NU SKIN ENTERPRISES, INC.
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is dated as of October 12, 2000
and is entered into by and among Nu Skin Enterprises, Inc., a Delaware
corporation ("Company"), each Additional Pledgor that may become a party hereto
after the date hereof in accordance with Section 16 hereof (each of Company and
each Additional Pledgor being a "Pledgor" and collectively "Pledgors"), and
State Street Bank and Trust Company of California, N.A. ("Secured Party"), as
agent for and on behalf of the other Benefitted Parties party to the Collateral
Agency and Intercreditor Agreement referred to below.
PRELIMINARY STATEMENTS
A. The Prudential Insurance Company of America ("Prudential") is purchasing
an aggregate principal amount of JPY9,706,500,000 of Company's Senior Secured
Notes due October 12, 2010 (the "Notes") pursuant to that certain Note Purchase
Agreement dated as of October 12, 2000 by and between Company and Prudential
(such agreement, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Note Purchase Agreement," the terms
defined therein and not otherwise defined herein being used herein as therein
defined), and it is desired that the obligations of Company under the Note
Purchase Agreement and the Notes be secured hereunder.
B. The Note Purchase Agreement requires Company to (i) pledge, or cause a
pledge of, 65% of the Equity Securities of each Material Foreign Subsidiary to
Secured Party, for the ratable benefit of the Benefitted Parties (as defined in
the Collateral Agency and Intercreditor Agreement), as security for the Notes,
and (ii) take all actions as may be necessary or desirable to give to Secured
Party, for the ratable benefit of the Benefitted Parties, a valid and perfected
first priority Lien on and security interest in the Pledged Collateral.
C. Secured Party, Prudential and each of the other Benefitted Parties have
entered into that certain Collateral Agency and Intercreditor Agreement dated as
of October 12, 2000 (such agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, being the "Collateral
Agency and Intercreditor Agreement").
D. Company is the legal and beneficial owner of all of the Equity
Securities of Nu Skin Japan Co., Ltd., a Japanese corporation ("Nu Skin Japan").
E. It is a condition precedent to Prudential's obligation to purchase and
pay for the Notes that Pledgors shall have granted the security interest and
undertaken the obligations contemplated by this Agreement and the Note Purchase
Agreement.
F. This Agreement, the Note Purchase Agreement and each of the other
documents relating to the Secured Obligations (as defined in Section 2) are
hereinafter referred to collectively as the "Senior Secured Loan Documents."
NOW, THEREFORE, in consideration of the premises and in order to induce
Prudential to purchase and for the Notes under the Note Purchase Agreement, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, each Pledgor hereby agrees with Secured Party as follows:
SECTION 1. Pledge of Security. Each Pledgor hereby pledges and assigns to
Secured Party, and hereby grants to Secured Party a first priority security
interest in, all of such Pledgor's right, title and interest in and to the
following (the "Pledged Collateral"):
(a) the Equity Securities described in Schedule I attached hereto for such
Pledgor and the Equity Securities of each Person that becomes a Material Foreign
Subsidiary, including all securities convertible into, and rights, warrants,
options and other rights to purchase or otherwise acquire, any of the foregoing
now or hereafter owned by such Pledgor, and the certificates or other
instruments representing any of the foregoing and any interest of such Pledgor
in the entries on the books of any securities intermediary pertaining thereto
(the "Pledged Shares"), and all dividends, distributions, returns of capital,
cash, warrants, option, rights, instruments, right to vote or manage the
business of such Person pursuant to organizational documents governing the
rights and obligations of the stockholders, and other property or proceeds from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Shares; provided that the Pledged Shares
shall not include any Equity Securities of such issuer in excess of the number
of shares or other equity interests of such issuer possessing up to but not
exceeding 65% of the voting power of all classes of Equity Securities entitled
to vote of such issuer, and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such Equity
Securities; and
(b) to the extent not covered by clause (a) above, all proceeds of any or
all of the foregoing Pledged Collateral. For purposes of this Agreement, the
term "proceeds" includes whatever is receivable or received when Pledged
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary.
