid after such amount is due, such
Borrower shall pay interest on the aggregate, outstanding balance of
such amount from the date due until such amount is paid in full at a
per annum rate equal to (i) in the case any amount payable in Dollars,
the Base Rate plus two percent (2.00%), such rate to change from time
to time as the Base Rate shall change, and (ii) in the case of any
amount payable in Yen, the Overnight Rate for such amount plus three
percent (3.00%), such rate to change from time to time as the Overnight
Rate shall change.
(e) Application of Payments. All payments hereunder shall be
applied first to unpaid fees, costs and expenses then due and payable
under this Agreement or the other Credit Documents, second to accrued
interest then due and payable under this Agreement or the other Credit
Documents and finally to reduce the principal amount of outstanding
Loans.
(f) Failure to Pay Agent. Unless Agent shall have received
notice from a Borrower at least one (1) Business Day prior to the date
on which any payment is due to Lenders hereunder that such Borrower
will not make such payment in full, Agent shall be entitled to assume
that such Borrower has made or will make such payment in full to Agent
on such date and Agent may, in reliance upon such assumption, cause to
be paid to the applicable Lenders on such due date an amount equal to
<PAGE>
the amount then due such Lenders. If and to the extent such Borrower
shall not have so made such payment in full to Agent, each such Lender
shall repay to Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day from the date
such amount is distributed to such Lender until the date such Lender
repays such amount to Agent, at a per annum rate equal to (i) the
Federal Funds Rate for the first three (3) days and the Base Rate
thereafter for any amount in Dollars or (ii) the Overnight Rate for the
first three (3) days and the Overnight Rate plus one percent (1%)
thereafter for any amount in Yen. A certificate of Agent submitted to
any Lender with respect to any amount owing by such Lender under this
Subparagraph 2.06(e) shall constitute prima facie evidence of such
amount.
2.07. Loan Accounts; Notes.
(a) Loan Accounts. The obligation of each Borrower to repay
the Loans made to it by each Lender and to pay interest thereon at the
rates provided herein shall be evidenced by an account or accounts
maintained by such Lender on its books (individually, a "Loan
Account"), except that any Lender may request that its U.S. Loans be
evidenced by a note or notes pursuant to Subparagraph 2.07(b). Each
Lender shall record in its Loan Accounts (i) the date and amount of
each Loan made by such Lender, (ii) the interest rates applicable to
each such Loan and each Portion thereof and the effective dates of all
changes thereto, (iii) the Interest Period for each LIBOR Portion and
each Portion of a Japanese Loan, (iv) the date and amount of each
principal and interest payment on each Loan and Portion and (v) such
other information as such Lender may determine is necessary for the
computation of principal and interest payable to it by each Borrower
hereunder; provided, however, that any failure by a Lender to make, or
any error by any Lender in making, any such notation shall not affect
Borrowers' Obligations hereunder. The Loan Accounts shall constitute
prima facie evidence of the matters noted therein.
(b) Notes. If any Lender so requests, such Lender's U.S. Loans
shall be evidenced by a promissory note in the form of Exhibit G
(individually, a "Note"), each of which shall be (i) payable to the
order of such Lender, (ii) in the amount of such Lender's U.S. Loan,
(iii) dated the U.S. Closing Date, and (iv) otherwise appropriately
completed.
<PAGE>
2.08. Loan Funding.
(a) Lender Funding and Disbursements to Borrowers.
(i) Each U.S. Lender shall, before 11:00 a.m. (New
York time) on the U.S. Closing Date, make available to Agent
at Agent's New York office specified in Paragraph 8.01, in
immediately available funds, such Lender's Proportionate Share
of the U.S. Borrowing. After Agent's receipt of such funds and
upon satisfaction of the applicable conditions set forth in
Section III, Agent shall promptly disburse such funds to NSE
no later than 1:00 p.m. (New York time) in immediately
available funds. Agent shall disburse the proceeds of the U.S.
Borrowing as directed by NSE in the Notice of U.S. Borrowing.
(ii) Each Japanese Lender shall, before 10:00 a.m.
(Tokyo time) on the Japanese Closing Date, make available to
Agent at Agent's Tokyo office specified in Paragraph 8.01, in
immediately available funds, such Lender's Proportionate Share
of the Japanese Borrowing. After Agent's receipt of such funds
and upon satisfaction of the applicable conditions set forth
in Section III, Agent shall promptly disburse such funds to
NSJ no later than 1:00 p.m. (Tokyo time) in immediately
available funds. Agent shall disburse the proceeds of the
Japanese Borrowing as directed by NSJ in the Notice of
Japanese Borrowing.
(b) Lender Failure to Fund. Unless Agent shall have received
notice from a Lender prior to the date of either Borrowing that such
Lender will not make available to Agent such Lender's Proportionate
Share of such Borrowing, Agent shall be entitled to assume that such
Lender has made or will make such portion available to Agent on the
date of such Borrowing in accordance with Subparagraph 2.08(a), and
Agent may on such date, in reliance upon such assumption, disburse or
otherwise credit to Borrower a corresponding amount. If any Lender does
not make the amount of its Proportionate Share of either Borrowing
available to Agent on or prior to the date of such Borrowing, such
Lender shall pay to Agent, on demand, interest which shall accrue on
such amount from the date of such Borrowing until such amount is paid
to Agent at rates equal to (i) the Federal Funds Rate for the first
three (3) days and the Base Rate thereafter for any amount in Dollars
or (ii) the Overnight Rate plus one percent (1%) for any amount in Yen.
A certificate of Agent submitted to any Lender with respect to any
amount owing by such Lender under this Subparagraph 2.08(b) shall
constitute prima facie evidence of such amount. If the amount of any
Lender's Proportionate Share of either Borrowing is not paid to Agent
by such Lender within three (3) Business Days after the date of such
Borrowing, the applicable Borrower shall repay such amount to Agent, on
demand, together with interest thereon, for each day from the date such
amount was disbursed to such Borrower until the date such amount is
repaid to Agent, at the interest rate applicable at the time to the
Loans comprising such Borrowing.
(c) Lenders' Obligations Several. The failure of any Lender to
make the Loan to be made by it as part of either Borrowing shall not
relieve any other Lender of its obligation hereunder to make its Loan
as part of such Borrowing, but no Lender shall be obligated in any way
to make any Loan which another Lender has failed or refused to make or
otherwise be in any way responsible for the failure or refusal of any
other Lender to make any Loan required to be made by such other Lender.
<PAGE>
2.09. Pro Rata Treatment.
(a) Borrowings, Commitment Reductions, Etc. Except as
otherwise provided herein:
(i) The U.S. Borrowing shall be made by U.S. Lenders
pro rata according to their applicable respective U.S.
Commitments, and the Japanese Borrowing shall be made by
Japanese Lenders pro rata according to their applicable
respective Japanese Commitments;
(ii) Each payment of interest on Loans in either
Borrowing shall be shared among Lenders which made or funded
the Loans in such Borrowing pro rata according to (A) the
respective unpaid principal amounts of such Loans so made or
funded by such Lenders and (B) the dates on which such Lenders
so made or funded such Loans;
(iii) Each payment of U.S. Commitment Fees shall be
shared among U.S. Lenders (except for Defaulting Lenders) pro
rata according to (A) their respective Proportionate Shares of
the U.S. Facility and (B) in the case of each U.S. Lender
which becomes a U.S. Lender hereunder after the date hereof
and before the U.S. Closing Date, the date upon which such
U.S. Lender so became a U.S. Lender;
(iv) Each payment of Japanese Commitment Fees shall
be shared among Japanese Lenders (except for Defaulting
Lenders) pro rata according to (A) their respective
Proportionate Shares of the Japanese Facility and (B) in the
case of each Japanese Lender which becomes a Japanese Lender
hereunder after the date hereof and before the Japanese
Closing Date, the date upon which such Japanese Lender so
became a Japanese Lender;
(v) Each payment of interest (other than interest on
Loans) shall be shared among Lenders and Agent owed the amount
upon which such interest accrues pro rata according to (A) the
respective amounts so owed such Lenders and Agent and (B) the
dates on which such amounts became owing to such Lenders and
Agent; and
(vi) All other payments under this Agreement and the
other Credit Documents shall be for the benefit of the Person
or Persons specified.
(b) Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any
right of setoff, or otherwise) on account of the Loan owed to it as
part of either Borrowing in excess of its ratable share of payments on
account of all Loans in such Borrowing obtained by all applicable
Lenders entitled to such payments, such Lender shall forthwith purchase
from such other Lenders such participations in their Loans as shall be
necessary to cause such purchasing Lender to share the excess payment
<PAGE>
ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase shall be rescinded and each other
applicable Lender shall repay to the purchasing Lender the purchase
price to the extent of such recovery together with an amount equal to
such other Lender's ratable share (according to the proportion of (i)
the amount of such other Lender's required repayment to (ii) the total
amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the
total amount so recovered. Each Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this
Subparagraph 2.09(b) may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Lender were the
direct creditor of such Borrower in the amount of such participation.
2.10. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the first
day of any Interest Period for any LIBOR Portion of the U.S. Borrowing
or any Portion of the Japanese Borrowing, (i) any U.S. Lender or
Japanese Lender, as the case may be, shall advise Agent that the LIBO
Rate or TIBO Rate, as the case may be, for such Interest Period cannot
be adequately and reasonably determined due to the unavailability of
funds in or other circumstances affecting the London interbank market
or the Tokyo interbank market, as the case may be, or (ii) any U.S.
Lender or Japanese Lender, as the case may be, shall advise Agent that
the rate of interest for such Portion does not adequately and fairly
reflect the cost to such Lender of making or maintaining such Portion,
Agent shall immediately give notice of such condition to the applicable
Borrower and the other U.S. Lenders or Japanese Lenders, as the case
may be. After the giving of any such notice and until Agent shall
otherwise notify the applicable Borrower that the circumstances giving
rise to such condition no longer exist, such Borrower's right to
obtain, continue or convert to Portions of the affected Type shall be
suspended. Any LIBOR Portions outstanding at the commencement of any
such suspension affecting the LIBO Rate shall be converted at the end
of the then current Interest Period for such Portions into Base Rate
Portions unless such suspension has then ended. All Portions of the
Japanese Borrowing outstanding at the commencement of any such
suspension affecting the TIBO Rate shall bear interest at the Overnight
Rate plus one percent (1.0%), such rate to change from time to time as
the Overnight Rate shall change, until such suspension has ended.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by any Lender with any request or directive (whether or
not having the force of law) of any Governmental Authority (a "Change
of Law") shall make it unlawful or impossible for any U.S. Lender to
make or maintain any LIBOR Portion or any Japanese Lender to make or
maintain its Japanese Loan, such Lender shall immediately notify Agent
and the applicable Borrower of such Change of Law. Upon receipt of such
notice, (i) such Borrower's right to obtain, continue or convert to
Portions of the affected Type shall be suspended until such time as
Agent shall notify such Borrower and the applicable Lenders that the
circumstances giving rise to such suspension no longer exist, and (ii)
such Borrower shall, if so requested by such Lender, immediately repay
such Portions if such Lender shall notify such Borrower that such
Lender may not lawfully continue to fund and maintain such Portions.
Any conversion or prepayment of Portions made pursuant to the preceding
sentence prior to the last day of an Interest Period for such Portions
shall be deemed a prepayment thereof for purposes of Paragraph 2.12.
<PAGE>
(c) Increased Costs. If, after the date of this Agreement, any
Change of Law:
(i) Shall subject any U.S. Lender or Japanese Lender
to any tax, duty or other charge with respect to any LIBOR
Portion or its Japanese Loan, as the case may be, or shall
change the basis of taxation of payments by either Borrower to
any such Lender on such a LIBOR Portion or its Japanese Loan,
as the case may be, or in respect to such a LIBOR Portion or
its Japanese Loan, as the case may be, under this Agreement
(except for changes in the rate of taxation on the overall net
income of such Lender imposed by its jurisdiction of
incorporation or the jurisdiction of its Applicable Lending
Office); or
(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve to
the extent included in the calculation of the LIBO Rate or
TIBO Rate for any Loans or Portions), special deposit or
similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans by, or
any other acquisition of funds by any Lender for any LIBOR
Portion or its Japanese Loan; or
(iii) Shall impose on any Lender any other condition
related to any LIBOR Portion or its Japanese Loan or such
Lender's Commitments;
And the effect of any of the foregoing is to increase the cost to such
Lender of making, continuing or maintaining any such LIBOR Portion, its
Japanese Loan or its Commitments or to reduce any amount receivable by
such Lender hereunder; then the Borrowers shall from time to time,
within ten (10) Business Days after demand by such Lender, pay to such
Lender additional amounts sufficient to reimburse such Lender for such
increased costs or to compensate such Lender for such reduced amounts;
provided, however, that Borrowers shall have no obligation to make any
payment to any demanding party under this Subparagraph 2.10(c) on
account of any such increased costs or reduced amounts unless Borrowers
receive notice of such increased costs or reduced amounts from the
demanding party within six (6) months after they are incurred or
realized. A certificate setting forth in reasonable detail the amount
of such increased costs or reduced amounts, submitted by such Lender to
Borrowers shall constitute prima facie evidence of such costs or
amounts. The obligations of Borrowers under this Subparagraph 2.10(c)
shall survive the payment and performance of the Obligations and the
termination of this Agreement.
<PAGE>
(d) Capital Requirements. If, after the date of this
Agreement, any Lender determines that (i) any Change of Law affects the
amount of capital required or expected to be maintained by such Lender
or any Person controlling such Lender (a "Capital Adequacy
Requirement") and (ii) the amount of capital maintained by such Lender
or such Person which is attributable to or based upon the Loans, the
Commitments or this Agreement must be increased as a result of such
Capital Adequacy Requirement (taking into account such Lender's or such
Person's policies with respect to capital adequacy), Borrowers shall
pay to such Lender or such Person, within ten (10) Business Days after
demand of such Lender, such amounts as such Lender or such Person shall
determine are necessary to compensate such Lender or such Person for
the increased costs to such Lender or such Person of such increased
capital; provided, however, that Borrowers shall have no obligation to
make any payment to any demanding party under this Subparagraph 2.10(d)
on account of any such increased costs unless Borrowers receive notice
of such increased costs from the demanding party within twelve (12)
months after they are incurred or realized. A certificate setting forth
in reasonable detail the amount of such increased costs, submitted by
any Lender to Borrowers shall constitute prima facie evidence of such
costs.. The obligations of Borrowers under this Subparagraph 2.10(d)
shall survive the payment and performance of the Obligations and the
termination of this Agreement.
(e) Mitigation. Any Lender which becomes aware of (i) any
Change of Law which will make it unlawful or impossible for such Lender
to make or maintain any LIBOR Portion or its Japanese Loan or (ii) any
Change of Law or other event or condition which will obligate Borrowers
to pay any amount pursuant to Subparagraph 2.10(c) or Subparagraph
2.10(d) shall notify Borrowers and Agent thereof as promptly as
practical. If any Lender has given notice of any such Change of Law or
other event or condition and thereafter becomes aware that such Change
of Law or other event or condition has ceased to exist, such Lender
shall notify Borrowers and Agent thereof as promptly as practical. Each
Lender affected by any Change of Law which makes it unlawful or
impossible for such Lender to make or maintain any LIBOR Portion or its
Japanese Loan or to which Borrowers are obligated to pay any amount
pursuant to Subparagraph 2.10(c) or Subparagraph 2.10(d) shall use
reasonable commercial efforts (including changing the jurisdiction of
its Applicable Lending Offices) to avoid the effect of such Change of
Law or to avoid or materially reduce any amounts which Borrowers are
obligated to pay pursuant to Subparagraph 2.10(c) or Subparagraph
2.10(d) if, in the reasonable opinion of such Lender, such efforts
would not be disadvantageous to such Lender or contrary to such
Lender's normal banking practices.
2.11. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Borrowers
under this Agreement and the other Credit Documents shall be made free
and clear of, and without deduction or withholding for or on account
of, all present and future income, stamp, documentary and other taxes
and duties, and all other levies, imposts, charges, fees, deductions
and withholdings, now or hereafter imposed, levied, collected, withheld
or assessed by any Governmental Authority (except net income taxes and
franchise taxes in lieu of net income taxes imposed on Agent or any
Lender by its jurisdiction of incorporation or the jurisdiction in
<PAGE>
which its Applicable Lending Office is located) (all such non-excluded
taxes, duties, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable to Agent or any Lender
hereunder or under the other Credit Documents, the amounts so payable
to Agent or such Lender shall be increased to the extent necessary to
yield to Agent or such Lender (after payment of all Taxes) interest or
any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the other Credit Documents. Whenever
any Taxes are payable by Borrowers, as promptly as possible thereafter,
Borrowers shall send to Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original
official receipt received by Borrowers showing payment thereof. If
Borrowers fail to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Agent the required receipts or other
required documentary evidence, Borrowers shall indemnify Agent and
Lenders for any taxes (including interest or penalties) that may become
payable by Agent or any Lender as a result of any such failure. The
obligations of Borrowers under this Subparagraph 2.11(a) shall survive
the payment and performance of the Obligations and the termination of
this Agreement.
(b) Withholding Exemption Certificates. On or prior to the
applicable Closing Date, each U.S. Lender which is not organized under
the laws of the United States of America or a state thereof and each
Japanese Lender which is not organized under the laws of Japan shall
deliver to NSE and NSJ, respectively, and Agent such certificates and
other evidence as such Borrower or Agent may reasonably request to
establish that such Lender is entitled to receive payments under this
Agreement on account of the U.S. Borrowing or Japanese Borrowing, as
the case may be, without deduction or withholding of any United States
federal income taxes or Japanese income taxes, respectively. Each such
Lender further agrees (i) promptly to notify the applicable Borrower
and Agent of any change of circumstances (including any change in any
treaty, law or regulation) which would prevent such Lender from
receiving payments hereunder without any deduction or withholding of
such taxes and (ii) on or before the date that any certificate or other
form delivered by such Lender under this Subparagraph 2.11(b) expires
or becomes obsolete or after the occurrence of any event requiring a
change in the most recent such certificate or form previously delivered
by such Lender, to deliver to the applicable Borrower and Agent a new
certificate or form, certifying that such Lender is entitled to receive
payments under this Agreement without deduction or such taxes. If any
Lender fails to provide to Borrowers or Agent pursuant to this
Subparagraph 2.11(b) (or, in the case of an Assignee Lender,
Subparagraph 8.05(c)) any certificates or other evidence required by
such provision to establish that such Lender is, at the time it becomes
a Lender hereunder, entitled to receive payments under this Agreement
on account of the U.S. Borrowing or Japanese Borrowing, as the case may
be, without deduction or withholding of any United States federal
income taxes or Japanese income taxes, respectively, such Lender shall
not be entitled to any indemnification under Subparagraph 2.11(a) for
any Taxes imposed on such Lender primarily as a result of such failure.
<PAGE>
(c) Mitigation. If Agent or any Lender claims any additional
amounts to be payable to it pursuant to this Paragraph 2.11, such
Person shall use reasonable commercial efforts to file any certificate
or document requested in writing by the applicable Borrower reflecting
a reduced rate of withholding or to change the jurisdiction of its
Applicable Lending Office if the making of such a filing or such change
in the jurisdiction of its Applicable Lending Office would avoid the
need for or materially reduce the amount of any such additional amounts
which may thereafter accrue and if, in the reasonable opinion of such
Person, in the case of a change in the jurisdiction of its Applicable
Lending Office, such change would not be disadvantageous to such Person
or contrary to such Person's normal banking practices.
(d) Tax Returns. Nothing contained in this Paragraph 2.11
shall require Agent or any Lender to make available any of its tax
returns (or any other information relating to its taxes which it deems
to be confidential).
2.12. Funding Loss Indemnification. If either Borrower shall (a) repay, prepay
or convert any LIBOR Portion of the U.S. Borrowing or any Portion of the
Japanese Borrowing on any day other than the last day of an Interest Period
therefor (whether a scheduled payment, an optional prepayment or conversion, a
mandatory prepayment or conversion, a payment upon acceleration or otherwise),
(b) fail to borrow any LIBOR Portion of the U.S. Borrowing or any Portion of the
Japanese Borrowing after delivering the Notices of Borrowing therefor to Agent
(whether as a result of the failure to satisfy any applicable conditions or
otherwise) or (c) fail to convert any Portion of the U.S. Borrowing into a LIBOR
Portion in accordance with a Notice of U.S. Borrowing Conversion delivered to
Agent (whether as a result of the failure to satisfy any applicable conditions
or otherwise), such Borrower shall, within ten (10) Business Days after demand
of such Lender, reimburse such Lender for and hold such Lender harmless from all
reasonable costs and losses incurred by such Lender as a result of such
repayment, prepayment, conversion or failure; provided, however, that Borrowers
shall have no obligation to make any payment to any demanding party under this
Paragraph 2.12 on account of any such costs or losses unless Borrowers receive
notice of such costs or losses from the demanding party within six (6) months
after they are incurred or realized. Borrowers understand that such costs and
losses may include, without limitation, losses incurred by a Lender as a result
of funding and other contracts entered into by such Lender to fund a LIBOR
Portion of the U.S. Borrowing or any Portion of the Japanese Borrowing. Each
Lender demanding payment under this Paragraph 2.12 shall deliver to Borrowers,
with a copy to Agent, a certificate setting forth the amount of costs and losses
for which demand is made, which certificate shall set forth in reasonable detail
the calculation of the amount demanded. Such a certificate so delivered to
Borrowers shall constitute prima facie evidence of such costs and losses. The
obligations of Borrowers under this Paragraph 2.12 shall survive the payment and
performance of the Obligations and the termination of this Agreement.
<PAGE>
2.13. Security.
(a) Guaranties, Etc.
(i) The Obligations of NSE shall be secured by a
Guaranty in the form of Exhibit H (the "Subsidiary Guaranty"),
duly executed by all Material Domestic Subsidiaries of NSE
and, in the case of any such Subsidiaries that are organized
under the laws of jurisdictions outside the United States and
domesticated under the laws of Delaware (or any other state of
the United States), by the Delaware (or other state)
counterparts of such Subsidiaries.
(A) If, at any time after the date of this
Agreement, any Material Domestic Subsidiary of NSE
that is a party to the Subsidiary Guaranty shall
become a Material Foreign Subsidiary of NSE, Agent
shall release such Subsidiary from its obligations
under the Subsidiary Guaranty, subject to the
completion by NSE and such Subsidiary of such actions
as may be necessary to grant to Agent, to the extent
provided in clause (ii) below, a perfected security
interest in the Equity Securities of such Subsidiary
owned by NSE.
(B) If, at any time after the date of this
Agreement, any Subsidiary of NSE that is not a party
to the Subsidiary Guaranty shall become a Material
Domestic Subsidiary of NSE, NSE shall deliver to
Agent (1) a Subsidiary Joinder in the form of
Attachment 1 to the Subsidiary Guaranty,
appropriately completed and duly executed by such
Subsidiary, and (2) such other instruments,
agreements, certificates, opinions and documents as
Agent may reasonably request to secure, maintain,
protect and evidence the obligations of such
Subsidiary under the Subsidiary Guaranty.
(ii) If, at any time after the date of this
Agreement, any direct Subsidiary of NSE shall become a
Material Foreign Subsidiary of NSE, NSE shall deliver to Agent
(A) a Pledge Agreement in the form of Exhibit I, appropriately
completed and duly executed by NSE (the "Pledge Agreement"),
and (B) such other instruments, agreements, certificates,
opinions and documents (including Uniform Commercial Code
financing statements) as Agent may reasonably request to
grant, perfect, maintain, protect and evidence security
interests in favor of Agent, for the benefit of Agent and
Lenders as security for the Obligations of NSE, in any and all
Equity Securities of such Subsidiary, to the extent (1) such
security interests do not increase the gross income of NSE
pursuant to Sections 951 or 956(c) of the IRC and (2)
requiring such security interests is not unreasonable.
(A) If, at any time after the grant to Agent
of a security interest in the Equity Securities of
any Material Foreign Subsidiary of NSE pursuant to
this Paragraph 2.13, such security interest increases
the gross income of NSE pursuant to Sections 951 or
956(c) of the IRC, Agent shall release such security
interest, subject to the compliance by NSE with
clause (i)(B) above to make such Subsidiary a party
to the Subsidiary Guaranty, unless such compliance
also would cause the gross income of NSE to increase
pursuant to Sections 951 or 956(c) of the IRC.
<PAGE>
(B) If, at any time after the execution and
delivery to Agent of the Pledge Agreement, any
Subsidiary of NSE shall become a Material Foreign
Subsidiary of NSE, NSE shall deliver to Agent such
instruments, agreements, certificates, opinions and
documents (including Uniform Commercial Code
financing statements) as Agent may reasonably request
to grant, perfect, maintain, protect and evidence
security interests in favor of Agent, for the benefit
of Agent and Lenders as security for the Obligations
of NSE, in any and all Equity Securities of such
Subsidiary, to the extent (1) such security interests
do not increase the gross income of NSE pursuant to
Sections 951 or 956(c) of the IRC and (2) requiring
such security interests is not unreasonable.
(iii) The Obligations of NSJ shall be secured by a
Guaranty in the form of Exhibit J, duly executed by NSE (the
"NSE Guaranty").
(b) Further Assurances. Borrowers shall deliver, and shall
cause their Subsidiaries to deliver, to Agent such other pledge
agreements, guaranties, guaranty supplements and other instruments,
agreements, certificates, opinions and documents (including Uniform
Commercial Code financing statements) as Agent may reasonably request
to implement the provisions of Subparagraph 2.13(a) and otherwise to
establish, maintain, protect and evidence the rights provided to Agent,
for the benefit of Agents and Lenders, pursuant to the Security
Documents. Without limiting the foregoing, NSE shall cause Nu Skin
Korea, Inc. to seek any Governmental Approval required in order to
permit Nu Skin Korea, Inc. to remit payments under the Subsidiary
Guaranty outside the Republic of Korea.
