Caroderm Agreement And Plan of Merger

AGREEMENT AND PLAN OF MERGER among NU SKIN INTERNATIONAL, INC. a Utah corporation PHARMANEX LICENSE ACQUISITION CORPORATION a Utah corporation and a wholly-owned subsidiary of Nu Skin International, Inc. CARODERM, INC. a Utah corporation and CERTAIN SHAREHOLDERS OF CARODERM, INC. Dated as of March 7, 2006 AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this " Agreement" ) dated as of March 7, 2006 by and among Nu Skin International, Inc., a Utah corporation (" Parent" ), Pharmanex License Acquisition Corporation, a Utah corporation and a wholly-owned subsidiary of Parent (" Purchaser" ), Caroderm, Inc., a Utah corporation (" Caroderm" ), and the following shareholders of Caroderm: E. Dallin Bagley, Werner Gellermann and Paul S. Bernstein (such shareholders collectively, the " Shareholders" ). Reference is made to Article IX for the definitions of certain terms used in this Agreement.

In consideration of the mutual agreements contained in this Agreement, and for other good and valuable consideration, the value, receipt and sufficiency of which are acknowledged, the parties agree as follows: ARTICLE I
THE MERGER

1.1 The Merger . Subject to the terms and conditions of this Agreement, at the Effective Time, Caroderm will be merged with Purchaser (the " Merger" ) in accordance with the provisions of the Revised Business Corporation Act of the State of Utah (the " Utah Act" ). Following the Merger, the Purchaser will continue as the surviving corporation (the " Surviving Corporation" ) and the separate corporate existence of Caroderm will cease. Caroderm and Purchaser are sometimes referred to collectively herein as the " Constituent Corporations."

1.2 The Closing . The closing of the Merger contemplated by this Agreement (the " Closing" or " Closing Date" ) will take place upon execution of this Agreement by each of the parties hereto.

1.3 Effective Time . According to the terms of this Agreement, on the Closing Date (or on such other date as the parties may agree), Caroderm and Purchaser will file with the Utah Division of Corporations and Commercial Code (the " Utah Division" ) appropriate articles of merger (the " Articles of Merger" ) and make all other filings or recordings required by the Utah Act in connection with the Merger. The Merger will be consummated on the later of the date on which the Articles of Merger have been filed with the Utah Division or such time as is agreed upon by the parties and specified in the Articles of Merger. The time the Merger becomes effective in accordance with the Utah Act is referred to in this Agreement as the " Effective Time."

1.4 Effects of the Merger . The Merger will have the effects set forth in this Agreement and Section 16-10a-1106 of the Utah Act. Without limiting the generality of the foregoing, as of the Effective Time, the Surviving Corporation will succeed to all the properties, rights, privileges, powers, franchises and assets of the Constituent Corporations, and all debts, liabilities and duties of the Constituent Corporations will become debts, liabilities and duties of the Surviving Corporation.

1.5 Organizational Documents . At the Effective Time, the articles of incorporation and bylaws of Purchaser (as in effect immediately prior to the Effective Time) will become the articles of incorporation and bylaws of the Surviving Corporation until thereafter amended in accordance with their respective terms and the Utah Act.

1.6 Directors and Officers . The directors and the officers of Purchaser at the Effective Time will be the initial directors and officers of the Surviving Corporation and will hold office from the Effective Time in accordance with the articles of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified.


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1.7 Conversion of Shares. As of the Effective Time, by virtue of the Merger and without any action on the part of Caroderm, Parent or Purchaser: 1.7.1 Merger Consideration . Each of the shares of Caroderm' s capital stock (other than any Dissenting Shares) issued and outstanding immediately prior to the Effective Time (such aggregate number of common shares, the " Caroderm Shares" ) will be converted into the right to receive cash in an aggregate amount equal to the Per Share Merger Consideration. The " Per Share Merger Consideration" shall consist of the aggregate cash sum of Four Million Dollars ($4,000,000), subject to the Holdback (the " Merger Consideration" ), divided by the Caroderm Shares.
1.7.2 Conversion of Shares of Purchaser. Each issued and outstanding share of capital stock of Purchaser shall be converted into one share of common stock of the Surviving Corporation.