SECTION 2. Security for Obligations. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Sect. 362(a) or any similar or
comparable laws of jurisdictions outside the United States), of all obligations
and liabilities of every nature of Pledgors now or hereafter existing under or
arising out of or in connection with the Obligations (as defined in the
Collateral Agency and Intercreditor Agreement) and all extensions or renewals
thereof, whether for principal, interest (including without limitation interest
that, but for the filing of a petition in bankruptcy with respect to
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any Pledgor, would accrue on such Obligations, whether or not a claim is allowed
against such Pledgor for such interest in the related bankruptcy proceeding),
reimbursement of amounts drawn under Letters of Credit, fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such Obligations
that are paid, to the extent all or any part of such payment is avoided or
recovered directly or indirectly from Secured Party or any Senior Secured
Creditor as a preference, fraudulent transfer or otherwise, and all obligations
of every nature of Pledgors now or hereafter existing under any Senior Secured
Loan Document (all such obligations of Pledgors being the "Secured
Obligations").
SECTION 3. Delivery of Pledged Collateral. All certificates or instruments
representing or evidencing the Pledged Collateral shall be delivered to and held
by or on behalf of Secured Party and shall be in suitable form for transfer by
delivery or, as applicable, shall be accompanied by each Pledgor's endorsement,
where necessary, or duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to Secured Party. Upon the
occurrence and during the continuation of a Triggering Event (as defined in the
Collateral Agency and Intercreditor Agreement), Secured Party shall have the
right, without notice to Pledgors, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Pledged Collateral;
provided that if the Triggering Event is the result of the institution of an
involuntary Bankruptcy Proceeding against the Company, any Subsidiary Guarantor
or any Material Foreign Subsidiary (an "Involuntary Proceeding"), Secured Party
shall not have such right until such proceeding continues for at least 60
consecutive days. In addition, Secured Party shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties. Each Pledgor represents and
warrants as follows:
(a) Due Authorization, etc. of Pledged Shares. All of the Pledged Shares
described on Schedule I for such Pledgor have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) Description of Pledged Shares. The Pledged Shares constitute 65% of the
voting power of all classes of Equity Securities of each issuer thereof, and
there are no outstanding warrants, options or other rights to purchase, or other
agreements outstanding with respect to, or property that is now or hereafter
convertible into, or that requires the issuance or sale of, any Pledged Shares.
(c) Ownership of Pledged Collateral. Such Pledgor is the legal, record and
beneficial owner of the Pledged Collateral free and clear of any Lien except for
Permitted Liens.
(d) Governmental Authorizations. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is
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required for either (i) the pledge by such Pledgor of the Pledged Collateral
pursuant to this Agreement and the grant by such Pledgor of the security
interest granted hereby, (ii) the execution, delivery or performance of this
Agreement by such Pledgor, or (iii) the exercise by Secured Party of the voting
or other rights, or the remedies in respect of the Pledged Collateral, provided
for in this Agreement (except as may be required in connection with a
disposition of Pledged Collateral by laws affecting the offering and sale of
securities generally).
(e) Perfection. The pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Secured Obligations.
(f) Margin Regulations. The pledge of the Pledged Collateral pursuant to
this Agreement does not violate Regulation T, U or X of the Board of Governors
of the Federal Reserve System.
(g) Other Information. All information heretofore, herein or hereafter
supplied to Secured Party by or on behalf of such Pledgor with respect to the
Pledged Collateral is accurate and complete in all respects.
SECTION 5. Transfers and Other Liens; Additional Pledged Collateral; etc.
Each Pledgor shall:
(a) not, except as expressly permitted by the Senior Secured Loan
Documents, (i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral,
(ii) create or suffer to exist any Lien upon or with respect to any of the
Pledged Collateral, except for Permitted Liens, or (iii) permit any issuer of
Pledged Shares to merge or consolidate unless all the outstanding Equity
Securities of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other property is
distributed in respect of the outstanding Equity Securities of any other
constituent corporation; provided, if the surviving or resulting corporation is
a foreign corporation, then such Pledgor shall only be required to pledge
outstanding Equity Securities of such surviving or resulting corporation
possessing up to but not exceeding 65% of the voting power of all classes of
Equity Securities of such issuer entitled to vote;
(b) (i) cause each issuer of Pledged Shares not to issue any Equity
Securities in addition to or in substitution for the Pledged Shares issued by
such issuer, except to such Pledgor or as otherwise permitted by the Senior
Secured Loan Documents, (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional Equity Securities of
each issuer of Pledged Shares, and (iii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all Equity Securities of
any Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a Material Foreign Subsidiary; provided, notwithstanding anything
contained in clause (ii) or this clause (iii) to the contrary, such Pledgor
shall only be required to pledge the outstanding Equity Securities up to but not
exceeding 65% of the voting power of all classes of Equity Securities of such
controlled foreign corporation entitled to vote;
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(c) promptly deliver to Secured Party all written notices received by it
with respect to the Pledged Collateral (other than customary notices received
from a governmental or regulatory body and customary and routine notices
received from the issuer of the Pledged Shares in the ordinary course of
business); and
(d) pay promptly when due all taxes, assessments and governmental charges
or levies imposed upon, and all claims against, the Pledged Collateral, except
to the extent the validity thereof is being contested in good faith; provided
that such Pledgor shall in any event pay such taxes, assessments, charges,
levies or claims not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment entered or filed against such
Pledgor or any of the Pledged Collateral as a result of the failure to make such
payment.
