DUE: September 1, 2004
TERM NOTE
USANA, Inc.
$10,000,000.00 Dated: September 20, 1999
Seattle, Washington
USANA, Inc., a Utah corporation ("Borrower") unconditionally promises
to pay to the order of Bank of America, N.A. ("Bank"), at its Commercial Banking
office, on or before September 1, 2004, in immediately available funds, the
principal sum of Ten Million and No/100 Dollars ($10,000,000.00), plus interest.
Interest under this Note shall accrue on the daily unpaid principal
balance from the date of this Note in accordance with the terms, conditions, and
definitions of Exhibit A attached, which are incorporated herein. This Note
shall be governed by the terms and conditions of the Credit Agreement dated
September 20, 1999 ("Agreement") between Borrower and Bank, as may be amended or
restated from time to time. This is the "Term Note" referred to in the
Agreement.
Borrower shall pay all accrued interest under this Note on each
Interest Payment Date until the maturity date of this Note. Principal of this
Note shall be repaid in equal quarterly installments of $500,000 each, on the
first Business Day of each December, March, June, and September, beginning
December 1, 1999. Any prepayments of principal under this Note shall be applied
to installments of principal due under this Note in inverse order of their
maturities. All unpaid principal and accrued but unpaid interest shall be due
and payable in full on September 1, 2004.
If at any time in connection with this Note Borrower and Bank enter
into a "Swap Contract" as such term is defined in the Agreement, and if as a
consequence the quarterly installment payments under this Note will change, then
unless otherwise agreed to in writing, this Note shall thereafter be repaid in
quarterly installments, due on the first Business Day of each December, March,
June, and September until the maturity date of this Note, equal to the sum of
(a) accrued interest, computed as provided herein, to the due date of the
quarterly payment, plus (b) quarterly principal payments in the amounts set
forth in a schedule (the "Principal Payment Schedule") to be prepared by Bank
and delivered to Borrower after the Swap Contract has been entered into. The
Principal Payment Schedule shall be deemed incorporated into and a part of this
Note.
All conversions between the interest rate options, and all payments of
principal and interest, may be reflected on a schedule or a computer-generated
statement which shall become a part hereof. Bank is authorized to automatically
debit each required installment of interest from Xxxxxxxx's checking account
number 00000000 at Bank, or such other deposit account at Bank as Borrower may
authorize in the future.
If a "Default" shall occur as such term is defined in the Agreement,
interest shall accrue, at the option of the holder of this Note, from the date
of Default, at a floating rate per annum three percent (3%) above the Reference
Rate, as the Reference Rate may vary from time to time, and the entire unpaid
principal amount of this Note, together with all accrued interest, shall become
immediately due and payable at the option of the holder hereof.
Borrower hereby waives presentment, demand, protest, and notice of
dishonor hereof. Each party signing or endorsing this Note signs as maker and
principal, and not as guarantor, surety, or accommodation party; and is estopped
from asserting any defense based on any capacity other than maker or principal.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, TO EXTEND CREDIT, OR
TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
USANA, Inc.
By
Xxxxxxx X. Xxxxxx, Senior Vice President & CFO
EXHIBIT A
INTEREST PROVISIONS
Article 1: Definitions
All terms defined below shall have the meaning indicated.
1.1 Adjusted LIBOR Rate shall mean for any day that per annum rate equal to the
sum of (a) the Margin, (b) the Assessment Rate, and (c) the quotient of (i) the
LIBOR Rate as determined for such day, divided by (ii) the Reserve Adjustment.
The Adjusted LIBOR Rate shall change with any change in the LIBOR Rate on the
first day of each Interest Period and on the effective date of any change in the
Assessment Rate or Reserve Adjustment.
1.2 Agreement shall mean the Credit Agreement dated as of September 20, 1999,
between Borrower and Bank, including all amendments thereto and restatements
thereof.
1.3 Assessment Rate shall mean as of any day the minimum annual percentage rate
established by the Federal Deposit Insurance Corporation (or any successor) for
the assessment due from members of the Bank Insurance Fund (or any successor) in
effect for the assessment period during which said day occurs based on deposits
maintained at such members' offices located outside of the United States. In the
event of a retroactive reduction in the Assessment Rate after a commencement of
any Interest Period, Bank shall not retroactively adjust as to such Interest
Period any interest rate calculated using the Assessment Rate.