1.8 Funding of Holdback . At the Closing, Parent shall deduct Two Million Dollars ($2,000,000) from the Merger Consideration and withhold such amount for future distribution in accordance with the provisions of Section 7.3.3. Such amount shall be withheld, on a pro rata basis, from the Merger Consideration otherwise deliverable to Caroderm' s shareholders on delivery of their Caroderm Stock Certificates in accordance with Section 2.1. ARTICLE II
PAYMENT

2.1 Surrender of Caroderm Stock Certificates . From and after the Effective Time, each holder of a stock certificate that immediately prior to the Effective Time represented outstanding Caroderm Shares (a " Caroderm Stock Certificate" ) will be entitled to receive in exchange therefor, upon surrender thereof to Parent, the Per Share Merger Consideration into which the Caroderm Shares evidenced by such Caroderm Stock Certificate were converted pursuant to the Merger. No interest will be payable on the Per Share Merger Consideration to be paid to any holder of a Caroderm Stock Certificate irrespective of the time at which such Caroderm Stock Certificate is surrendered for exchange.

2.2 Caroderm Stock Certificate Surrender Procedures; Transmittals . No later than five (5) business days after the Effective Time, Caroderm will have mailed to each record holder of a Caroderm Stock Certificate a letter of transmittal in a form mutually agreeable to the parties, including instructions for use in effecting the surrender of Caroderm Stock Certificates for the Per Share Merger Consideration to which such holder is entitled. Upon the surrender to Parent of a Caroderm Stock Certificate together with a duly executed and completed letter of transmittal and all other documents and other materials required by Parent to be delivered in connection therewith, following the Effective Time, the holder will be entitled to receive the aggregate Per Share Merger Consideration into which the Caroderm Stock Certificate so surrendered has been converted in accordance with the provisions of this Agreement. Until so surrendered, each outstanding Caroderm Stock Certificate will be deemed from and after the Effective Time, for all corporate purposes, to evidence the right to receive the aggregate Per Share Merger Consideration into which the Caroderm Shares represented by such Caroderm Stock Certificate have been converted in accordance with the provisions of this Agreement.


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2.3 Transfer Books . The stock transfer books of Caroderm will be closed at the Effective Time, and no transfer of any Caroderm Shares will thereafter be recorded on any of the stock transfer books. In the event of a transfer of ownership of any Caroderm Shares prior to the Effective Time that is not registered in Caroderm' s stock transfer records at the Effective Time, the Per Share Merger Consideration into which such Caroderm Shares have been converted in the Merger will be paid to the transferee in accordance with the provisions of Section 2.2 only if the Caroderm Stock Certificate is surrendered as provided in Section 2.2 and accompanied by all documents required to evidence and effect such transfer (including evidence of payment of any applicable stock transfer taxes).

2.4 Dissenters Rights . Notwithstanding anything in this Agreement to the contrary, Caroderm Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has complied with all of the relevant provisions of Section 16-10a-1301 et. seq. of the Utah Act regarding appraisal for such shares (" Dissenting Shares" ), will not be converted into a right to receive the Per Share Merger Consideration, unless such holder fails to perfect or withdraws or otherwise loses its right to appraisal. Each holder of Dissenting Shares who becomes entitled to payment for such Dissenting Shares under the provisions of the Utah Act, will receive payment thereof from the Surviving Corporation and such Dissenting Shares will no longer be outstanding and will automatically be canceled and retired and will cease to exist.

2.5 Lost Caroderm Stock Certificates . If any Caroderm Stock Certificate has been lost, stolen or destroyed, upon the making of an affidavit (in form and substance reasonably acceptable to Parent) of that fact by the person making such a claim, Parent will deliver in exchange for the affidavit representing such lost, stolen or destroyed Caroderm Stock Certificate the Per Share Merger Consideration pursuant to Section 2.2.

2.6 No Rights as Stockholder . From and after the Effective Time, the holders of Caroderm Stock Certificates will cease to have any rights as a stockholder of the Surviving Corporation except as otherwise expressly provided in this Agreement or by applicable Laws, and Parent will be entitled to treat each Caroderm Stock Certificate that has not yet been surrendered for exchange solely as evidence of the right to receive the aggregate Per Share Merger Consideration to which such holder is entitled.

2.7 Escheat . Neither Parent, Purchaser nor Caroderm will be liable to any former holder of Caroderm Shares for any portion of the Per Share Merger Consideration delivered to any public official pursuant to any applicable abandoned property, escheat or similar Law. In the event any Caroderm Stock Certificate has not been surrendered for the Merger Consideration prior to the sixth anniversary of the Closing Date, or prior to such earlier date as of which such Caroderm Stock Certificate or the Per Share Merger Consideration payable upon the surrender thereof would otherwise escheat to or become the property of any Governmental Entity, then the Per Share Merger Consideration otherwise payable upon the surrender of such Caroderm Stock Certificate will, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all rights, interests and adverse claims of any person.