SECTION 6. Further Assurances; Pledge Amendments.
(a) Each Pledgor agrees that from time to time, at the expense of such
Pledgor, such Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, each
Pledgor will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted hereby
and (ii) at Secured Party's request, appear in and defend any action or
proceeding that may affect such Pledgor's title to or Secured Party's security
interest in all or any part of the Pledged Collateral. Each Pledgor hereby
authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the Pledged
Collateral without the signature of such Pledgor. Such Pledgor agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by such Pledgor shall be sufficient as a financing statement
and may be filed as a financing statement in any and all jurisdictions.
(b) Each Pledgor further agrees that it will, upon obtaining any additional
shares of stock or other Equity Securities required to be pledged hereunder as
provided in the Note Purchase Agreement, promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
Pledgor, in substantially the form of Schedule II annexed hereto (a "Pledge
Amendment"), in respect of the additional Pledged Shares to be pledged pursuant
to this Agreement. Upon each delivery of a Pledge Amendment to Secured Party,
the representations and warranties contained in Section 4 hereof shall be deemed
to have been made by such Pledgor as to the Pledged Collateral described in such
Pledge Amendment. Pledgor hereby authorizes Secured Party to attach each Pledge
Amendment to this Agreement and agrees that all Pledged Shares listed on any
Pledge Amendment delivered to Secured Party shall for all purposes hereunder be
considered Pledged Collateral; provided that the failure of such Pledgor to
execute a Pledge Amendment with respect to any additional Pledged Shares pledged
pursuant to this Agreement shall not
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impair the security interest of Secured Party therein or otherwise adversely
affect the rights and remedies of Secured Party hereunder with respect thereto.
SECTION 7. Voting Rights; Dividends; Etc.
(a) So long as no Triggering Event shall have occurred and be continuing:
(i) each Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms of the Senior Secured Loan
Documents; provided, however, that such Pledgor shall not exercise or refrain
from exercising any such right if Secured Party or Required Creditors shall have
notified such Pledgor that, in Secured Party's or Required Creditors' judgment,
such action would have a material adverse effect on the value of the Pledged
Collateral or any part thereof; and provided, further, that such Pledgor shall
give Secured Party and each Senior Secured Party at least five Business Days
prior written notice of the manner in which it intends to exercise, or the
reasons for refraining from exercising, any such right (it being understood,
however, that neither (A) the voting by such Pledgor of any Pledged Shares for
or such Pledgor's consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or with respect to incidental matters at
any such meeting, nor (B) such Pledgor's consent to or approval of any action
otherwise not prohibited under this Agreement and each of the other Senior
Secured Loan Documents shall be deemed inconsistent with the terms of any Senior
Secured Loan Document within the meaning of this Section 7(a)(i), and no notice
of any such voting or consent need be given to Secured Party);
(ii) each Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the lien of this Agreement, any and all dividends, other
distributions and interest paid in respect of the Pledged Collateral; provided,
however, that any and all dividends, other distributions and interest paid or
payable other than in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
any Pledged Collateral shall be, and shall forthwith be delivered to Secured
Party to hold as, Pledged Collateral and shall, if received by such Pledgor, be
received in trust for the benefit of Secured Party, be segregated from the other
property or funds of such Pledgor and be forthwith delivered to Secured Party as
Pledged Collateral in the same form as so received (with all necessary
endorsements); and
(iii) Secured Party shall promptly execute and deliver (or cause to be
executed and delivered) to each Pledgor all such proxies, dividend payment
orders and other instruments as such Pledgor may from time to time reasonably
request for the purpose of enabling such Pledgor to exercise the voting and
other consensual rights which it is entitled to exercise pursuant to paragraph
(i) above and to receive the dividends, other distributions, principal
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or interest payments which it is authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuation of a Triggering Event
(other than an Involuntary Proceeding) or upon the occurrence and continuation
of an Involuntary Proceeding for at least 60 consecutive days and during the
continuation of such Involuntary Proceeding:
(i) upon written notice from Secured Party to Pledgors, all rights of
Pledgors to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and
all such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights;
(ii) all rights of Pledgors to receive the dividends and interest payments
which it would otherwise be authorized to receive and retain pursuant to Section
7(a)(ii) shall cease, and all such rights shall thereupon become vested in
Secured Party who shall thereupon have the sole right to receive and hold as
Pledged Collateral such dividends, other distributions and interest payments;
and
(iii) all dividends, principal, interest payments and other distributions
which are received by Pledgors contrary to the provisions of paragraph (ii) of
this Section 7(b) shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Pledgors and shall forthwith be paid
over to Secured Party as Pledged Collateral in the same form as so received
(with any necessary endorsements).