(c) Borrowers shall fully cooperate with Agent and Lenders and
perform all additional acts reasonably requested by Agent or any Lender
to effect the purposes of this Paragraph 2.13. (Agent and the Lenders
recognize that (A) NSE's Foreign Subsidiaries may be organized under
the laws of jurisdictions that impose restrictions on the imposition of
Liens in such Subsidiaries' Equity Securities and (B) it may be costly
or impossible to comply with such restrictions in some cases. Agent and
the Lenders agree that, in determining whether requiring NSE to grant a
security interest in the Equity Securities of one of its Foreign
Subsidiaries is reasonable, they will in good faith consider (1)
whether any applicable restrictions prohibit such a security interest,
(2) whether, if not so prohibited, the financial and other costs to NSE
of granting such a security interest are material or unduly burdensome
to NSE, and (3) whether such costs to NSE outweigh the benefits to
Agent and the Lenders of such a security interest.)
<PAGE>
2.14. Replacement of Lenders. If any Lender shall (a) become a Defaulting Lender
more than one (1) time in a period of twelve (12) consecutive months, (b)
continue as a Defaulting Lender for more than five (5) Business Days at any
time, (c) suspend its obligation to make or maintain LIBOR Portions of the U.S.
Borrowing or any Portion of the Japanese Borrowing pursuant to Subparagraph
2.10(b) for a reason which is not applicable to any other Lender or (d) demand
any payment under Subparagraph 2.10(c), 2.10(d) or 2.11(a) for a reason which is
not applicable to any other Lender, then Agent may (or upon the written request
of Borrowers, shall) replace such Lender (the "affected Lender"), or cause such
affected Lender to be replaced, with another lender (the "replacement Lender")
satisfying the requirements of an Assignee Lender under Subparagraph 8.05(c), by
having the affected Lender sell and assign all of its rights and obligations
under this Agreement and the other Credit Documents to the replacement Lender
pursuant to Subparagraph 8.05(c); provided, however, that if Borrowers seek to
exercise such right, they must do so within sixty (60) days after either
Borrower first knows or should have known of the occurrence of the event or
events giving rise to such right, and neither Agent nor any Lender shall have
any obligation to identify or locate a replacement Lender for Borrowers. Upon
receipt by any affected Lender of a written notice from Agent stating that Agent
is exercising the replacement right set forth in this Paragraph 2.14, such
affected Lender shall sell and assign all of its rights and obligations under
this Agreement and the other Credit Documents to the replacement Lender pursuant
to an Assignment Agreement and Subparagraph 8.05(c) for a purchase price equal
to the sum of the principal amount of the affected Lender's Loans so sold and
assigned, all accrued and unpaid interest thereon and its ratable share of all
fees to which it is entitled.
SECTION III. CONDITIONS PRECEDENT.
3.01. Initial Closing Date Conditions Precedent. The obligations of the
applicable Lenders to make the Loans to be made on the Initial Closing Date are
subject to receipt by Agent, on or prior to the Initial Closing Date, of each
item listed in Schedule 3.01, each in form and substance satisfactory to Agent
and each Lender, and with sufficient copies for, Agent and each Lender.
3.02. Second Closing Date Conditions Precedent. The obligations of the
applicable Lenders to make the Loans to be made on the Second Closing Date are
subject to (a) the satisfaction of the conditions precedent set forth in
Paragraph 3.01 and (b) the receipt by Agent, on or prior to the Second Closing
Date, of (i) the Commitment Fees and (ii) if such Loans are U.S. Loans, each
Note requested by such a Lender, each duly executed by the applicable Borrower.
3.03. Conditions Precedent to Each Credit Event. The occurrence of each Credit
Event (including the Borrowings) is subject to the further conditions that:
(a) Borrowers shall have delivered to Agent the Notice of
Borrowing, Notice of U.S. Borrowing Conversion or Notice of Interest
Period Selection, as the case may be, for such Credit Event in
accordance with this Agreement; and
(b) On the date such Credit Event is to occur and after giving
effect to such Credit Event, the following shall be true and correct:
<PAGE>
(i) The representations and warranties of Borrowers
and their Subsidiaries set forth in Paragraph 4.01 and in the
other Credit Documents are true and correct in all material
respects as if made on such date (except for representations
and warranties expressly made as of a specified date, which
shall be true as of such date); and
(ii) No Default has occurred and is continuing or
will result from such Credit Event.
The submission by either Borrower to Agent of each Notice of Borrowing, each
Notice of U.S. Borrowing Conversion (other than a notice for a conversion to a
Base Rate Portion) and each Notice of Interest Period Selection (other than a
notice selecting an Interest Period of one (1) month for any Portion of the
Japanese Borrowing) shall be deemed to be a representation and warranty by such
Borrower that each of the statements set forth above in this Subparagraph
3.03(b) is true and correct as of the date of such notice.
3.04. Covenant to Deliver. Borrowers agree (not as a condition but as a
covenant) to deliver to Agent each item required to be delivered to Agent as a
condition to the occurrence of any Credit Event if such Credit Event occurs.
Borrowers expressly agree that the occurrence of any such Credit Event prior to
the receipt by Agent of any such item shall not constitute a waiver by Agent or
any Lender of Borrowers' obligation to deliver such item.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. Borrowers' Representations and Warranties. In order to induce Agent and
Lenders to enter into this Agreement, Borrowers hereby represent and warrant to
Agent and Lenders as follows:
(a) Due Incorporation, Qualification, etc. Each of Borrowers
and their Material Subsidiaries (i) is a corporation duly organized,
validly existing and, in any jurisdiction in which such legal concept
is applicable, in good standing under the laws of its jurisdiction of
organization; (ii) has the power and authority to own, lease and
operate its properties and carry on its business as now conducted; and
(iii) is duly qualified and licensed to do business as a foreign
corporation or branch in each jurisdiction where the failure to be so
qualified or licensed is reasonably likely to have a Material Adverse
Effect.
(b) Authority. The execution, delivery and performance by each
of Borrowers and their Subsidiaries of each Credit Document executed,
or to be executed, by such Person and the consummation of the
transactions contemplated thereby (i) are within the power of such
Person and (ii) have been duly authorized by all necessary actions on
the part of such Person.
(c) Enforceability. Each Credit Document executed, or to be
executed, by each of Borrowers and their Subsidiaries has been, or will
be, duly executed and delivered by such Person and constitutes, or will
constitute, a legal, valid and binding obligation of such Person,
enforceable against such Person in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and general principles of equity.
<PAGE>
(d) Non-Contravention. The execution and delivery by each of
Borrowers and their Subsidiaries of the Credit Documents executed by
such Person and the performance and consummation of the transactions
contemplated thereby do not (i) violate any Requirement of Law
applicable to such Person; (ii) violate any provision of, or result in
the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of notice or lapse of time or
both), any Contractual Obligation of such Person; or (iii) result in
the creation or imposition of any Lien (or the obligation to create or
impose any Lien) upon any property, asset or revenue of such Person
(except such Liens as may be created in favor of Agent pursuant to this
Agreement or the other Credit Documents).
(e) Approvals. Except as set forth in Schedule 4.01(e), no
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or other Person
(including the shareholders of any Person) is required in connection
with the execution and delivery of the Credit Documents executed by
Borrowers and their Subsidiaries or the performance or consummation of
the transactions contemplated thereby, except for those which have been
made or obtained and are in full force and effect.
(f) No Violation or Default. Neither either Borrower nor any
of its Material Subsidiaries is in violation of or in default with
respect to (i) any Requirement of Law applicable to such Person or (ii)
any Contractual Obligation of such Person (nor is there any waiver in
effect which, if not in effect, would result in such a violation or
default), where, in each case, such violation or default is reasonably
likely to have a Material Adverse Effect. Without limiting the
generality of the foregoing, neither either Borrower nor any of its
Subsidiaries (A) has violated any Environmental Laws, (B) has any
liability under any Environmental Laws or (C) has received notice or
other communication of an investigation or is under investigation by
any Governmental Authority having authority to enforce Environmental
Laws, where such violation, liability or investigation is reasonably
likely to have a Material Adverse Effect. No Default has occurred and
is continuing.
(g) Litigation. Except as set forth in Schedule 4.01(g), no
actions (including derivative actions), suits, proceedings or
investigations are pending or, to the knowledge of either Borrower,
threatened against either Borrower or any of its Subsidiaries at law or
in equity in any court or before any other Governmental Authority which
(i) is reasonably likely (alone or in the aggregate) to have a Material
Adverse Effect or (ii) seeks to enjoin, either directly or indirectly,
the execution, delivery or performance by either Borrower or any of its
Subsidiaries of the Credit Documents, the NSI Acquisition Documents or
the transactions contemplated thereby.
<PAGE>
(h) Title; Possession Under Leases. Each Borrower and its
Material Subsidiaries own and have good and marketable title, or a
valid leasehold interest in, all their respective properties and assets
as reflected in the most recent Financial Statements delivered to Agent
(except those assets and properties disposed of in the ordinary course
of business or otherwise in compliance with this Agreement since the
date of such Financial Statements) and all respective assets and
properties acquired by such Borrower and its Material Subsidiaries
since such date (except those disposed of in the ordinary course of
business or otherwise in compliance with this Agreement). Such assets
and properties are subject to no Lien, except for Permitted Liens. Each
Borrower and its Subsidiaries have complied with all material
obligations under all material leases to which they are parties and
enjoy peaceful and undisturbed possession under such leases.
(i) Financial Statements. The Financial Statements of each
Borrower and its Subsidiaries which have been delivered to Agent, (i)
are in accordance with the books and records of such Borrower and its
Subsidiaries, which have been maintained in accordance with good
business practice; (ii) have been prepared in conformity with GAAP; and
(iii) fairly present in all material respects the financial conditions
and results of operations of such Borrower and its Subsidiaries as of
the date thereof and for the period covered thereby. Neither either
Borrower nor any of its Subsidiaries has any Contingent Obligations,
liability for taxes or other outstanding obligations which are material
in the aggregate, except as disclosed in the audited Financial
Statements of such Borrower dated December 31, 1997, furnished by such
Borrower to Agent prior to the date hereof, or in the Financial
Statements delivered to Agent pursuant to clause (i) or (ii) of
Subparagraph 5.01(a).
(j) Employee Benefit Plans.
(i) Based on the latest valuation of each Employee
Benefit Plan that either NSE or any ERISA Affiliate maintains
or contributes to, or has any obligation under (which occurred
within twelve months of the date of this representation), the
aggregate benefit liabilities of such plan within the meaning
of ss. 4001 of ERISA did not exceed the aggregate value of the
assets of such plan. Neither NSE nor any ERISA Affiliate has
any liability with respect to any post-retirement benefit
under any Employee Benefit Plan which is a welfare plan (as
defined in section 3(1) of ERISA), other than liability for
health plan continuation coverage described in Part 6 of Title
I(B) of ERISA, which liability for health plan contribution
coverage is not reasonably likely to have a Material Adverse
Effect.
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its terms,
ERISA and the IRC, and no condition exists or event has
occurred with respect to any such plan which would result in
the incurrence by either NSE or any ERISA Affiliate of any
material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of
NSE or any ERISA Affiliate is legally valid and binding and in
full force and effect. No Employee Benefit Plan is being
audited or investigated by any government agency or is subject
to any pending or threatened claim or suit. Neither NSE nor
any ERISA Affiliate nor any fiduciary of any Employee Benefit
Plan has engaged in a prohibited transaction under section 406
of ERISA or section 4975 of the IRC.
<PAGE>
(iii) Neither NSE nor any ERISA Affiliate contributes
to or has any material contingent obligations to any
Multiemployer Plan. Neither NSE nor any ERISA Affiliate has
incurred any material liability (including secondary
liability) to any Multiemployer Plan as a result of a complete
or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets
described in Section 4204 of ERISA. Neither NSE nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in
reorganization or insolvent under and within the meaning of
Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated
under Section 4041A of ERISA.
(iv) All employer and employee contributions required
by any applicable Governmental Rule in connection with all
Foreign Plans have been made, or, if applicable, accrued, in
accordance with the country-specific accounting practices. The
fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded
through insurance or the book reserve established for any
Foreign Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit
obligations, as of the date hereof, with respect to all
current and former participants in such Foreign Plan according
to the actuarial assumptions and valuations most recently used
to determine employer contributions to such Foreign Plan,
which actuarial assumptions are commercially reasonable. Each
Foreign Plan required to be registered has been registered and
has been maintained in good standing with applicable
Governmental Authorities. Each Foreign Plan reasonably
complies in all material respects with all applicable
Governmental Rules.
(k) Other Regulations. No Borrower or any Subsidiary thereof
is subject to regulation under the Investment Company Act of 1940, the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or any state public utilities code.
(l) Patent and Other Rights. Each Borrower and its
Subsidiaries own, license or otherwise have the full right to use,
under validly existing agreements, all material patents, licenses,
trademarks, trade names, trade secrets, service marks, copyrights and
all rights with respect thereto, which are required to conduct their
businesses as now conducted.
(m) Governmental Charges. Each Borrower and its Subsidiaries
have filed or caused to be filed all tax returns which are required to
be filed by them. Each Borrower and its Subsidiaries have paid, or made
provision for the payment of, all taxes and other Governmental Charges
which have or may have become due pursuant to said returns or otherwise
and all other indebtedness, except such Governmental Charges or
indebtedness, if any, which are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been
provided or which are not reasonably likely to have a Material Adverse
Effect if unpaid.
<PAGE>
(n) Margin Stock. Neither Borrower owns any Margin Stock
which, in the aggregate, would constitute a substantial part of the
assets of such Borrower, and no proceeds of any Loan will be used to
purchase or carry, directly or indirectly, any Margin Stock or to
extend credit, directly or indirectly, to any Person for the purpose of
purchasing or carrying any Margin Stock.
(o) Subsidiaries, Etc. Schedule 4.01(o) (as supplemented by
NSE from time to time in a written notice to Agent) sets forth each of
NSE's Subsidiaries, its jurisdiction of organization, whether it is a
Domestic Subsidiary or a Foreign Subsidiary, the classes of its Equity
Securities, the number of shares of each such class issued and
outstanding, the percentages of shares of each such class owned
directly or indirectly by NSE and whether NSE owns such shares directly
or, if not, the Subsidiary of NSE that owns such shares. Except for
such Subsidiaries, neither Borrower has any Subsidiaries. The only
Material Subsidiaries of NSE on the date of this Agreement are NSJ;
NSI; Nu Skin Hong Kong, Inc., a Utah corporation; Nu Skin Taiwan, Inc.,
a Utah corporation; and Nu Skin Korea, Inc., a South Korean
corporation. NSJ and Nu Skin Korea, Inc. also are domesticated under
the Delaware General Corporate Laws, and their respective Delaware
counterparts have only nominal assets.
(p) Solvency, Etc. Each of the Borrowers and their Material
Subsidiaries is Solvent and, after the execution and delivery of the
Credit Documents and NSI Acquisition Documents and the consummation of
the transactions contemplated thereby, will be Solvent.
(q) NSI Acquisition. NSE consummated the NSI Acquisition on
March 30, 1998. The consideration paid by NSE to acquire the Acquired
Entities consisted solely of (i) Equity Securities issued by NSE, (ii)
NSE's undertaking to pay the NSI Contingent Payments and (iii)
promissory notes issued by NSE in an aggregate principal amount equal
to the difference between $180,000,000 and the aggregate principal
amount of certain promissory notes issued by the Acquired Entities to
the former stockholders of the Acquired Entities, which promissory
notes of NSE will not exceed $25,000,000 in aggregate principal amount.
(r) No Material Adverse Effect. No event has occurred and no
condition exists which is reasonably likely to have a Material Adverse
Effect.
(s) Accuracy of Information Furnished. The Credit Documents
and the other certificates, statements and information (excluding
projections) furnished to Agent or any Lender by or on behalf of
Borrowers and their Subsidiaries in connection with the Credit
Documents and the transactions contemplated thereby, taken as a whole,
do not contain and will not contain any untrue statement of a material
fact and do not omit and will not omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. All projections have been
based upon reasonable assumptions and represent, as of their respective
dates of presentations, Borrowers' best estimates of the future
performance of Borrowers and their Subsidiaries.
<PAGE>
4.02. Reaffirmation. Each Borrower shall be deemed to have reaffirmed, for the
benefit of Lenders and Agent, each representation and warranty contained in
Paragraph 4.01 on and as of the date of each Credit Event (except for
representations and warranties expressly made as of a specified date, which
shall be true as of such date).
SECTION V. COVENANTS.
5.01. Affirmative Covenants. Until the termination of this Agreement and the
satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and
will cause compliance, with the following affirmative covenants, unless Required
Lenders shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. Each Borrower shall
furnish to Agent the following, each in such form and such detail as
Agent or the Required Lenders shall reasonably request:
(i) As soon as available and in no event later than
sixty (60) days after the last day of each fiscal quarter of
NSE, a copy of the Financial Statements of NSE and its
Subsidiaries (prepared on a consolidated and consolidating
basis) for such quarter and for the fiscal year to date,
certified by the chief financial officer or treasurer of NSE
to present fairly in all material respects the financial
condition, results of operations and other information
reflected therein and to have been prepared in accordance with
GAAP (subject to normal year-end audit adjustments);
(ii) As soon as available and in no event later than
one hundred, twenty (120) days after the close of each fiscal
year of NSE, (A) copies of the audited Financial Statements of
NSE and its Subsidiaries (prepared on a consolidated and
consolidating basis) for such year, audited by independent
certified public accountants of recognized national standing
reasonably acceptable to Agent, (B) copies of the unqualified
opinions (or qualified opinions reasonably acceptable to
Agent) and, to the extent delivered, management letters
delivered by such accountants in connection with all such
Financial Statements and (C) if available from such
accountants, certificates of such accountants to Agent stating
that in making the examination necessary for their opinion
they have reviewed this Agreement and have obtained no
knowledge of any Default which has occurred and is continuing,
or if, in the opinion of such accountants, a Default has
occurred and is continuing, a statement as to the nature
thereof;
(iii) Contemporaneously with the quarterly and
year-end Financial Statements required by the foregoing
clauses (i) and (ii), a compliance certificate of the chief
financial officer or treasurer of each Borrower (a "Compliance
Certificate") which (A) states that no Default has occurred
and is continuing, or, if any such Default has occurred and is
continuing, a statement as to the nature thereof and what
action Borrowers propose to take with respect thereto and (B)
sets forth, for the quarter or year covered by such Financial
Statements or as of the last day of such quarter or year (as
the case may be), the calculation of the financial ratios and
tests provided in Paragraph 5.03 for such Borrower;
(iv) As soon as available and in no event later than
sixty (60) days after the last day of the last fiscal quarter
in each fiscal year of NSE, a certificate of the chief
financial officer or treasurer of NSE which sets forth the
calculation of NSE's Debt/EBITDA Ratio for such year;
(v) As soon as possible and in no event later than
five (5) Business Days after any officer of such Borrower
knows of the occurrence or existence of (A) any Reportable
Event under any Employee Benefit Plan or Multiemployer Plan;
(B) any actual or threatened litigation, suits, claims or
disputes against either Borrower or any of its Subsidiaries
involving potential monetary damages payable by either
Borrower or its Subsidiaries of $10,000,000 or more (alone or
in the aggregate); (C) any other event or condition which is
reasonably likely to have a Material Adverse Effect; or (D)
any Default; the statement of the chief financial officer or
treasurer of such Borrower setting forth details of such
event, condition or Default and the action which such Borrower
proposes to take with respect thereto;
<PAGE>
(vi) As soon as available and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of (A) all registration statements and reports
filed by NSE or any of its Subsidiaries with the United States
Securities and Exchange Commission (including, without
limitation, all 10-Q, 10-K and 8-Q reports); (B) all reports,
proxy statements and financial statements sent or made
available by NSE or any of its Subsidiaries to its security
holders; and (C) all press releases and other similar public
announcements concerning any material developments in the
business of either Borrower or any of its Subsidiaries made
available by either Borrower or any of its Subsidiaries to the
public generally;
(vii) As soon as available and in no event later than
thirty (30) days after the first day of each fiscal year of
each Borrower, the consolidated plan and forecast of such
Borrower and its Subsidiaries for such fiscal year, including
quarterly cash flow projections and quarterly projections of
such Borrower's compliance with each of the covenants set
forth in Paragraph 5.03;
(viii) As soon as possible and in no event later than
(A) sixty (60) days after the last day of each fiscal quarter,
written notice of any new Subsidiary acquired or established
by NSE during such quarter, any new Equity Securities of any
existing Subsidiary acquired by NSE during such quarter or any
other change in the information set forth in Schedule 4.01(o)
during such quarter and (B) one hundred, twenty (120) days
after the last day of each fiscal year, written notice of any
Subsidiary of NSE that has become a Material Subsidiary during
such year; and
<PAGE>
(ix) Such other instruments, agreements,
certificates, opinions, statements, documents and information
relating to the operations or condition (financial or
otherwise) of such Borrower or its Subsidiaries, and
compliance by such Borrower with the terms of this Agreement
and the other Credit Documents as Agent may from time to time
reasonably request.
(b) Books and Records. Each Borrower and its Subsidiaries
shall at all times keep proper books of record and account which shall
be complete and correct in all material respects in accordance with
GAAP.
(c) Inspections. Each Borrower and its Subsidiaries shall
permit Agent and each Lender, or any agent or representative thereof,
upon reasonable notice and during normal business hours, to visit and
inspect any of the properties and offices of such Borrower and its
Subsidiaries, to examine the books and records of such Borrower and its
Subsidiaries and make copies thereof and to discuss the affairs,
finances and business of such Borrower and its Subsidiaries with, and
to be advised as to the same by, their officers, auditors and
accountants, all at such times and intervals as Agent or any Lender may
reasonably request (which visits and inspections shall be at the
expense of Agent or such Lender unless a Default has occurred and is
continuing).
(d) Insurance. Each Borrower and its Subsidiaries shall (i)
carry and maintain insurance of the types and in the amounts
customarily carried from time to time during the term of this Agreement
by others engaged in substantially the same business as such Person and
operating in the same geographic area as such Person, including fire,
public liability, property damage and worker's compensation, (ii) carry
and maintain each policy for such insurance with financially sound
insurers and (iii) deliver to Agent from time to time, as Agent may
request, schedules setting forth all insurance then in effect.
(e) Governmental Charges and Other Indebtedness. Each Borrower
and its Subsidiaries shall promptly pay and discharge when due (i) all
taxes and other Governmental Charges prior to the date upon which
penalties accrue thereon, (ii) all indebtedness which, if unpaid, could
become a Lien upon the property of such Borrower or its Subsidiaries
and (iii) subject to any subordination provisions applicable thereto,
all other Indebtedness, which in each case, if unpaid, is reasonably
likely to have a Material Adverse Effect, except such Indebtedness as
may in good faith be contested or disputed, or for which arrangements
for deferred payment have been made, provided that in each such case
appropriate reserves are maintained in accordance with GAAP.
(f) Use of Proceeds. NSE shall use the proceeds of the U.S.
Loans only for the purposes set forth in Subparagraph 2.01(g), and NSJ
shall use the proceeds of the Japanese Loans only for the purposes set
forth in Subparagraph 2.02(f). Neither Borrower shall use any part of
the proceeds of any Loan, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of
purchasing or carrying or trading in any securities under such
circumstances as to involve such Borrower, any Lender or Agent in a
violation of Regulations T, U or X issued by the Federal Reserve Board.
<PAGE>
(g) General Business Operations. Each of the Borrowers and
their Subsidiaries shall (i) preserve and maintain its corporate
existence and all of its rights, privileges and franchises reasonably
necessary to the conduct of its business, (ii) conduct its business
activities in compliance with all Requirements of Law and Contractual
Obligations applicable to such Person and (iii) keep all property
useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted, except, in each case, where
any failure is not reasonably likely to have a Material Adverse Effect.
NSE shall maintain its chief executive office and principal place of
business in the United States and shall not relocate its chief
executive office or principal place of business outside of Utah except
upon not less than sixty (60) days prior written notice to Agent.
(h) Pari Passu Ranking. Each Borrower shall take, or cause to
be taken, all actions necessary to ensure that the Obligations of such
Borrower are and continue to rank at least pari passu in right of
payment with all other unsecured and unsubordinated Indebtedness of
such Borrower.
(i) Year 2000 Compatibility. Borrowers shall, and shall cause
their Material Subsidiaries to, take all acts reasonably necessary to
ensure that all software, hardware, firmware, equipment, goods and
systems utilized by or material to their business operations or
financial condition will properly perform date sensitive functions
before, during and after the year 2000. At the request of Agent,
Borrowers shall provide to Agent such certifications or other evidence
of compliance with this Subparagraph 5.01(i) as Agent may from time to
time require.
