NSHK - NSK
WHOLESALE DISTRIBUTION
AGREEMENT
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5
1.1 AP Region . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Asia-Pacific Distribution Center. . . . . . . . . . . . . . 2
1.4 Exclusive Regional Distributor. . . . . . . . . . . . . . . 2
1.5 NSI Independent Distributor . . . . . . . . . . . . . . . . 3
1.6 NSHK Information. . . . . . . . . . . . . . . . . . . . . . 3
1.7 NSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 NSI Proprietary Information . . . . . . . . . . . . . . . . 4
1.9 Products. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Sales Aids. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Territory . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Trademarks. . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
APPOINTMENT AS EXCLUSIVE WHOLESALE DISTRIBUTOR. . . . . . . . . . . . 5-7
2.1 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Sub-distributors. . . . . . . . . . . . . . . . . . . . . . 5,6
2.3 NSHK Sales in the Territory . . . . . . . . . . . . . . . . 6
2.4 Sales Outside the Territory . . . . . . . . . . . . . . . . 6,7
2.5 AP Region Orders and Inquiries. . . . . . . . . . . . . . . 7
ARTICLE III
GOVERNMENT APPROVALS AND REGISTRATIONS . . . . . . . . . . . . . . . . 7-8
ARTICLE IV
OBLIGATIONS OF NSK AS EXCLUSIVE WHOLESALE DISTRIBUTOR
IN THE TERRITORY . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-13
4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Marketing and Distribution. . . . . . . . . . . . . . . . . 8,9
4.3 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 NSK Operations. . . . . . . . . . . . . . . . . . . . . . . 9,10
4.5 NSHK Management Plan. . . . . . . . . . . . . . . . . . . . 10
4.6 NSK Actions . . . . . . . . . . . . . . . . . . . . . . . . 11
4.7 NSK Claims and Representations. . . . . . . . . . . . . . . 11,12
4.8 Government Approvals, Laws and Regulations. . . . . . . . . 12
4.9 Manufacture Or Distribution of Competitive Goods. . . . . . 12
4.10 Customer Support. . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
PURCHASE, SALE AND DELIVERY OF PRODUCTS AND SALES AIDS . . . . . . . . 13-15
5.1 Agreement to Purchase . . . . . . . . . . . . . . . . . . . 13,14
5.2 Product Shipment. . . . . . . . . . . . . . . . . . . . . . 14
TABLE OF CONTENTS
-CONTINUED-
5.3 Payment Due Date. . . . . . . . . . . . . . . . . . . . . . 14
5.4 Passage of Title and Risk of Loss . . . . . . . . . . . . . 14
5.5 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Inventory Obsolescence. . . . . . . . . . . . . . . . . . . 15
ARTICLE VI
PRODUCT AND SALES AIDS PURCHASE PRICE
AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Payment method. . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VII
OBLIGATIONS OF NSHK AS SUPPLIER OF PRODUCTS
AND SALES AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-18
7.1 Product Quality . . . . . . . . . . . . . . . . . . . . . . 16,17
7.2 Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.5 U.S. and Hong Kong Export Regulations . . . . . . . . . . . 18
7.6 Export Expenses . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII
MANAGEMENT AND SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX
PAYMENT DISPUTES AND RESOLUTION. . . . . . . . . . . . . . . . . . . . 19
ARTICLE X
COMPETING PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . 19-20
ARTICLE XI
NATURE OF RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XII
TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XIII
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21-22
ARTICLE XIV
EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 22-23
TABLE OF CONTENTS
-CONTINUED-
ARTICLE XV
CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23-24
ARTICLE XVI
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XVII
INDEMNIFICATION AND INSURANCE. . . . . . . . . . . . . . . . . . . . . 24-25
ARTICLE XVIII
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-26
ARTICLE XIX
WAIVER AND DELAY . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XX
FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-27
ARTICLE XXI
GOVERNING LAW AND DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . 27
ARTICLE XXII
APPLICABILITY OF POST-EFFECTIVE LAW. . . . . . . . . . . . . . . . . . 28
ARTICLE XXIII
INTEGRATED CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XXIV
MODIFICATIONS AND AMENDMENTS . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XXV
NONDISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXVI
SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XXVII
COUNTERPARTS AND HEADINGS. . . . . . . . . . . . . . . . . . . . . . . 29-30
WHOLESALE DISTRIBUTION AGREEMENT
THIS WHOLESALE DISTRIBUTION AGREEMENT (hereinafter the "Agreement") is made
and entered into pursuant to the terms of Article XII, by and between Nu Skin
Hong Kong, Inc., a corporation duly organized and existing under the laws of the
State of Utah, U.S.A., (hereinafter "NSHK") and Nu Skin Korea, Ltd. a
corporation duly organized and existing under the laws of the country of Korea,
(hereinafter "NSK"). Hereinafter, NSHK and NSK collectively shall be referred
to as the "Parties".