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
7(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) each Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), each Pledgor hereby grants
to Secured Party an irrevocable proxy to vote the Pledged Shares and to exercise
all other rights, powers, privileges and remedies to which a holder of the
Pledged Shares would be entitled (including, without limitation, giving or
withholding written consents of shareholders, calling special meetings of
shareholders and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer of
any Pledged Shares on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Shares or any officer or agent
thereof), upon the occurrence of a Triggering Event (other than an Involuntary
Proceeding) or the occurrence and continuation of an Involuntary Proceeding for
at least 60 consecutive days and which proxy shall only terminate upon the
payment in full of the Secured Obligations.
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SECTION 8. Secured Party Appointed Attorney-in-Fact. Each Pledgor hereby
irrevocably appoints Secured Party as such Pledgor's attorney-in-fact, with full
authority in the place and stead of such Pledgor and in the name of such
Pledgor, Secured Party or otherwise, from time to time in Secured Party's
discretion to take any action and to execute any instrument that Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement,
including without limitation:
(a) to file one or more financing or continuation statements, or amendments
thereto, relative to all or any part of the Pledged Collateral without the
signature of Pledgor;
(b) upon the occurrence and during the continuation of a Triggering Event
(other than an Involuntary Proceeding) or upon the occurrence and continuation
of an Involuntary Proceeding for at least 60 consecutive days and during the
continuation of such Involuntary Proceeding, to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Pledged Collateral;
(c) upon the occurrence and during the continuation of a Triggering Event
(other than an Involuntary Proceeding) or upon the occurrence and continuation
of an Involuntary Proceeding for at least 60 consecutive days and during the
continuation of such Involuntary Proceeding, to receive, endorse and collect any
instruments made payable to Pledgor representing any dividend, principal or
interest payment or other distribution in respect of the Pledged Collateral or
any part thereof and to give full discharge for the same;
(d) upon the occurrence and during the continuation of a Triggering Event
(other than an Involuntary Proceeding) or upon the occurrence and continuation
of an Involuntary Proceeding for at least 60 consecutive days and during the
continuation of such Involuntary Proceeding, to file any claims or take any
action or institute any proceedings that Secured Party may deem necessary or
desirable for the collection of any of the Pledged Collateral or otherwise to
enforce the rights of Secured Party with respect to any of the Pledged
Collateral;
(e) to pay or discharge taxes or Liens (other than Permitted Liens) levied
or placed upon or threatened against the Pledged Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of such Pledgor to Secured Party, due and
payable immediately without demand; and
(f) upon the occurrence and during the continuation of a Triggering Event
(other than an Involuntary Proceeding) or upon the occurrence and continuation
of an Involuntary Proceeding for at least 60 consecutive days and during the
continuation of such Involuntary Proceeding, generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any of the
Pledged Collateral as fully and completely as though Secured Party were the
absolute owner thereof for all purposes, and to do, at Secured Party's option
and such Pledgor's expense, at any time or from time to time, all acts and
things that Secured Party deems necessary to protect, preserve or realize upon
the Pledged Collateral and
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Secured Party's security interest therein in order to effect the intent of this
Agreement, all as fully and effectively as such Pledgor might do.