5.02. Negative Covenants. Until the termination of this Agreement and the
satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and
will cause compliance, with the following negative covenants, unless Required
Lenders shall otherwise consent in writing:
(a) Indebtedness. NSE's Subsidiaries shall not create, incur,
assume or permit to exist any Indebtedness except for the following
("Permitted Indebtedness"):
(i) The Obligations of NSJ and NSE's other
Subsidiaries under the Credit Documents;
(ii) Indebtedness of NSJ and NSE's other Subsidiaries
listed in Schedule 5.02(a) and existing on the date of this
Agreement;
(iii) Indebtedness of NSJ and NSE's other
Subsidiaries arising from the endorsement of instruments for
collection in the ordinary course of their businesses;
(iv) Indebtedness of NSJ and NSE's other Subsidiaries
for trade accounts payable, provided that (A) such accounts
arise in the ordinary course of business and (B) no material
part of any such account is more than ninety (90) days past
due (unless subject to a bona fide dispute and for which
adequate reserves have been established);
(v) Indebtedness of NSJ and NSE's other Subsidiaries
under Rate Contracts, provided that all such Rate Contracts
are entered into in connection with bona fide hedging
operations and not for speculation;
(vi) Indebtedness of NSJ and NSE's other Subsidiaries
under purchase money loans and Capital Leases incurred by them
to finance their acquisition of real property, fixtures or
equipment provided that (A) in each case, (y) such
Indebtedness is incurred at the time of, or not later than
thirty (30) days after, the acquisition of the property so
financed and (z) such Indebtedness does not exceed the
purchase price of the property so financed and (B) the
aggregate amount of such Indebtedness outstanding at any time
does not exceed $5,000,000;
<PAGE>
(vii) Indebtedness of NSJ and NSE's other
Subsidiaries under initial or successive refinancings of any
Indebtedness permitted by clause (ii) or (vi) above, provided
that (A) the principal amount of any such refinancing does not
exceed the principal amount of the Indebtedness being
refinanced (except to the extent any excess is otherwise
permitted by another clause of this Subparagraph 5.02(a)) and
(B) the material terms and provisions of any such refinancing
(including maturity, redemption, prepayment, default and
subordination provisions) are no less favorable to Lenders
than the Indebtedness being refinanced;
(viii) Indebtedness of NSJ and NSE's other
Subsidiaries with respect to surety, appeal, indemnity,
performance or other similar bonds in the ordinary course of
business (including surety or similar bonds issued in
connection with the stay of a proceeding of the type described
in Subparagraph 6.01(h));
(ix) Indebtedness of NSJ and NSE's other Subsidiaries
to and among each other and NSE;
(x) Indebtedness of any Subsidiary acquired by NSE or
any of its Subsidiaries after the date of this Agreement
pursuant to Subparagraph 5.02(d), provided that (A) such
Indebtedness exists at the time such Subsidiary is so acquired
and (B) such Indebtedness was not created in contemplation of
such acquisition;
(xi) Indebtedness of NSJ and NSE's other Subsidiaries
to one or more Lenders, provided that the aggregate principal
amount of such Indebtedness does not exceed $30,000,000 at any
time and no guaranty or security is provided for such
Indebtedness which is more extensive than the guaranties and
security required to be provided by Paragraph 2.13;
(xii) Indebtedness of NSJ and NSE's other
Subsidiaries to Affiliates (other than Borrowers and their
Subsidiaries), provided that (A) the terms of such
Indebtedness are at least as favorable to NSJ and NSE's other
Subsidiaries as an arms-length transaction with unaffiliated
Persons and (B) the aggregate principal amount of such
Indebtedness does not exceed $10,000,000 at any time; and
<PAGE>
(xiii) Other Indebtedness of Borrowers and its
Subsidiaries, provided that the aggregate principal amount of
all such other Indebtedness does not exceed $1,000,000 at any
time.
(b) Liens. Neither Borrowers nor their Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of their assets or property of any character, whether now owned or
hereafter acquired, except for the following ("Permitted Liens"):
(i) Liens in favor of Agent or any Lender securing
the Obligations;
(ii) Liens listed in Schedule 5.02(b) and existing on
the date of this Agreement;
(iii) Liens for taxes or other Governmental Charges
not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided that
adequate reserves for the payment thereof have been
established in accordance with GAAP;
(iv) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for
sums not overdue more than 45 days or being contested in good
faith, provided that adequate reserves for the payment thereof
have been established in accordance with GAAP;
(v) Deposits under workers' compensation,
unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure
statutory obligations of surety or appeal bonds or to secure
indemnity, performance or other similar bonds in the ordinary
course of business;
(vi) Zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which
alone or in the aggregate are not substantial in amount and do
not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
of Borrower or any of its Subsidiaries;
(vii) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(viii) Liens on any property or assets acquired, or
on the property or assets of any Persons acquired, by Borrower
or any of its Subsidiaries after the date of this Agreement
pursuant to Subparagraph 5.02(d), provided that (A) such Liens
exist at the time such property or assets or such Persons are
so acquired and (B) such Liens were not created in
contemplation of such acquisitions;
<PAGE>
(ix) Judgement Liens, provided that such Liens do not
constitute an Event of Default under Subparagraph 6.01(h);
(x) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties
and in connection with the importation of goods in the
ordinary course of each Borrower's and its Subsidiaries'
businesses;
(xi) Liens securing Indebtedness which constitutes
Permitted Indebtedness under clause (vi) of Subparagraph
5.02(a) or Indebtedness of NSE under purchase money loans and
Capital Leases incurred to finance its acquisition of real
property, fixtures or equipment, provided that, in each case,
such Lien (A) covers only those assets, the acquisition of
which was financed by such Permitted Indebtedness, and (B)
secures only such Permitted Indebtedness;
(xii) Liens incurred in connection with the
extension, renewal or refinancing of the Indebtedness secured
by the Liens described in clause (ii) or (xi) above, provided
that any extension, renewal or replacement Lien (A) is limited
to the property covered by the existing Lien and (B) secures
Indebtedness which is no greater in amount and has material
terms no less favorable to Lenders than the Indebtedness
secured by the existing Lien; and
(xiii) Other Liens, provided that the aggregate
amount of Indebtedness secured by such other Liens does not
exceed $5,000,000 at any time;
Provided, however, that the foregoing exceptions shall not permit any
Lien in any of the Collateral or in any other Equity Securities issued
by any Subsidiary of NSE and owned by NSE or any of its other
Subsidiaries, except for Liens in favor of Agent securing the
Obligations.
(c) Asset Dispositions. Neither Borrowers nor their
Subsidiaries shall sell, lease, transfer or otherwise dispose of any of
their assets or property, whether now owned or hereafter acquired,
except for the following:
(i) Sales of inventory by Borrowers and their
Subsidiaries in the ordinary course of their businesses;
(ii) Sales of surplus, damaged, worn or obsolete
assets by Borrowers and their Subsidiaries in the ordinary
course of their businesses;
(iii) Sales or assignments of defaulted receivables
to a collection agency in the ordinary course of business; and
(iv) Other sales, leases, transfers and disposals of
assets and property, provided that (A) no Default has occurred
and is continuing on the date of, or will result after giving
effect to, any such sale, lease, transfer or disposal and (B)
the aggregate book value of all such assets and property so
sold, leased, transferred or otherwise disposed of in any
fiscal year does not exceed $10,000,000 per year;
<PAGE>
Provided, however, that the foregoing exceptions shall not permit any
sale, lease, transfer or other disposition of any Collateral or of any
other Equity Securities issued by any Material Subsidiary of NSE and
owned by NSE or any of its other Subsidiaries.
(d) Mergers, Acquisitions, Etc. Neither Borrowers nor their
Subsidiaries shall consolidate with or merge into any other Person or
permit any other Person to merge into them, acquire any Person as a new
Subsidiary or acquire all or substantially all of the assets of any
other Person, except for the following:
(i) Borrowers and their Subsidiaries may merge with
each other, provided that (A) in any such merger involving
either Borrower, such Borrower is the surviving corporation
and (B) no Default has occurred and is continuing on the date
of, or will result after giving effect to, any such merger;
(ii) Acquisitions described in Schedule 5.02(d),
provided that:
(A) No Default has occurred and is
continuing on the date of, or will result after
giving effect to, any such acquisition; and
(B) The aggregate consideration paid by
Borrowers and their Subsidiaries for all such
acquisitions (excluding consideration consisting of
the Equity Securities of Borrowers or their
Subsidiaries) paid in any fiscal year does not exceed
$35,000,000 (provided that any portion of such amount
limitation not used in any year may be carried
forward in subsequent years to increase the amount of
such limitation in such subsequent years until used);
and
(iii) Other acquisitions of any Person as a new
Subsidiary or of all or substantially all of the assets of any
other Person, provided that:
(A) No Default has occurred and is
continuing on the date of, or will result after
giving effect to, any such acquisition; and
(B) The aggregate consideration paid by
Borrowers and their Subsidiaries for all such
acquisitions (excluding consideration consisting of
the Equity Securities of Borrowers or their
Subsidiaries) paid in any fiscal year does not exceed
$15,000,000 (provided that any portion of such amount
limitation not used in any year may be carried
forward in subsequent years to increase the amount of
such limitation in such subsequent years until used).
(e) Investments. Neither Borrowers nor their Subsidiaries
shall make any Investment except for the following:
(i) Investments permitted by the investment policy of
NSE set forth in Schedule 5.02(e) or, if any changes to the
investment policy of NSE are hereafter duly approved by the
Board of Directors of NSE, in any subsequent investment policy
which is the most recent investment policy delivered by NSE to
Agent with a certificate of NSE`s chief financial officer to
the effect that such investment policy has been duly approved
by NSE's Board of Directors and is then in effect;
<PAGE>
(ii) Investments listed in Schedule 5.02(e) existing
on the date of this Agreement;
(iii) Investments received by Borrowers and their
Subsidiaries in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of
delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(iv) Investments by Borrowers and their consolidated
Subsidiaries in each other;
(v) Investments consisting of loans to employees and
officers for travel, relocation and other similar expenses
incurred in the ordinary course of business;
(vi) Investments of Borrower and its Subsidiaries in
interest rate protection, currency swap and foreign exchange
arrangements, provided that all such arrangements are entered
into in connection with bona fide hedging operations and not
for speculation;
(vii) Deposit accounts;
(viii) Investments permitted by Subparagraph 5.02(d);
and
(ix) Other Investments, provided that:
(A) No Default has occurred and is
continuing on the date of, or will result after
giving effect to, any such Investment; and
(B) The aggregate consideration paid by
Borrowers and their Subsidiaries for (1) all such
Investments in joint ventures in any fiscal year do
not exceed $5,000,000 or (2) all other such
Investments in any fiscal year do not exceed
$5,000,000 (provided that, in the case of both the
preceding clause (1) and clause (2), any portion of
such amount limitation not used in any year may be
carried forward in subsequent years to increase the
amount of such limitation in such subsequent years
until used).
<PAGE>
(f) Dividends, Redemptions, Etc. Neither Borrowers nor their
Subsidiaries shall pay any dividends or make any distributions on its
Equity Securities; purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; return any capital to
any holder of its Equity Securities as such; make any distribution of
assets, Equity Securities, obligations or securities to any holder of
its Equity Securities as such; or set apart any sum for any such
purpose; except as follows:
(i) Either Borrower or any of its Subsidiaries may
pay dividends on its capital stock payable solely in such
Person's own capital stock, provided that, in the case of any
such dividend payable by a Foreign Subsidiary that is a
Material Subsidiary to NSE or another Subsidiary, such
dividend is delivered and pledged to Agent to the extent
required by Subparagraph 2.13(b);
(ii) Any Subsidiary of either Borrower may pay
dividends to or repurchase its capital stock from such
Borrower; and
(iii) NSE may pay dividends on its capital stock
payable in cash or repurchase its capital stock for cash,
provided that, in each case, no Default has occurred and is
continuing on the date of, or will result after giving effect
to, any such payment or repurchase.
(g) Change in Business. Neither Borrowers nor their
Subsidiaries shall engage, either directly or indirectly, in any
business substantially different from their present business.
(h) Employee Benefit Plans.
(i) Neither NSE nor any ERISA Affiliate shall (A)
adopt or institute any Employee Benefit Plan that is an
employee pension benefit plan within the meaning of Section
3(2) of ERISA, (B) take any action which will result in the
partial or complete withdrawal, within the meanings of
sections 4203 and 4205 of ERISA, from a Multiemployer Plan,
(C) engage or permit any Person to engage in any transaction
prohibited by section 406 of ERISA or section 4975 of the IRC
involving any Employee Benefit Plan or Multiemployer Plan
which would subject NSE or any ERISA Affiliate to any tax,
penalty or other liability including a liability to indemnify,
(D) incur or allow to exist any accumulated funding deficiency
(within the meaning of section 412 of the IRC or section 302
of ERISA), (E) fail to make full payment when due of all
amounts due as contributions to any Employee Benefit Plan or
Multiemployer Plan, (F) fail to comply with the requirements
of section 4980B of the IRC or Part 6 of Title I(B) of ERISA,
or (G) adopt any amendment to any Employee Benefit Plan which
would require the posting of security pursuant to section
401(a)(29) of the IRC, where singly or cumulatively, the above
would be reasonably likely to have a Material Adverse Effect.
(ii) Neither Borrowers nor their Subsidiaries shall
(A) engage in any transaction prohibited by any Governmental
Rule applicable to any Foreign Plan, (B) fail to make full
payment when due of all amounts due as contributions to any
Foreign Plan or (C) otherwise fail to comply with the
requirements of any Governmental Rule applicable to any
Foreign Plan, where singly or cumulatively, the above would be
reasonably likely to have a Material Adverse Effect.
(i) Transactions With Affiliates. Neither Borrower nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate (other than one of the Borrowers or one of its Subsidiaries)
or engage in any other transaction with any such Affiliate except upon
terms at least as favorable to such Borrower or such Subsidiary as an
arms-length transaction with unaffiliated Persons.
<PAGE>
(j) Accounting Changes. Neither Borrowers nor their
Subsidiaries shall change (i) their fiscal year (currently January 1
through December 31) or (ii) their accounting practices except as
required by GAAP.
(k) NSI Contingent Payments. NSE shall not make NSI Contingent
Payments that exceed in aggregate amount $100,000,000.
5.03. Financial Covenants. Until the termination of this Agreement and the
satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and
will cause compliance, with the following financial covenants, unless Required
Lenders shall otherwise consent in writing:
(a) Leverage Ratio. Neither Borrower shall permit its Leverage
Ratio to be greater than (i) 0.50 to 1.00 on June 30, 1998, (ii) 0.47
to 1.00 on September 30, 1998 or December 31, 1998 or (iii) 0.40 to
1.00 on the last day of any fiscal quarter thereafter.
(b) Fixed Charge Coverage Ratio. Neither Borrower shall permit
its Fixed Charge Coverage Ratio to be less than 2.50 to 1.00 for any
consecutive four-quarter period ending on the last day of any fiscal
quarter.
(c) Debt/EBITDA Ratio. Neither Borrower shall permit its
Debt/EBITDA Ratio to be greater than 1.50 to 1.00 for any consecutive
four-quarter period ending on the last day of any fiscal quarter.
(d) Tangible Net Worth. Neither Borrower shall permit its
Tangible Net Worth on any date of determination (such date to be
referred to herein as a "determination date") which occurs after March
31, 1998 (such date to be referred to herein as the "base date") to be
less than the sum on such determination date of the following:
(i) Eighty-five percent (85%) of such Borrower's
Tangible Net Worth on the base date;
(ii) Eighty percent (80%) of the sum of such
Borrower's consolidated quarterly net income (ignoring any
quarterly losses and deducting, in the case of NSJ, dividends
paid by NSJ to NSE) for each quarter after the base date
through and including the quarter ending immediately prior to
the determination date;
(iii) Seventy-five percent (75%) of the Net Proceeds
of all Equity Securities issued by such Borrower and its
Subsidiaries during the period commencing on the base date and
ending on the determination date; and
(iv) Seventy-five percent (75%) of the principal
amount of all debt securities of such Borrower and its
Subsidiaries converted to Equity Securities during the period
commencing on the base date and ending on the determination
date.
<PAGE>
(e) Capital Expenditures. Borrowers and their Subsidiaries
shall not pay or incur Capital Expenditures which exceed in aggregate
in any fiscal year $35,000,000.
SECTION VI. DEFAULT.
6.01. Events of Default. The occurrence or existence of any one or more of the
following shall constitute an "Event of Default" hereunder:
(a) Non-Payment. Either Borrower shall (i) fail to pay when
due any principal of any Loan or (ii) fail to pay within two (2)
Business Days after the same becomes due any interest, fee or other
payment required under the terms of this Agreement or any of the other
Credit Documents; or
(b) Specific Defaults. Either Borrower or any of its
Subsidiary shall fail to observe or perform any covenant, obligation,
condition or agreement set forth in Paragraph 5.02 or Paragraph 5.03;
or
(c) Other Defaults. Either Borrower or any of its Subsidiaries
shall fail to observe or perform any other covenant, obligation,
condition or agreement contained in this Agreement or the other Credit
Documents and such failure shall continue for fifteen (15) Business
Days after the earlier of (i) either Borrower's written acknowledgement
of such failure and (ii) Agent's or any Lender's written notice to
Borrowers of such failure; or
(d) Representations and Warranties. Any representation,
warranty, certificate, information or other statement (financial or
otherwise) made or furnished by or on behalf of either Borrower to
Agent or any Lender in or in connection with this Agreement or any of
the other Credit Documents, or as an inducement to Agent or any Lender
to enter into this Agreement, shall be false, incorrect, incomplete or
misleading in any material respect when made (or deemed made) or
furnished and either (i) Agent or any Lender has delivered to Borrowers
written notice thereof and such representation, warranty, certificate,
information or other statement cannot be remedied or (ii) such
representation, warranty, certificate, information or other statement
continues to be false, incorrect, incomplete or misleading in any
material respect ten (10) Business Days after the earlier of (A) either
Borrower's written acknowledgement that such representation, warranty,
certificate, information or other statement was false, incorrect,
incomplete or misleading in any material respect and (B) Agent's or any
Lender's written notice to Borrowers that such representation,
warranty, certificate, information or other statement was false,
incorrect, incomplete or misleading in any material respect; or
<PAGE>
(e) Cross-Default. (i) Either Borrower or any of its
Subsidiaries shall fail to make any payment on account of any
Indebtedness of such Person (other than the Obligations) when due
(whether at scheduled maturity, by required prepayment, upon
acceleration or otherwise) and such failure shall continue beyond any
period of grace provided with respect thereto, if the amount of such
Indebtedness exceeds $1,000,000 or the effect of such failure is to
cause, or permit the holder or holders thereof to cause, Indebtedness
of Borrowers and their Subsidiaries (other than the Obligations) in an
aggregate amount exceeding $10,000,000 to become due (whether at
scheduled maturity, by required prepayment, upon acceleration or
otherwise) or (ii) either Borrower or any of its Subsidiaries shall
otherwise fail to observe or perform any agreement, term or condition
contained in any agreement or instrument relating to any Indebtedness
of such Person (other than the Obligations), or any other event shall
occur or condition shall exist, if the effect of such failure, event or
condition is to cause, or permit the holder or holders thereof to
cause, Indebtedness of Borrower and its Subsidiaries (other than the
Obligations) in an aggregate amount exceeding $10,000,000 to become due
(and/or to be secured by cash collateral); or
(f) Insolvency, Voluntary Proceedings. Either Borrower or any
of its Subsidiaries shall (i) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian of itself or of all or
a substantial part of its property, (ii) be unable, or admit in writing
its inability, to pay its debts generally as they mature, (iii) make a
general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated in full or in part, (v) become insolvent (as
such term may be defined or interpreted under any applicable statute),
(vi) commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in an involuntary
case or other proceeding commenced against it, or (vi) take any action
for the purpose of effecting any of the foregoing; or
(g) Involuntary Proceedings. Proceedings for the appointment
of a receiver, trustee, liquidator or custodian of either Borrower or
any of its Subsidiaries or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to either
Borrower or any of its Subsidiaries or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days of
commencement; or
(h) Judgments. (i) One or more judgments, orders, decrees or
arbitration awards requiring Borrowers and/or their Subsidiaries to pay
an aggregate amount of $10,000,000 or more (exclusive of amounts
covered by insurance issued by an insurer not an Affiliate of Borrowers
and otherwise satisfying the requirements set forth in Subparagraph
5.01(d)) shall be rendered against Borrowers and/or their Subsidiaries
in connection with any single or related series of transactions,
incidents or circumstances and the same shall not be satisfied, vacated
or stayed for a period of sixty (60) consecutive days; (ii) any
judgment, writ, assessment, warrant of attachment, tax lien or
execution or similar process shall be issued or levied against a
substantial part of the property of either Borrower or any of its
Subsidiaries and the same shall not be released, stayed, vacated or
otherwise dismissed within sixty (60) days after issue or levy; or
(iii) any other judgments, orders, decrees, arbitration awards, writs,
assessments, warrants of attachment, tax liens or executions or similar
processes which, alone or in the aggregate, are reasonably likely to
have a Material Adverse Effect are rendered, issued or levied; or
<PAGE>
(i) Credit Documents. Any Credit Document or any material term
thereof shall cease to be, or be asserted by Borrower or any of its
Subsidiaries not to be, a legal, valid and binding obligation of
Borrower or any of its Subsidiaries enforceable in accordance with its
terms; or
(j) Employee Benefit Plans. Any Reportable Event which
constitutes grounds for the termination of any Employee Benefit Plan by
the PBGC or for the appointment of a trustee by the PBGC to administer
any Employee Benefit Plan shall occur, or any Employee Benefit Plan
shall be terminated within the meaning of Title IV of ERISA or a
trustee shall be appointed by the PBGC to administer any Employee
Benefit Plan; or
(k) Change of Control. Any Change of Control shall occur; or
(l) Material Adverse Effect. Any event(s) or condition(s)
which is (are) reasonably likely to have a Material Adverse Effect
shall occur or exist.
6.02. Remedies. At any time after the occurrence and during the continuance of
any Event of Default (other than an Event of Default referred to in Subparagraph
6.01(f) or 6.01(g)), Agent may, with the consent of the Required Lenders, or
shall, upon instructions from the Required Lenders, by written notice to
Borrowers, (a) terminate the Commitments and the obligations of Lenders to make
Loans and/or (b) declare all outstanding Obligations payable by Borrowers to be
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the Notes to the contrary notwithstanding. Upon the occurrence or
existence of any Event of Default described in Subparagraph 6.01(f) or 6.01(g),
immediately and without notice, (1) the Commitments and the obligations of
Lenders to make Loans shall automatically terminate and (2) all outstanding
Obligations payable by Borrowers hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the Notes to the contrary notwithstanding. In addition to the
foregoing remedies, upon the occurrence or existence of any Event of Default,
Agent may exercise any other right, power or remedy available to it under any of
the Credit Documents or otherwise by law, either by suit in equity or by action
at law, or both.
<PAGE>
SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS.
7.01. Appointment, Powers and Immunities. Each Lender hereby appoints and
authorizes Agent to act as its agent hereunder and under the other Credit
Documents with such powers as are expressly delegated to Agent by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in any
other Credit Document, be a trustee for any Lender or have any fiduciary duty to
any Lender. Co-Agents shall not have any duties or responsibilities or any
liabilities under this Agreement or any other Credit Document. Notwithstanding
anything to the contrary contained herein Agent shall not be required to take
any action which is contrary to this Agreement or any other Credit Document or
any applicable Governmental Rule. Neither Agent nor any Lender shall be
responsible to any other Lender for any recitals, statements, representations or
warranties made by either Borrower or any of its Subsidiaries contained in this
Agreement or in any other Credit Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Credit Document or for any failure by either Borrower or any of its
Subsidiaries to perform their respective obligations hereunder or thereunder.
Agent may employ agents and attorneys-in-fact and shall not be responsible to
any Lender for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of
its directors, officers, employees, agents or advisors shall be responsible to
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Credit Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as
otherwise provided under this Agreement, Agent shall take such action with
respect to the Credit Documents as shall be directed by the Required Lenders.
7.02. Reliance by Agent. Agent shall be entitled to rely upon any certificate,
notice or other document (including any cable, telegram, facsimile or telex)
believed by it in good faith to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by Agent with reasonable care. As to any other matters not expressly provided
for by this Agreement, Agent shall not be required to take any action or
exercise any discretion, but shall be required to act or to refrain from acting
upon instructions of the Required Lenders and shall in all cases be fully
protected by Lenders in acting, or in refraining from acting, hereunder or under
any other Credit Document in accordance with the instructions of the Required
Lenders, and such instructions of the Required Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of Lenders.
7.03. Defaults. Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default unless Agent has received a written notice from a
Lender or either Borrower, referring to this Agreement, describing such Default
and stating that such notice is a "Notice of Default". If Agent receives such a
notice of the occurrence of a Default, Agent shall give prompt notice thereof to
Lenders. Agent shall take such action with respect to such Default as shall be
reasonably directed by the Required Lenders; provided, however, that until Agent
shall have received such directions, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of Lenders.
<PAGE>
7.04. Indemnification. Without limiting the Obligations of Borrowers hereunder,
each Lender agrees to indemnify Agent, ratably in accordance with their
Proportionate Shares, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against Agent in any way relating to or arising out of this Agreement
or any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof; provided, however, that no Lender shall be liable for
any of the foregoing to the extent they arise from Agent's gross negligence or
willful misconduct. Agent shall be fully justified in refusing to take or in
continuing to take any action hereunder unless it shall first be indemnified to
its satisfaction by Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
obligations of each Lender under this Paragraph 7.04 shall survive the payment
and performance of the Obligations, the termination of this Agreement and any
Lender ceasing to be a party to this Agreement (with respect to events which
occurred prior to the time such Lender ceased to be a Lender hereunder).
7.05. Non-Reliance. Each Lender represents that it has, independently and
without reliance on Agent, or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of the
business, prospects, management, financial condition and affairs of Borrowers
and their Subsidiaries and its own decision to enter into this Agreement and
agrees that it will, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own appraisals and decisions in taking or not
taking action under this Agreement. Neither Agent nor any of its affiliates nor
any of their respective directors, officers, employees, agents or advisors shall
(a) be required to keep any Lender informed as to the performance or observance
by either Borrower or any of its Subsidiaries of the obligations under this
Agreement or any other document referred to or provided for herein or to make
inquiry of, or to inspect the properties or books of either Borrower or any of
its Subsidiaries; (b) have any duty or responsibility to provide any Lender with
any credit or other information concerning either Borrower or any of its
Subsidiaries which may come into the possession of Agent, except for notices,
reports and other documents and information expressly required to be furnished
to Lenders by Agent hereunder; or (c) be responsible to any Lender for (i) any
recital, statement, representation or warranty made by either Borrower or any
officer, employee or agent of either Borrower in this Agreement or in any of the
other Credit Documents, (ii) the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any Credit Document, (iii)
the value or sufficiency of the Collateral or the validity or perfection of any
of the liens or security interests intended to be created by the Credit
Documents, or (iv) any failure by either Borrower to perform its obligations
under this Agreement or any other Credit Document.
7.06. Resignation or Removal of Agent. Agent may resign at any time by giving
thirty (30) days prior written notice thereof to Borrowers and Lenders, and
Agent may be removed at any time with or without cause by the Required Lenders.
Upon any such resignation or removal, the Required Lenders shall have the right
to appoint a successor Agent, which Agent, if not a Lender, shall be reasonably
acceptable to Borrowers; provided, however, that Borrowers shall have no right
to approve a successor Agent if a Default has occurred and is continuing. Upon
the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from the duties and obligations thereafter arising
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Section VII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
Agent.