W I T N E S S E T H
WHEREAS, NSHK is the Exclusive Regional Distributor of certain Products and
Sales Aids and desires to increase the sales of such Products and Sales Aids in
the Asia/Pacific region through the appointment of territorial distributors in
various jurisdictions comprising such Region; and,
WHEREAS, NSK has represented that it possesses the necessary expertise and
marketing organization and personnel for the promotion, sales, and customer
service relating to such Products and Sales Aids in the territory of Korea; and,
WHEREAS, NSHK is willing to appoint NSK and NSK is willing to accept such
appointment as exclusive wholesale distributor of NSHK's Products and Sales Aids
in the Territory, as hereinafter defined;
1
NOW THEREFORE, in consideration of the premises, the mutual promises and
covenants hereinafter set forth and for other good and valuable consideration,
the sufficiency of which is hereby acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement the following words, terms, and phrases
shall have the meaning assigned to them in this Article I, unless the context
otherwise requires or the parties otherwise agree within the terms of this
Agreement:
1.1 "AP REGION" shall mean the Asia-Pacific region, including, among
other countries and without limitation, the Territory.
1.2 "AGREEMENT" shall mean this Wholesale Distribution Agreement between
NSHK and NSK.
1.3 "ASIA-PACIFIC DISTRIBUTION CENTER" shall mean a place of business
independently maintained by a business entity carrying on a trade or business in
a country located in the AP Region and authorized by NSHK to act as an exclusive
wholesale distributor of Products and Sales Aids within that country. For the
purposes of this Agreement that business entity shall be NSK and the country
shall be the Territory.
1.4 "EXCLUSIVE REGIONAL DISTRIBUTOR" shall mean NSHK, as NSHK internally
and for itself, performs or designates others, under contract, to perform
functions and services in the AP Region to accomplish the distribution of
Products and Sales Aids to Asia-Pacific Distribution Centers and to perform
certain contractual functions in the AP Region.
2
1.5 "NSI INDEPENDENT DISTRIBUTOR" shall mean a person or business entity
authorized by contract with NSI to distribute, as an independent contractor, the
Products and Sales Aids purchased from an authorized Asia Pacific Distribution
Center in accordance with the terms of such distribution contract. For the
purposes of this Agreement, NSK shall be the only authorized Asia Pacific
Distribution Center in the Territory.
1.6 "NSHK INFORMATION" shall mean, without limitation, all information
other than information in published form or expressly designated by NSHK in
writing as non-confidential, which is directly or indirectly disclosed to NSK or
reflected for public notice on Products or Sales Aids provided pursuant to this
Agreement, regardless of the form in which it is disclosed, relating in any way
to the following property owned by NSHK or which NSHK has been licensed to use
or sub-license: NSHK's market, market studies, penetration data, customers,
Products, Sales Aids, contracts, copyrights, computer programs, applications,
technical data, licensed technology, patents, inventions, procedures, methods,
designs, strategies, plans, liabilities, assets, cost revenues, sales costs,
production costs, raw material sources or costs, profits, organization,
employees, agents, distributors, suppliers, know-how, Trademarks, trade names or
other business and commercial practices in general, relating directly or
indirectly to the foregoing.
1.7 "NSI" shall mean Nu Skin International, Inc., a U.S. corporation,
duly authorized and existing under the laws of the State of Utah, U.S.A. Nothing
contained in this Agreement shall be construed in a manner which may imply that
NSI has created a permanent business establishment in the Territory or in any
jurisdiction in the AP Region.
1.8 "NSI PROPRIETARY INFORMATION" shall mean, without limitation: (1)
proprietary technical information related to the NSI Distribution Network, the
Sales and Compensation
3
Plan, the copyrights, the Products and their formulations; (2) the identity of
or other pertinent information with respect to the actual or potential customers
or customer contacts and customer sales strategies; (3) market studies,
penetration data and other market information; (4) other sales and marketing
plans, programs and strategies; (5) sales costs, production costs and other
financial data; (6) Trademarks, trade secrets, know-how, designs and proprietary
commercial and technical information, methods, practices, procedures, processes,
manufacturing formulae, assembly, design or processing Products subject to this
agreement and any component, part or manufacturer thereof; and, (7) sources of
supplies and raw materials for Products, components and services.
1.9 "PRODUCTS" shall mean those goods, including without limitation,
cosmetics, nutritional products, dietary supplements, vitamins, over-the-counter
drugs, quasi-drugs, drugs and pharmaceutical products designed and produced for
the Territory's market purchased at wholesale by NSI Independent Distributors.
1.10 "SALES AIDS" shall mean the materials, in whatever form, designed,
approved and produced for the Territory to assist in the marketing of the
Products in the Territory.
1.11 "TERRITORY" shall mean the entire area and jurisdiction comprising
the country of the Republic of Korea. The Territory defined in this Agreement
may be modified from time to time by written amendment, signed by the Parties.
1.12 "TRADEMARKS" shall mean those words, symbols, devices, logos, trade
names and company names or a combination thereof used in relation to all
Products and Sales Aids covered by the existing or eventual registrations
thereof in the Territory.
ARTICLE II
4
APPOINTMENT AS EXCLUSIVE WHOLESALE DISTRIBUTOR
2.1 SCOPE. NSHK hereby appoints and authorizes NSK as NSHK's exclusive
wholesale distributor in the Territory during the term of this Agreement, with
the right to sell and distribute, at wholesale, Products and Sales Aids in the
Territory, under the Products' names, logos, and Trademarks, subject to all
terms and conditions of this Agreement. NSK hereby accepts such appointment and
authorization and agrees to use its best lawful efforts to sell such Products
and Sales Aids throughout the Territory. In addition, the Parties undertake to
perform their respective obligations as set forth in this Agreement.