1.4 Bank shall mean the holder of the Note.
1.5 Borrower shall mean the maker of the Note.
1.6 Business Day shall mean any day other than a Saturday, Sunday, or other day
on which commercial banks in Seattle, Washington, are authorized or required by
law to close.
1.7 Commencement Date shall mean the first day of any Interest Period as
requested by Xxxxxxxx.
1.8 Floating Rate shall mean the Reference Rate per annum plus the Margin.
1.9 Floating Rate Loans shall mean those portions of principal of the Note
accruing interest at the Floating Rate.
1.10 Interest Payment Date shall mean (a) the first Business Day of each
December, March, June, and September for Floating Rate Loans, (b) the last day
of the Interest Period as to LIBOR Rate Loans with Interest Periods of three
months or less, (c) as to LIBOR Rate Loans with Interest Periods of more than
three months, on the day which is three months after the Commencement Date and
the last day of the Interest Period, and (d) upon maturity of this Note,
including maturity by acceleration.
1.11 Interest Period shall mean the period commencing on the date of any
conversion to an Adjusted LIBOR Rate and ending on any date thereafter as
selected by Xxxxxxxx, subject to the restrictions of Section 2.3. If any
Interest Period would end on a day which is not a Business Day, the Interest
Period shall be extended to the next succeeding Business Day.
1.12 LIBOR Rate shall mean for any Interest Period the per annum rate for U.S.
Dollar deposits for a period equal to the Interest Period appearing on the
display designated as "Page 3750" on the Telerate Service (or such other page on
that service or such other service designated by the British Banker's
Association for the display of that Association's Interest Settlement Rates for
U.S. Dollar deposits) as of 11:00 a.m., London time, on the day which is two
London Banking Days prior to the first day of the Interest Period. If there is
no period equal to the Interest Period on the display, the LIBOR Rate shall be
determined by straight-line interpolation to the nearest month (or week or day
if expressed in weeks or days) corresponding to the Interest Period between the
two nearest neighboring periods on the display.
1.13 LIBOR Rate Loans shall mean those portions of principal of the Note
accruing interest at the Adjusted LIBOR Rate.
1.14 London Banking Day shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks in London, England, are authorized or
required by law to close.
1.15 Margin shall have the meaning given in the Agreement.
1.16 Note shall mean the promissory note to which this exhibit is attached.
1.17 Reference Rate shall mean the rate of interest publicly announced from time
to time by Bank as its "Reference Rate." The Reference Rate is set based on
various factors, including Bank's costs and desired return, general economic
conditions, and other factors, and is used as a reference point for pricing some
loans. Bank may price loans to its customers at, above, or below the Reference
Rate. Any change in the Reference Rate shall take effect at the opening of
business on the day specified in the public announcement of a change in the
Reference Rate.
1.18 Reserve Adjustment shall mean as of any day the remainder of one minus that
percentage (expressed as a decimal) which is the highest of any such percentages
established by the Board of Governors of the Federal Reserve System (or any
successor) for required reserves (including any emergency, marginal, or
supplemental reserve requirement) regardless of the aggregate amount of deposits
with said member bank and without benefit of any possible credit, proration,
exemptions, or offsets for time deposits established at offices of member banks
located outside of the United States or for eurocurrency liabilities, if any.
Article 2: Interest Rate Options
2.1 Interest Rates and Payment Date. The Note shall bear interest from the date
of initial advance on the unpaid principal balance outstanding from time to time
at the Floating Rate or Adjusted LIBOR Rate as selected by Borrower and all
accrued interest shall be payable in arrears on each Interest Payment Date.
2.2 Procedure. Borrower may, by 11:30 a.m., Pacific time, on any London Banking
Day two London Banking Days before a Commencement Date, request Bank to give an
Adjusted LIBOR Rate quote for a specified loan amount and Interest Period. Bank
will then quote to Borrower the available Adjusted LIBOR Rate. Borrower shall
have one hour from the time of the quote to elect an Adjusted LIBOR Rate by
giving Bank irrevocable notice of such election.
2.3 Restrictions. Each Interest Period shall be one, two, three, or six months.
In no event shall an Interest Period extend beyond the maturity date of the
Note. The minimum amount of a LIBOR Rate Loan shall be $100,000.