2.8 Accounting . Upon the request of any Shareholder, but not more often than once in any six-month period, Parent shall provide to the Shareholders an accounting of all payments of Merger Consideration to holders of the Caroderm Shares.


3 ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT

Parent or Purchaser, as set forth below, hereby represents and warrants to Caroderm and the Shareholders as follows:

3.1 Corporate Organization; Officers and Directors . Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah and has full corporate power and authority to carry on its business as now conducted. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah and has full corporate power and authority to carry on its business as now conducted. Parent directly owns and has power to vote all of the outstanding capital stock of Purchaser. Purchaser was formed for the purpose of effecting the Merger and has not conducted, and will not conduct, any business prior to the Effective Time other than that which is necessary to effectuate the Merger.

3.2 Authority Relative to this Agreement; No Violation. 3.2.1 Authority . Each of Parent and Purchaser has the corporate power to enter into this Agreement, to carry out its obligations hereunder, to perform and comply with all the terms and conditions hereof to be performed and complied with by it, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance and compliance with all the terms and conditions hereof to be performed and complied with, and the consummation of the transactions contemplated hereby, by Parent and Purchaser have been duly authorized by all requisite corporate action on the part of each of Parent and Purchaser. This Agreement has been duly and validly executed and delivered by each of Parent and Purchaser and is the legal, valid and binding obligation of each of Parent and Purchaser enforceable against each of them in accordance with its terms. Any reference in this Article III to an agreement being " enforceable" shall be deemed to be qualified to the extent such enforceability is subject to (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and the relief of debtors, and similar laws affecting creditors' rights and remedies generally, and (ii) the availability of specific performance, injunctive relief and other equitable remedies, regardless of whether enforcement is sought in a proceeding at law or in equity.
3.2.2 Compliance with Organizational Documents and Laws . Neither the execution and delivery of this Agreement by Parent and Purchaser, the performance and compliance by Parent and Purchaser of and with the terms and conditions hereof to be performed and complied with by Parent and Purchaser, nor the consummation by Parent and Purchaser of the transactions contemplated hereby will (i) violate, conflict with or result in a breach of, any provision of the Organizational Documents of Parent or Purchaser or (ii) assuming that the approvals referred to in Section 3.3 are obtained, (A) violate, conflict with or result in a breach of any Law applicable to Parent or Purchaser or any of the respective properties or assets of Parent or Purchaser, which violation, conflict or breach is material to Parent or Purchaser or could prevent or materially delay Parent or Purchaser from consummating the transactions contemplated hereby.


3.3 Consents and Approvals . There are no consents, approvals or authorizations of or designations, declarations or filings with any Governmental Entities or any other person on the part of Parent required for the validity of the execution and delivery by Parent and Purchaser of this Agreement or the performance and compliance by them of and with the terms and conditions of this Agreement to be performed and complied with by them or the consummation of the transactions contemplated hereby, other than (i) the filing of the Articles of Merger in accordance with the Utah Act, (ii) compliance with


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any applicable requirements of the Securities Act and the Exchange Act and (iii) such actions as may be required under any applicable state securities or blue sky laws. ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CARODERM AND THE SHAREHOLDERS

Except as set forth on the Disclosure Schedule, Caroderm and the Shareholders, jointly and severally, hereby represent and warrant to Parent and Purchaser as follows:

4.1 Organization and Qualification . Caroderm is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah and has full corporate power and authority to carry on its business as now being conducted. Caroderm is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction wherein the character of its properties owned or leased or the nature of its activities makes such qualification legally required, except where the failure to be so qualified would not, taken together, have a Material Adverse Effect. Copies of the Caroderm Organizational Documents, as in effect on the date hereof, including all amendments thereto, have been previously delivered by Caroderm to Parent. Caroderm' s current and former officers and/or directors consist exclusively of the Shareholders and Robert McClane.