SECTION 9. Secured Party May Perform. If any Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by such Pledgor under Section 13(b).
SECTION 10. Standard of Care. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in the Secured
Party's possession and the accounting for moneys actually received by it
hereunder, Secured Party shall have no duty as to any Pledged Collateral, it
being understood by the parties hereto that Secured Party shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Secured Party or any Senior Secured Creditor
has or is deemed to have knowledge of such matters, (b) taking any necessary
steps (other than steps taken in accordance with the standard of care set forth
above to maintain possession of the Pledged Collateral) to preserve rights
against any prior parties or any other rights pertaining to any Pledged
Collateral, (c) taking any necessary steps to collect or realize upon the
Secured Obligations or any guarantee therefor, or any part thereof, or any of
the Pledged Collateral, or (d) initiating any action to protect the Pledged
Collateral against the possibility of a decline in market value. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Collateral in its possession if such Pledged Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property consisting of negotiable securities.
SECTION 11. Remedies.
(a) If any Triggering Event (other than Involuntary Proceeding) shall have
occurred and be continuing or any Involuntary Proceeding shall have occurred and
be continuing for at least 60 consecutive days, Secured Party may exercise in
respect of the Pledged Collateral, in addition to all other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of
a secured party on default under the Uniform Commercial Code as in effect in any
relevant jurisdiction (the "UCC") (whether or not the UCC applies to the
affected Pledged Collateral), and Secured Party may also in its sole discretion,
without notice except as specified below, sell the Pledged Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange
or broker's board or at any of Secured Party's offices or elsewhere, for cash,
on credit or for future delivery, at such time or times and at such price or
prices and upon such other terms as Secured Party may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. Secured Party or any Senior Secured Creditor may be the
purchaser of any or all of the Pledged Collateral at any such sale and Secured
Party, as agent for and representative of the Benefitted Parties, shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Pledged Collateral sold at any such
public sale, to use and apply any of the Secured
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Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party or any Senior Secured Creditor at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Pledgors, and each Pledgor hereby waives
(to the extent permitted by applicable law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted. Each Pledgor
agrees that, to the extent notice of sale shall be required by law, at least ten
days' notice to Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. Secured Party shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Each Pledgor hereby waives any
claims against Secured Party arising by reason of the fact that the price at
which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if Secured
Party accepts the first offer received and does not offer such Pledged
Collateral to more than one offeree. If the proceeds of any sale or other
disposition of the Pledged Collateral are insufficient to pay all the Secured
Obligations, Pledgors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party or any Senior Secured
Creditor to collect such deficiency.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and applicable state securities laws, Secured Party may be
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged Collateral
under the Securities Act and/or such state securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act) and each Pledgor
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that Secured Party shall have no obligation
to engage in public sales and no obligation to delay the sale of any Pledged
Collateral for the period of time necessary to permit the issuer thereof to
register it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if such issuer
would, or should, agree to so register it.
(c) If Secured Party determines to exercise its right to sell any or all of
the Pledged Collateral, upon written request, each Pledgor shall and shall cause
each issuer of any Pledged Shares to be sold hereunder from time to time to
furnish to Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.
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SECTION 12. Application of Proceeds. Except as expressly provided elsewhere
in this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied as provided in the Collateral Agency and
Intercreditor Agreement.
SECTION 13. Indemnity and Expenses.
(a) Pledgors jointly and severally agree to indemnify Secured Party and
each Senior Secured Creditor from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party's or such Senior Secured
Creditor's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(b) Pledgors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of counsel and of any experts and agents, that Secured Party
may incur in connection with (i) the administration of this Agreement and the
Collateral Agency and Intercreditor Agreement, (ii) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder and under the Collateral Agency and Intercreditor
Agreement, or (iv) the failure by any Pledgor to perform or observe any of the
provisions hereof.
SECTION 14. Continuing Security Interest; Transfer of Loans. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(a) remain in full force and effect until the payment in full of all Secured
Obligations, the cancellation or termination of all commitments under each
Senior Secured Loan Document, and the cancellation or expiration of all
outstanding Letters of Credit (as defined in the Collateral Agency and
Intercreditor Agreement), (b) be binding upon Pledgor, its successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Upon the payment in full of all Secured Obligations, the cancellation
or termination of all commitments under each Senior Secured Loan Document, and
the cancellation or expiration of all outstanding Letters of Credit, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to Pledgors. Upon any such termination Secured Party
will, at Pledgors' expense, execute and deliver to Pledgors such documents as
Pledgors shall reasonably request to evidence such termination.