2.4 Prepayments. If Borrower prepays all or any portion of a LIBOR Rate Loan
prior to the end of an Interest Period, there shall be due at the time of any
such prepayment the Prepayment Fee, determined in accordance with Exhibit 1
attached to the Note.
Floating Rate Loans may be prepaid on any Business Day, without premium or
penalty.
2.5 Reversion to Floating. The Note shall bear interest at the Floating Rate
unless an Adjusted LIBOR Rate is specifically selected. At the termination of
any Interest Period each LIBOR Rate Loan shall revert to a Floating Rate Loan
unless Borrower directs otherwise pursuant to Section 2.2.
2.6 Inability to Participate in Market. If Bank in good faith cannot participate
in the Eurodollar market for legal or practical reasons, there shall be no
Adjusted LIBOR Rate option. Bank shall notify Borrower of and when it again
becomes legal or practical to participate in the Eurodollar market, at which
time the Adjusted LIBOR Rate option shall resume being an interest rate option.
2.7 Costs. Borrower shall reimburse Bank for all costs, taxes, and expenses, and
defend and hold Bank harmless for any liabilities, which Bank may incur as a
consequence of any changes in the cost of participating in, or in the laws or
regulations affecting, the Eurodollar market, including any additional reserve
requirements, except to the extent such costs are already calculated into the
Adjusted LIBOR Rate. This covenant shall survive the payment of the Note.
2.8 Basis of Quotes. Borrower acknowledges that Bank may or may not in any
particular case actually match-fund a LIBOR Rate Loan. FDIC assessments, and
Federal Reserve Board reserve requirements, if any are assessed, will be based
on Bank's best estimates of its marginal cost for each of these items. Whether
such estimates in fact represent the actual cost to Bank for any particular
dollar or Eurodollar deposit or any LIBOR Rate Loan will depend upon how Bank
actually chooses to fund the LIBOR Rate Loan. By electing an Adjusted LIBOR
Rate, Borrower waives any right to object to Bank's means of calculating the
Adjusted LIBOR Rate quote accepted by Borrower.
Exhibit 1 -- PREPAYMENT FEES
If the principal balance of this note is prepaid in whole or in part,
whether by voluntary prepayment, operation of law, acceleration or otherwise, a
prepayment fee, in addition to any interest earned, will be immediately payable
to the holder of this note.
The amount of the prepayment fee depends on the following:
(1) The amount by which interest prepayment reference rates as defined
below have changed between the time the loan is prepaid and either a)
the time the loan was made for fixed rate loans, or b) the time the
interest rate last changed (repriced) for variable rate loans.
(2) A prepayment fee factor (see "Prepayment Fee Factor Schedule" on reverse).
(3) The amount of principal prepaid.
If the proceeds from a CD or time deposit pledged to secure the loan are used to
prepay the loan resulting in payment of an early withdrawal penalty for the CD,
a prepayment fee will not also be charged under the loan.
Definition of Prepayment Reference Rate for Variable Rate Loans
The "Prepayment Reference Rate" used to represent interest rate levels for
variable rate loans shall be the index rate used to determine the rate on this
loan having maturities equivalent to the remaining period to interest rate
change date (repricing) of this loan rounded upward to the nearest month. The
"Initial Prepayment Reference Rate" shall be the Prepayment Reference Rate at
the time of last repricing and a new Initial Prepayment Reference Rate shall be
assigned at each subsequent repricing. The "Final Prepayment Reference Rate"
shall be the Prepayment Reference Rate at the time of prepayment.
Definition of Prepayment Reference Rate for Fixed Rate Loans
The "Prepayment Reference Rate" used to represent interest rate levels on fixed
rate loans shall be the bond equivalent yield of the average U.S. Treasury rate
having maturities equivalent to the remaining period to maturity of this loan
rounded upward to the nearest month. The "Initial Prepayment Reference Rate"
shall be the Prepayment Reference Rate at the time the loan was made. The "Final
Prepayment Reference Rate" shall be the Prepayment Reference Rate at time of
prepayment.
The Prepayment Reference Rate shall be interpolated from the yields as displayed
on Page 119 of the Dow Xxxxx Telerate Service (or such other page or service as
may replace that page or service for the purpose of displaying rates comparable
to said U.S. Treasury rates) on the day the loan was made (Initial Prepayment
Reference Rate) or the day of prepayment (Final Prepayment Reference Rate).
An Initial Prepayment Reference Rate of N/A % has been assigned to this loan to
represent interest rate levels at origination.