2.2 SUB-DISTRIBUTORS. NSK shall not, without the prior written approval
of NSHK, appoint sub-distributors or agents to promote or distribute Products or
Sales Aids in any portion of the Territory or outside the Territory. Further,
notwithstanding any such appointments or NSHK's approval thereof, NSK shall at
all times remain fully liable for the performance of its sub-distributors and/or
agents and NSK hereby agrees to indemnify and hold harmless NSHK from all
damages, losses, cost or expenses arising in any manner from any act or omission
on the part of its sub-distributors or agents.
2.2(a) NSK agrees that any wholesale distribution of Products OR Sales Aids
in the Territory shall be made only pursuant to the terms and conditions of
a separate written agreement entered with an NSI Independent Distributor
duly authorized by agreement with NSI to sell Products and Sales Aids at
retail within the Territory.
2.2(b) NSHK shall inform NSK, either for itself or through NSI, of the
identity of duly authorized NSI Independent Distributors.
2.2(c) NSK shall distribute to any NSI Independent Distributor only those
Products or Sales Aids specifically approved for distribution within the
Territory. NSK agrees to
5
assume all risk and liability for claims arising out of the use of Products
or Sales Aids it improperly distributes or represents in the Territory.
NSK agrees to maintain current an insurance policy in an amount sufficient
to cover claims arising from any such improper distribution or
representations.
2.2(d) NSK, as long as it retains title, shall be solely responsible for
the coordination, sale and delivery of any Products or Sales Aids taken
from its inventory in the Territory and distributed to any NSI Independent
Distributor in the Territory.
2.3 NSHK SALES IN THE TERRITORY. NSHK agrees not to sell Products or
Sales Aids to any party within the Territory or to any party outside the
Territory for delivery within the Territory, except to NSK pursuant to the terms
and conditions of this Agreement, unless NSHK has received the written consent
of NSK.
2.4 SALES OUTSIDE THE TERRITORY. NSK agrees that it will not sell
Products or Sales Aids outside the Territory. NSK shall not promote or solicit
customers for Product or Sales Aids sales outside the Territory. NSK shall not
establish any office outside the Territory
6
through which orders are solicited or any depot in which inventories of NSHK
Products or Sales Aids are stored without NSHK's written consent.
2.5 AP REGION ORDERS AND INQUIRIES. The Parties agree that from time to
time inquiries and orders concerning the Territory will arise. If NSHK receives
any order or inquiry concerning the sale of Products or Sales Aids in the
Territory, NSHK agrees to give notice of such inquiry or order to NSK, such
notice to include the name and address of the person making the order or inquiry
as well as any other relevant details regarding such order or inquiry that NSK
shall reasonably request. If NSK receives any order or inquiry concerning the
sale of Products or Sales Aids in the country or territory of any Asia-Pacific
Distribution Center in the AP Region, NSK agrees to give notice of such inquiry
or order to such Asia-Pacific Distribution Center, such notice to include the
name and address of the person making the order or inquiry, as well as any other
relevant details regarding such order or inquiry that such Asia-Pacific
Distribution Center shall reasonably request.
ARTICLE III
GOVERNMENT APPROVALS AND REGISTRATIONS
NSK agrees its will obtain any governmental approval required in the
Territory to enable this Agreement to become effective or to enable any payment
pursuant to the provisions of this Agreement to be made; it will further obtain,
at its sole expense, all governmental approvals and registrations required for
importation of the Products into the Territory; and, in addition it will obtain
any other governmental approvals or registrations to fulfill all other
7
obligations hereunder to be observed or performed. NSK agrees to keep NSHK
informed of the progress in obtaining all such governmental approvals.
ARTICLE IV
OBLIGATIONS OF NSK AS EXCLUSIVE WHOLESALE DISTRIBUTOR
IN THE TERRITORY
4.1 INTRODUCTION. NSK agrees it will fulfill all of its obligations set
forth below.
4.2 MARKETING AND DISTRIBUTION. NSK shall have the following
obligations with respect to marketing and distribution of the Products and Sales
Aids:
4.2(a) To use its best efforts to further the promotion, marketing, sales
and other distribution of the Products and Sales Aids in the Territory.
4.2(b) To maintain, or caused to be maintained, an adequate and balanced
inventory of Products, Sales Aids, supplies and necessary materials to
promote, market, sell and distribute the Products and Sales Aids in the
Territory.
4.2(c) To respond promptly to all inquiries by sub-distributors, NSI
Independent Distributors and customers, including complaints. To process
all orders and effect timely shipments of Products and Sales Aids within
the Territory.
4.2(d) To diligently investigate all leads with potential customers
referred to it by NSHK.
4.2(e) To permit NSHK to visit NSK and its sub-distributors or customers
and to visit NSK's place of business and inspect its inventories, service
records, financial records and other relevant documents.
8
4.2(f) To maintain, or contract to maintain, adequate personnel,
distribution and laboratory facilities dedicated on a full-time or part-
time basis to the quality control and sale of Products, in compliance with
all laws, ordinances and regulations of the Territory.
4.2(g) To provide, at the request of NSHK, a comprehensive three-year
business plan in the form and detail requested by NSHK and to update such
business plan at least each year or at more frequent intervals if required
by NSHK.
4.2(h) To provide, at the request of NSHK, reports of its activities and
sales respecting the Products and Sales Aids in the Territory in a form and
in such detail and time period as NSHK may reasonably require.