<PAGE>
7.07. Agent in its Individual Capacity. Agent and its affiliates may make loans
to, accept deposits from and generally engage in any kind of banking or other
business with Borrowers and their Subsidiaries and affiliates as though Agent
were not Agent hereunder. With respect to Loans, if any, made by Agent in its
capacity as a Lender, Agent in its capacity as a Lender shall have the same
rights and powers under this Agreement and the other Credit Documents as any
other Lender and may exercise the same as though it were not Agent, and the
terms "Lender" or "Lenders" shall include Agent in its capacity as a Lender.
SECTION VIII. MISCELLANEOUS.
8.01. Notices. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon either
Borrower, any Lender or Agent under this Agreement or the other Credit Documents
shall be in writing and faxed, mailed or delivered, if to either Borrower or
Agent, at its respective facsimile number or address set forth below or, if to
any Lender, at the address or facsimile number specified for such Lender in Part
B of Schedule I (or to such other facsimile number or address for any party as
indicated in any notice given by that party to the other parties). All such
notices and communications shall be effective (a) when sent by an overnight
courier service of recognized standing, on the second Business Day following the
deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service or registered
mail through the Japanese Post Office, upon receipt; (c) when delivered by hand,
upon delivery; and (d) when faxed, upon confirmation of receipt; provided,
however, that any notice delivered to Agent under Section II shall not be
effective until received by Agent.
Agent: For notices related to the Japanese Borrowing:
ABN AMRO Bank N.V.
Tokyo Branch
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105
Japan
Attn: Kiyoharu Michiwaki
Tel. No: 81-3-5405-6575
Fax No: 81-3-5405-6902 or 6903
<PAGE>
For notices related to the U.S. Borrowing,
all other notices and copies of notices
related to the Japanese Borrowing:
ABN AMRO Bank N.V.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
U.S.A.
Attn: Linda Boardman
Tel. No: (212) 314-1724
Fax. No: (212) 314-1712
With a copy in each case to:
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Tamira Treffers-Herrera
Tel: (415) 984-3709
Fax: (415) 362-3524
NSE: Nu Skin Enterprises, Inc.
One Nu Skin Plaza
75 West Center
Provo, Utah 84601
Attn: Chief Financial Officer
Tel. No: (801) 345-3000
Fax No. (801) 345-3099
NSJ: Nu Skin Japan Co., Ltd.
Shinjuku I-Land Tower 23F
6-5-1 Nishi Shinju-ku
Tokyo, Japan 163-13
Attn: [___________]
Tel. No: 81-3-5321-3600
Fax No. 81-3-5321-3799
with a copy to NSE as provided above.
<PAGE>
Each Notice of U.S. Borrowing, Notice of U.S. Borrowing Conversion, Notice of
U.S. Borrowing Interest Period Selection and Extension Request shall be given by
NSE to Agent's New York office located at the address referred to above during
such office's normal business hours; provided, however, that any such notice
received by Agent after 11:00 a.m. (New York time) on any Business Day shall be
deemed received by Agent on the next Business Day. Each Notice of Japanese
Borrowing, Notice of Japanese Borrowing Interest Period Selection and Extension
Request shall be given by NSJ to Agent's Tokyo office at the address referred to
above during such office's normal business hours; provided, however, that any
such notice received by Agent after 10:00 a.m. (Tokyo time) on any Business Day
shall be deemed received by Agent on the next Business Day. In any case where
this Agreement authorizes notices, requests, demands or other communications by
Borrowers to Agent or any Lender to be made by telephone or facsimile, Agent or
any Lender may conclusively presume that anyone purporting to be a person
designated in any incumbency certificate or other similar document received by
Agent or a Lender is such a person.
8.02. Expenses. Borrowers jointly and severally agree to pay on demand, whether
or not any Loan is made hereunder, (a) all reasonable and documented fees and
expenses, including reasonable attorneys' fees and expenses, incurred by Agent
in connection with the syndication of the Facilities, the preparation,
negotiation, execution and delivery of, and the exercise of its duties under,
this Agreement and the other Credit Documents, and the preparation, negotiation,
execution and delivery of amendments and waivers hereunder and thereunder and
(b) all reasonable and documented fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Agent and Lenders in the enforcement
or attempted enforcement of any of the Obligations or in preserving any of
Agent's or Lenders' rights and remedies (including, without limitation, all such
fees and expenses incurred in connection with any "workout" or restructuring
affecting the Credit Documents or the Obligations or any bankruptcy or similar
proceeding involving either Borrower or any of its Subsidiaries). As used
herein, the term "reasonable attorneys' fees and expenses" shall include,
without limitation, allocable costs and expenses of Agent's and Lenders'
in-house legal counsel and staff. The obligations of Borrowers under this
Paragraph 8.02 shall survive the payment and performance of the Obligations and
the termination of this Agreement.
8.03. Indemnification. To the fullest extent permitted by law, Borrowers jointly
and severally agree to protect, indemnify, defend and hold harmless Agent,
Lenders and their Affiliates and their respective directors, officers,
employees, agents and advisors ("Indemnitees") from and against any and all
liabilities, losses, damages or expenses of any kind or nature and from any
suits, claims or demands (including in respect of or for reasonable attorney's
fees and other expenses) arising on account of or in connection with any matter
or thing or action or failure to act by Indemnitees, or any of them, arising out
of or relating to the Credit Documents or any transaction contemplated thereby,
including without limitation any use by either Borrower of any proceeds of the
Loans, except to the extent such liability arises from the willful misconduct or
gross negligence of such Indemnitee. Upon receiving knowledge of any suit, claim
or demand asserted by a third party that Agent or any Lender believes is covered
by this indemnity, Agent or such Lender shall give Borrowers notice of the
matter and an opportunity to defend it, at Borrowers' sole cost and expense,
with legal counsel satisfactory to Agent or such Lender, as the case may be.
Agent or such Lender may also require Borrowers to defend the matter. Any
failure or delay of Agent or any Lender to notify Borrowers of any such suit,
claim or demand shall not relieve Borrowers of their obligations under this
Paragraph 8.03 but shall reduce such obligations to the extent of any increase
in those obligations caused solely by any such failure or delay which is
unreasonable. The obligations of Borrowers under this Paragraph 8.03 shall
survive the payment and performance of the Obligations and the termination of
this Agreement.
<PAGE>
8.04. Waivers; Amendments. Any term, covenant, agreement or condition of this
Agreement or any other Credit Document may be amended or waived, and any consent
under this Agreement or any other Credit Document may be given, if such
amendment, waiver or consent is in writing and is signed by Borrowers and the
Required Lenders (or Agent on behalf of the Required Lenders with the written
approval of the Required Lenders); provided, however that:
(a) Any amendment, waiver or consent which would (i) extend
the Maturity Date (except for extensions as provided in Paragraph
2.03), (ii) reduce the Commitment Fees or any other fees or other
amounts payable for the account of all Lenders hereunder or extend the
scheduled date for payment of any such fees or amounts, (iii) amend
this Paragraph 8.04, (iv) amend the definition of Required Lenders or
(v) release any substantial part of the Collateral or any Guaranty
(except for releases as provided in Paragraph 2.13), must be in writing
and signed or approved in writing by all Lenders;
(b) Any amendment, waiver or consent which would (i) increase
the Total U.S. Commitment or (ii) reduce the principal of or interest
on the U.S. Loans or any fees or other amounts payable for the account
of all U.S. Lenders hereunder or extend the scheduled date for payment
of any such principal, interest, fees or amounts, must be in writing
and signed or approved in writing by all U.S. Lenders;
(c) Any amendment, waiver or consent which would (i) increase
the Total Japanese Commitment or (ii) reduce the principal of or
interest on the Japanese Loans or any fees or other amounts payable for
the account of all Japanese Lenders hereunder or extend the scheduled
date for payment of any such principal, interest, fees or amounts, must
be in writing and signed or approved in writing by all Japanese
Lenders;
(d) Any amendment, waiver or consent which would (i) increase
or decrease the U.S. Commitment of any U.S. Lender (except for a pro
rata decrease in the U.S. Commitments of all U.S. Lenders) or (ii)
increase or decrease the Japanese Commitment of any Japanese Lender
(except for a pro rata decrease in the Japanese Commitments of all
Japanese Lenders) must be in writing and signed by such Lender; and
(e) Any amendment, waiver or consent which affects the rights
or obligations of Agent must be in writing and signed by Agent.
No failure or delay by Agent or any Lender in exercising any right under this
Agreement or any other Credit Document shall operate as a waiver thereof or of
any other right hereunder or thereunder nor shall any single or partial exercise
of any such right preclude any other further exercise thereof or of any other
right hereunder or thereunder. Unless otherwise specified in such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
8.05. Successors and Assigns.
(a) Binding Effect. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of Borrowers,
Lenders, Agent, all future holders of the Notes and their respective
successors and permitted assigns, except that neither Borrower may
assign or transfer any of its rights or obligations under any Credit
Document without the prior written consent of Agent and each Lender.
<PAGE>
(b) Participations. Any Lender may at any time sell to one or
more banks or other financial institutions ("Participants")
participating interests in any Loan owing to such Lender, any Note held
by such Lender, any Commitment of such Lender or any other interest of
such Lender under this Agreement and the other Credit Documents. In the
event of any such sale by a Lender of participating interests, such
Lender's obligations under this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof,
such Lender shall remain the holder of its Notes for all purposes under
this Agreement and Borrowers and Agent shall continue to deal solely
and directly with such Lender in connection with such Lender's rights
and obligations under this Agreement. Any agreement pursuant to which
any such sale is effected may require the selling Lender to obtain the
consent of the Participant in order for such Lender to agree in writing
to any amendment, waiver or consent of a type specified in clause
(a)(i), (a)(v), (b)(ii), (c)(ii) or Subparagraph (d) of Paragraph 8.04
but may not otherwise require the selling Lender to obtain the consent
of such Participant to any other amendment, waiver or consent
hereunder. Borrowers also agree that any Lender which has transferred
any participating interest in its Commitments or Loans shall,
notwithstanding any such transfer, be entitled to the full benefits
accorded such Lender under Paragraph 2.10, Paragraph 2.11, and
Paragraph 2.12, as if such Lender had not made such transfer.
(c) Assignments. Any Lender may, at any time, sell and assign
to any other Lender or any Eligible Assignee (individually, an
"Assignee Lender") all or a portion of its rights and obligations under
this Agreement and the other Credit Documents (such a sale and
assignment to be referred to herein as an "Assignment") pursuant to an
assignment agreement in the form of Exhibit K(an "Assignment
Agreement"), executed by each Assignee Lender and such assignor Lender
(an "Assignor Lender") and delivered to Agent for its acceptance and
recording in the Register; provided, however, that:
(i) Without the written consent of Agent and, if no
Default has occurred and is continuing, NSE (which consent of
Agent and NSE shall not be unreasonably withheld), no U.S.
Lender may make any Assignment of its U.S. Commitment or U.S.
Loan to any Assignee Lender which is not, immediately prior to
such Assignment, a U.S. Lender hereunder or an Affiliate
thereof acting through an office or branch located in the
United States;
(ii) Without the written consent of Agent and, if no
Default has occurred and is continuing, NSJ (which consent of
Agent and NSJ shall not be unreasonably withheld), no Japanese
Lender may make any Assignment of its Japanese Commitment or
Japanese Loan to any Assignee Lender which is not, immediately
prior to such Assignment, a Japanese Lender hereunder or an
Affiliate thereof acting through an office or branch located
in Japan;
<PAGE>
(iii) Without the written consent of Agent and, if no
Default has occurred and is continuing, NSE (which consent of
Agent and NSE shall not be unreasonably withheld), no U.S.
Lender may make any Assignment of its U.S. Commitment or U.S.
Loan to any Assignee Lender if, after giving effect to such
Assignment, the U.S. Commitment or U.S. Loan of such Lender or
such Assignee Lender would be less than Ten Million Dollars
($10,000,000) (except that a U.S. Lender may make an
Assignment which reduces its U.S. Commitment or U.S. Loan to
zero without the written consent of NSE and Agent);
(iv) Without the written consent of Agent and, if no
Default has occurred and is continuing, NSJ (which consent of
Agent and NSJ shall not be unreasonably withheld), no Japanese
Lender may make any Assignment of its Japanese Commitment or
Japanese Loan to any Assignee Lender if, after giving effect
to such Assignment, the Japanese Commitment or Japanese Loan
of such Lender or such Assignee Lender would be less than One
Billion Yen ((Y)1,000,000,000) (except that a Japanese Lender
may make an Assignment which reduces its Japanese Commitment
or Japanese Loan to zero without the written consent of NSE
and Agent);
(v) Without the written consent of Agent and, if no
Default has occurred and is continuing, NSE (which consent of
Agent and NSE shall not be unreasonably withheld), no U.S.
Lender may make any Assignment of its U.S. Commitment or U.S.
Loan which does not assign and delegate an equal pro rata
interest in all rights, duties and obligations of such Lender
under this Agreement and the other Credit Documents (except
for its rights and duties, if any, relating to the Japanese
Facility); and
(vi) Without the written consent of Agent and, if no
Default has occurred and is continuing, NSJ (which consent of
Agent and NSJ shall not be unreasonably withheld), no Japanese
Lender may make any Assignment of its Japanese Commitment or
Japanese Loan which does not assign and delegate an equal pro
rata interest in all rights, duties and obligations of such
Lender under this Agreement and the other Credit Documents
(except for its rights and duties, if any, relating to the
U.S. Facility).
Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective Date
determined pursuant to such Assignment Agreement, (A) each Assignee
Lender thereunder shall be a Lender hereunder with Commitments or Loans
as set forth on Attachment 1 to such Assignment Agreement (under the
caption "Commitments or Loans After Assignment") and shall have the
rights, duties and obligations of such a Lender under this Agreement
and the other Credit Documents, and (B) the Assignor Lender thereunder
shall be a Lender with Commitments or Loans as set forth on Attachment
1 to such Assignment Agreement (under the caption "Commitments or Loans
After Assignment"), or, if the Commitments or Loans of the Assignor
Lender have been reduced to zero, the Assignor Lender shall cease to be
a Lender and to have any obligation to make any Loan; provided,
however, that any such Assignor Lender which ceases to be a Lender
shall continue to be entitled to the benefits of any provision of this
Agreement which by its terms survives the termination of this
Agreement. Each Assignment Agreement shall be deemed to amend Schedule
<PAGE>
I to the extent, and only to the extent, necessary to reflect the
addition of each Assignee Lender, the deletion of each Assignor Lender
which reduces its Commitments or Loans to zero, and the resulting
adjustment of Commitments or Loans arising from the purchase by each
Assignee Lender of all or a portion of the rights and obligations of an
Assignor Lender under this Agreement and the other Credit Documents. On
or prior to the Assignment Effective Date determined pursuant to each
Assignment Agreement, Borrowers, at their own expense, shall, if
requested by Assignee Lenders, execute and deliver to Agent, in
exchange for the surrendered Notes, if any, of the Assignor Lender
thereunder, new Notes to the order of each Assignee Lender thereunder
and, if the Assignor Lender is continuing as a Lender hereunder, new
Notes to the order of the Assignor Lender. The Notes surrendered by the
Assignor Lender shall be returned by Agent to Borrowers marked
"replaced". Each Assignee Lender which becomes a U.S. Lender and was
not previously a U.S. Lender hereunder and which is not incorporated
under the laws of the United States of America or a state thereof
shall, within three (3) Business Days of becoming a U.S. Lender,
deliver to NSE and Agent such certificates and other evidence as NSE or
Agent may reasonably request to establish that such Lender is entitled
to receive payments under this Agreement on account of its U.S. Loan
without deduction or withholding of any United States federal income
taxes. Each Assignee Lender which becomes a Japanese Lender and was not
previously a Japanese Lender hereunder and which is not incorporated
under the laws of Japan shall, within three (3) Business Days of
becoming a Japanese Lender, deliver to NSJ and Agent such certificates
and other evidence as NSJ or Agent may reasonably request to establish
that such Lender is entitled to receive payments under this Agreement
on account of its Japanese Loan without deduction or withholding of any
Japanese income taxes.
(d) Register. Agent shall maintain at its address referred to
in Paragraph 8.01 a copy of each Assignment Agreement delivered to it
and a register (the "Register") for the recordation of the names and
addresses of Lenders and the Commitments or Loans of each Lender from
time to time. The entries in the Register shall be conclusive in the
absence of manifest error, and Borrowers, Agent and Lenders may treat
each Person whose name is recorded in the Register as the owner of the
Commitments or Loans recorded therein for all purposes of this
Agreement. The Register shall be available for inspection by either
Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(e) Registration. Upon its receipt of an Assignment Agreement
executed by an Assignor Lender and an Assignee Lender (and, to the
extent required by Subparagraph 8.05(c), by Borrowers and Agent)
together with payment to Agent by Assignor Lender of a registration and
processing fee of $3,000, Agent shall (i) promptly accept such
Assignment Agreement and (ii) on the Effective Date determined pursuant
thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to Lenders and
Borrowers. Agent may, from time to time at its election, prepare and
deliver to Lenders and Borrowers a revised Schedule I reflecting the
names, addresses and respective Commitments or Loans of all Lenders
then parties hereto.
<PAGE>
(f) Confidentiality. Subject to Paragraph 8.12, Agent and
Lenders may disclose the Credit Documents and any financial or other
information relating to Borrowers or any Subsidiary to each other or to
any potential Participant or Assignee Lender.
(g) Pledges to Federal Reserve Banks. Notwithstanding any
other provision of this Agreement, any Lender may at any time assign
all or a portion of its rights under this Agreement and the other
Credit Documents to a Federal Reserve Bank. No such assignment shall
relieve the assigning Lender from its obligations under this Agreement
and the other Credit Documents.
8.06. Setoff; Security Interest.
(a) Setoff. In addition to any rights and remedies of Lenders
provided by law, each Lender shall have the right, with the prior
consent of Agent but without prior notice to or consent of Borrowers,
any such notice and consent being expressly waived by Borrowers to the
extent permitted by applicable law, upon the occurrence and during the
continuance of an Event of Default, to set-off and apply against the
Obligations of either Borrower any amount owing from such Lender to
such Borrower. The aforesaid right of set-off may be exercised by such
Lender against a Borrower or against any trustee in bankruptcy, debtor
in possession, assignee for the benefit of creditors, receiver or
execution, judgment or attachment creditor of such Borrower or against
anyone else claiming through or against such Borrower or such trustee
in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off may not have been
exercised by such Lender at any prior time. Each Lender agrees promptly
to notify the applicable Borrower after any such set-off and
application made by such Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
(b) Security Interest. As security for the Obligations, each
Borrower hereby grants to Agent and each Lender, for the benefit of all
Lenders, a continuing security interest in any and all deposit accounts
or moneys of such Borrower now or hereafter maintained with such
Lender. Each Lender shall have all of the rights of a secured party
with respect to such security interest.
8.07. No Third Party Rights. Nothing expressed in or to be implied from this
Agreement is intended to give, or shall be construed to give, any Person, other
than the parties hereto and their permitted successors and assigns hereunder,
any benefit or legal or equitable right, remedy or claim under or by virtue of
this Agreement or under or by virtue of any provision herein.
8.08. Partial Invalidity. If at any time any provision of this Agreement is or
becomes illegal, invalid or unenforceable in any respect under the law or any
jurisdiction, neither the legality, validity or enforceability of the remaining
provisions of this Agreement nor the legality, validity or enforceability of
such provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
<PAGE>
8.09. Jury Trial. EACH OF BORROWERS, LENDERS AND AGENT, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.
8.10. Counterparts. This Agreement may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed
to constitute a complete, executed original for all purposes.
8.11. . NSE is individually liable for the payment of the U.S. Commitment Fees
and the principal of, interest on and all other amounts related to the U.S.
Loans, and NSJ is individually liable for the payment of the Japanese Commitment
Fees and the principal of, interest on and all other amounts related to the
Japanese Loans. Each Borrower is jointly and severally liable for the payment
and performance of all other Obligations under this Agreement and the other
Credit Documents, and NSE also is liable for the payment and performance of all
Obligations of NSJ under this Agreement and the other Credit Documents as
provided in the NSE Guaranty.
8.12. . Neither any Lender nor Agent shall disclose to any Person any
information with respect to Borrowers or any of their Subsidiaries which is
furnished pursuant to this Agreement or under the other Credit Documents, except
that any Lender or Agent may disclose any such information (a) to its own
directors, officers, employees, auditors, counsel and other advisors and to its
Affiliates to the extent reasonably determined by such Lender or Agent to be
necessary for the administration or enforcement of the Credit Documents; (b) to
any other Lender or Agent; (c) which is otherwise available to the public; (d)
if required or appropriate in any report, statement or testimony submitted to
any Governmental Authority having or claiming to have jurisdiction over such
Lender or Agent; (e) if required in response to any summons or subpoena; (f) in
connection with any enforcement by Lenders and Agent of their rights under this
Agreement or the other Credit Documents or any litigation among the parties
relating to the Credit Documents or the transactions contemplated thereby; (g)
to comply with any Requirement of Law applicable to such Lender or Agent; (h) to
any Assignee Lender or Participant or any prospective Assignee Lender or
Participant, provided that such Assignee Lender or Participant or prospective
Assignee Lender or Participant agrees to be bound by this Paragraph 8.12; or (i)
otherwise with the prior consent of Borrowers; provided, however, that (i) any
Lender or Agent served with any summons or subpoena demanding the disclosure of
any such information shall use reasonable efforts to notify Borrowers promptly
of such summons or subpoena if not prohibited by any Requirement of Law and, if
requested by Borrowers and not disadvantageous to such Lender or Agent, to
cooperate with Borrowers in obtaining a protective order restricting such
disclosure, and (ii) any disclosure made in violation of this Agreement shall
not affect the obligations of Borrowers and their Subsidiaries under this
Agreement and the other Credit Documents.
<PAGE>
8.13. . Each Borrower irrevocably submits to the non-exclusive jurisdiction of
the courts of the State of California and the courts of the United States of
America located in the Northern District of California and agrees that any legal
action, suit or proceeding arising out of or relating to this Agreement or any
of the other Credit Documents may be brought against such party in any such
courts. Final judgment against either Borrower in any such action, suit or
proceeding shall be conclusive and may be enforced in any other jurisdiction by
suit on the judgment, a certified or exemplified copy of which shall be
conclusive evidence of the judgment, or in any other manner provided by law.
Nothing in this Subparagraph 8.13 shall affect the right of Agent or any Lender
to commence legal proceedings or otherwise sue either Borrower in any other
appropriate jurisdiction, or concurrently in more than one jurisdiction, or to
serve process, pleadings and other papers upon either Borrower in any manner
authorized by the laws of any such jurisdiction. Each Borrower agrees that
process served either personally or by registered mail shall, to the extent
permitted by law, constitutes adequate service of process in any such suit.
Without limiting the foregoing, each Borrower hereby appoints, in the case of
any such action or proceeding brought in the courts of or in the State of
California, CT Corporation, with offices on the date hereof at 818 West Seventh
Street, Los Angeles, California 90017, to receive for it and on its behalf,
service of process in the State of California with respect thereto, provided
each Borrower may appoint any other person, reasonably acceptable to Agent, with
offices in the State of California to replace such agent for service of process
upon delivery to Agent of a reasonably acceptable agreement of such new agent
agreeing so to act. Each Borrower irrevocably waives to the fullest extent
permitted by applicable law (a) any objection which it may have now or in the
future to the laying of the venue of any such action, suit or proceeding in any
court referred to in the first sentence above; (b) any claim that any such
action, suit or proceeding has been brought in an inconvenient forum; (c) its
right of removal of any matter commenced by any other party in the courts of the
State of California to any court of the United States of America; (d) any
immunity which it or its assets may have in respect of its obligations under
this Agreement or any other Credit Document from any suit, execution, attachment
(whether provisional or final, in aid of execution, before judgment or
otherwise) or other legal process; and (e) any right it may have to require the
moving party in any suit, action or proceeding brought in any of the courts
referred to above arising out of or in connection with this Agreement or any
other Credit Document to post security for the costs of such Borrower or to post
a bond or to take similar action.
[The first signature page follows.]
<PAGE>
IN WITNESS WHEREOF, Borrowers, Lenders and Agent have caused this
Agreement to be executed as of the day and year first above written.
BORROWERS: NU SKIN ENTERPRISES, INC.
By: /s/ Steven J. Lund
Name: Steven J. Lund
Title:President and CEO
NU SKIN JAPAN CO., LTD.
By: /s/ Steven J. Lund
Name: Steven J. Lund
Title:Representative Director
AGENT: ABN AMRO BANK N.V.
By: /s/ Tamira Treffers-Herrera
Name: Tamira Treffers-Herrera
Title:Vice President & Director
By: /s/ Bradford H. Leahy
Name: Bradford H. Leahy
Title:Assistant Vice President
LENDERS: ABN AMRO BANK N.V.
By: /s/ Tamira Treffers-Herrera
Name: Tamira Treffers-Herrera
Title:Vice President & Director
By: /s/ Bradford H. Leahy
Name: Bradford H. Leahy
Title:Assistant Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Kevin C. Leader
Name: Kevin C. Leader
Title:Vice President
By:
Name:
Title:
BANK ONE, UTAH, NATIONAL ASSOCIATION
By: /s/ Stephen A. Cazier
Name: Stephen A. Cazier
Title: Vice President
BANQUE NATIONALE DE PARIS
By: /s/ D. Guy Gibb
Name: D. Guy Gibb
Title:Vice President
By: /s/ Jeffrey S. Kajisa
Name: Jeffrey S. Kajisa
Title:Assistant Vice President
<PAGE>
KEYBANK NATIONAL ASSOCIATION
By: /s/ Mary K. Young
Name: Mary K. Young
Title:Commercial Banking Officer
By: /s/ James A. Taylor
Name: James A. Taylor
Title:Assistant Vice President
NATIONSBANK, N.A.