4.2 Capitalization . There are 10,000,000 duly authorized shares of Caroderm common stock, no par value, of which 2,025,946 shares are issued and outstanding. All of the issued and outstanding shares of capital stock of Caroderm have been duly authorized and are validly issued, fully paid, and nonassessable. Section 4.2 of the Disclosure Schedule sets forth the name of each holder of Caroderm Shares and the number of Caroderm Shares held by such holder. There are no outstanding options, warrants, calls, stock appreciation rights or other rights, or convertible debt or security, or any share reserved for issuance or any arrangement, subscription agreement, plan, or commitment, relating to the issued (including treasury stock) or unissued capital stock or other securities of Caroderm granted or made by Caroderm or to which Caroderm is a party. Caroderm has no option, equity incentive or similar plan. Caroderm is not a party or subject to any agreement or understanding and, to the Knowledge of Caroderm or the Shareholders, other than in connection with this Agreement, there is no agreement or understanding between any persons that affects or relates to the voting or giving of written consents with respect to any securities of Caroderm or the voting by any director or shareholder of Caroderm. No shareholder of Caroderm or any Affiliate thereof is indebted to Caroderm, and Caroderm is not indebted to any of its shareholders or any Affiliate thereof. Caroderm is not under any contractual or other obligation to register any of its presently outstanding securities or any of its securities that could have been issued in the future. There are no rights of refusal, co-sale rights or registration rights granted by Caroderm with respect to any of Caroderm' s capital stock. Each shareholder of Caroderm that is an individual is either a citizen or a resident of the United States and, in either case, is not subject to federal backup withholding taxes.

4.3 Subsidiaries . Caroderm has no subsidiaries. Caroderm does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity.


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4.4 Authority Relative to this Agreement; No Violation; Consents. 4.4.1 Authority; Approval; Due Execution . Caroderm has the corporate power to enter into this Agreement, to carry out its obligations hereunder, to perform and comply with all the terms and conditions hereof to be performed and complied with by it, and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Caroderm, the performance and compliance with all the terms and conditions hereof to be performed and complied with by Caroderm, and the consummation by Caroderm of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of Caroderm, including approval of the Merger by the holders of at least ninety-six percent (96%) of the Caroderm Shares. The approval by the holders of such percentage of Caroderm Shares, voting together as a single class, is sufficient to approve the Merger in accordance with the requirements of the Utah Act and Caroderm' s Organizational Documents. The Board of Directors of Caroderm, by unanimous written consent effective February 17, 2006, (i) determined that this Agreement, the Merger and the transactions contemplated thereby are advisable and in the best interests of holders of Caroderm Shares, and (ii) resolved to recommend to holders of Caroderm Shares that such holders approve and adopt the Merger and this Agreement. This Agreement has been duly and validly executed and delivered by Caroderm and is a legal, valid and binding obligation of Caroderm enforceable against Caroderm in accordance with its terms. Any reference in this Article IV to an agreement being " enforceable" shall be deemed to be qualified to the extent such enforceability is subject to (i) laws of general application relating to bankruptcy, insolvency, reorganization, moratorium and the relief of debtors, and similar laws affecting creditors' rights and remedies generally, and (ii) the availability of specific performance, injunctive relief and other equitable remedies, regardless of whether enforcement is sought in a proceeding at law or in equity.
4.4.2 Compliance with Organizational Documents and Laws . Except as disclosed in Section 4.4.2 of the Disclosure Schedule, neither the execution and delivery of this Agreement by Caroderm, the performance and compliance by Caroderm of and with the terms and conditions hereof to be performed and complied with by it, nor the consummation by Caroderm of the transactions contemplated hereby will: (i) violate, conflict with or result in a breach of, any provision of the Organizational Documents of Caroderm; or (ii) assuming that the approvals referred to in Section 4.6 are obtained, (A) violate, conflict with or result in a breach of any Law applicable to Caroderm or any of the properties or assets of Caroderm, which violation, conflict or breach is material to Caroderm or could prevent Caroderm from consummating the transactions hereby or (B) violate, conflict with, result in a breach of, result in the impairment of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, result in the creation or imposition of any Lien upon any of the properties or assets of Caroderm under, or require any consent, approval, waiver, exemption, amendment, authorization, notice or filing under, any of the terms, conditions or provisions of, any Material Contract to which Caroderm is a party or by which any of its properties or assets may be bound or affected, except for Liens created by or through Parent or Purchaser.