4.3 PROMOTION. NSK shall diligently undertake to promote the Products
and Sales Aids in the Territory in a manner consistent with the judgment,
policies and regional sales strategies of NSHK for the promotion of such
Products and Sales Aids. NSHK shall furnish NSK with copies of NSHK's
brochures, videos, Product literature, Sales Aids, etc. in the English language
for use by NSK in preparing its own promotional materials for distribution in
the Territory. All such materials prepared by NSK shall be in compliance with
applicable laws, regulations, and ordinances of the Territory, and, will be
reviewed and approved in the promotion of the Products by NSHK. All expenses
incurred by NSK with respect to creating such promotional materials and
promoting the Products and Sales Aids shall be borne by NSK.
4.4 NSK OPERATIONS. NSK agrees to maintain, at its sole cost and
expense, such facilities and other places of business within the Territory
necessary to effect the purposes and intentions of this Agreement. NSK further
agrees to bear all costs and expenses it incurs in the negotiation,
memorialization, execution and performance of all leases, rentals, equipment,
9
salaries, taxes, licenses, insurance, permits, telephone, telegraph,
promotional, advertising, travel, accounting and legal expenses, relating to the
business of NSK under the terms and conditions of this Agreement, unless
otherwise agreed in writing by the Parties.
4.4(a) In the event, NSK and NSHK obtain mutually beneficial professional
services including, without limitation, accounting or legal services, prior
to execution of or during the term of this Agreement, NSK and NSHK each
agree to pay the portion of any such expenses incurred in an amount
commensurate with the value each derived from such services. Any dispute
respecting expenses for such services shall be resolved in accordance with
the provisions of Article IX.
4.4(b) To the extent NSK is required to apply for or maintain import
licenses for the import of the Products or Sales Aids into the Territory,
NSK shall pay all costs and expenses related to obtaining such import
licenses.
4.4(c) NSK shall be liable to pay all customs duties, excise taxes, similar
governmental charges and levies, and any other charges or expenses related
to any Products or Sales Aids it imports into the Territory for subsequent
distribution.
4.5 NSHK MANAGEMENT PLAN. In order to allow NSHK to design and carry
out necessary and reasonable managerial planning for its legitimate business
purposes in the AP Region, NSK shall, in accordance with the schedule required
by NSHK, advise NSHK of the distribution prices at which NSK plans to sell
Products or Sales Aids to NSK and NSI Independent Distributors in the Territory
prior to effecting such sales.
4.6 NSK ACTIONS. NSK shall not in any manner represent itself as an
agent of NSHK or NSI in the Territory or in any jurisdiction within the AP
Region and neither NSHK nor NSI shall not be responsible for acts, omissions or
defaults of NSK or of NSK's
10
employees, officers, agents, independent contractors or representatives, and
neither NSK or its employees, officers, agents or representatives shall create
or assume any obligation on behalf of NSHK or NSI for any purpose whatsoever,
whether as agent or otherwise.
4.6(a) NSK agrees it has no authority, actual or apparent, to represent,
act for or in any way bind NSHK or NSI in any manner whatsoever, in any
jurisdiction.
4.6(b) NSK shall not in any manner represent its offices to be a branch
office or other fixed place of business of NSHK or NSI.
4.7 NSK CLAIMS AND REPRESENTATIONS. NSK shall not make any promises,
representations, warranties or guarantees respecting the Products, Sales Aids or
the Sales and Compensation Plan, except that NSK may represent that the Products
are safe for use when used as intended. NSK may make such other claims and
representations as are found in literature distributed or approved by NSHK at
the relevant time with statements intended for use in the Territory.
4.7(a) NSK shall not at any time make any explicit or implicit medical or
drug claim for or concerning any of the Products intended for distribution
in the Territory or AP Region as cosmetic products, nor may NSK
specifically recommend or prescribe any of such Products as suitable for
any specific ailment or condition. To do so would wrongly imply that any
Product so represented is a drug rather than a cosmetic. No cosmetic
Product is, or is represented to be a drug. NSK shall at all times comply
with all applicable laws, regulations and ordinances within the Territory.
4.8 GOVERNMENT APPROVALS, LAWS AND REGULATIONS. In addition to the
foregoing, NSK shall:
11
4.8(a) Comply with and make all necessary filings and notifications under
all applicable laws, regulations and ordinances in the Territory and
elsewhere, including, without limitation, any requirement for the
registration or recording of this Agreement with any responsible
governmental entities and authorities;
4.8(b) Refrain from any action that will cause NSHK to be in violation
of any applicable law, regulation, or ordinance of any jurisdiction in the
AP Region or the United States or elsewhere or any international convention
or bilateral or multilateral treaty to which any jurisdiction in the AP
Region or the United States is a signatory, including, without limitation,
the U.S. Foreign Corrupt Practices Act of 1977, the U.S. Export Control
Laws, and the U.S. Anti-Boycott laws; and,
4.8(c) Capitalize itself adequately and maintain its operations both on a
financially sound basis and in compliance with all applicable laws,
regulations or ordinances covering the operations of such a business entity
in the Territory.
4.9 MANUFACTURE OR DISTRIBUTION OF COMPETITIVE GOODS. NSK shall not
manufacture or distribute any products inside or outside the Territory which are
directly or indirectly competitive with the Products during the term of this
Agreement and for a period of three years after the termination of this
Agreement, without the written consent of NSHK.
4.10 CUSTOMER SUPPORT. NSK agrees to cooperate with NSHK in dealing with
any NSI Independent Distributor or customer complaints concerning the Products
and to take any action requested by NSHK to solve such complaints. NSK also
agrees to assist NSHK in arranging for any customer warranty service required by
law or required pursuant to the judgment of NSHK.