By: /s/ Natalie E. Herbert
Name: Natalie E. Herbert
Title:Vice President
By:
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Wanda Headrick
Name: Wanda Headrick
Title:Vice President
By:
Name:
Title:
<PAGE>
U.S. BANK, NATIONAL ASSOCIATION
By: /s/ Thomas A. Eshom
Name: Thomas A. Eshom
Title:Vice President
By:
Name:
Title:
ZIONS FIRST NATIONAL BANK
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
CO-AGENTS: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Kevin C. Leader
Name: Kevin C. Leader
Title:Vice President
By:
Name:
Title:
NATIONSBANK, N.A.
By: /s/ Natalie E. Herbert
Name: Natalie E. Herbert
Title:Vice President
By:
Name:
Title:
<PAGE>
SCHEDULE I
LENDERS
PART A - COMMITMENTS
U.S. JAPANESE
LENDER COMMITMENT COMMITMENT
- ----------------------------------- ---------------- ---------------------
ABN AMRO Bank N.V. 0 $33,400,000.00
Bank of America National Trust and $10,000,000.00 $20,000,000.00
Savings Association
Bank One, Utah, National $10,000,000.00 0
Association
Banque Nationale de Paris $8,400,000.00 $6,600,000.00
KeyBank National Association $20,000,000.00 0
NationsBank, N.A. $21,600,000.00 0
Union Bank of California, N.A. $10,000,000.00 $10,000,000.00
U.S. Bank, National Association $15,000,000.00 0
Zions First National Bank $15,000,000.00 0
TOTAL $110,000,000.00 $70,000,000.00
<PAGE>
PART B - ADDRESSES FOR NOTICES, ETC.
ABN AMRO BANK N.V.
Domestic Lending Office and Euro-Dollar Lending Office:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111
Japanese Lending Office:
ABN AMRO Bank N.V.
Tokyo Branch
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105
Japan
Address for Notices related to the U.S. Borrowing:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111
Attn: Tamira Treffers-Herrera
Tel. No: (415) 984-3709
Fax No: (415) 362-3524
Address for Notices related to the Japanese Borrowing:
ABN AMRO Bank N.V.
Tokyo Branch
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105
Japan
Attn: Kiyoharu Michiwaki
Tel. No: 81-3-5405-6575
Fax No: 81-3-5405-6902 or 6903
<PAGE>
With a copy of all notices to:
ABN AMRO North America, Inc.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Linda Boardman
Tel. No: (212) 314-1724
Fax No: (212) 314-1712
Wiring Instructions for the U.S. Borrowing:
ABN AMRO Bank N.V.
New York, New York
RT/ABA No.: 026009580
Account Name: ABN AMRO Bank N.V. - Chicago CPU
Account No.: 650-001-1789-41
Reference: Nu Skin Enterprises, Inc.
Wiring Instructions for the Japanese Borrowing:
Paying Bank: Sakura Bank, Tokyo Eigyo-bu
Beneficiary: Oranda Ginko Tokyo Shiten
(Japanese Account Name for ABN AMRO Bank Tokyo Branch)
Type of Account: Current
Account No.: 1008000
Reference: Nu Skin Japan
-or-
BOJ Net (Bank of Japan Financial Network System)
Tohzo Yokin Furikae
Account No.: 0422-001
Transfer Code: 055
Settlement: Kokan Jiri
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
Domestic Lending Office and Euro-Dollar Lending Office:
Bank of America National Trust and Savings Association
555 California Street, 41st Floor
San Francisco, CA 94104
Japanese Lending Office:
Bank of America National Trust and Savings Association
Ark Mori Building
No. 12-32, Akasaka 1-Chome
Minato-ku, Tokyo 107
Japan
Address for Notices related to the U.S. Borrowing:
Bank of America National Trust and Savings Association
555 California Street, 41st Floor
San Francisco, CA 94104
Attn: Kevin C. Leader, Vice President
Tel. No: (415) 622-8168
Fax No: (415) 622-4585
Telex: 34346
Answerback: BANKAMER SFO
Address for Notices related to the Japanese Borrowing:
Bank of America National Trust and Savings Association
Ark Mori Building
No. 12-32, Akasaka 1-Chome
Minato-ku, Tokyo 107
Japan
Attn: Atshushi Tauchi
Tel. No: 81-3-3587-3165
Fax No: 81-3-3587-3377
Wiring Instructions for the U.S. Borrowing:
Bank of America National Trust and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Attn: Vickie Kish
Tel. No.: (925) 675-7343
Fax No.: (925) 675-7531 or 7532
TELEX: 34346
ANSWERBACK: BANKAMER SFO
ABA No: 121000358
Account No: 12331-83980
Attn: Vickie Kish
Reference: Nu Skin Enterprises
<PAGE>
Wiring Instructions for the Japanese Borrowing:
Bank of Japan
For Account of: Bank of America Tokyo Branch
Account No.: 0403-001
Attn: Ayako Nishimura
<PAGE>
BANK ONE, UTAH, NATIONAL ASSOCIATION
Domestic Lending Office and Euro-Dollar Lending Office:
Bank One, Utah, N.A.
80 West Broadway, Suite 200
Salt Lake City, UT 84101
Address for Notices related to the U.S. Borrowing:
Bank One, Utah, N.A.
80 West Broadway, Suite 200
Salt Lake City, UT 84101
Attn: Stephen A. Cazier
Tel. No.: (801) 481-5139
Fax No.: (801) 481-5031
with a copy to:
Bank One, Utah, N.A.
80 West Broadway, Suite 300
Salt Lake City, UT 84101
Attn: Lori Koncar
Tel. No: (801) 481-5771
Fax No: (801) 481-5369
Wiring Instructions for the U.S. Borrowing:
Bank One, Utah, N.A.
80 West Broadway, Suite 300
Salt Lake City, Utah 84101
ABA No.: 124001545
For Further Credit to: Account No. 1547-8015
<PAGE>
BANQUE NATIONALE DE PARIS
Domestic Lending Office and Euro-Dollar Lending Office:
Banque Nationale de Paris
San Francisco Branch
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Japanese Lending Office:
Banque Nationale de Paris
Tokyo Branch
Shiroyama JT Mori Bldg. 23F
3-1, Toranomon 4-chome
Minato-ku, Tokyo
Japan
Address for Notices related to the U.S. Borrowing:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attn: Donald A. Hart, Vice President-Treasury
Tel. No: (415) 956-2511
Fax No: (415) 989-9041
Telex No: RCA 278900
Answerback: BNPS UR
with a copy to:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attn: D. Guy Gibb, Vice President
Tel. No: (415) 956-0707, Ext. 206
Fax No: (415) 296-8954
Telex No: RCA 278900
Answerback: BNPS UR
<PAGE>
Address for Notices related to the Japanese Borrowing:
Banque Nationale de Paris
Tokyo Branch
Shiroyama JT Mori Bldg. 23F
3-1, Toranomon 4-chome
Minato-ku, Tokyo
Japan
Attn: Patricia Doyle
Tel. No: 81-3-5473-3526
Fax No: 81-3-5473-3545
with a copy to:
Banque Nationale de Paris
Tokyo Branch
Shiroyama JT Mori Bldg. 23F
3-1, Toranomon 4-chome
Minato-ku, Tokyo
Japan
Attn: Osamu Azuma
Tel. No: 81-3-5473-3680
Fax No: 81-3-5473-3679
Wiring Instructions for the U.S. Borrowing:
Banque Nationale de Paris
ABA No: 026007689
Beneficiary: BNP San Francisco
Account No.: 14334000176
Reference: [commitment fee, interest payment,
principal paydown, etc.]
By Order: Nu Skin Enterprises, Inc.
Attn: Peggy Tatum
Wiring Instructions for the Japanese Borrowing:
Banque Nationale de Paris
c/o Bank of Japan
Tokyo
Account No: 0443
<PAGE>
KEYBANK NATIONAL ASSOCIATION
Domestic Lending Office and Euro-Dollar Lending Office:
KeyBank National Association
700 Fifth Avenue, 46th Floor
Seattle, WA 98104
Address for Notices related to the U.S. Borrowing:
KeyBank National Association
431 E. Parkcenter Boulevard
Boise, ID 83706
Attn: Specialty Services Team
Tel. No: (800) 297-5518
Fax No: (800) 297-5495
Wiring Instructions for the U.S. Borrowing:
KeyBank National Association
ABA No: 125000574
Attn: Specialty Services
Account No: 01500163
Reference: Nu Skin
<PAGE>
NATIONSBANK, N.A.
Domestic Lending Office and Euro-Dollar Lending Office:
NationsBank, N.A.
901 Main Street, 67th Floor
Dallas, TX 75202
Address for Notices related to the U.S. Borrowing:
NationsBank, N.A.
901 Main Street, 67th Floor
Dallas, TX 75202
Attn: Natalie E. Hebert
Tel. No: (214) 508-9060
Fax No: (214) 508-0980
with a copy to:
NationsBank, N.A.
901 Main Street, 14th Floor
Dallas, TX 75202
Attn: Ngozi Ebete
Tel. No: (214) 508-0519 or 1-800-687-4810
Fax No: (214) 508-0944 or (214) 290-8374
Wiring Instructions for the U.S. Borrowing:
NationsBank, N.A.
Dallas, Texas
ABA No: 111000012
For Further Credit To: Corporate Credit Services
Account No: 1292000883
Attn: Ngozi Ebete
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
Domestic Lending Office and Euro-Dollar Lending Office:
Union Bank of California, N.A.
350 California Street, 6th Floor
San Francisco, CA 94104
Japanese Lending Office:
Union Bank of California, N.A.
Tokyo Branch
4-6-1 Hatchobori, Chuo Ku
Tokyo 104 0032
Japan
Address for Notices related to the U.S. Borrowing:
Union Bank of California, N.A.
1980 Saturn Street
Monterey Park, CA 91755
Attn: Maria Flores
Tel. No: (213) 720-2679
Fax No: (213) 724-6198
Address for Notices related to the Japanese Borrowing:
Union Bank of California, N.A.
Tokyo Branch
4-6-1 Hatchobori, Chuo Ku
Tokyo 104 0032
Japan
Attn: Tsutomu Aruga
Tel. No: 81-3-5543-0353
Fax No: 81-3-5543-0356
With a copy of all notices to:
Union Bank of California, N.A.
Corporate Markets Group
350 California Street, 6th Floor
San Francisco, CA 94104
Attn: Wanda Headrick
Tel. No: (415) 705-7459
Fax No: (415) 705-7566
<PAGE>
Wiring Instructions for the U.S. Borrowing:
Union Bank of California, N.A.
1980 Saturn Street
Monterey Park, CA 91755
FED ABA No: 1220-0049-6
Account No: 070196431
Reference: Nu Skin Enterprises
Wiring Instructions for the Japanese Borrowing:
Paying Bank: The Bank of Tokyo-Mitsubishi, Ltd.
-Head Office
Beneficiary: Union Bank of California, Tokyo Branch
Account No: 001-9151209
Reference: Nu Skin Japan
Credit Contact//Business Matters/Documentation/Bid Option/Financial Information
should be sent to:
Union Bank of California, N.A.
Corporate Markets Group
350 California Street, 6th Floor
San Francisco, CA 94104
Attn: Dave Taylor
Tel. No: (415) 705-5098
Fax No: (415) 705-5093
<PAGE>
U.S. BANK, NATIONAL ASSOCIATION
Domestic Lending Office and Euro-Dollar Lending Office:
U.S. Bank, National Association
1420 Fifth Avenue, 9th Floor
Seattle, WA 98101
Address for Notices related to the U.S. Borrowing:
U.S. Bank, National Association
P.O. Box 720
1420 Fifth Avenue, 9th Floor
Seattle, WA 98101-2391
Attn: Thomas A. Eshom, Vice President
Tel. No: (206) 344-4589
Fax No: (206) 344-4515
Telex: 6733211
Answerback: USB UW
with a copy to:
U.S. Bank, National Association
P.O. Box 720
1420 Fifth Avenue, 9th Floor
Seattle, WA 98101-2391
Attn: Jack Sommerville
Tel. No: (206) 344-5318
Fax No: (206) 344-4515
Telex: 6733211
Answerback: USB UW
Wiring Instructions for the U.S. Borrowing:
U.S. Bank, National Association
Portland, Oregon
ABA No: 123000220
For Further Credit To: Commercial Loan Servicing
Account No: 010-0111-210
Attn: Participation Specialist
<PAGE>
ZIONS FIRST NATIONAL BANK
Domestic Lending Office and Euro-Dollar Lending Office:
Zions First National Bank
Central Utah Commercial Banking Center
1220 South 800 East
Orem, UT 84097-2743
Address for Notices related to the U.S. Borrowing:
Zions First National Bank
Central Utah Commercial Banking Center
1220 South 800 East
Orem, UT 84097-2743
Attn: Richard W. Thomsen, Vice President
Tel. No: (801) 764-9415
Fax No: (801) 224-3280
with a copy to:
Zions First National Bank
#1 South Main
Salt Lake City, UT 84111
-or-
P.O. Box 25822
Salt Lake City, UT 84125-822
Attn: Patricia A. Youngren
Tel. No: (801) 524-4846
Fax No: (801) 524-2166
Wiring Instructions for the U.S. Borrowing:
Zions First National Bank
Salt Lake City, Utah
ABA No.: 124000054
Attn: Note Teller, 187-K2
<PAGE>
SCHEDULE II
PRICING GRID
APPLICABLE
APPLICABLE APPLICABLE MARGIN
NSE'S MARGIN MARGIN FOR
DEBT/ PRICING FOR FOR JAPANESE
EBITDA PERIOD BASE RATE LIBOR LOAN
RATIO LEVEL PORTIONS PORTIONS PORTIONS
------ ----- -------- -------- ----------
less than 0.50 1 0% 0.600% 0.600%
greater than
or equal to 0.50,
less than 1.00 2 0% 0.750% 0.750%
greater than
or equal to 1.00 3 0% 1.000% 1.000%
EXPLANATION
1. The Applicable Margin For Base Rate Portions, LIBOR Portions and
Japanese Loan Portions will be set for each Pricing Period and will
vary depending upon whether such period is a Level 1 Period, a Level 2
Period or a Level 3 Period.
2. The first Pricing Period, which commences on the date of this Agreement
and ends on September 30, 1998, will be a Level 2 Period.
3. The second Pricing Period, which commences on October 1, 1998 and ends
on December 31, 1998, will be a Level 1 Period, a Level 2 Period, or a
Level 3 Period depending upon NSE's Debt/EBITDA Ratio for the
consecutive four-quarter period ending on June 30, 1998.
4. Each Pricing Period thereafter will be a Level 1 Period, a Level 2
Period, or a Level 3 Period depending upon NSE's Debt/EBITDA Ratio for
the consecutive four-quarter period ending on the last day of the
quarter that ended one quarter prior to the first day of such Pricing
Period.
5. Examples:
(a) NSE's Debt/EBITDA Ratio is 0.46 for the consecutive
four-quarter period ending on September 30, 1998. The Pricing Period of
January 1, 1999 through March 31, 1999 will be a Level 1 Period.
(b) NSE's Debt/EBITDA Ratio is 1.10 for the consecutive
four-quarter period ending on December 31, 1998. The Pricing Period of
April 1, 1999 through June 30, 1999 will be a Level 3 Period.
<PAGE>
SCHEDULE 3.01
INITIAL CLOSING DATE CONDITIONS PRECEDENT
A. Principal Credit Documents.
(1) The Credit Agreement, duly executed by each Borrower, each
Lender, Agent and each Co-Agent;
(2) A Note payable to each applicable Lender requesting such a
Note for its U.S. Loan, each duly executed by the applicable Borrower;
(3) The Subsidiary Guaranty, duly executed by each Material
Domestic Subsidiary of NSE; and
(4) The NSE Guaranty, duly executed by NSE.
B. NSE Corporate Documents.
(1) The Certificate of Incorporation of NSE, certified as of a
recent date prior to the Initial Closing Date by the Secretary of State
of Delaware;
(2) A Certificate of Good Standing (or comparable certificate)
for NSE, certified as of a recent date prior to the Initial Closing
Date by the Secretary of State of Delaware;
(3) A certificate of the Secretary or an Assistant Secretary
of NSE, dated the Initial Closing Date, certifying (a) that attached
thereto is a true and correct copy of the Bylaws of NSE as in effect on
the Initial Closing Date; (b) that attached thereto are true and
correct copies of resolutions duly adopted by the Board of Directors of
NSE and continuing in effect, which (i) authorize the execution,
delivery and performance by NSE of this Agreement and the other Credit
Documents executed or to be executed by NSE and the consummation of the
transactions contemplated hereby and thereby and (ii) designate the
officers authorized so to execute, deliver and perform on behalf of
NSJ; and (c) that there are no proceedings for the dissolution or
liquidation of NSE;
(4) A certificate of the Secretary or an Assistant Secretary
of NSE, dated the Initial Closing Date, certifying the incumbency,
signatures and authority of the officers of Borrower authorized to
execute, deliver and perform this Agreement, the other Credit Documents
and all other documents, instruments or agreements related thereto
executed or to be executed by NSE; and
(5) Certificates of Good Standing (or comparable certificates)
for NSE, certified as of a recent date prior to the Initial Closing
Date by the Secretaries of State (or comparable official) of each
jurisdiction in which NSE is qualified to do business.
<PAGE>
C. NSJ Corporate Documents.
(1) The Articles of Association (Teikan) of NSJ, certified as
of a recent date prior to the Initial Closing Date by a Statutory
Auditor of NSJ, together with an English translation thereof (if
appropriate);
(2) A copy of the commercial registry (Syougyou Tookibotoohon)
for NSJ, issued as of a recent date prior to the Initial Closing Date
by the registrar of the Tokyo Legal Affairs Bureau of the Ministry of
Justice, together with an English translation thereof (if appropriate);
(3) A certificate of a Statutory Auditor of NSJ, dated the
Initial Closing Date, certifying (a) that attached thereto are true and
correct copies of resolutions duly adopted by the Board of Directors of
NSJ and continuing in effect, which (i) authorize the execution,
delivery and performance by NSJ of this Agreement and the other Credit
Documents executed or to be executed by NSJ and the consummation of the
transactions contemplated hereby and (ii) designate the officers,
directors and attorneys authorized so to execute, deliver and perform
on behalf of NSJ; and (b) that there are no proceedings for the
dissolution or liquidation of NSJ, together with an English translation
thereof (if appropriate);
(4) A certificate of a Statutory Auditor of NSJ, dated the
Initial Closing Date, certifying the incumbency, signatures and
authority of the officers, directors or attorneys of NSJ authorized to
execute, deliver and perform this Agreement, the other Credit Documents
and all other documents, instruments or agreements related thereto
executed or to be executed by NSJ, together with an English translation
thereof (if appropriate).
D. Other Subsidiary Corporate Documents.
(1) The Certificate of Incorporation (or comparable
certificate) of each Material Subsidiary of NSE, certified as of a
recent date prior to the Initial Closing Date by the Secretary of State
(or comparable public official) of its jurisdiction of incorporation
(or, if any such Subsidiary is organized under the laws of any
jurisdiction outside the United States, such other evidence as Agent
may request to establish that such Subsidiary is duly organized and
existing under the laws of such jurisdiction), together with an English
translation thereof (if appropriate);
(2) To the extent such jurisdiction has the legal concept of a
corporation being in good standing and a Governmental Authority in such
jurisdiction issues any evidence of such good standing, a Certificate
of Good Standing (or comparable certificate) for each Material
Subsidiary of NSE, certified as of a recent date prior to the Initial
Closing Date by the Secretary of State (or comparable public official)
of its jurisdiction of incorporation (or, if any such Subsidiary is
organized under the laws of any jurisdiction outside the United States,
such other evidence as Agent may request to establish that such
Subsidiary is duly qualified to do business and in good standing under
the laws of such jurisdiction), together with an English translation
thereof (if appropriate);
<PAGE>
(3) A certificate of the Secretary or an Assistant Secretary
(or comparable officer) of each Material Subsidiary of NSE executing
the Subsidiary Guaranty, dated the Initial Closing Date, certifying (a)
that attached thereto is a true and correct copy of the Bylaws of such
Subsidiary as in effect on the Closing Date (or, if any such Subsidiary
is organized under the laws of any jurisdiction outside the United
States, any comparable document provided for in the respective
corporate laws of that jurisdiction); (b) that attached thereto are
true and correct copies of resolutions duly adopted by the Board of
Directors of such Subsidiary (or other comparable enabling action) and
continuing in effect, which (i) authorize the execution, delivery and
performance by such Subsidiary of the Credit Documents to be executed
by such Subsidiary and the consummation of the transactions
contemplated thereby and (ii) designate the officers, directors and
attorneys authorized so to execute, deliver and perform on behalf of
such Subsidiary; and (c) that there are no proceedings for the
dissolution or liquidation of such Subsidiary, together with a
certified English translation thereof (if appropriate);
(4) A certificate of the Secretary or an Assistant Secretary
(or comparable officer) of each Material Subsidiary of NSE executing
the Subsidiary Guaranty, dated the Initial Closing Date, certifying the
incumbency, signatures and authority of the officers, directors and
attorneys of such Subsidiary authorized to execute, deliver and perform
the Credit Documents to be executed by such Subsidiary, together with a
certified English translation thereof (if appropriate); and
(5) In the case of any Material Subsidiary that is organized
under the laws of jurisdictions outside the United States and
domesticated under the laws of Delaware (or any other state of the
United States), the documents described in paragraphs (1) through (4)
above shall also be provided with respect to the Delaware (or other
state) counterparts of such Subsidiaries, together with a Certification
of Domestication for such Subsidiary.
E. Financial Statements, Financial Condition, Etc.
(1) A copy of the audited consolidated Financial Statements of
NSE for the fiscal year ended December 31, 1997, prepared by Price
Waterhouse LLP, together with a copy of the unqualified opinion and
management letter delivered by such accountants in connection with such
Financial Statements;
(2) A copy of the 10-K report filed by NSE with the Securities
and Exchange Commission for the fiscal year ended December 31, 1997;
<PAGE>
(3) A copy of the audited consolidated Financial Statements of
NSJ for the fiscal year ended December 31, 1997, prepared by Price
Waterhouse LLP, together with a copy of the unqualified opinion and
management letter delivered by such accountants in connection with such
Financial Statements;
(4) A final sources and uses statement for the NSI Acquisition
(including transaction costs);
(5) A balance sheet of NSE dated March 31, 1998 (which
incorporates all preclosing adjustments), reflecting the consummation
of the NSI Acquisition and the other transactions contemplated by the
NSI Acquisition Documents, certified by the chief financial officer or
treasurer of NSE as having been prepared based upon reasonable
assumptions and in good faith;
(6) A certificate of the chief financial officer or treasurer
of NSE setting forth, in such detail as Agent may reasonably request,
the calculation of NSE's Tangible Net Worth on March 31, 1998;
(7) A certificate of the Statutory Auditor of NSJ setting
forth, in such detail as Agent may reasonably request, the calculation
of NSJ's Tangible Net Worth on March 31, 1998;
<PAGE>
(8) A Solvency Certificate in the form of Exhibit L for each
Borrower and its Material Subsidiaries, dated the Initial Closing Date
and executed by the chief financial officer or treasurer of each
Borrower;
(9) The consolidated plan and forecast of NSE and its
Subsidiaries for the fiscal year to end December 31, 1998 (reflecting
among other events the NSI Acquisition and the anticipated Borrowings
under this Agreement), including quarterly cash flow projections and
quarterly projections of NSE's and NSJ's compliance with each of the
covenants set forth in Paragraph 5.03 of this Agreement; and
(10) Such other financial, business and other information
regarding Borrowers or any of their Subsidiaries as Agent or any Lender
may reasonably request, including information as to the NSI Acquisition
and possible contingent liabilities, tax matters, environmental matters
and obligations for employee benefits and compensation.
F. UCC Searches.
(1) Uniform Commercial Code search certificates from the
jurisdictions in the United States in which any Borrower or Material
Subsidiary has a place of business which do not evidence any Liens
which is not a Permitted Lien, except for which Agent has received a
termination statement pursuant to item F.(2) below;
(2) Such Uniform Commercial Code termination statements
(appropriately completed and executed) for filing in such jurisdictions
as Agent may request to terminate any financing statement evidencing
Liens of any Borrower or Material Subsidiary which do not constitute
Permitted Liens.
G. Opinions. Favorable written opinions from each of the following counsel for
Borrowers and their Subsidiaries, each dated the Initial Closing Date, addressed
to Agent for the benefit of Agent and Lenders, covering such legal matters as
Agent may reasonably request and otherwise in form and substance satisfactory to
Agent:
(1) Truman Hunt, Esq., counsel for NSE and its Subsidiaries;
(2) Shearman & Sterling, special California counsel for
Borrowers and Guarantors;
<PAGE>
(3) Tokyo Aoyama Law Office-Baker & McKenzie, Japanese counsel
for NSJ;
(4) Kim & Chang, Korean counsel for Nu Skin Korea, Inc.;
(5) Baker & McKenzie, Hong Kong counsel for Nu Skin Hong Kong,
Inc.; and
(6) Lee and Li, Taiwanese counsel for Nu Skin Taiwan, Inc..
H. Other Items.
(1) A duly completed and timely delivered Notice of Borrowing
for the applicable Borrowing;
(2) Copies of the NSI Acquisition Agreement; the Contribution
and Distribution Agreement dated as of December 31, 1997 between NSI
and NSUSA; the Tax Sharing and Indemnification Agreement dated as of
December 31, 1997 among NSI, NSUSA and the shareholders of NSI and
NSUSA; the Assumption of Liabilites and Indemnification Agreement dated
as of December 31, 1997 between NSI and NSUSA; together with all
amendments thereto through the Initial Closing Date; and, to the extent
requested by Agent or any Lender, copies of any other NSI Acquisition
Documents;
(3) Copies of all filings made by NSE with the Securities and
Exchange Commission in connection with the NSI Acquisition, together
with all exhibits and all amendments thereto through the Initial
Closing Date;
(4) An organization chart for Borrowers and their
Subsidiaries, setting forth the relationship among such Persons,
certified by the Secretary or an Assistant Secretary of NSE;
(5) A certificate of the Chief Financial Officer of NSE and a
Statutory Auditor of NSJ, respectively, addressed to Agent and dated
the Initial Closing Date, certifying that:
(a) The representations and warranties set forth in
Paragraph 4.01 and in the other Credit Documents are true and
correct in all material respects as of such date (except for
such representations and warranties made as of a specified
date, which shall be true as of such date); and
(b) No Default has occurred and is continuing as of
such date;
(6) All fees and expenses payable to Agent and Lenders on or
prior to the Initial Closing Date (including any Commitment Fees
payable on such Closing Date and all fees payable to Agent pursuant to
the Agent's Fee Letter);
(7) All fees and expenses of Agent's counsels through the
Initial Closing Date;
<PAGE>
(8) Such other evidence as Agent or any Lender may reasonably
request to establish the accuracy and completeness of the
representations and warranties and the compliance with the terms and
conditions contained in this Agreement and the other Credit Documents;
and
(9) Such documentation as ABN AMRO may require in order for
NSJ to open an account with its Tokyo branch, including, without
limitation, an Agreement on Bank Transactions and an Agreement on
Overdraft in Current Account.