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4.5 Financial Statements, Financial Condition and Books and Records of Caroderm. 4.5.1 Caroderm Financial Statements . Caroderm has delivered to Purchaser the following financial statements (all such financial statements collectively, the " Financial Statements" ): (i) the unaudited consolidated balance sheet of Caroderm and the related unaudited consolidated statement of cash flows as of and for the years ended December 31, 2005, December 31, 2004 and December 31, 2003, and the unaudited consolidated statement of operations and shareholders' equity as of and for the years ended December 31, 2005, December 31, 2004 and December 31, 2003; and (ii) the unaudited consolidated balance sheet of Caroderm (the " Most Recent Balance Sheet" ), and the related unaudited consolidated statement of cash flows as of and for the month ended January 31, 2006 and the unaudited consolidated statement of operations and shareholders' equity as of and for the month ended January 31, 2006 (such preceding financial statements collectively, the " Most Recent Financial Statements" ). The Financial Statements are true and correct, have been prepared consistently from year to year and, with respect to statements of operations and cash flows, present fairly in all material respects the results of operations of Caroderm for the respective periods covered, and with respect to balance sheets, present fairly in all material respects the consolidated financial condition of Caroderm as of their respective dates; provided however that the Most Recent Financial Statements are subject to year-end adjustments which will not be material. Section 4.5.1 of the Disclosure Schedule sets forth all of Caroderm' s liabilities and indebtedness.
4.5.2 Books and Records . The books of account, minute books, stock record books, and other records of Caroderm that have been provided to Parent are complete and correct in all material respects. The minute books of Caroderm contain accurate records of all corporate action taken by Caroderm' s shareholders, its Board of Directors, and the committees of its Board of Directors. At the Effective Time, all of those books and records will be in the possession of the Surviving Corporation. Caroderm maintains appropriate and sufficient financial records that allow it to properly and completely prepare the Financial Statements and other financial reports.


4.6 No Consents . There are no consents, approvals or authorizations of or designations, declarations or filings with any Governmental Entities or any other person on the part of Caroderm required for the validity of the execution and delivery by Caroderm of this Agreement or the performance and compliance by it of and with the terms and conditions of this Agreement to be performed and complied with by it or the consummation of the transactions contemplated hereby, other than as set forth in Section 4.6 of the Disclosure Schedule.

4.7 Absence of Material Changes or Events . Except as disclosed in Section 4.7 of theDisclosure Schedule, since the date of the Most Recent Balance Sheet, Caroderm has conducted its business only in the ordinary course, and since the date of the Most Recent Balance Sheet, there has been no Material Adverse Effect on Caroderm' s business, assets or operations. Except as referred to in this Agreement or as disclosed in Section 4.7 of the Disclosure Schedule, Caroderm has not entered into or agreed to enter into any transaction, agreement or commitment, suffered the occurrence of any event or events or experienced any change in financial condition, business, results of operations or otherwise that, in the aggregate, has (i) interfered with its normal and usual operations of the business or business prospects of the business or (ii) resulted in a Material Adverse Effect on its business, assets, operations, prospects or condition (financial or other) or could reasonably be expected to have such a Material Adverse Effect.


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4.8 Taxes and Tax Returns . Except as set forth in Section 4.5.1 of the Disclosure Schedule, Caroderm has filed all federal, state and local Tax and information returns which are required to be filed by it and such returns are true and correct. Except as set forth in Section 4.5.1 of the Disclosure Schedule, Caroderm has paid all Taxes, interest and penalties, if any, reflected in such Tax returns or otherwise due and payable by it. Caroderm has no Knowledge of any material additional assessments or any basis therefor. The reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) on the balance sheet of Caroderm as of the Most Recent Balance Sheet accurately reflects all liabilities of Caroderm for such Taxes or other governmental charges. Except as set forth in Section 4.5.1 of the Disclosure Schedule, Caroderm has withheld or collected from each payment made to its employees and other service providers the amount of all Taxes required to be withheld or collected therefrom and has paid over such amounts to the appropriate taxing authorities. Any Tax deficiencies proposed as a result of any governmental audits have been paid or settled, there are no present disputes or audits as to Taxes payable by Caroderm and, to Caroderm' s Knowledge, no such additional Taxes or audits have been proposed or threatened.

4.9 Employees. 4.9.1 Agreements; Benefit Plans . Caroderm does not sponsor, maintain or contribute to, and has never sponsored, maintained or contributed to or incurred any obligation or liability under any pension, retirement, profit-sharing, life, health, accident or other employee benefit plan, practice, policy or arrangement, including, but not limited to, any employee benefit plan within the meaning of Section 3(3) of ERISA. No other Person that is treated as a single employer with Caroderm under Section 414(b), (c), (m) or (o) of the Code has ever maintained, sponsored or contributed to any employee benefit plan that is subject to Title IV of ERISA or Section 412 of the Code.
4.9.2 Employees; Compensation . Section 4.9.2 of the Disclosure Schedule sets forth a true and correct list of all of Caroderm' s employees, together with each employee' s annual rate of compensation (including all bonus amounts paid to such employees since December 31, 2004). Except as set forth in Section 4.9.2 of the Disclosure Schedule: (i) as of the date of this A ...