Document:

EXHIBIT 4.11

 

SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT

 

This SECOND AMENDMENT TO NOTE PURCHASE
AGREEMENT dated as of June 30, 2004 (this “Amendment”), among AFFINITY
GROUP, INC. (the “Borrower”), THE GUARANTORS PARTY HERETO (the “Guarantors”),
THE LENDERS PARTY HERETO (the “Lenders”), CANADIAN IMPERIAL BANK OF
COMMERCE, as Syndication Agent (the “Syndication Agent”), CANADIAN
IMPERIAL BANK OF COMMERCE (“CIBC”), as Administrative Agent (the “Administrative
Agent”), and GENERAL ELECTRIC CAPITAL CORPORATION , as Documentation Agent
(the “Documentation Agent” and together with the Administrative Agent
and the Syndication Agent, the “Agents”).

 

WHEREAS, the Note Purchase Agreement (as
defined below) provides that the Lenders may make Term Loans to the Borrower;
and

 

WHEREAS, the Credit Parties wish to amend the
Note Purchase Agreement to permit the Borrower and the other Credit Parties to
permit additional transactions with Affiliates;

 

NOW, THEREFORE, in consideration of the
foregoing and the agreements contained herein, the parties hereby agree as
follows:

 

1.             Reference to Note Purchase Agreement. 
Reference is made to the Amended and Restated Note Purchase
Agreement dated as of June 24, 2003, as amended by the First Amendment to the
Note Purchase Agreement dated as of February 18, 2004, among the Borrower, the
Guarantors, the Lenders, the Syndication Agent, the Administrative Agent and
the Documentation Agent (as amended on or prior to the date hereof and as it
may be further amended or amended and restated from time to time, the “Note
Purchase Agreement”).  Capitalized
terms used herein which are defined in the Note Purchase Agreement have the
same meanings herein as therein, except to the extent that such meanings are
amended hereby.

 

2.             Amendment to Note Purchase Agreement.  The Credit Parties, the Lenders, and the
Agents agree that Section 7.7 of the Note Purchase Agreement is hereby amended,
effective as of the date hereof, by deleting the reference to “$2,000,000” in
clause (v) of the proviso at the end of said section and replacing it with
“$10,000,000.”

 

3.             No Default; Representations and Warranties, etc.  The Credit Parties hereby confirm that: (a)
the representations and warranties of the Credit Parties contained in Article 4
of the Note Purchase Agreement are true on and as of the date hereof as if made
on such date; (b) the Credit Parties are in compliance in all material respects
with all of the terms and provisions set forth in the Note Purchase Agreement
on their part to be observed or performed thereunder; and (c) after giving
effect to this Amendment, no Event of Default, nor any event which with the
giving of notice or expiration of any applicable grace period or both would
constitute such an Event of Default, shall have occurred and be continuing.

 

1

 

4.             Conditions to this Amendment. This Amendment shall not
become effective until the date on which each of the following conditions is
satisfied or waived in writing by the Required Senior Lenders:

 

Counterparts of Amendment.  The
Administrative Agent shall have received from the Credit Parties and the
Required Senior Lenders either (i) a counterpart of this Amendment signed on
behalf of the Lenders which are parties to the Note Purchase Agreement and an
amendment to the Credit Agreement signed on behalf of the Lenders which are
parties to the Credit Agreement or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Amendment) that such parties have signed counterparts of
such Agreements.

 

Other Documents.  The Administrative Agent shall
have received such other documents as any Agent or Special Counsel shall have
reasonably requested.

 

Expenses.  The Administrative Agent shall
have received all fees and other amounts due and payable on or prior to the
date hereof, including, to the extent invoiced, all reasonable expenses,
including legal fees and disbursements incurred by the Administrative Agent in
connection with this Amendment and the transactions contemplated hereby and the
reimbursement or payment of all other out-of-pocket expenses required to be
reimbursed or paid by the Borrower under the Note Purchase Agreement.

 

5.             Miscellaneous.

 

Except
to the extent specifically amended or waived hereby, the Note Purchase
Agreement, the Loan Documents and all related documents shall remain in full
force and effect.  Whenever the terms or
sections amended hereby shall be referred to in the Note Purchase Agreement,
Loan Documents or such other documents (whether directly or by incorporation
into other defined terms), such defined terms shall be deemed to refer to those
terms or sections as amended by this Amendment. 
The foregoing waivers shall apply solely to the provisions of the Note
Purchase Agreement specified herein for the periods and purposes specified
herein.  Nothing herein shall be deemed
to constitute a modification, amendment or waiver of any other term or
condition of the Note Purchase Agreement.

 

This
Amendment may be executed in any number of counterparts, each of which, when
executed and delivered, shall be an original, but all counterparts shall
together constitute one instrument.

 

This
Amendment shall be governed by the laws of the Commonwealth of Massachusetts
and shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.

 

2

 

IN WITNESS WHEREOF, the parties hereto have
executed this Amendment which shall be deemed to be a sealed instrument as of
the date first above written.

 

	
   

  	
  BORROWER

  
	
   

  	
   

  
	
   

  	
  AFFINITY GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas F. Wolfe

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas F. Wolfe

  
	
   

  	
   

  	
  Title:

  	
  Sr. Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUBSIDIARIES/GUARANTORS

  
	
   

  	
   

  
	
   

  	
  AFFINITY ADVERTISING, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  VBI, INC., its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas F. Wolfe

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas F. Wolfe

  
	
   

  	
   

  	
  Title:

  	
  Sr. Vice President

  
						

 

3

 

	
   

  	
  AFFINITY BROKERAGE, INC.

  
	
   

  	
  AFFINITY ROAD AND TRAVEL CLUB,
  INC.

  
	
   

  	
  CAMP COAST TO COAST, INC.