<PAGE>
NOTE
$-------------- --------------------, ----------
----------------, ----
FOR VALUE RECEIVED, NU SKIN ENTERPRISES, INC., a Delaware corporation
("Borrower"), hereby promises to pay to the order of ____________________, a
____________________ ("Lender"), the principal sum of
______________________________ DOLLARS ($__________) on the dates and in the
amounts provided in the Credit Agreement referred to below (as amended from time
to time, the "Credit Agreement") and interest on the outstanding amount of said
sum at the rates and on the dates provided in the Credit Agreement.
Borrower shall make all payments hereunder, for the account of Lender's
Applicable Lending Office, to Agent as indicated in the Credit Agreement, in
lawful money of the United States and in same day or immediately available
funds.
This note is one of the Notes referred to in the Credit Agreement,
dated as of May 8, 1998, among Borrower, Nu Skin Japan Co., Ltd., Lender and the
other financial institutions from time to time parties thereto (collectively,
the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders. This note is
subject to the terms of the Credit Agreement, including the rights of prepayment
and the rights of acceleration of maturity set forth therein. Terms used herein
have the meanings assigned to those terms in the Credit Agreement, unless
otherwise defined herein.
The transfer, sale or assignment of any rights under or interest in
this note is subject to certain restrictions contained in the Credit Agreement,
including Paragraph 8.05 thereof.
Borrower shall pay all reasonable fees and expenses, including
reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to
enforce any of Borrower's obligations hereunder not performed when due. Borrower
hereby waives notice of presentment, demand, protest or notice of any other
kind. This note shall be governed by and construed in accordance with the laws
of the State of California.
NU SKIN ENTERPRISES, INC.
By:
Name:
Title:
<PAGE>
SUBSIDIARY GUARANTY
THIS GUARANTY, dated as of May [A], 1998, is executed by each of the
undersigned (each such entity and each entity which hereafter executes and
delivers a Subsidiary Joinder in substantially the form of Attachment 1 hereto
to be referred to herein as a "Guarantor"), in favor of ABN AMRO BANK N.V.,
acting as agent (in such capacity, and each successor thereto in such capacity,
"Agent") for the financial institutions which are from time to time parties to
the Credit Agreement referred to in Recital A below (collectively, "Lenders").
RECITALS
A. Pursuant to a Credit Agreement dated as of May 8, 1998 (as amended
from time to time, the "Credit Agreement"), among Nu Skin Enterprises, Inc.
("NSE"), Nu Skin Japan Co., Ltd. ("NSJ"), Lenders and Agent, Lenders have agreed
to extend certain credit facilities to NSE and NSJ (collectively, "Borrowers")
upon the terms and subject to the conditions set forth therein. Each Guarantor
is a direct or indirect Subsidiary of NSE and expects to derive substantial
direct and indirect benefit from the transactions contemplated by the Credit
Agreement.
B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of (1) this Guaranty, duly executed by each existing Material Domestic
Subsidiary of NSE, and (2) Subsidiary Joinders, duly executed by each future
Material Domestic Subsidiary of NSE.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, each Guarantor hereby agrees with Agent, for the ratable benefit
of Lenders and Agent, as follows:
1. Definitions and Interpretation.
(a) Definitions. When used in this Guaranty, the following
terms shall have the following respective meanings:
"Agent" shall have the meaning given to that term in
the introductory paragraph hereof.
"Aggregate Guaranty Payments" shall mean, with
respect to any Guarantor at any time, the aggregate net amount
of all payments made by such Guarantor under this Guaranty
(including, without limitation, under Paragraph 5 hereof) at
or prior to such time.
<PAGE>
"Borrowers" shall have the meaning given to that term
in the Recital A hereof.
"Credit Agreement" shall have the meaning given to
that term in the Recital A hereof.
"Debtor Relief Proceeding" shall mean any suit,
action, case or other proceeding commenced by, against or for
NSJ or NSE or its property seeking the dissolution,
liquidation, reorganization, rearrangement or other relief of
NSJ or NSE or its debts under any applicable bankruptcy,
insolvency or debtor relief law or other similar Governmental
Rule now or hereafter in effect or seeking the appointment of
a receiver, trustee, liquidator, custodian or other similar
official for NSJ or NSE or any substantial part of its
property or any general assignment by NSJ or NSE for the
benefit of its creditors, whether or not any such suit,
action, case or other proceeding is voluntary or involuntary.
"Disallowed Post-Commencement Interest and Expenses"
shall mean interest computed at the rate provided in the
Credit Agreement and claims for reimbursement, costs, expenses
or indemnities under the terms of any of the Credit Documents
accruing or claimed at any time after the commencement of any
Debtor Relief Proceeding, if the claim for such interest,
reimbursement, costs, expenses or indemnities is not
allowable, allowed or enforceable against NSE in such Debtor
Relief Proceeding.
"Fair Share" shall mean, with respect to any
Guarantor at any time, an amount equal to (i) a fraction, the
numerator which is the Maximum Guaranty Amount of such
Guarantor and the denominator of which is the aggregate
Maximum Guaranty Amounts of all Guarantors, multiplied by (ii)
the aggregate amount paid by all Funding Guarantors under this
Guaranty at or prior to such time.
"Fair Share Shortfall" shall mean, with respect to
any Guarantor at any time, the amount, if any, by which the
Fair Share of such Guarantor at such time exceeds the
Aggregate Guaranty Payments of such Guarantor at such time.
"Funding Guarantor" shall have the meaning given to
that term in Paragraph 5 hereof.
"Guaranteed Obligations" shall mean and include all
loans, advances, debts, liabilities, and obligations,
howsoever arising, owed by NSE to Agent or any Lender of every
kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money)
individual or joint and several, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of the Credit Documents,
including all interest, fees, charges, expenses, attorneys'
fees and accountants' fees chargeable to NSE or payable by NSE
thereunder.
<PAGE>
"Guarantor" shall have the meaning given to that term
in the introductory paragraph hereof.
"Lenders" shall have the meaning given to that term
in the introductory paragraph hereof.
"Maximum Guaranty Amount" shall mean, with respect to
any Guarantor at any time, (i) the full amount of the
Guaranteed Obligations at such time or (ii) if any court of
competent jurisdiction determines in any action to enforce
this Guaranty that enforcement against such Guarantor for the
full amount of the Guaranteed Obligations is not lawful under
or would be subject to avoidance under Section 548 of the
United States Bankruptcy Code or any applicable provision of
any comparable law of any state or other jurisdiction, then
the maximum amount lawful and not subject to such avoidance.
"NSE" shall have the meaning given to that term in
the Recital A hereof.
"NSJ" shall have the meaning given to that term in
the Recital A hereof.
"Subordinated Obligations" shall have the meaning
given to that term in Paragraph 4 hereof.
"Subsidiary Joinder" shall mean an instrument
substantially in the form of Attachment 1 hereto.
"Taxes" shall have the meaning given to such term in
Subparagraph 6(h).
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Credit Agreement shall have the respective
meanings given to those terms in the Credit Agreement.
(b) Other Interpretive Provisions. The rules of construction
set forth in Section I of the Credit Agreement shall, to the extent not
inconsistent with the terms of this Guaranty, apply to this Guaranty
and are hereby incorporated by reference. Each Guarantor acknowledges
receipt of copies of the Credit Agreement and the other Credit
Documents.
2. Guaranty.
(a) Payment Guaranty. Each Guarantor unconditionally
guarantees and promises to pay and perform as and when due, whether at
stated maturity, upon acceleration or otherwise, any and all of the
Guaranteed Obligations. If any Debtor Relief Proceeding relating to NSE
is commenced, each Guarantor further unconditionally guarantees and
promises to pay and perform, upon the demand of Agent, any and all of
the Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses) in accordance with the terms
of the Credit Documents, whether or not such obligations are then due
and payable by NSE and whether or not such obligations are modified,
reduced or discharged in such Debtor Relief Proceeding. This Guaranty
is a guaranty of payment and not of collection.
<PAGE>
(b) Continuing Guaranty. This Guaranty is an irrevocable
continuing guaranty of the Guaranteed Obligations which shall continue
in effect until all obligations of Lenders to extend credit to NSE have
terminated and all of the Guaranteed Obligations have been fully paid.
If any payment on any Guaranteed Obligation is set aside, avoided or
rescinded or otherwise recovered from Agent or any Lender, such
recovered payment shall constitute a Guaranteed Obligation hereunder
and, if this Guaranty was previously released or terminated, it
automatically shall be fully reinstated, as if such payment was never
made.
(c) Joint, Several and Independent Obligations. The liability
of each Guarantor hereunder is joint and several and is independent of
the Guaranteed Obligations. A separate action or actions may be brought
and prosecuted against each Guarantor for the full amount of the
Guaranteed Obligations irrespective of whether action is brought
against NSE, any other Guarantor or any other guarantor of the
Guaranteed Obligations or whether NSE, any other Guarantor or any other
guarantor of the Guaranteed Obligations is joined in any such action or
actions.
(d) Fraudulent Transfer Limitation. If, in any action to
enforce this Guaranty, any court of competent jurisdiction determines
that enforcement against any Guarantor for the full amount of the
Guaranteed Obligations is not lawful under or would be subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
applicable provision of any comparable law of any state or other
jurisdiction, the liability of such Guarantor under this Guaranty shall
be limited to the maximum amount lawful and not subject to such
avoidance.
(e) Termination. Notwithstanding any termination of this
Guaranty in accordance with Paragraph 3 hereof, this Guaranty shall
continue to be in full force and effect and applicable to any
Guaranteed Obligations arising thereafter which arise because prior
payments of Guaranteed Obligations are rescinded or otherwise required
to be surrendered by Agent or any Lender after receipt.
3. Authorizations, Waivers, Etc.
(a) Authorizations. Each Guarantor authorizes Agent and
Lenders, in their discretion, without notice to such Guarantor,
irrespective of any change in the financial condition of NSE, NSJ, such
Guarantor, any other Guarantor or any other guarantor of the Guaranteed
Obligations since the date hereof, and without affecting or impairing
in any way the liability of such Guarantor hereunder, from time to time
to:
(i) Create new Guaranteed Obligations and renew,
compromise, extend, accelerate or otherwise change the time
for payment or performance of, or otherwise amend or modify
the Credit Documents or change the terms of the Guaranteed
Obligations or any part thereof, including increase or
decrease of the rate of interest thereon;
<PAGE>
(ii) Take and hold security for the payment or
performance of the Guaranteed Obligations and exchange,
enforce, waive or release any such security; apply such
security and direct the order or manner of sale thereof; and
purchase such security at public or private sale;
(iii) Otherwise exercise any right or remedy they may
have against NSE, NSJ, such Guarantor, any other Guarantor,
any other guarantor of the Guaranteed Obligations or any
security, including, without limitation, the right to
foreclose upon any such security by judicial or nonjudicial
sale;
(iv) Settle, compromise with, release or substitute
any one or more makers, endorsers or guarantors of the
Guaranteed Obligations; and (v) Assign the Guaranteed
Obligations, this Guaranty or the other Credit Documents in
whole or in part to the extent provided in the Credit
Agreement and the other Credit Documents.
(b) Waivers. Each Guarantor hereby waives:
(i) Any right to require Agent or any Lender to (A)
proceed against NSE, NSJ, any other Guarantor or any other
guarantor of the Guaranteed Obligations, (B) proceed against
or exhaust any security received from NSE, NSJ, such
Guarantor, any other Guarantor or any other guarantor of the
Guaranteed Obligations or otherwise marshall the assets of
NSE, NSJ, such Guarantor, any other Guarantor or any other
guarantor of the Guaranteed Obligations or (C) pursue any
other remedy in Agent's or any Lender's power whatsoever;
(ii) Any defense arising by reason of the application
by NSE or NSJ of the proceeds of any borrowing;
(iii) Any defense resulting from the absence,
impairment or loss of any right of reimbursement, subrogation,
contribution or other right or remedy of Guarantor against
NSE, NSJ, any other Guarantor, any other guarantor of the
Guaranteed Obligations or any security, whether resulting from
an election by Agent or any Lender to foreclose upon security
by nonjudicial sale, or otherwise;
(iv) Any setoff or counterclaim of NSE or any defense
which results from any disability or other defense of NSE or
the cessation or stay of enforcement from any cause whatsoever
of the liability of NSE (including, without limitation, the
lack of validity or enforceability of any of the Credit
Documents);
(v) Any defense based upon any law, rule or
regulation which provides that the obligation of a surety must
not be greater or more burdensome than the obligation of the
principal;
<PAGE>
(vi) Until all obligations of Agent or any Lender to
extend credit to NSE have terminated and all of the Guaranteed
Obligations have been fully paid, any right of subrogation,
reimbursement, indemnification or contribution and other
similar right to enforce any remedy which Agent, Lenders or
any other Person now has or may hereafter have against NSE on
account of the Guaranteed Obligations, and any benefit of, and
any right to participate in, any security now or hereafter
received by Agent, any Lender or any other Person on account
of the Guaranteed Obligations;
(vii) All presentments, demands for performance,
notices of non-performance, notices delivered under the Credit
Documents, protests, notice of dishonor, and notices of
acceptance of this Guaranty and of the existence, creation or
incurring of new or additional Guaranteed Obligations and
notices of any public or private foreclosure sale;
(viii) The benefit of any statute of limitations to
the extent permitted by law;
(ix) Any appraisement, valuation, stay, extension,
moratorium redemption or similar law or similar rights for
marshalling;
(x) Any right to be informed by Agent or any Lender
of the financial condition of NSE, NSJ, any other Guarantor or
any other guarantor of the Guaranteed Obligations or any
change therein or any other circumstances bearing upon the
risk of nonpayment or nonperformance of the Guaranteed
Obligations;
(xi) Until all obligations of Agent or any Lender to
extend credit to NSE have terminated and all of the Guaranteed
Obligations have been fully paid, any right to revoke this
Guaranty;
(xii) Any defense arising from an election for the
application of Section 1111(b)(2) of the United States
Bankruptcy Code which applies to the Guaranteed Obligations;
(xiii) Any defense based upon any borrowing or grant
of a security interest under Section 364 of the United States
Bankruptcy Code; and
(xiv) Any right it may have to a fair value hearing
to determine the size of a deficiency judgment following any
foreclosure on any security for the Guaranteed Obligations.
Without limiting the scope of any of the foregoing provisions of this
Paragraph 3, each Guarantor hereby further waives (A) all rights and
defenses arising out of an election of remedies by Agent or any Lender,
even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a Guaranteed Obligation, has
destroyed such Guarantor's rights of subrogation and reimbursement
against NSE by the operation of Section 580d of the Code of Civil
Procedure or otherwise, (B) all rights and defenses such Guarantor may
have by reason of protection afforded to NSE with respect to the
Guaranteed Obligations pursuant to the antideficiency or other laws of
California limiting or discharging the Guaranteed Obligations,
including, without limitation, Section 580a, 580b, 580d, or 726 of the
California Code of Civil Procedure, and (C) all other rights and
defenses available to such Guarantor by reason of Sections 2787 to
2855, inclusive, Section 2899 or Section 3433 of the California Civil
Code or Section 3605 of the California Commercial Code.
<PAGE>
(c) Financial Condition of NSE, Etc. Each Guarantor is fully
aware of the financial condition and affairs of NSE. Each Guarantor has
executed this Guaranty without reliance upon any representation,
warranty, statement or information concerning NSE furnished to such
Guarantor by Agent or any Lender and has, independently and without
reliance on Agent or any Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of NSE and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations. Each Guarantor is in a position to obtain, and assumes
full responsibility for obtaining, any additional information about the
financial condition and affairs of NSE and of other circumstances
affecting the risk of nonpayment or nonperformance of the Guaranteed
Obligations and will, independently and without reliance upon Agent or
any Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action in connection with this
Guaranty.
4. Subordination. Each Guarantor hereby subordinates any and all debts,
liabilities and obligations owed to such Guarantor by NSE (the
"Subordinated Obligations") to the Guaranteed Obligations as provided
in this Paragraph 4.
(a) Prohibited Payments, Etc. Except during the continuance of
a Default (including the commencement and continuation of any Debtor
Relief Proceeding relating to NSE), each Guarantor may receive
regularly scheduled payments from NSE on account of Subordinated
Obligations. After the occurrence and during the continuance of any
Default (including the commencement and continuation of any Debtor
Relief Proceeding relating to NSE), however, unless Agent otherwise
agrees, no Guarantor shall demand, accept or take any action to collect
any payment on account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any Debtor
Relief Proceeding relating to NSE, each Guarantor agrees that Agent and
Lenders shall be entitled to receive payment of all Guaranteed
Obligations (including any and all Disallowed Post-Commencement
Interest and Expenses) before such Guarantor receives payment of any
Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance
of any Default (including the commencement and continuation of any
Debtor Relief Proceeding relating to NSE), each Guarantor shall, if
Agent so requests, collect, enforce and receive payments on account of
the Subordinated Obligations as trustee for Agent and Lenders and
deliver such payments to Agent on account of the Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and
Expenses), together with any necessary endorsements or other
instruments of transfer, but without reducing or affecting in any
manner the liability of such Guarantor under the other provisions of
this Guaranty.
<PAGE>
(d) Agent Authorization. After the occurrence and during the
continuance of any Default (including the commencement and continuation
of any Debtor Relief Proceeding relating to NSE), Agent is authorized
and empowered (but without any obligation to so do), in its discretion,
(i) in the name of each Guarantor, to collect and enforce, and to
submit claims in respect of, Subordinated Obligations and to apply any
amounts received thereon to the Guaranteed Obligations (including any
and all Disallowed Post-Commencement Interest and Expenses), and (ii)
to require each Guarantor (A) to collect and enforce, and to submit
claims in respect of, Subordinated Obligations and (B) to pay any
amounts received on such obligations to Agent for application to the
Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses).
5. Contribution among Guarantors. Guarantors desire to allocate among
themselves, in a fair and equitable manner, their rights of
contribution from each other when any payment is made by any Guarantor
under this Guaranty. Accordingly, if any payment is made by any
Guarantor under this Guaranty (a "Funding Guarantor") that exceeds its
Fair Share, the Funding Guarantor shall be entitled to a contribution
from each other Guarantor in the amount of such other Guarantor's Fair
Share Shortfall, so that all such contributions shall cause each
Guarantor's Aggregate Guaranty Payments to equal its Fair Share. The
amounts payable as contributions hereunder shall be determined by the
Funding Guarantor as of the date on which the related payment or
distribution is made by the Funding Guarantor, and such determination
shall be binding on the other Guarantors absent manifest error. The
allocation and right of contribution among Guarantors set forth in this
Paragraph 5 shall not be construed to limit in any way the liability of
any Guarantor under this Guaranty or the amount of the Guaranteed
Obligations.
6. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or
upon any Guarantor or Agent under this Guaranty or the other Credit
Documents shall be in writing and faxed, mailed or delivered, if to
Agent, at its facsimile number or address set forth below, or, if to
any Guarantor, at its facsimile number or address set forth below its
signature below or in the respective Subsidiary Joinder for such
Guarantor (or to such other facsimile number or address for any party
as indicated in any notice given by that party to the other parties).
All such notices and communications shall be effective (i) when sent by
any overnight courier service of recognized standing, on the second
Business Day following the deposit with such service; (ii) when mailed,
first class postage prepaid and addressed through the United States
Postal Service or registered mail through the Japanese Post Office,
upon receipt; (iii) when delivered by hand, upon delivery; and (iv)
when faxed, upon confirmation of receipt.
<PAGE>
Agent: ABN AMRO Bank N.V.
Syndications Group
1325 Avenue of the Americas, 9th Floor
New York, NY 10019
U.S.A.
Attn: Linda Boardman
Tel. No: (212) 314-1724
Fax. No: (212) 314-1712
With copies to:
ABN AMRO Bank N.V.
Tokyo Branch
13F, Shiroyama JT Mori Building
4-3-1, Toranomon, Minato-ku
Tokyo 105
Japan
Attn: Kiyoharu Michiwaki
Tel. No: 81-3-5405-6575
Fax No: 81-3-5405-6902 or 6903
ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Tamira Treffers-Herrera
Tel: (415) 984-3709
Fax: (415) 362-3524
(b) Payments.
(i) Each Guarantor shall make all payments of the
Guaranteed Obligations to Agent , or its order, at the office
of Agent and at the times specified in the Credit Documents
for the payment of such Guaranteed Obligations. Each Guarantor
shall make all other payments hereunder at such office as
Agent may designate. Each payment shall be made in same day or
immediately available funds not later than 11:00 a.m.(local
time of the office of Agent at which such payment is to be
made) on the date due.
(ii) Each Guarantor shall make all payments of the
Guaranteed Obligations hereunder in the currency in which such
Guaranteed Obligations are required to be paid by NSE pursuant
to the Credit Documents and shall make all other payments
hereunder in Dollars; provided, however, that, if Agent shall
request a Guarantor to pay any amount hereunder which would
otherwise be payable in another currency in the lawful
currency of the United States, such Guarantor shall pay to
Agent the Dollar Equivalent of such amount.
<PAGE>
(iii) If any sum due from any Guarantor under this
Guaranty or any other Credit Document to which such Guarantor
is a party or any order, judgment or award given or rendered
in relation hereto or thereto has to be converted from the
currency (the "first currency") in which the same is payable
hereunder or thereunder into another currency (the "second
currency") for the purpose of (A) making or filing a claim or
proof against such Guarantor with any Governmental Authority,
(B) obtaining an order or judgment in any court or other
tribunal or (C) enforcing any order or judgment given or made
in relation hereto, such Guarantor shall, to the fullest
extent permitted by law, indemnify and hold harmless each of
the Persons to whom such sum is due from and against any loss
suffered as a result of any discrepancy between (1) the rate
of exchange used for such purpose to convert the amounts in
question from the first currency into the second currency and
(2) the rate or rates of exchange at which such Person may,
using reasonable efforts in the ordinary course of business,
purchase the first currency with the second currency upon
receipt of a sum paid to it in satisfaction, in whole or in
part, of any such order, judgment, claim or proof. The
foregoing indemnity shall constitute a separate obligation of
each Guarantor distinct from its other obligations hereunder
and shall survive the giving or making of any judgment or
order in relation to all or any of such obligations.
(iv) If any amounts required to be paid by any
Guarantor under this Guaranty or any order, judgment or award
given or rendered in relation hereto remain unpaid after such
amounts are due, such Guarantor shall pay interest on the
aggregate, outstanding balance of such amounts from the date
due until those amounts are paid in full at a per annum rate
equal to:
(A) In the case of amounts payable in
Dollars, the Base Rate plus two percent (2.00%), such
rate to change from time to time as the Base Rate
shall change.
(B) In the case of amounts payable in Yen,
the Overnight Rate plus two percent (2.0%), such rate
to change from time to time as the Overnight Rate
shall change.
(c) Expenses. Each Guarantor shall pay on demand (i) all
reasonable and documented fees and expenses, including reasonable
attorneys' fees and expenses, incurred by Agent in connection with the
preparation, execution and delivery of, and the exercise of its duties
under, this Guaranty and the preparation, execution and delivery of
amendments and waivers hereunder and (ii) all reasonable and documented
fees and expenses, including reasonable attorneys' fees and expenses,
incurred by Agent and Lenders in connection with the enforcement or
attempted enforcement of this Guaranty or any of the Guaranteed
Obligations or in preserving any of Agent's or Lenders' rights and
remedies (including, without limitation, all such fees and expenses
incurred in connection with any "workout" or restructuring affecting
the Credit Documents or the Guaranteed Obligations or any bankruptcy or
similar proceeding involving Guarantor, any other Guarantor, NSE, NSJ
or any of their affiliates).
<PAGE>
(d) Waivers; Amendments. This Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written
instruments signed by each Guarantor and Agent. Each waiver or consent
under any provision hereof shall be effective only in the specific
instances for the purpose for which given. No failure or delay on
Agent's or any Lender's part in exercising any right hereunder shall
operate as a waiver thereof or of any other right nor shall any single
or partial exercise of any such right preclude any other further
exercise thereof or of any other right.
(e) Successors and Assigns. This Guaranty shall be binding
upon and inure to the benefit of Agent, Lenders, Guarantors and their
respective successors and assigns; provided, however, that no Guarantor
may assign or transfer any of its rights and obligations under this
Guaranty without the prior written consent of Agent and Lenders, and,
provided, further, that Agent or any Lender may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. All references in this Guaranty to
any Person shall be deemed to include all permitted successors and
assigns of such Person.
(f) Cumulative Rights, etc. The rights, powers and remedies of
Agent and Lenders under this Guaranty shall be in addition to all
rights, powers and remedies given to Agent and Lenders by virtue of any
applicable law, rule or regulation of any Governmental Authority, the
Credit Agreement, any other Credit Document or any other agreement, all
of which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Agent's or any
Lender's rights hereunder. Each Guarantor waives any right to require
Agent or any Lender to proceed against any Person or to exhaust any
Collateral or to pursue any remedy in Agent's or such Lender's power.
(g) Setoff; Security Interest.
