EXHIBIT 10.5
PROMISSORY NOTE AND REDEMPTION AGREEMENT
Principal: $5,000,000 Date: April 28, 1999
1. Promise to Pay. For value received, Xxxxx X. Xxxxx ("Borrower"), promises
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to pay to the order of USANA, Inc. ("Holder") at 0000 Xxxx Xxxxxxx Xxxx.,
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Xxxx Xxxx Xxxx, Xxxx or such other place as the Holder hereof from time to
time may designate in writing, the principal sum of up to FIVE MILLION
DOLLARS ($5,000,000), plus interest and such other sums as are payable
under the terms of this Note.
2. Payments. All unpaid principal, interest and other sums owing under this
Note shall be due and payable as follows: (a) $2,500,000 on or before
August 31, 1999; and (b) the balance of principal and accrued interest on
or before December 31, 1999 (each of August 31, 1999 and December 31, 1999,
a "Due Date"). Borrower may completely or partially prepay this Note at any
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time or from time to time without penalty. Payments shall be applied first
to accrued interest, costs and expenses payable under this Note and then to
principal.
3. Interest. Interest shall accrue on the unpaid principal balance from and
after the date hereof at "Prime Rate" as that term is defined in Holder's
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bank line of credit agreement until this Note is paid in full. At the date
of this Note, the Prime Rate is 7.75% per annum. Upon occurrence of an
Event of Default under that certain Stock Pledge Agreement of even date
herewith ("Stock Pledge Agreement") executed by Gull Holdings Ltd.
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("Gull"), which prevents the delivery of securities having a Market Value
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sufficient to make payment in full of any installment or amount when due
hereunder, the unpaid balance of principal then due will bear interest at
the rate of Prime Rate plus 5% until payment of such delinquent amount is
made in full.
4. Method of Payment; Default. Unless prepayment is made by Borrower, amounts
due and owing hereunder will be paid by the immediate and automatic
redemption on each Due Date of shares of common stock of USANA, Inc.
("Shares") beneficially owned by Borrower in the name of Gull having a
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Market Value (as defined below) equal to the principal and interest then
owing on such Due Date(s). For purposes of this Note and the Stock Pledge
Agreement, the Market Value of Shares surrendered or cancelled in payment
of amounts owing hereunder will be determined by the average closing price
of USANA, Inc. common stock as reported by the Nasdaq Stock Market for the
five trading days preceding the date payment is made. Payment will be made
from the Shares pledged by Gull pursuant to the Stock Pledge Agreement.
Borrower's failure to surrender or cause the surrender of such Shares as
may be required to make a payment when due will not prevent Holder from
instructing its transfer agent to cancel Shares having the Market Value of
the payment then due. Holder may instruct its transfer agent to stop
transfer of Shares held by Gull or to cancel such Shares as may be
necessary to make the payments required hereunder. Borrower consents to
such action by Holder and waives any objection or right to notice of such
action. No additional instruction to the transfer agent will be necessary
other than a copy of this Note and the Holder's notice that payment is due
and the Shares have not been surrendered as contemplated hereunder.
5. Prepayment. Borrower may make interim payments prior to the Due Dates in
cash or by surrendering Shares or instructing USANA to cancel Shares
pledged by Gull as provided herein. However, not more than two (2) interim
payments by the surrender of Shares may be made from the date hereof
through August 31, 1999, and not more than two (2) such payments may be
made from September 1, 1999 through December 31, 1999.
6. Attorneys' Fees and Costs. If any action, judicial or nonjudicial, is
brought on this Note, or if it is placed in the hands of an attorney for
collection, Borrower promises to pay all of Holder's costs and expenses in
connection therewith, including without limitation the reasonable
attorneys' fees incurred and paid by holder in connection herewith through
any appeal or in bankruptcy.
7. Waivers. The undersigned, all endorsers, and all persons liable or to
become liable on this Note hereby waive presentment, demand, protest and
notice of demand, protest and nonpayment, and any defense or claim that
resort must first be had to any security or to any other person, and
authorize the holder of this Note, without affecting his, her or its
liability hereunder, from time to time, to renew, extend, or change the
time for payment or the other terms of this Note, to take and hold security
for the payment of this Note, to release or exchange the security therefor,
to apply any such security to such obligations as the holder may determine
in its sole discretion, and to release, substitute, or add to those liable
or to become liable on this Note.
8. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of Utah, United States of America, without
regard for conflict of law rules, and the parties consent and stipulate to
the jurisdiction and venue in all appropriate courts located in Salt Lake
County, Utah.
BORROWER:
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
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