SECTION 15. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder by
the Benefitted Parties. Secured Party shall be obligated, and shall have the
right hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including,
without limitation, the release or substitution of Pledged Collateral), solely
in accordance with this Agreement and the other Senior Secured
11
Loan Documents; provided that Secured Party shall exercise, or refrain from
exercising, any remedies provided for in Section 11 in accordance with the
instructions of Requisite Creditors (as defined in the Collateral Agency and
Intercreditor Agreement). In furtherance of the foregoing provisions of this
Section 15, each Senior Secured Creditor, by its acceptance of the benefits
hereof, agrees that it shall have no right individually to realize upon any of
the Pledged Collateral hereunder, it being understood and agreed by such Senior
Secured Creditor that all rights and remedies hereunder may be exercised solely
by Secured Party for the benefit of the Benefitted Parties in accordance with
the terms of this Section 15.
(b) Secured Party shall at all times be the same Person that is Collateral
Agent under the Collateral Agency and Intercreditor Agreement. Written notice of
resignation by the Collateral Agent pursuant to subsection 4(h) of the
Collateral Agency and Intercreditor Agreement shall also constitute notice of
resignation as Secured Party under this Agreement; removal of the Collateral
Agent pursuant to subsection 4(h) of the Collateral Agency and Intercreditor
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Collateral Agent pursuant to subsection 4(h) of
the Collateral Agency and Intercreditor Agreement shall also constitute
appointment of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Collateral Agent under subsection 4(h) of the
Collateral Agency and Intercreditor Agreement by a successor Collateral Agent,
that successor Collateral Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Secured Party under this Agreement, and the retiring or removed Secured Party
under this Agreement shall promptly (i) transfer to such successor Secured Party
all sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Agent's resignation or removal
hereunder as Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
(c) Secured Party shall not be deemed to have any duty whatsoever with
respect to any Additional Senior Lender (as defined in the Collateral Agency and
Intercreditor Agreement) until Secured Party shall have received written notice
in form and substance satisfactory to Secured Party from a Pledgor or such
Additional Senior Lender as to the existence and terms of the applicable Senior
Secured Loan Documents.
SECTION 16. Additional Pledgors. Company shall be the initial Pledgor
hereunder. From time to time subsequent to the date hereof, Subsidiary
Guarantors may become parties hereto as additional Pledgors (each an "Additional
Pledgor") by executing a counterpart of this Agreement substantially in the form
of Schedule III annexed hereto. Upon delivery of any such counterpart to Secured
Party, notice of which is hereby waived by Pledgors, each such Additional
Pledgor shall be a Pledgor and shall be as fully a party hereto as if such
Additional Pledgor were an original signatory hereto. Each Pledgor expressly
12
agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Pledgor hereunder, nor by any
election of Secured Party or any Senior Secured Creditor not to cause any
Subsidiary Guarantor to become an Additional Pledgor hereunder. This Agreement
shall be fully effective as to any Pledgor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Pledgor hereunder.
SECTION 17. Amendments; Etc. No amendment, modification, termination or
waiver of any provision of this Agreement, and no consent to any departure by
any Pledgor therefrom, shall in any event be effective unless the same shall be
in writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgors. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 18. Notices. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served or sent
by telefacsimile or United States mail or courier service and shall be deemed to
have been given when received. For the purposes hereof, the address of each
party hereto shall be as set forth under such party's name on the signature
pages hereof or as such other address as shall be designated by such party in a
written notice delivered to the other party hereto.
SECTION 19. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 20. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 21. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
SECTION 22. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING, WITHOUT LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES,
EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE
13
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless
otherwise defined herein or in the Note Purchase Agreement, terms used in
Articles 8 and 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined. The rules of construction set forth in Section
23.4 of the Note Purchase Agreement shall be applicable to this Agreement
mutatis mutandis.