(i) In addition to any rights and remedies of Lenders
provided by law, each Lender shall have the right, with the
prior consent of Agent but without prior notice to or consent
of any Guarantor, any such notice and consent being expressly
waived by each Guarantor to the extent permitted by applicable
law, upon the occurrence and during the continuance of an
Event of Default, to set-off and apply against the obligations
of each Guarantor any amount owing from such Lender to such
Guarantor. The aforesaid right of set-off may be exercised by
such Lender against a Guarantor or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or execution, judgment or attachment
creditor of such Guarantor or against anyone else claiming
through or against such Guarantor or such trustee in
bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off
may not have been exercised by such Lender at any prior time.
Each Lender agrees promptly to notify the applicable Guarantor
after any such set-off and application made by such Lender,
provided that the failure to give such notice shall not affect
the validity of such set-off and application.
<PAGE>
(ii) As security for the obligations of each
Guarantor hereunder, each Guarantor hereby grants to Agent and
each Lender, for the benefit of all Lenders, a continuing
security interest in any and all deposit accounts or moneys of
such Guarantor now or hereafter maintained with such Lender.
Each Lender shall have all of the rights of a secured party
with respect to such security interest.
(h) Payments Free of Taxes. All payments made by each
Guarantor under this Guaranty shall be made free and clear of, and
without deduction or withholding for or on account of, all present and
future income, stamp, documentary and other taxes and duties, and all
other levies, imposts, charges, fees, deductions and withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (except net income taxes and franchise taxes in
lieu of net income taxes imposed on Agent or any Lender by its
jurisdiction of incorporation or the jurisdiction in which its
Applicable Lending Office is located) (all such non-excluded taxes,
duties, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any Taxes are
required to be withheld from any amounts payable to Agent or any -----
Lender hereunder, the amounts so payable to Agent or such Lender shall
be increased to the extent necessary to yield to Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Guaranty or
the other Credit Documents, as applicable. Whenever any Taxes are
payable by any Guarantor, as promptly as possible thereafter, such
Guarantor shall send to Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original
official receipt received by such Guarantor showing payment thereof. If
Guarantors fail to pay any Taxes when due to the appropriate taxing
authority or fail to remit to Agent the required receipts or other
required documentary evidence, Guarantors shall indemnify Agent and
Lenders for any taxes (including interest or penalties) that may become
payable by Agent or any Lender as a result of any such failure. The
obligations of Guarantors under this Subparagraph 6(h) shall survive
the payment and performance of the Guaranteed Obligations and the
termination of this Guaranty. Nothing contained in this Subparagraph
6(h) shall require Agent or any Lender to make available any of its tax
returns (or any other information relating to its taxes which it deems
to be confidential).
(i) Partial Invalidity. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Guaranty nor the
legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired
thereby.
(j) Jury Trial. EACH OF GUARANTORS, LENDERS AND AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
GUARANTY.
<PAGE>
(k) Counterparts. This Guaranty may be executed in any number
of identical counterparts, any set of which signed by all the
Guarantors shall be deemed to constitute a complete, executed original
for all purposes.
(l) Governing Law, Consent to Jurisdiction, Etc.
(i) This Guaranty shall be governed by and construed
in accordance with the laws of the State of California without
reference to conflicts of law rules.
(ii) Each Guarantor irrevocably submits to the
non-exclusive jurisdiction of the courts of the State of
California and the courts of the United States of America
located in the Northern District of California and agrees that
any legal action, suit or proceeding arising out of or
relating to this Guaranty or any of the other Credit Documents
may be brought against such party in any such courts. Final
judgment against a Guarantor in any such action, suit or
proceeding shall be conclusive and may be enforced in any
other jurisdiction by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the
judgment, or in any other manner provided by law. Nothing in
this Subparagraph 6(k) shall affect the right of Agent or any
Lender to commence legal proceedings or otherwise sue any
Guarantor in any other appropriate jurisdiction, or
concurrently in more than one jurisdiction, or to serve
process, pleadings and other papers upon any Guarantor in any
manner authorized by the laws of any such jurisdiction. Each
Guarantor agrees that process served either personally or by
registered mail shall, to the extent permitted by law,
constitutes adequate service of process in any such suit.
Without limiting the foregoing, each Guarantor hereby
appoints, in the case of any such action or proceeding brought
in the courts of or in the State of California, CT
Corporation, with offices on the date hereof at 818 West
Seventh Street, Los Angeles, California 90017, to receive for
it and on its behalf, service of process in the State of
California with respect thereto, provided each Guarantor may
appoint any other person, reasonably acceptable to Agent, with
offices in the State of California to replace such agent for
service of process upon delivery to Agent of a reasonably
acceptable agreement of such new agent agreeing so to act.
Each Guarantor irrevocably waives to the fullest extent
permitted by applicable law (A) any objection which it may
have now or in the future to the laying of the venue of any
such action, suit or proceeding in any court referred to in
the first sentence above; (B) any claim that any such action,
suit or proceeding has been brought in an inconvenient forum;
(C) its right of removal of any matter commenced by any other
party in the courts of the State of California to any court of
the United States of America; (D) any immunity which it or its
assets may have in respect of its obligations under this
Agreement or any other Credit Document from any suit,
execution, attachment (whether provisional or final, in aid of
execution, before judgment or otherwise) or other legal
process; and (E) any right it may have to require the moving
party in any suit, action or proceeding brought in any of the
courts referred to above arising out of or in connection with
this Agreement or any other Credit Document to post security
for the costs of any Guarantor or to post a bond or to take
similar action.
[The first signature page follows.]
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
executed as of the day and year first above written.
[GUARANTOR]
By: /s/ Steven J. Lund
Name:Steven J. Lund
Title:Vice President
Address:
One Nu Skin Plaza,
75 West Center,
Provo, UT 84601
Attn: Chief Financial Officer
Telephone: (801) 345-3000
Facsimile: (801) 345-3099
[GUARANTOR]
By: /s/ Blake M. Roney
Name: Blake M. Roney
Title:Representative Director
Address:
890-12
Daechi-dong
Kangnam-ku, Seoul
Attn: Chief Fianacial Officer
Telephone: (822) 538-1441
Facsimile: (822) 552-9728
<PAGE>
ATTACHMENT 1
SUBSIDIARY JOINDER
THIS SUBSIDIARY JOINDER (this "Agreement"), dated as of ____________,
____, is executed by [NEW SUBSIDIARY], a _________ [corporation] [partnership]
[etc.] ("New Subsidiary") in favor of ABN AMRO BANK N.V., acting as agent (in
such capacity, and each successor thereto in such capacity, "Agent") for the
financial institutions which are from time to time parties to the Credit
Agreement referred to in Recital A below (collectively, the "Lenders").
RECITALS
A. Pursuant to a Credit Agreement dated as of May 8, 1998 (as amended
from time to time, the "Credit Agreement"), among Nu Skin Enterprises, Inc.
("NSE"), Nu Skin Japan Co., Ltd. ("NSJ"), Lenders and Agent, Lenders have agreed
to extend certain credit facilities to NSE and NSJ (collectively,
"Borrower")upon the terms and subject to the conditions set forth therein.
B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of (1) a Guaranty, dated as of May [A], 1998, duly executed by each
existing Domestic Subsidiary of NSE, and (2) Subsidiary Joinders, duly executed
by each future Domestic Subsidiary of NSE.
C. New Subsidiary is a new Domestic Subsidiary of NSE and expects to
derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, New Subsidiary hereby agrees with Agent, for the ratable benefit
of Lenders and Agent, as follows:
1. Definitions and Interpretation. Unless otherwise defined herein, all
capitalized terms used herein and defined in the Guaranty shall have the
respective meanings given to those terms in the Guaranty. New Subsidiary
acknowledges receipt of copies of the Guaranty, the Credit Agreement and the
other Credit Documents.
2. Representations and Warranties. On and as of the date of this Agreement (the
"Effective Date") and for the ratable benefit of the Agent and Lenders, New
Subsidiary hereby makes each of the representations and warranties made by each
Guarantor in the Guaranty.
<PAGE>
3. Agreement to be Bound. New Subsidiary agrees that, on and as of the Effective
Date, it shall become a Guarantor under the Guaranty and shall be bound by all
the provisions of the Guaranty to the same extent as if New Subsidiary had
executed the Guaranty on the Closing Date. 4. Waiver. Without limiting the
generality of the waivers in the Guaranty, New Subsidiary specifically agrees to
be bound by the Guaranty and waives any right to notice of acceptance of its
execution of this Agreement and of its agreement to be bound by the Guaranty. 5.
Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California.
IN WITNESS WHEREOF, New Subsidiary has caused this Agreement to be
executed by its duly authorized officer.
[NEW SUBSIDIARY]
By:
Name:
Title:
Address:
[-------------------------]
[-------------------------]
[-------------------------]
Attn: [___________________]
Telephone: [(___) ___-____]
Facsimile: [(___) ___-____]
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of [ ], is executed by NU SKIN
ENTERPRISES, INC., a Delaware corporation ("NSE"), in favor of ABN AMRO BANK
N.V., acting as agent (in such capacity and each successor thereto acting in
such capacity, "Agent") for the financial institutions which are from time to
time parties to the Credit Agreement referred to in Recital A below
(collectively, "Lenders").
RECITALS
A. Pursuant to a Credit Agreement, dated as of May 8, 1998 (as amended
from time to time, the "Credit Agreement"), among NSE, Nu Skin Japan Co., Ltd.
("NSJ"), Lenders and Agent, Lenders have agreed to extend certain credit
facilities to NSE and NSJ (collectively, "Borrowers") upon the terms and subject
to the conditions set forth therein.
B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of this Agreement, duly executed by NSE.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, NSE hereby agrees with Agent, for the ratable benefit of Lenders
and Agent, as follows:
1. Definitions and Interpretation.
(a) Definitions. When used in this Agreement, the following
terms shall have the following respective meanings:
"Agent" shall have the meaning given to that term in
the introductory paragraph hereof.
"Collateral" shall have the meaning given to that
term in Paragraph 2 hereof.
"Credit Agreement" shall have the meaning given to
that term in Recital A hereof.
<PAGE>
"Domestic Subsidiary" shall mean, at any time, each
Subsidiary of NSE (a) which is created or organized in the
United States or under the law of the United States or any
state thereof or any territory thereof, (b) which was included
as a member of NSE's affiliated group in NSE's most recent
consolidated United States federal income tax return, or (c)
the earnings of which were includible in the taxable income of
NSE or any other Domestic Subsidiary (to the extent of NSE's
or such other Domestic Subsidiary's ownership interest of such
Subsidiary) in NSE's most recent consolidated United States
federal income tax return.
"Equity Securities" of any Person shall mean (a) all
common stock, preferred stock, participations, shares,
partnership interests or other equity interests in and of such
Person (regardless of how designated and whether or not voting
or non-voting) and (b) all warrants, options and other rights
to acquire any of the foregoing.
"Foreign Subsidiary" shall mean each Subsidiary of
NSE which is not a Domestic Subsidiary, including, as of the
date of this Agreement, the Subsidiaries of NSE set forth in
Attachment 1 hereto.
"Foreign Subsidiary Non-Voting Shares" shall mean,
with respect to any Foreign Subsidiary, Equity Securities
issued by such Foreign Subsidiary which are not Foreign
Subsidiary Voting Shares.
"Foreign Subsidiary Voting Shares" shall mean, with
respect to any Foreign Subsidiary, Equity Securities issued by
such Foreign Subsidiary [having voting power to elect the
members of the Board of Directors (or comparable body) of such
Foreign Subsidiary].
"Lenders" shall have the meaning given to that term
in the introductory paragraph hereof.
"Maximum Percentage" shall mean, with respect to the
Foreign Subsidiary Voting Shares of any Foreign Subsidiary,
the maximum percentage of such shares that can be pledged to
Agent hereunder without increasing the gross income of NSE
pursuant to Sections 951 or 956(c) of the IRC.
"NSE" shall have the meaning given to that term in
the introductory paragraph hereof.
"Obligations" shall mean and include all loans,
advances, debts, liabilities, and obligations, howsoever
arising, owed by NSE to Agent or any Lender of every kind and
description (whether or not evidenced by any note or
instrument and whether or not for the payment of money)
individual or joint and several, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of the Credit Documents,
including all interest, fees, charges, expenses, attorneys'
fees and accountants' fees chargeable to NSE or payable by NSE
thereunder.
"Pledged Shares" shall mean collectively the Foreign
Subsidiary Voting Shares and Foreign Subsidiary Non-Voting
Shares pledged to Agent pursuant to Paragraph 2 hereof.
<PAGE>
"Subsidiary" of any Person shall mean (a) any
corporation of which more than 50% of the issued and
outstanding Equity Securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the
time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other
Subsidiaries, (b) any partnership, joint venture, limited
liability company or other association of which more than 50%
of the equity interest having the power to vote, direct or
control the management of such partnership, joint venture or
other association is at the time owned and controlled by such
Person, by such Person and one or more of the other
Subsidiaries or by one or more of such Person's other
Subsidiaries or (c) any other Person included in the Financial
Statements of such Person on a consolidated basis. (All
references in this Agreement and the other Credit Documents to
NSE and its Subsidiaries shall, unless otherwise indicated,
include NSJ and its Subsidiaries.)
"Taxes" shall have the meaning given to such term in
Subparagraph 8(g).
"UCC" shall mean the Uniform Commercial Code as in
effect in the State of California from time to time.
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Credit Agreement shall have the respective
meanings given to those terms in the Credit Agreement, and all terms
defined in the UCC shall have the respective meanings given to those
terms in the UCC.
(b) Other Interpretive Provisions. The rules of construction
set forth in Section I of the Credit Agreement shall, to the extent not
inconsistent with the terms of this Agreement, apply to this Agreement
and are hereby incorporated by reference.
2. Pledge. As security for the Obligations, NSE hereby pledges and assigns to
Agent (for the ratable benefit of Lenders and Agent) and grants to Agent (for
the ratable benefit of Lenders and Agent) a security interest in all right,
title and interest of NSE in and to the property described in subparagraphs (a)
- - (d) below, whether now owned or hereafter acquired (collectively and
severally, the "Collateral"):
(a) Sixty-six percent (or, if the Maximum Percentage shall
change after the date hereof, the Maximum Percentage) of all Foreign
Subsidiary Voting Shares of each Foreign Subsidiary owned directly by
NSE (including the Foreign Subsidiary Voting Shares described in
Attachment 1 hereto), whether certificated or uncertificated;
(b) All of the Foreign Subsidiary Non-Voting Shares of each
Foreign Subsidiary owned directly by NSE (including the Foreign
Subsidiary Non-Voting Shares described in Attachment 1 hereto), whether
certificated or uncertificated;
<PAGE>
(c) All dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any of the property
described in subparagraph (a) or (b) above; and
(d) All proceeds of the foregoing.
3. Representations and Warranties. NSE represents and warrants to Lenders and
Agent as follows:
(a) NSE is the record legal and beneficial owner of the
Collateral (or, in the case of after-acquired Collateral, at the time
NSE acquires rights in the Collateral, will be the record legal and
beneficial owner thereof). No other Person has (or, in the case of
after-acquired Collateral, at the time NSE acquires rights therein,
will have) any right, title, claim or interest (by way of Lien,
purchase option or otherwise) in, against or to the Collateral.
(b) Agent has (or in the case of after-acquired Collateral, at
the time NSE acquires rights therein, will have) a first priority
perfected security interest in the Collateral.
(c) All Pledged Shares have been (or in the case of
after-acquired Pledged Shares, at the time NSE acquires rights therein,
will have been) duly authorized, validly issued and fully paid and are
(or in the case of after-acquired Pledged Shares, at the time NSE
acquires rights therein, will be) non-assessable.
(d) NSE has delivered to Agent, together with all necessary
stock powers, endorsements, assignments and other necessary instruments
of transfer, the originals of all Pledged Shares, other certificated
securities, other Collateral and all certificates, instruments and
other writings evidencing the same.
(e) Set forth in Attachment 1 hereto is a true, complete and
accurate list, as of the date of this Agreement, of all Foreign
Subsidiaries and all Foreign Subsidiary Voting Shares and all Foreign
Subsidiary Non-Voting Shares.
4. Covenants. NSE hereby agrees as follows:
(a) NSE, at NSE's expense, shall promptly procure, execute and
deliver to Agent all documents, instruments and agreements and perform
all acts which are necessary or desirable, or which Agent may request,
to establish, maintain, preserve, protect and perfect the Collateral,
the Lien granted to Agent therein and the first priority of such Lien
or to enable Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the
generality of the preceding sentence, NSE shall (i) procure, execute
and deliver to Agent all stock powers, endorsements, assignments,
financing statements and other instruments of transfer requested by
Agent, (ii) deliver to Agent promptly upon receipt the originals of all
Pledged Shares, other certificated securities, other Collateral and all
certificates, instruments and other writings evidencing the same and
(iii) cause the Lien of Agent to be recorded or registered in the books
of any financial intermediary or clearing corporation requested by
Agent.
<PAGE>
(b) NSE shall pay promptly when due all taxes and other
Governmental Charges, all Liens and all other charges now or hereafter
imposed upon, relating to or affecting any Collateral.
(c) NSE shall appear in and defend any action or proceeding
which may affect its title to or Agent's interest in the Collateral.
(d) NSE shall not surrender or lose possession of (other than
to Agent), sell, encumber, lease, rent, option, or otherwise dispose of
or transfer any Collateral or right or interest therein except as
permitted in the Credit Agreement, and, notwithstanding any provision
of the Credit Agreement, NSE shall keep the Collateral free of all
Liens.
5. Voting Rights and Dividends Prior to Default. Unless an Event of Default has
occurred and is continuing:
(a) NSE may exercise or refrain from exercising any and all
voting and other consensual rights pertaining to the Pledged Shares or
any part thereof; provided, however, that NSE shall not exercise or
refrain from exercising any such rights where the consequence of such
action or inaction would be (i) to impair any Collateral, the Lien
granted to Agent therein, the first priority of such Lien or Agent's
rights and remedies hereunder with respect to any Collateral or (ii)
otherwise inconsistent with the terms of this Agreement and the other
Credit Documents.
(b) NSE may receive and retain all dividends and interest paid
in cash in respect of the Pledged Shares, except for any such dividends
and interest paid in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital
surplus or paid-in-surplus. NSE shall promptly deliver to Agent to hold
as Collateral all dividends and interest which NSE is not entitled to
receive and retain pursuant to the preceding sentence, in the same form
as so received (with any necessary endorsement), and, until so
delivered, shall hold such dividends and interest in trust for the
benefit of Agent, segregated from the other property or funds of NSE.
6. Authorized Action by Agent. NSE hereby irrevocably appoints Agent as its
attorney-in-fact and agrees that Agent may perform (but Agent shall not be
obligated to and shall incur no liability to NSE or any third party for failure
so to do) any act which NSE is obligated by this Agreement to perform, and to
exercise such rights and powers as NSE might exercise with respect to the
Collateral, including, without limitation, the right to (a) collect by legal
proceedings or otherwise and endorse, receive and receipt for all dividends,
interest, payments, proceeds and other sums and property now or hereafter
payable on or on account of the Collateral; (b) enter into any extension,
reorganization, deposit, merger, consolidation or other agreement pertaining to,
or deposit, surrender, accept, hold or apply other property in exchange for the
Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make
any compromise or settlement, and take any action it deems advisable, with
respect to the Collateral; (e) pay any Indebtedness of NSE relating to the
Collateral; and (f) execute UCC financing statements and other documents,
<PAGE>
instruments and agreements required hereunder; provided, however, that Agent may
exercise such powers only after the occurrence and during the continuance of an
Event of Default. NSE agrees to reimburse Agent upon demand for all reasonable
and documented costs and expenses, including reasonable and documented
attorneys' fees, Agent may incur while acting as NSE's attorney-in-fact
hereunder, all of which costs and expenses are included in the Obligations. NSE
agrees that such care as Agent gives to the safekeeping of its own property of
like kind shall constitute reasonable care of the Collateral when in Agent's
possession; provided, however, that Agent shall not be required to make any
presentment, demand or protest, or give any notice and need not take any action
to preserve any rights against any prior party or any other Person in connection
with the Obligations or with respect to the Collateral.
7. Events of Default.
(a) Event of Default. NSE shall be deemed in default under
this Agreement upon the occurrence and during the continuance of an
Event of Default, as that term is defined in the Credit Agreement.
(b) Voting Rights and Dividends. Upon the occurrence and
during the continuance of an Event of Default:
(i) All rights of NSE to exercise the voting and
other consensual rights which it would otherwise be entitled
to exercise pursuant to subparagraph 5(a) hereof and to
receive the dividends and interest payments which it would
otherwise be authorized to receive and retain pursuant to
subparagraph 5(a) hereof shall cease and all such rights shall
thereupon become vested in Agent which shall thereupon have
the sole right, but not the obligation, to exercise such
voting and other consensual rights and to receive and hold as
Collateral such dividends and interest payments.
(ii) NSE shall promptly deliver to Agent to hold as
Collateral all dividends and interest received by NSE after
the occurrence and during the continuance of any Event of
Default, in the same form as so received (with any necessary
endorsement), and, until so delivered, shall hold such
dividends and interest in trust for the benefit of Agent,
segregated from the other property or funds of NSE.
(c) Other Rights and Remedies. In addition to all other rights
and remedies granted to Agent by this Agreement, the Credit Agreement,
the other Credit Documents, the UCC and other applicable Governmental
Rules, Agent may, upon the occurrence and during the continuance of any
Event of Default, exercise any one or more of the following rights and
remedies: (i) collect, receive, appropriate or realize upon the
Collateral or otherwise foreclose or enforce Agent's security interests
in any or all Collateral in any manner permitted by applicable
Governmental Rules or in this Agreement; (ii) notify any or all issuers
of or transfer or paying agents for the Collateral or any applicable
clearing corporation, financial intermediary or other Person to
register the Collateral in the name of Agent or its nominee and/or to
<PAGE>
pay all dividends, interest and other amounts payable in respect of the
Collateral directly to Agent; (iii) sell or otherwise dispose of any or
all Collateral at one or more public or private sales, whether or not
such Collateral is present at the place of sale, for cash or credit or
future delivery, on such terms and in such manner as Agent may
determine; and (iv) require NSE to assemble all records and information
relating to the Collateral and make it available to Agent at a place to
be designated by Agent. In any case where notice of any sale or
disposition of any Collateral is required, NSE hereby agrees that seven
(7) days notice of such sale or disposition is reasonable.
(d) Securities Laws.
(i) NSE acknowledges and recognizes that Agent may be
unable to effect a public sale of all or a part of the Pledged
Shares and may be compelled to resort to one or more private
sales to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire the Pledged
Shares for their own account, for investment and not with a
view to the distribution or resale thereof. NSE acknowledges
that any such private sales may be at prices and on terms less
favorable to Agent than those of public sales, and agrees that
such private sales shall be deemed to have been made in a
commercially reasonable manner and that Agent has no
obligation to delay sale of any Pledged Shares to permit the
issuer thereof to register it for public sale under the
Securities Act of 1933, as amended, or under any state
securities law.
(ii) Upon the occurrence and during the continuance
of an Event of Default and at Agent's request, NSE shall, and
shall cause all issuers of Collateral and all officers and
directors thereof and all other necessary Persons to, execute
and deliver all documents, instruments and agreements and
perform all other acts necessary or, in the opinion of Agent,
advisable to sell the Collateral in any public or private
sale, including any acts requested by Agent to (A) register
any Collateral under the Securities Act of 1933, (B) qualify
any Collateral under any state securities or "Blue Sky" laws
or (C) otherwise permit any such sale to be made in full
compliance with all applicable Governmental Rules.
8. Miscellaneous.
(a) Notices. Except as otherwise specified herein, all
notices, requests, demands, consents, instructions or other
communications to or upon NSE or Agent under this Agreement shall be
given as provided in Paragraph 8.01 of the Credit Agreement.
(b) Waivers; Amendments. Any term, covenant, agreement or
condition of this Agreement may be amended or waived only as provided
in the Credit Agreement. No failure or delay by Agent or any Lender in
exercising any right hereunder shall operate as a waiver thereof or of
any other right nor shall any single or partial exercise of any such
right preclude any other further exercise thereof or of any other
right. Unless otherwise specified in any such waiver or consent, a
waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
<PAGE>
(c) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Agent, Lenders, NSE and their
respective successors and assigns; provided, however, that NSE may not
assign or transfer any of its rights and obligations under this
Agreement without the prior written consent of Agent and Lenders, and,
provided, further, that Agent or any Lender may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. All references in this Agreement to
any Person shall be deemed to include all permitted successors and
assigns of such Person.
(d) Cumulative Rights, etc. The rights, powers and remedies of
Agent and Lenders under this Agreement shall be in addition to all
rights, powers and remedies given to Agent and Lenders by virtue of any
applicable law, rule or regulation of any Governmental Authority, the
Credit Agreement, any other Credit Document or any other agreement, all
of which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Agent's or any
Lender's rights hereunder. NSE waives any right to require Agent or any
Lender to proceed against any Person or to exhaust any Collateral or to
pursue any remedy in Agent's or such Lender's power.
(e) Partial Invalidity. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, neither the legality,
validity or enforceability of the remaining provisions of this
Agreement nor the legality, validity or enforceability of such
provision under the law of any other jurisdiction shall in any way be
affected or impaired thereby.
(f) Cumulative Rights, etc. The rights, powers and remedies of
Agent and Lenders under this Agreement shall be in addition to all
rights, powers and remedies given to Agent and Lenders by virtue of any
applicable Governmental Rule, the Credit Agreement, any other Credit
Document or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively or
concurrently without impairing Agent's rights hereunder. NSE waives any
right to require Agent or any Lender to proceed against any Person or
to exhaust any Collateral or to pursue any remedy in Agent's or such
Lender's power.
