REDEMPTION AGREEMENT
REDEMPTION AGREEMENT (the "Agreement") dated effective July 30, 1999,
by and among USANA, Inc., a Utah corporation (the "Company"), Gull Holdings,
Ltd., an Isle of Man corporation ("Shareholder"), and Myron W. Wentz, an
individual and the sole owner of Shareholder ("Wentz").
Recitals
A. At April 28, 1999, Shareholder was the owner of 7,598,882 shares of
the Company's issued and outstanding common stock, no par value per share
("Common Stock").
B. Wentz is the President, Chairman and Chief Executive Officer of the
Company and the sole owner of Shareholder. On or about April 28, 1999, the
Company and Wentz entered into a promissory note ("Note") for the loan of funds
to Wentz. The obligations of Wentz under the Note were secured by a stock pledge
agreement entered into by the Company, Wentz and Shareholder ("Stock Pledge
Agreement"). Under the terms of the Note and the Stock Pledge Agreement,
repayment of amounts advanced under the Note were to be repaid by the redemption
of shares of the Company's Common Stock held by Shareholder.
C. On May 21, 1999, the Company redeemed 300,000 shares of Common Stock
in satisfaction of amounts then outstanding under the Note. Those shares were
canceled by the Company following their redemption.
D. The Company and the Shareholder have agreed that the Company will
redeem additional shares of Common Stock from Shareholder according to the terms
and conditions in this Agreement.
E. The Company's Board of Directors have determined (with Wentz and
other affiliates of the Shareholder abstaining from the action taken by the
Board on this matter) that the terms and conditions of this Agreement are fair
to the Company, the redemption of the Shareholder's Common Stock will enhance
shareholder value and earnings per share of the Company and that the Company
should proceed with the transaction contemplated by this Agreement.
Now, therefore, in consideration of the premises and mutual covenants
set forth below, the parties agree:
Agreement
1. Surrender of Shares. In addition to the shares redeemed in May 1999,
the Company will redeem and the Shareholder will sell and surrender to the
Company, an additional 2,650,000 shares of Common Stock (the "Redeemed Shares").
The delivery of the certificates for the Redeemed Shares and the payment of the
purchase price for those Redeemed Shares will be the "Closing" of the
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transaction contemplated by this Agreement. The Closing will occur at the
offices of Durham Jones & Pinegar, counsel to the Company, located at 50 South
Main Street, Suite 800, Salt Lake City, Utah 84144. Closing will occur not later
than September 30, 1999 and is subject to the conditions set forth in Section 3,
below. At the Closing Shareholder will surrender and deliver to the Company
certificates for the Redeemed Shares, together with duly executed stock powers
for the transfer of the Redeemed Shares to the Company. The Redeemed Shares will
then be canceled by the Company.
2. Payment of Redemption Price. The total price to be paid to the
Shareholder for the Redeemed Shares (the "Redemption Price") will be $7.90 per
share, the average closing price of the Company's Common Stock as reported by
the Nasdaq Stock Market for the five trading days preceding August 1, 1999. The
total purchase price for all of the Redeemed Shares will be Twenty Million Nine
Hundred Thirty-five Thousand Dollars ($20,935,000). Payment of the Redemption
Price will be made as follows:
a. by cancellation of the Note as of August 7, 1999, the
Company's fiscal month end, in principal amount of $2,054,305; and
b. offset of amounts advanced by the Company to Wentz after
August 7, 1999 through the date of Closing; and
c. Wire transfer or cashier's check for the balance of the
Redemption Price. Wire instructions will be provided to the Company by
Shareholder in writing prior to the Closing if a wire is requested.
3. Conditions to Closing. Closing of the redemption contemplated by
this Agreement will be subject to the satisfaction of the following conditions:
a. Company shall have received financing for the
transaction from Bank of America on terms and subject to conditions
that are acceptable to management of the Company; and
b. The Board of Directors of the Company shall have received
the opinion of a reputable independent adviser to the effect that the
terms of this Agreement are fair to the Company and the shareholders of
the Company.
c. The Company shall have received from Wentz at or before
Closing payment of accrued interest under the April 28, 1999 agreement
and interest accruing under any other advances made after that date
through the date of Closing.
4. Representations of Shareholder. The Shareholder represents and
warrants to the Company as follows:
a. No Liens or Encumbrances. Shareholder is the sole owner of
the Redeemed Shares tendered to the Company and all Redeemed Shares
tendered by Shareholder are free and clear of liens or encumbrances of
any kind.
b. Authority. Shareholder has full power and authority to
enter into and perform this Agreement without the consent or approval
of any other person or entity. Shareholder is not subject to any
restriction under any mortgage, lien, lease, agreement, instrument,
order, judgment, decree, law, statute, ordinance, regulation, or other
restriction of any kind or character that would prevent it from
entering into and performing this Agreement.
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5. Representations and Warranties of the Company. The Company
represents and warrants to the Shareholder as follows:
a. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of Utah, and has
all requisite power and authority to enter into this Agreement and
perform its obligations hereunder.
b. Authorization. The execution, delivery and performance of
this Agreement by the Company have been duly authorized by all
necessary corporate action.
6. Replacement Certificates. At the Closing, the Company will cause to
be prepared and delivered to Shareholder a replacement certificate for the
shares of Common Stock owned by Shareholder that have not been redeemed under
this Agreement.
7. Indemnification. Each party (for purposes of this Section,
"Indemnifying Party") to this Agreement agrees that it will indemnify and hold
the other party ("Indemnified Party") harmless from and against, for and in
respect of any and all damages, losses, obligations, liabilities, claims,
encumbrances, costs and expenses (including without limitation reasonable
attorneys' fees), and other costs and expenses (collectively, "Damages") arising
out of any suit, action, investigation, proceeding or demand that the
Indemnified Party may suffer or incur as a result of or arising out of the acts
of, or failure to act by, the Indemnifying Party, which is in violation of any
of the Indemnifying Party's representations or warranties, or other terms and
conditions, this Agreement.
8. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9. Entire Agreement. This Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
10. Amendment. Except as otherwise expressly provided in this
Agreement, this Agreement may be modified or amended only by a writing signed by
duly authorized representatives of both parties.
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11. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Utah without regard to any applicable
conflicts of law principles.
SIGNED effective as of the date first set forth above.
USANA, Inc.
By: /s/ Gilbert A. Fuller
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Its: Senior Vice President and Chief Financial Officer
SHAREHOLDER
Gull Holdings, Ltd.
By: /s/ Ian Plummer
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Its: Director
/s/ Myron W. Wentz
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Myron W. Wentz