ARTICLE V
12
PURCHASE, SALE AND DELIVERY OF PRODUCTS AND SALES AIDS
5.1 AGREEMENT TO PURCHASE. NSK shall order such quantities of Products
and Sales Aids as it deems necessary to meet its sales requirements within the
Territory.
5.1(a) Each order shall be in the form of a written and signed Purchase
Order appearing on the official letterhead of NSK and shall be negotiated,
signed, accepted and become effective in the Territory. Acceptance by NSHK
shall be in writing, signed by a duly authorized representative of NSHK,
and effective upon execution.
5.1(b) Each Purchase Order shall identify the Products or Sales Aids to be
purchased, the country to which such Products or Sales Aids shall be
distributed to ensure shipment and receipt of Products or Sales Aids which
comply with such country's laws and regulation, the quantities thereof, and
the shipment dates therefor.
5.1(c) NSHK agrees to accept each Purchase Order for Products or Sales Aids
placed by NSK pursuant to this Article and subject to:
5.1(c)(i) The availability in NSHK's current inventory of the
Product(s) or Sales Aid(s) ordered by NSK; and,
5.1(c)(ii) The inability of NSHK to perform by reason of force
majeure as defined in Article XX of this Agreement.
5.2 PRODUCT SHIPMENT. NSHK shall ship all Product(s) and Sales Aids
sold by NSHK to NSK hereunder to the port of Pusan or such other place NSK may
designate in writing on the Purchase Order. NSHK shall transmit all commercial
invoices for the Products and Sales Aids directly to NSK by registered airmail,
postage prepaid, or any other method mutually acceptable to the Parties.
13
5.3 PAYMENT DUE DATE. NSK shall pay for each shipment of Products and
Sales Aids within one hundred twenty (120) days after the date of the issuance
of the commercial invoice or as the parties may decide, and NSK shall make
payment for the Products and Sales Aids as provided in Article IV of this
Agreement.
5.4 PASSAGE OF TITLE AND RISK OF LOSS. Title to and risk of loss for
any Products or Sales Aids ordered and shipped pursuant to the terms of this
Article shall remain with NSHK until their actual delivery to NSK or its
designated agent at the port of Pusan or at some point in transit as the parties
may agree to in writing. Shipment shall be made in a commercially reasonable
manner in accordance with standards applicable in the trade and industry, paid
by NSHK in accordance with the terms set forth in Article VI to a delivery point
outside the customs border ("Delivered at Frontier") at the port of Pusan or
such designated transhipment point. Upon delivery and thereafter, NSK is liable
for any risks related to theft, destruction, or other loss attributable to the
improper storage, care or negligence of NSK.
5.5 INSPECTION. Within forty-five (45) days following actual receipt of
a shipment of Products or Sales Aids by NSK, NSK (or its designated agent) shall
inspect the Products and Sales Aids and shall notify NSHK in writing, in
accordance with Article XVIII, of any defects in such shipment of Products or
Sales Aids. In the event of such notification, NSHK shall make appropriate
arrangements, acceptable to NSK, to replace any such defective Products or Sales
Aids at NSHK's sole cost and expense or, failing such replacement, shall, at the
option of NSHK, either credit the purchase price of the defective Products or
Sales Aids to NSK's account or promptly grant NSK a cash refund for such
purchase price. If NSHK is not notified of any defect in a shipment of Products
or Sales Aids within forty-five (45) days after
14
actual receipt thereof by NSK, then NSK shall be deemed to have waived its right
to claim any defect in the Products or Sales Aids contained in such shipment,
except for any latent or other defect not reasonably discernable upon inspection
of the Products or Sales Aids under the prevailing circumstances.
5.6 INVENTORY OBSOLESCENCE. In the event and to the extent that
Products or Sales Aids in the possession of NSK shall, due to the expiration of
shelf life, change in formulation, change in market conditions, or other reasons
not within the control of NSK, become non-saleable, NSHK agrees to credit the
original purchase price of such Products or Sales Aids to NSK. The ultimate
cost and method of disposal of any such Products and Sales Aids shall be the
responsibility by NSHK.
15
ARTICLE VI
PRODUCT AND SALES AIDS PURCHASE PRICE AND TERMS OF PAYMENT
6.1 PRICING. In order to determine and set the prices to be paid by NSK
to NSHK for Products and Sales Aids purchased hereunder, the Parties shall use
those factors and circumstances relevant to prevailing market conditions and
shall negotiate in good faith to set such prices.
6.2 PAYMENT METHOD. NSK shall pay the commercial invoices for Products
and Sales Aids shipped under this Agreement in immediately available funds by
wire transfer to a bank or banks designated by NSHK, or by such other means of
payment agreed to by NSHK. All purchases of Products and Sales Aids will be
payable in Korean Won. Without limiting any of NSHK's other rights and remedies
pursuant to this Agreement, amounts not paid within the time period set forth in
the payment provisions herein shall be subject to an interest charge equal to
two percent (2%) over the U.S. prime rate for the entire period such amounts
remain unpaid. Whether or not interest charges are actually levied is at the
discretion of NSI.
ARTICLE VII
OBLIGATIONS OF NSHK AS SUPPLIER OF PRODUCTS AND SALES AIDS
7.1 PRODUCT QUALITY. NSHK shall use its best efforts to maintain and
augment the quality, image and goodwill of the Products and Sales Aids and to
sell to NSK for resale in the Territory only Products and Sales Aids that are
consistent with the quality of Products and Sales Aids sold in the United States
of America and other jurisdictions in the AP Region.