Calculation of Prepayment Fee
If the Initial Prepayment Reference Rate is less than or equal to the Final
Prepayment Reference Rate, there is no prepayment fee.
If the Initial Prepayment Reference Rate is greater than the Final Prepayment
Reference Rate, the prepayment fee shall be equal to the difference between the
Initial and Final Prepayment Reference Rates (expressed as a decimal),
multiplied by the appropriate factor from the Prepayment Fee Factor Schedule,
multiplied by the principal amount of the loan being prepaid.
Example of Prepayment Fee Calculation
Variable Rate Loan: A non-amortizing 6-month LIBOR based loan with principal of
$250,000 is fully prepaid with 3 months remaining until next interest rate
change date (repricing). An Initial Prepayment Reference Rate of 7.0% was
assigned to the loan at last repricing. The Final Prepayment Reference Rate (as
determined by the 3-month LIBOR index) is 6.5%. Rates therefore have dropped
0.5% since last repricing and a prepayment fee applies. A prepayment fee factor
of 0.31 is determined from Table 3 below and the prepayment fee is computed as
follows:
Prepayment Fee = (0.07 -- 0.065) x (0.31) x ($250,000) = $387.50
Fixed Rate Loan: An amortizing loan with remaining principal of $250,000 is
fully prepaid with 24 months remaining until maturity. An Initial Prepayment
Reference Rate of 9.0% was assigned to the loan when the loan was made. The
Final Prepayment Reference Rate (as determined by the current 24-month U.S.
Treasury rate on Page 119 of Telerate) is 7.5%. Rates therefore have dropped
1.5% since the loan was made and a prepayment fee applies. A prepayment fee
factor of 1.3 is determined from Table 1 below and the prepayment fee is
computed as follows:
Prepayment Fee = (0.09 -- 0.075) x (1.3) x ($250,000) = $4,875
PREPAYMENT FEE FACTOR SCHEDULE
TABLE I: FULLY AMORTIZING LOANS
Proportion of Remaining Principal Months Remaining To Maturity/Repricing1
Amount Being Prepaid
--------------------------------------------------------------------------------------------------------------------
0 3 6 9 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------------------------------------------------------------
90-100% 0 .21 .36 .52 .67 1.3 1.9 2.5 3.1 4.3 5.9 10.3 13.1
60-89% 0 .24 .44 .63 .83 1.6 2.4 3.1 3.9 5.4 7.5 13.2 17.0
30-59% 0 .28 .53 .78 1.02 2.0 3.0 4.0 5.0 7.0 9.9 18.5 24,4
0-29% 0 .31 .63 .92 1.22 2.4 3.7 5.0 6.3 9.0 13.4 28.3 41.8
TABLE II: PARTIALLY AMORTIZING (BALLOON) LOANS
Proportion of Remaining Principal Months Remaining To Maturity/Repricing1
Amount Being Prepaid
--------------------------------------------------------------------------------------------------------------------
0 3 6 9 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------------------------------------------------------------
90-100% 0 .26 .49 .71 .94 1.8 2.7 3.4 4.2 5.6 7.4 11.6 14.0
60-89% 0 .30 .59 .86 1.15 2.2 3.3 4.3 5.3 7.1 9.4 15.0 18.1
30-59% 0 .31 .63 .95 1.27 2.6 3.9 5.3 6.6 9.1 12.6 21.2 26.2
0-29% 0 .31 .63 .95 1.27 2.6 4.0 5.4 7.0 10.2 15.7 33.4 46.0
TABLE III: NONAMORTIZING (INTEREST ONLY) LOANS
Proportion of Remaining Principal Months Remaining To Maturity/Repricing1
Amount Being Prepaid
--------------------------------------------------------------------------------------------------------------------
0 3 6 9 12 24 36 48 60 84 120 240 360
--------------------------------------------------------------------------------------------------------------------
0-100% 0 .31 .61 .91 1.21 2.3 3.4 4.4 5.3 6.9 8.9 13.0 14.8
1 For the remaining period to maturity/repricing between any two
maturities/repricings shown in the above schedules, interpolate between the
corresponding factors to the closest month.
The holder of this note is not required to actually reinvest the prepaid
principal in any U.S. Government Treasury Obligations, or otherwise prove its
actual loss, as a condition to receiving a prepayment fee as calculated above.