(g) Payments Free of Taxes. All payments made by NSE under
this Agreement shall be made free and clear of, and without deduction
or withholding for or on account of, all present and future income,
stamp, documentary and other taxes and duties, and all other levies,
imposts, charges, fees, deductions and withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority (except net income taxes and franchise taxes in lieu of net
income taxes imposed on Agent or any Lender by its jurisdiction of
incorporation or the jurisdiction in which its Applicable Lending
Office is located) (all such non-excluded taxes, duties, levies,
imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld
from any amounts payable to Agent or any Lender hereunder, the amounts
so payable to Agent or such Lender shall be increased to the extent
necessary to yield to Agent or such Lender (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in
<PAGE>
the amounts specified in this Agreement or the other Credit Documents,
as applicable. Whenever any Taxes are payable by NSE, as promptly as
possible thereafter, NSE shall send to Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an
original official receipt received by NSE showing payment thereof. If
NSE fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to Agent the required receipts or other required
documentary evidence, NSE shall indemnify Agent and Lenders for any
taxes (including interest or penalties) that may become payable by
Agent or any Lender as a result of any such failure. The obligations of
NSE under this Subparagraph 8(g) shall survive the payment and
performance of the Obligations and the termination of this Agreement.
Nothing contained in this Subparagraph 8(g) shall require Agent or any
Lender to make available any of its tax returns (or any other
information relating to its taxes which it deems to be confidential).
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California
without reference to conflicts of law rules (except to the extent
otherwise provided in the UCC).
[The signature page follows.]
<PAGE>
IN WITNESS WHEREOF, NSE has caused this Agreement to be executed as of
the day and year first above written.
NU SKIN ENTERPRISES, INC.
By: _________________________
Name: ____________________
Title: _____________________
<PAGE>
ATTACHMENT 1
TO PLEDGE AGREEMENT
INITIAL PLEDGED SHARES
<TABLE>
<CAPTION>
Classes of Voting Issued and Shares Shares
Foreign Jurisdiction Equity Or Outstanding Owned by Pledged to
Subsidiary Of Organization Securities Non-Voting Shares NSE Agent
- ---------- --------------- ---------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
NSE GUARANTY
THIS GUARANTY, dated as of May [A], 1998, is executed by NU SKIN
ENTERPRISES, INC., a Delaware corporation ("NSE"), in favor of ABN AMRO BANK
N.V., acting as agent (in such capacity, and each successor thereto in such
capacity, "Agent") for the financial institutions which are from time to time
parties to the Credit Agreement referred to in Recital A below (collectively,
"Lenders").
RECITALS
A. Pursuant to a Credit Agreement dated as of May 8, 1998 (as amended
from time to time, the "Credit Agreement"), among NSE, Nu Skin Japan Co., Ltd.
("NSJ"), Lenders and Agent, Lenders have agreed to extend certain credit
facilities to NSE and NSJ (collectively, "Borrowers") upon the terms and subject
to the conditions set forth therein. NSJ is a wholly-owned Subsidiary of NSE.
B. Lenders' obligations to extend the credit facilities to Borrowers
under the Credit Agreement are subject, among other conditions, to receipt by
Agent of this Guaranty, duly executed by NSE.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, NSE hereby agrees with Agent, for the ratable benefit of Lenders
and Agent, as follows:
1. Definitions and Interpretation.
(a) Definitions. When used in this Guaranty, the
following terms shall have the following respective meanings:
"Agent" shall have the meaning given to that term in
the introductory paragraph hereof.
"Borrowers" shall have the meaning given to that term
in the Recital A hereof.
"Credit Agreement" shall have the meaning given to
that term in the Recital A hereof.
<PAGE>
"Debtor Relief Proceeding" shall mean any suit,
action, case or other proceeding commenced by, against or for
NSJ or NSE or its property seeking the dissolution,
liquidation, reorganization, rearrangement or other relief of
NSJ or NSE or its debts under any applicable bankruptcy,
insolvency or debtor relief law or other similar Governmental
Rule now or hereafter in effect or seeking the appointment of
a receiver, trustee, liquidator, custodian or other similar
official for NSJ or NSE or any substantial part of its
property or any general assignment by NSJ or NSE for the
benefit of its creditors, whether or not any such suit,
action, case or other proceeding is voluntary or involuntary.
"Disallowed Post-Commencement Interest and Expenses"
shall mean interest computed at the rate provided in the
Credit Agreement and claims for reimbursement, costs, expenses
or indemnities under the terms of any of the Credit Documents
accruing or claimed at any time after the commencement of any
Debtor Relief Proceeding, if the claim for such interest,
reimbursement, costs, expenses or indemnities is not
allowable, allowed or enforceable against NSJ in such Debtor
Relief Proceeding.
"Guaranteed Obligations" shall mean and include all
loans, advances, debts, liabilities, and obligations,
howsoever arising, owed by NSJ to Agent or any Lender of every
kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money),
individual or joint and several, direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising pursuant to the terms of the Credit Documents,
including all interest, fees, charges, expenses, attorneys'
fees and accountants' fees chargeable to NSJ or payable by NSJ
thereunder.
"Lenders" shall have the meaning given to that term
in the introductory paragraph hereof.
"NSE" shall have the meaning given to that term in
the introductory paragraph hereof.
"NSJ" shall have the meaning given to that term in
the Recital A hereof.
"Subordinated Obligations" shall have the meaning
given to that term in Paragraph 4 hereof.
"Taxes" shall have the meaning given to such term in
Subparagraph 5(h).
Unless otherwise defined herein, all other capitalized terms used
herein and defined in the Credit Agreement shall have the respective
meanings given to those terms in the Credit Agreement.
(b) Other Interpretive Provisions. The rules of construction
set forth in Section I of the Credit Agreement shall, to the extent not
inconsistent with the terms of this Guaranty, apply to this Guaranty
and are hereby incorporated by reference.
<PAGE>
2. Guaranty.
(a) Payment Guaranty. NSE unconditionally guarantees and
promises to pay and perform as and when due, whether at stated
maturity, upon acceleration or otherwise, any and all of the Guaranteed
Obligations. If any Debtor Relief Proceeding relating to NSJ is
commenced, NSE further unconditionally guarantees and promises to pay
and perform, upon the demand of Agent, any and all of the Guaranteed
Obligations (including any and all Disallowed Post-Commencement
Interest and Expenses) in accordance with the terms of the Credit
Documents, whether or not such obligations are then due and payable by
NSJ and whether or not such obligations are modified, reduced or
discharged in such Debtor Relief Proceeding. This Guaranty is a
guaranty of payment and not of collection.
(b) Continuing Guaranty. This Guaranty is an irrevocable
continuing guaranty of the Guaranteed Obligations which shall continue
in effect until all obligations of Lenders to extend credit to NSJ have
terminated and all of the Guaranteed Obligations have been fully paid.
If any payment on any Guaranteed Obligation is set aside, avoided or
rescinded or otherwise recovered from Agent or any Lender, such
recovered payment shall constitute a Guaranteed Obligation hereunder
and, if this Guaranty was previously released or terminated, it
automatically shall be fully reinstated, as if such payment was never
made.
(c) Independent Obligation. The liability of NSE hereunder is
independent of the Guaranteed Obligations, and a separate action or
actions may be brought and prosecuted against NSE irrespective of
whether action is brought against NSJ or any other guarantor of the
Guaranteed Obligations or whether NSJ or any other guarantor of the
Guaranteed Obligations is joined in any such action or actions.
(d) Fraudulent Transfer Limitation. If, in any action to
enforce this Guaranty, any court of competent jurisdiction determines
that enforcement against NSE for the full amount of the Guaranteed
Obligations is not lawful under or would be subject to avoidance under
Section 548 of the United States Bankruptcy Code or any applicable
provision of any comparable law of any state or other jurisdiction, the
liability of NSE under this Guaranty shall be limited to the maximum
amount lawful and not subject to such avoidance.
(e) Termination. Notwithstanding any termination of this
Guaranty in accordance with Paragraph 3 hereof, this Guaranty shall
continue to be in full force and effect and applicable to any
Guaranteed Obligations arising thereafter which arise because prior
payments of Guaranteed Obligations are rescinded or otherwise required
to be surrendered by Agent or any Lender after receipt.
<PAGE>
3. Authorizations, Waivers, Etc.
(a) Authorizations. NSE authorizes Agent and Lenders, in their
discretion, without notice to NSE, irrespective of any change in the
financial condition of NSJ, NSE or any other guarantor of the
Guaranteed Obligations since the date hereof, and without affecting or
impairing in any way the liability of NSE hereunder, from time to time
to:
(i) Create new Guaranteed Obligations and renew,
compromise, extend, accelerate or otherwise change the time
for payment or performance of, or otherwise amend or modify
the Credit Documents or change the terms of the Guaranteed
Obligations or any part thereof, including increase or
decrease of the rate of interest thereon;
(ii) Take and hold security for the payment or
performance of the Guaranteed Obligations and exchange,
enforce, waive or release any such security; apply such
security and direct the order or manner of sale thereof; and
purchase such security at public or private sale;
(iii) Otherwise exercise any right or remedy they may
have against NSJ, NSE, any other guarantor of the Guaranteed
Obligations or any security, including, without limitation,
the right to foreclose upon any such security by judicial or
nonjudicial sale;
(iv) Settle, compromise with, release or substitute
any one or more makers, endorsers or guarantors of the
Guaranteed Obligations; and
(v) Assign the Guaranteed Obligations, this Guaranty
or the other Credit Documents in whole or in part to the
extent provided in the Credit Agreement and the other Credit
Documents.
(b) Waivers. NSE hereby waives:
(i) Any right to require Agent or any Lender to (A)
proceed against NSJ or any other guarantor of the Guaranteed
Obligations, (B) proceed against or exhaust any security
received from NSJ, NSE or any other guarantor of the
Guaranteed Obligations or otherwise marshall the assets of
NSJ, NSE or any other guarantor of the Guaranteed Obligations
or (C) pursue any other remedy in Agent's or any Lender's
power whatsoever;
(ii) Any defense arising by reason of the
application by NSJ of the proceeds of any borrowing;
(iii) Any defense resulting from the absence,
impairment or loss of any right of reimbursement, subrogation,
contribution or other right or remedy of NSE against NSJ, any
other guarantor of the Guaranteed Obligations or any security,
whether resulting from an election by Agent or any Lender to
foreclose upon security by nonjudicial sale, or otherwise;
<PAGE>
(iv) Any setoff or counterclaim of NSJ or any defense
which results from any disability or other defense of NSJ or
the cessation or stay of enforcement from any cause whatsoever
of the liability of NSJ (including, without limitation, the
lack of validity or enforceability of any of the Credit
Documents);
(v) Any defense based upon any law, rule or
regulation which provides that the obligation of a surety must
not be greater or more burdensome than the obligation of the
principal;
(vi) Until all obligations of Agent or any Lender to
extend credit to NSJ have terminated and all of the Guaranteed
Obligations have been fully paid, any right of subrogation,
reimbursement, indemnification or contribution and other
similar right to enforce any remedy which Agent, Lenders or
any other Person now has or may hereafter have against NSJ on
account of the Guaranteed Obligations, and any benefit of, and
any right to participate in, any security now or hereafter
received by Agent, any Lender or any other Person on account
of the Guaranteed Obligations;
(vii) All presentments, demands for performance,
notices of non-performance, notices delivered under the Credit
Documents, protests, notice of dishonor, and notices of
acceptance of this Guaranty and of the existence, creation or
incurring of new or additional Guaranteed Obligations and
notices of any public or private foreclosure sale;
(viii) The benefit of any statute of limitations to
the extent permitted by law;
(ix) Any appraisement, valuation, stay, extension,
moratorium redemption or similar law or similar rights for
marshalling;
(x) Any right to be informed by Agent or any Lender
of the financial condition of NSJ or any other guarantor of
the Guaranteed Obligations or any change therein or any other
circumstances bearing upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations;
(xi) Until all obligations of Agent or any Lender to
extend credit to NSJ have terminated and all of the Guaranteed
Obligations have been fully paid, any right to revoke this
Guaranty;
(xii) Any defense arising from an election for the
application of Section 1111(b)(2) of the United States
Bankruptcy Code which applies to the Guaranteed Obligations;
(xiii) Any defense based upon any borrowing or grant
of a security interest under Section 364 of the United States
Bankruptcy Code; and
<PAGE>
(xiv) Any right it may have to a fair value hearing
to determine the size of a deficiency judgment following any
foreclosure on any security for the Guaranteed Obligations.
Without limiting the scope of any of the foregoing provisions of this
Paragraph 3, NSE hereby further waives (A) all rights and defenses
arising out of an election of remedies by Agent or any Lender, even
though that election of remedies, such as a nonjudicial foreclosure
with respect to security for a Guaranteed Obligation, has destroyed
NSE's rights of subrogation and reimbursement against NSJ by the
operation of Section 580d of the Code of Civil Procedure or otherwise,
(B) all rights and defenses NSE may have by reason of protection
afforded to NSJ with respect to the Guaranteed Obligations pursuant to
the antideficiency or other laws of California limiting or discharging
the Guaranteed Obligations, including, without limitation, Section
580a, 580b, 580d, or 726 of the California Code of Civil Procedure, and
(C) all other rights and defenses available to NSE by reason of
Sections 2787 to 2855, inclusive, Section 2899 or Section 3433 of the
California Civil Code or Section 3605 of the California Commercial
Code.
(c) Financial Condition of NSJ, Etc. NSE is fully aware of the
financial condition and affairs of NSJ. NSE has executed this Guaranty
without reliance upon any representation, warranty, statement or
information concerning NSJ furnished to NSE by Agent or any Lender and
has, independently and without reliance on Agent or any Lender, and
based on such documents and information as it has deemed appropriate,
made its own appraisal of the financial condition and affairs of NSJ
and of other circumstances affecting the risk of nonpayment or
nonperformance of the Guaranteed Obligations. NSE is in a position to
obtain, and assumes full responsibility for obtaining, any additional
information about the financial condition and affairs of NSJ and of
other circumstances affecting the risk of nonpayment or nonperformance
of the Guaranteed Obligations and will, independently and without
reliance upon Agent or any Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own appraisals and decisions in taking or not taking action in
connection with this Guaranty.
4. Subordination. NSE hereby subordinates any and all debts, liabilities and
obligations owed to NSE by NSJ (the "Subordinated Obligations") to the
Guaranteed Obligations as provided in this Paragraph 4.
(a) Prohibited Payments, Etc. Except during the continuance of
a Default (including the commencement and continuation of any Debtor
Relief Proceeding relating to NSJ), NSE may receive regularly scheduled
payments from NSJ on account of Subordinated Obligations. After the
occurrence and during the continuance of any Default (including the
commencement and continuation of any Debtor Relief Proceeding relating
to NSJ), however, unless Agent otherwise agrees, NSE shall not demand,
accept or take any action to collect any payment on account of the
Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any Debtor
Relief Proceeding relating to NSJ, NSE agrees that Agent and Lenders
shall be entitled to receive payment of all Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and
Expenses) before NSE receives payment of any Subordinated Obligations.
<PAGE>
(c) Turn-Over. After the occurrence and during the continuance
of any Default (including the commencement and continuation of any
Debtor Relief Proceeding relating to NSJ), NSE shall, if Agent so
requests, collect, enforce and receive payments on account of the
Subordinated Obligations as trustee for Agent and Lenders and deliver
such payments to Agent on account of the Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and
Expenses), together with any necessary endorsements or other
instruments of transfer, but without reducing or affecting in any
manner the liability of NSE under the other provisions of this
Guaranty.
(d) Agent Authorization. After the occurrence and during the
continuance of any Default (including the commencement and continuation
of any Debtor Relief Proceeding relating to NSJ), Agent is authorized
and empowered (but without any obligation to so do), in its discretion,
(i) in the name of NSE to collect and enforce, and to submit claims in
respect of, Subordinated Obligations and to apply any amounts received
thereon to the Guaranteed Obligations (including any and all Disallowed
Post-Commencement Interest and Expenses), and (ii) to require NSE (A)
to collect and enforce, and to submit claims in respect of,
Subordinated Obligations and (B) to pay any amounts received on such
obligations to Agent for application to the Guaranteed Obligations
(including any and all Disallowed Post-Commencement Interest and
Expenses).
5. Miscellaneous.
(a) Notices. Except as otherwise specified herein, all
notices, requests, demands, consents, instructions or other
communications to or upon NSE or Agent under this Agreement shall be
given as provided in Paragraph 8.01 of the Credit Agreement.
(b) Payments.
(i) NSE shall make all payments of the Guaranteed
Obligations to Agent , or its order, at the office of Agent
and at the times specified in the Credit Documents for the
payment of such Guaranteed Obligations. NSE shall make all
other payments hereunder at such office as Agent may
designate. Each payment shall be made in same day or
immediately available funds not later than 11:00 a.m.(local
time of the office of Agent at which such payment is to be
made) on the date due.
<PAGE>
(ii) NSE shall make all payments of the Guaranteed
Obligations hereunder in the currency in which such Guaranteed
Obligations are required to be paid by NSJ pursuant to the
Credit Documents and shall make all other payments hereunder
in Dollars; provided, however, that, if Agent shall request
NSE to pay any amount hereunder which would otherwise be
payable in another currency in the lawful currency of the
United States, NSE shall pay to Agent the Dollar Equivalent of
such amount.
(iii) If any sum due from NSE under this Guaranty or
any other Credit Document to which NSE is a party or any
order, judgment or award given or rendered in relation hereto
or thereto has to be converted from the currency (the "first
currency") in which the same is payable hereunder or
thereunder into another currency (the "second currency") for
the purpose of (A) making or filing a claim or proof against
NSE with any Governmental Authority, (B) obtaining an order or
judgment in any court or other tribunal or (C) enforcing any
order or judgment given or made in relation hereto, NSE shall,
to the fullest extent permitted by law, indemnify and hold
harmless each of the Persons to whom such sum is due from and
against any loss suffered as a result of any discrepancy
between (1) the rate of exchange used for such purpose to
convert the amounts in question from the first currency into
the second currency and (2) the rate or rates of exchange at
which such Person may, using reasonable efforts in the
ordinary course of business, purchase the first currency with
the second currency upon receipt of a sum paid to it in
satisfaction, in whole or in part, of any such order,
judgment, claim or proof. The foregoing indemnity shall
constitute a separate obligation of NSE distinct from its
other obligations hereunder and shall survive the giving or
making of any judgment or order in relation to all or any of
such obligations.
(iv) If any amounts required to be paid by NSE under
this Guaranty or any order, judgment or award given or
rendered in relation hereto remain unpaid after such amounts
are due, NSE shall pay interest on the aggregate, outstanding
balance of such amounts from the date due until those amounts
are paid in full at a per annum rate equal to:
(A) In the case of amounts payable in
Dollars, the Base Rate plus two percent (2.00%), such
rate to change from time to time as the Base Rate
shall change.
(B) In the case of amounts payable in Yen,
the Overnight Rate plus two percent (2.00%), such
rate to change from time to time as the Overnight
Rate shall change.
(c) Expenses. NSE shall pay on demand (i) all reasonable and
documented fees and expenses, including reasonable attorneys' fees and
expenses, incurred by Agent in connection with the preparation,
execution and delivery of, and the exercise of its duties under, this
Guaranty and the preparation, execution and delivery of amendments and
waivers hereunder and (ii) all reasonable and documented fees and
expenses, including reasonable attorneys' fees and expenses, incurred
by Agent and Lenders in connection with the enforcement or attempted
enforcement of this Guaranty or any of the Guaranteed Obligations or in
preserving any of Agent's or Lenders' rights and remedies (including,
without limitation, all such fees and expenses incurred in connection
with any "workout" or restructuring affecting the Credit Documents or
the Guaranteed Obligations or any bankruptcy or similar proceeding
involving NSE, NSJ or any of their affiliates).
<PAGE>
(d) Waivers; Amendments. This Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written
instruments signed by NSE and Agent. Each waiver or consent under any
provision hereof shall be effective only in the specific instances for
the purpose for which given. No failure or delay on Agent's or any
Lender's part in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial
exercise of any such right preclude any other further exercise thereof
or of any other right.
(e) Successors and Assigns. This Guaranty shall be binding
upon and inure to the benefit of Agent, Lenders, NSE and their
respective successors and assigns; provided, however, that NSE may not
assign or transfer any of its rights and obligations under this
Guaranty without the prior written consent of Agent and Lenders, and,
provided, further, that Agent or any Lender may sell, assign and
delegate their respective rights and obligations hereunder only as
permitted by the Credit Agreement. All references in this Guaranty to
any Person shall be deemed to include all permitted successors and
assigns of such Person.
(f) Cumulative Rights, etc. The rights, powers and remedies of
Agent and Lenders under this Guaranty shall be in addition to all
rights, powers and remedies given to Agent and Lenders by virtue of any
applicable law, rule or regulation of any Governmental Authority, the
Credit Agreement, any other Credit Document or any other agreement, all
of which rights, powers, and remedies shall be cumulative and may be
exercised successively or concurrently without impairing Agent's or any
Lender's rights hereunder. NSE waives any right to require Agent or any
Lender to proceed against any Person or to exhaust any Collateral or to
pursue any remedy in Agent's or such Lender's power.
(g) Setoff; Security Interest.
(i) In addition to any rights and remedies of Lenders
provided by law, each Lender shall have the right, with the
prior consent of Agent but without prior notice to or consent
of NSE, any such notice and consent being expressly waived by
NSE to the extent permitted by applicable law, upon the
occurrence and during the continuance of an Event of Default,
to set-off and apply against the obligations of NSE any amount
owing from such Lender to NSE. The aforesaid right of set-off
may be exercised by such Lender against NSE or against any
trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or execution, judgment or
attachment creditor of NSE or against anyone else claiming
through or against NSE or such trustee in bankruptcy, debtor
in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off may not
have been exercised by such Lender at any prior time. Each
Lender agrees promptly to notify NSE after any such set-off
and application made by such Lender, provided that the failure
to give such notice shall not affect the validity of such
set-off and application.
<PAGE>
(ii) As security for the obligations of NSE
hereunder, NSE hereby grants to Agent and each Lender, for the
benefit of all Lenders, a continuing security interest in any
and all deposit accounts or moneys of NSE now or hereafter
maintained with such Lender. Each Lender shall have all of the
rights of a secured party with respect to such security
interest.
(h) Payments Free of Taxes. All payments made by NSE under
this Guaranty shall be made free and clear of, and without deduction or
withholding for or on account of, all present and future income, stamp,
documentary and other taxes and duties, and all other levies, imposts,
charges, fees, deductions and withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority
(except net income taxes and franchise taxes in lieu of net income
taxes imposed on Agent or any Lender by its jurisdiction of
incorporation or the jurisdiction in which its Applicable Lending
Office is located) (all such non-excluded taxes, duties, levies,
imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld
from any amounts payable to Agent or any Lender hereunder, ----- the
amounts so payable to Agent or such Lender shall be increased to the
extent necessary to yield to Agent or such Lender (after payment of all
Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Guaranty or the other Credit
Documents, as applicable. Whenever any Taxes are payable by NSE, as
promptly as possible thereafter, NSE shall send to Agent for its own
account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by NSE showing
payment thereof. If NSE fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to Agent the required
receipts or other required documentary evidence, NSE shall indemnify
Agent and Lenders for any taxes (including interest or penalties) that
may become payable by Agent or any Lender as a result of any such
failure. The obligations of NSE under this Subparagraph 5(h) shall
survive the payment and performance of the Guaranteed Obligations and
the termination of this Guaranty. Nothing contained in this
Subparagraph 5(h) shall require Agent or any Lender to make available
any of its tax returns (or any other information relating to its taxes
which it deems to be confidential).
(i) Partial Invalidity. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Guaranty nor the
legality, validity or enforceability of such provision under the law of
any other jurisdiction shall in any way be affected or impaired
thereby.
(j) Jury Trial. EACH OF NSE, LENDERS AND AGENT, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
GUARANTY.
<PAGE>
(k) Governing Law, Consent to Jurisdiction, Etc.
(i) This Guaranty shall be governed by and construed
in accordance with the laws of the State of California without
reference to conflicts of law rules.
(ii) NSE irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of California and the
courts of the United States of America located in the Northern
District of California and agrees that any legal action, suit
or proceeding arising out of or relating to this Guaranty or
any of the other Credit Documents may be brought against such
party in any such courts. Final judgment against NSE in any
such action, suit or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment, a
certified or exemplified copy of which shall be conclusive
evidence of the judgment, or in any other manner provided by
law. Nothing in this Subparagraph 5(k) shall affect the right
of Agent or any Lender to commence legal proceedings or
otherwise sue NSE in any other appropriate jurisdiction, or
concurrently in more than one jurisdiction, or to serve
process, pleadings and other papers upon NSE in any manner
authorized by the laws of any such jurisdiction. NSE agrees
that process served either personally or by registered mail
shall, to the extent permitted by law, constitutes adequate
service of process in any such suit. Without limiting the
foregoing, NSE hereby appoints, in the case of any such action
or proceeding brought in the courts of or in the State of
California, CT Corporation, with offices on the date hereof at
818 West Seventh Street, Los Angeles, California 90017, to
receive for it and on its behalf, service of process in the
State of California with respect thereto, provided NSE may
appoint any other person, reasonably acceptable to Agent, with
offices in the State of California to replace such agent for
service of process upon delivery to Agent of a reasonably
acceptable agreement of such new agent agreeing so to act. NSE
irrevocably waives to the fullest extent permitted by
applicable law (A) any objection which it may have now or in
the future to the laying of the venue of any such action, suit
or proceeding in any court referred to in the first sentence
above; (B) any claim that any such action, suit or proceeding
has been brought in an inconvenient forum; (C) its right of
removal of any matter commenced by any other party in the
courts of the State of California to any court of the United
States of America; (D) any immunity which it or its assets may
have in respect of its obligations under this Agreement or any
other Credit Document from any suit, execution, attachment
(whether provisional or final, in aid of execution, before
judgment or otherwise) or other legal process; and (E) any
right it may have to require the moving party in any suit,
action or proceeding brought in any of the courts referred to
above arising out of or in connection with this Agreement or
any other Credit Document to post security for the costs of
NSE or to post a bond or to take similar action.
[The first signature page follows.]
<PAGE>
IN WITNESS WHEREOF, NSE has caused this Guaranty to be executed as of
the day and year first above written.
NU SKIN ENTERPRISES, INC.
By: /s/ Steven J. Lund
Name: Steven J. Lund
Title: President and CEO
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