16
NSHK does not however, warrant or represent that the formulae or ingredients
will be the same in all respects as those used in the United States or any other
region or territory.
7.2 WARRANTY. NSHK warrants that the Products and Sales Aids supplied
hereunder shall be merchantable under the laws and regulations of the
jurisdiction in which distribution of such Product or Sales Aid is intended;
that it will deliver good title thereto and that Products and Sales Aids will be
delivered free from any lawful security interest or other lien or encumbrance.
7.2(a) NSHK's liability for any breach of such warranties shall not exceed
in amount the price of the Products or Sales Aids in respect of which any
breach is claimed. NSHK'S WARRANTY STATED HEREIN IS EXPRESSLY IN LIEU OF
ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE.
7.2(b) NSHK neither assumes nor authorizes any person or entity to assume
for it any other liability in connection with the Products or Sales Aids
supplied hereunder, and there are no oral contracts or warranties
collateral to or affecting this Agreement. NSHK shall not be liable to NSK
or any third parties for consequential, special or incidental damages.
7.3 INSURANCE. NSHK covenants it will maintain, or cause to be
maintained, a current insurance policy covering claims arising from the use of
its Products in an amount consistent with normal and commercially reasonable
standards in the trade. NSHK agrees to provide NSK with any certificate of
insurance which NSK may reasonably request.
17
7.4 DELIVERY. NSHK shall promptly, in accordance with normal and
commercially reasonable delivery schedules in the trade, deliver to NSK those
Products or Sales Aids for which NSK places orders in accordance with Article V
hereof.
7.5 U.S. AND HONG KONG EXPORT REGULATIONS. To the extent NSHK is
required to obtain any United States, Hong Kong, or other export licenses to
export the Products or Sales Aids to NSK in the Territory, NSHK shall pay all
costs and expenses related to obtaining such export licenses.
7.6 EXPORT EXPENSES. NSHK shall be liable for all customs duties,
excise taxes and similar governmental charges and levies related to the export
of the Products or Sales Aids from the United States of America, Hong Kong, or
any other jurisdiction. NSHK shall also be liable for reasonable freight and
insurance costs and expenses related to the export of the Products and Sales
Aids from the United States, Hong Kong, or any other jurisdiction and delivery
of the Products and Sales Aids to NSK or its authorized agent as set forth in
Article V.
ARTICLE VIII
MANAGEMENT AND SUPPORT
NSHK shall provide NSK with the management guidance and support, including
but not limited to, legal, financial and distributor support. NSHK will also
provide training with respect to implementation and enforcement of corporate
policy and strategic planning as well as budget review; budget approvals will be
made under the direction of the Board of Directors of NSK. NSK shall compensate
NSHK for any such management guidance and support so provided.
18
ARTICLE IX
PAYMENT DISPUTES AND RESOLUTION
In the event NSHK and NSK disagree with respect to any payment described in
any of the provisions of this Agreement, NSHK and NSK agree to attempt in good
faith to resolve such dispute or, failing such attempt, to select a mutually
acceptable, independent accountant to resolve such dispute. Such accountant's
decision shall be final and binding upon the Parties. NSHK and NSK further
agree that if they are unable to select a mutually acceptable, independent
accountant, each of NSHK and NSK shall select an independent accountant and such
independent accountants shall select a third accountant who shall resolve the
dispute. The decision of the accountant selected in this manner shall be final
and binding on the parties hereto. Upon resolution of the dispute, the party
owing payment shall pay the full amount of the resolved payment due within sixty
(60) days of such resolution. Expenses incurred in this dispute resolution
procedure shall be shared equally between the Parties.
ARTICLE X
COMPETING PRODUCTS
Nothing contained herein shall restrict or prohibit NSK from acting as a
distributor of non-competing products or materials besides the Products and
Sales Aids, provided that such other products do not infringe upon any patent,
name, Trademarks, emblems, trade name, design right, model or other commercial
or industrial property right of NSHK or NSI. NSK shall not during the term of
this Agreement or any time thereafter, manufacture, have manufactured, or sell
copies of the Products, Sales Aids, or other products that might
19
reasonably be deemed under U.S. or Foreign law to be confusingly similar to the
Products or Sales Aids.
ARTICLE XI
NATURE OF RELATIONSHIP
The relationship of NSK and NSHK shall be and at all times remain,
respectively, that of independent contractor and contracting party. Nothing
contained or implied in this Agreement shall be construed to constitute NSK as
the legal representative or agent of NSHK or to constitute or construe the
Parties as partners, joint venturers, co-owners or otherwise as participants in
a joint or common undertaking. NSK shall not conclude any contract or agreement
or make any commitment, representation or warranty that binds NSHK or otherwise
act in the name of or on behalf of NSHK. In fact, the Parties understand and
agree that NSHK will refrain from conducting business or engaging in any
activity in the Territory which could be construed, under the applicable laws
and tax regulations, as carrying on or conducting business in the Territory.
ARTICLE XII
TERM
This Agreement shall be effective as of the date of NSK's commencement of
operations in the Territory. The term of this Agreement shall continue unless
and until terminated pursuant to Article XIII hereof.