SECTION 23. Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE , COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF
ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH PLEDGOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 18; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 23 RELATING TO JURISDICTION
AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
SECTION 24. Waiver of Jury Trial. PLEDGORS AND SECURED PARTY HEREBY AGREE
TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Each Pledgor and Secured Party
acknowledge that this waiver is a material inducement for such Pledgor and
Secured Party to enter into a business relationship, that each Pledgor and
Secured Party have already relied on this waiver in entering into this Agreement
and that each will continue to rely on this waiver in their related future
dealings. Each Pledgor and Secured Party further warrant and represent that each
has reviewed this waiver with its legal counsel, and that each knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SECTION 24 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
14
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
SECTION 25. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
15
IN WITNESS WHEREOF, Pledgors and Secured Party have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
NU SKIN ENTERPRISES, INC.,
as Pledgor
By: __________________________
Name: Corey B. Lindley
Title: Executive Vice President and
Chief Financial Officer
Notice Address
One Nu Skin Plaza
75 West Center Street
Provo, Utah 84601
Attention: General Counsel
Facsimile: (801) 345-6099
S-1
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.,
as Secured Party
By: __________________________
Name: Stephen Rivero
Title: Vice President
Notice Address
State Street Bank and Trust
Company of California, N.A.
633 West 5th Street, 12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Department
Facsimile: (213) 362-7357
S-2
SCHEDULE I
PLEDGED SHARES
Attached to and forming a part of the Pledge Agreement dated as of October
12, 2000 between Nu Skin Enterprises, Inc., as Pledgor, and State Street Bank
and Trust Company of California, N.A., as Secured Party.
Stock Number of Percentage Holder of
Class of Certificate Number of Shares Represented Shares Not
Issuer Stock Nos. Par Value Shares Issued and by Pledged Pledged
Outstanding Shares
- ----------------- ----------- ------------- ------------- ------------ ------------- ------------- -------------
Nu Skin Japan Common 3A-001 Y50,000 2,340 3,600 65% Pledgor
Co., Ltd.
I-1
SCHEDULE II
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated ____________, 20__, is delivered pursuant to
Section 6(b) of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Pledge Agreement dated
October 12, 2000, between Nu Skin Enterprises, Inc., as Pledgor, and State
Street Bank and Trust Company of California, N.A., as Secured Party (the "Pledge
Agreement," capitalized terms defined therein being used herein as therein
defined), and that the Pledged Shares listed on this Pledge Amendment shall be
deemed to be part of the Pledged Shares and shall become part of the Pledged
Collateral and shall secure all Secured Obligations.
[PLEDGOR]
By: ___________________________
Name:
Title:
Notice Address
Stock Number of Percentage Holder of
Class of Certificate Number of Shares Represented Shares Not
Issuer Stock Nos. Par Value Shares Issued and by Pledged Pledged
Outstanding Shares
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
II-1
SCHEDULE III
[FORM OF COUNTERPART]
This COUNTERPART, dated ____________, 20__ is delivered pursuant to Section
16 of the Pledge Agreement referred to below. ____________, a ________
corporation ("Company") hereby agrees (i) that this Counterpart may be attached
to the Pledge Agreement, dated as of October 12, 2000 (as it may be from time to
time amended, restated, supplemented or otherwise modified, the "Pledge
Agreement"; capitalized terms used herein not otherwise defined herein shall
have the meanings ascribed therein), among the Pledgors named therein, and State
Street Bank and Trust Company of California, N.A., as Secured Party, and (ii)
that by executing and delivering this Counterpart, Company hereby becomes a
Pledgor under the Pledge Agreement in accordance with Section 16 thereof and
agrees to be bound by all of the terms thereof, and that the Pledged Shares of
Company listed on Exhibit A attached hereto shall be deemed to be part of the
Pledged Shares and shall become part of the Pledged Collateral and shall secure
all Secured Obligations.
IN WITNESS WHEREOF, Company has caused this Counterpart to be executed and
delivered by a duly authorized officer as of the date first above written.
[ADDITIONAL PLEDGOR]
By: ________________________
Name:
Title:
Notice Address
III-1
EXHIBIT A
TO COUNTERPART
PLEDGED SHARES
=============== ============= ============= ============= ============ ============= ============= =============
Stock Number of Percentage Holder of
Class of Certificate Number of Shares Represented Shares Not
Issuer Stock Nos. Par Value Shares Issued and by Pledged Pledged
Outstanding Shares
<C.
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
- --------------- ------------- ------------- ------------- ------------ ------------- ------------- -------------
=============== ============= ============= ============= ============ ============= ============= =============
III-A-1