20
ARTICLE XIII
TERMINATION
13.1 This Agreement may be terminated in the following circumstances and
in the manner indicated:
13.1(a) upon written notice by one party to the other party at least
ninety (90) days prior to the desired cancellation date; or
13.1(b) immediately or at any time thereafter by NSHK, if (i) NSK shall
commence a voluntary case or any proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
or liquidation, the loss of clearinghouse privileges by NSK as cause for
NSHK's termination of the agreement, or similar law of any jurisdiction
whether now or hereafter in effect relating to NSHK, or; (ii) there is
commenced against NSK any such proceeding that remains undismissed for a
period of thirty (30) days, or; (iii) NSK is adjudicated, voluntarily or
involuntarily, as bankrupt or insolvent; or
13.1(c) immediately or at any time thereafter by NSHK, if NSK becomes
insolvent or suffers any appointment of any custodian, trustee or the like
for it or any substantial part of its assets to continue undischarged or
unstayed for a period of thirty (30) days, or NSK makes a general
assignment for the benefit of creditors; or
13.1(d) by either party, upon sixty (60) days' written notice and demand
to cure, if the other party is in default in the performance of any
material obligation under this Agreement and the default remains uncured;
if the other party cures any such default within the sixty (60) day notice
period, then such default shall be of no force or effect.
21
13.1(e) If NSK causes or allows a judgment to be entered against it or
causes or allows a lien, security interest, or other encumbrance to be
placed upon its assets or the assets of NSHK.
13.1(f) If NSK undergoes a substantial change in ownership or control.
13.1(g) If either party violates a term, condition, covenant, warranty or
promise under this Agreement.
ARTICLE XIV
EFFECT OF TERMINATION
14.1 Upon termination of this Agreement, all rights and licenses herein
granted to NSK shall cease and shall revert to NSHK and NSK shall immediately
cease holding itself out to the public as exclusive wholesale distributor in the
Territory or otherwise represent that it is associated in any manner with NSHK
or NSI.
14.2 Upon termination of this Agreement, NSHK may either (a) deliver, and
NSK shall pay for, all Products and Sales Aids ordered by NSK prior to such
termination or (b) cancel, without cost or liability, the order of such Products
or Sales Aids.
14.3 Upon termination of this Agreement, neither party shall be released
from its obligations to pay monies due or to become due to the other party or to
complete any unfulfilled obligations under this Agreement, and each party shall
immediately pay, perform and discharge all debts, obligations and liabilities
hereunder. Upon termination of this Agreement for any reason, neither party
shall be liable or obligated to the other party with respect to any payments,
future profits, exemplary, special or consequential damages,
22
indemnifications or other compensation regarding such termination, irrespective
of whether such obligations or liabilities may be contemplated in the law of the
Territory or elsewhere, and, except as otherwise provided by applicable law,
each party hereby waives and relinquishes any rights, pursuant to law or
otherwise, to any such payments, indemnifications or compensation. All remedies
of a party, whether contained herein or provided by law or in equity, shall be
cumulative and not alternative.
14.4 The provisions of this Article XIV, as well as any other provisions
that by their terms so provide, shall survive termination of this Agreement and
continue in full force and effect thereafter.
ARTICLE XV
CONFIDENTIALITY
15.1 NSHK and NSK agree to hold confidential any proprietary information
disclosed by the other party or otherwise obtained directly or indirectly. NSK
agrees that should it have access to any proprietary information during the
course of its relationship with NSHK, it will make no changes to or copies of
such materials without the prior, express written consent of NSHK's authorized
representative. Neither party will use, divulge, or disclose any proprietary
information, directly or indirectly, for its own benefit or for the benefit of
any third party.
15.2 NSHK and NSK agree to keep confidential the terms of this Article
until such time as: (a) either party releases the other party, in writing, from
its terms; or (b) the proprietary information becomes known to the general
public by means other than through a breach of this Agreement; provided that the
obligations of the parties shall cease only with
23
respect to that portion of proprietary information identified in a written
release or generally known to the public. The confidentiality provisions of
this Article shall survive termination of this Agreement. NSK further agrees to
take all reasonable measures to prevent its employees or agents from divulging
such information in any manner that may be contrary to the interests of NSI,
NSHK or NSK.
ARTICLE XVI
ASSIGNMENT
This Agreement shall be binding on and inure to the benefit of the heirs,
successors, assigns and beneficiaries of the Parties; provided that NSK may not
assign this Agreement or any rights or obligations hereunder, whether by
operation of law or otherwise, without the prior written consent of NSHK's
authorized representative (which consent may be granted or withheld by NSHK in
its sole discretion). Any such attempted assignment shall be void and
unenforceable.
ARTICLE XVII
INDEMNIFICATION AND INSURANCE
17.1 NSHK agrees during and after the term of this Agreement to
indemnify and hold harmless NSK from liability, loss, cost or damage which
NSK may incur, including reasonable attorney's fees, as a result of claims,
demands or judgments, of any kind or nature, by anyone whomsoever, arising
out of an alleged or actual defect in the design, manufacture or content of
the Products or Sales Aids. NSK agrees to provide NSHK with prompt notice in
writing of any claim or demand arising out of any alleged or actual defect in
the design,
24
manufacture or content of the Products or Sales Aids of which NSHK has actual
knowledge. NSK shall cooperate with NSHK in the defense of any such action.
17.2 At all times during and following the term of this Agreement, NSK
shall maintain insurance with one or more reputable insurers reasonable in
coverage and amount in direct proportion and corresponding to the business to be
conducted by NSK pursuant to this Agreement.
ARTICLE XVIII
NOTICES
All notices, requests and other communications hereunder shall be in
writing and shall be deemed to have been duly given, if delivered by hand, or if
communicated by facsimile, cable or similar electronic means to the facsimile
number or cable identification number as previously provided by each party to
the other, at the time that receipt thereof has been confirmed by return
electronic communication or signal that the message has been received, or if
mailed, ten (10) days after dispatch by registered airmail, postage prepaid,
from any post office addressed as follows:
If to NSK: Nu Skin Korea
Dabong Tower
890-12 Daechi-dong
Kangnam-ku, Seoul
Korea
Facsimile No.: 82-2-552-9728
If to NSHK: Nu Skin Hong Kong, Inc.
75 West Center Street
Provo, Utah 84601
Facsimile No.: (801) 345-3899
25
Either party may change its facsimile number, cable identification number
or address by a notice given to the other party in the manner set forth above.
ARTICLE XIX
WAIVER AND DELAY
No waiver by either party of any breach or default in performance by the
other party, and no failure, refusal or neglect of either party to exercise any
right, power or option given to it hereunder or to insist upon strict compliance
with or performance of the other party's obligations under this Agreement, shall
constitute a waiver of the provisions of this Agreement with respect to any
subsequent breach thereof or a waiver by either party of its right at any time
thereafter to require exact and strict compliance with the provisions thereof.
ARTICLE XX
FORCE MAJEURE
The Parties shall not be responsible for failure to perform hereunder due
to force majeure, which shall include, but not be limited to: fires, floods,
riots, strikes, labor disputes, freight embargoes or transportation delays,
shortage of labor, inability to secure fuel, material, supplies, equipment or
power at reasonable prices or on account of shortage thereof, acts of God or of
the public enemy, war or civil disturbances, any existing or future laws, rules,
regulations or acts of any government (including any orders, rules or
regulations issued by any official or agency or such government) affecting a
party that would delay or prohibit performance hereunder, or any cause beyond
the reasonable control of a party. If an event of
26
force majeure should occur, the affected party shall promptly give notice
thereof to the other party and such affected party shall use its reasonable best
efforts to cure or correct any such event of force majeure.
ARTICLE XXI
GOVERNING LAW AND DISPUTE RESOLUTION
This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah, applicable to contracts made and to be wholly
performed within such State. The Parties agree that the forum for any
arbitration, action, suit or proceeding arising out of this Agreement shall be
in the State of Utah, and each party to submits to the jurisdiction of the State
of Utah for resolution of any conflict or litigation arising under or purporting
to interpret this Agreement. Any dispute arising out of this Agreement or any
of the responsibilities and obligations therein shall be resolved through
arbitration administered by the American Arbitration Association in accordance
with its Commercial Arbitration Rules as supplemented by the Procedures for
International Commercial Arbitration. The arbitration proceedings shall be
conducted in Salt Lake City, Utah, U.S.A. The findings and conclusions of said
arbitration shall be binding upon the Parties, their heirs, successors, assigns
and beneficiaries.
27
ARTICLE XXII
APPLICABILITY OF POST-EFFECTIVE LAW
To the extent that the Vienna Convention on the International Sale of Goods
(the "Vienna Convention") the United Nations Convention on contracts for the
International Sale of Goods (the "UN Convention") or some other such similar
law, treaty or act becomes effective during the term of this Agreement, the
parties agree that neither the Vienna Convention, UN Convention nor any such
similar law, treaty or act shall be applicable to this Agreement or the
transactions contemplated hereunder.
ARTICLE XXIII
INTEGRATED CONTRACT
This Agreement constitutes the entire agreement between the Parties
relating to the subject matter hereof and supersedes all prior or
contemporaneous negotiations, representations, agreements and understandings
(both oral and written) of the Parties.
ARTICLE XXIV
MODIFICATIONS AND AMENDMENTS
No supplement, modification or amendment of this Agreement shall be binding
unless it is in writing and executed by the Parties.
28
ARTICLE XXV
NONDISCLOSURE
The Parties agree that, except to the extent required by law, neither party
will disclose the existence of any of the terms of this Agreement to any person
that is not an affiliate of such party or an employee or agent of such party or
affiliate without the prior written consent of the other party.
ARTICLE XXVI
SEVERABILITY
To the extent that any provision of this Agreement is (or, in the opinion
of counsel mutually acceptable to both parties, would be) prohibited, judicially
invalidated or otherwise rendered unenforceable in any jurisdiction, such
provision shall be deemed ineffective only to the extent of such prohibition,
invalidation or unenforceability in that jurisdiction, and only within that
jurisdiction. Any prohibited, judicially invalidated or unenforceable provision
of this Agreement will not invalidate or render unenforceable any other
provision of this Agreement, nor will such provision of this Agreement be
invalidated or rendered unenforceable in any other jurisdiction.
ARTICLE XXVII
COUNTERPARTS AND HEADINGS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
29
All headings and captions are inserted for convenience of reference only and
shall not affect the meaning or interpretation of any provision hereof.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized representatives in the United States of
America as of the day and the year first above written.
NU SKIN HONG KONG, INC. NU SKIN KOREA, LTD.
BY: /s/ BLAKE M. RONEY BY: /s/ SUNG-TAE HAN
--------------------------------- ---------------------------------
BLAKE M. RONEY SUNG-TAE HAN
PRESIDENT AND CEO REPRESENTATIVE DIRECTOR
30