  
	
   

  	
  CAMPING REALTY, INC.

  
	
   

  	
  CAMPING WORLD, INC.

  
	
   

  	
  CAMPING WORLD INSURANCE
  SERVICES OF NEVADA, INC.

  
	
   

  	
  COAST MARKETING GROUP, INC.

  
	
   

  	
  CWI, INC.

  
	
   

  	
  CW MICHIGAN, INC.

  
	
   

  	
  EHLERT PUBLISHING GROUP, INC.

  
	
   

  	
  GOLF CARD INTERNATIONAL CORP.

  
	
   

  	
  GOLF CARD RESORT SERVICES,
  INC.

  
	
   

  	
  GSS ENTERPRISES, INC.

  
	
   

  	
  POWER SPORTS MEDIA, INC.

  
	
   

  	
  TL ENTERPRISES, INC.

  
	
   

  	
  VBI, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas F. Wolfe

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas F. Wolfe

  
	
   

  	
   

  	
  Title:

  	
  Sr. Vice President

  
					

 

4

 

AGREEMENT OF HOLDING COMPANY
AND

 

RATIFICATION OF NONRECOURSE
GUARANTY

 

The undersigned hereby agrees to the
provisions of Section 2 and 3 and as guarantor hereby acknowledges and consents
to the foregoing Amendment as of the date hereof, and agrees that the Amended
and Restated Nonrecourse Guaranty and Pledge Agreement dated as of June 24,
2003 remains in full force and effect, and the undersigned confirms and
ratifies all of its obligations thereunder.

 

	
   

  	
  AGI HOLDING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Paul
  Schedler

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul Schedler

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

5

 

	
   

  	
  ADMINISTRATIVE AGENT and

  
	
   

  	
  SYNDICATION AGENT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CANADIAN IMPERIAL BANK OF

  COMMERCE, as Administrative Agent and

  Syndication Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jonathan Rabinowitz

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jonathan Rabinowitz

  
	
   

  	
   

  	
  Title:

  	
  CIBC World Markets Corp. As
  Agent

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  APEX (IDM) CDO I, LTD.

  
	
   

  	
  ELC (CAYMAN) LTD.

  
	
   

  	
  ELC (CAYMAN) LTD. CDO SERIES
  1999-I

  
	
   

  	
  ELC (CAYMAN) LTD. 1999-II

  
	
   

  	
  ELC (CAYMAN) LTD. 1999-III

  
	
   

  	
  ELC (CAYMAN) LTD. 2000-I

  
	
   

  	
  TRYON CLO LTD. 2000-I

  
	
   

  	
  By: David L. Babson &
  Company & Company Inc.

  as Collateral Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adrienne Musgnug

  	
   

  
	
   

  	
   

  	
  Name:  

  	
  Adrienne Musgnug

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
						

 

6

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BABSON CLO LTD. 2003-i

  
	
   

  	
  By: David L. Babson &
  Company Inc. as Collateral

  Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Adrienne
  Musgnug

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Adrienne Musgnug

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  By Callidus Debt Partners CLO
  Fund II, Ltd.

  
	
   

  	
  By:

  	
  Its Collateral Manager,

  Callidus Capital Management, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Mavis Taintor

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mavis Taintor

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Denali Capital LLC, managing
  member of DC

  Funding Partners, portfolio manager for DENALI

  CAPITAL CLO I, LTD., or an affiliate

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Charles A. Stearns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Charles A. Stearns

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Denali Capital LLC, managing
  member of DC

  Funding Partners, portfolio manager for

  DENALI CAPITAL CLO III, LTD., or an affiliate

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Charles A. Stearns

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Charles A. Stearns

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
						

 

7

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  ELF Funding Trust III

  
	
   

  	
  By:

  	
  New York Life Investment
  Management

  LLC, as Attorney-in-Fact

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert H. Dial

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert H. Dial

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  New York Life Insurance and
  Annuity Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  New York Life Investment
  Management

  LLC, its Investment Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert H. Dial

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert H. Dial

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NYLIM Flatiron CLO 2003-1 Ltd.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  New York Life Investment
  Management

  LLC, as Collateral Manager and Attorney-

  in-Fact

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert H. Dial

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert H. Dial

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Franklin CLO I, Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard Hsu

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Hsu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
										

 

8

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Franklin CLO III, Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Richard Hsu

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Hsu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Franklin CLO IV, Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Richard Hsu

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Hsu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  FRANKLIN FLOATING RATE DAILY
  ACCESS

  FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Richard Hsu

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Hsu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  FRANKLIN FLOATING RATE MASTER
  SERIES

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Richard Hsu

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Hsu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

9

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  FRANKLIN FLOATING RATE TRUST

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Richard Hsu

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard Hsu

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  GoldenTree High Yield Master
  Fund, Ltd.

  
	
   

  	
  By: GoldenTree Asset
  Management, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Frederick S. Haddad

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frederick S. Haddad

  
	
   

  	
   

  	
  Title:

  	
  Portfolio Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  GoldenTree High Yield
  Opportunities I, LP.

  
	
   

  	
  By: GoldenTree Asset
  Management, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Frederick S. Haddad

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frederick S. Haddad

  
	
   

  	
   

  	
  Title:

  	
  Portfolio Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  GoldenTree High Yield
  Opportunities II, LP.

  
	
   

  	
  By: GoldenTree Asset
  Management, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Frederick S. Haddad

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frederick S. Haddad

  
	
   

  	
   

  	
  Title:

  	
  Portfolio Manager

  
						

 

10

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  GoldenTree Loan Opportunities
  I, Limited

  
	
   

  	
  By: GoldenTree Asset
  Management, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Frederick S. Haddad

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frederick S. Haddad

  
	
   

  	
   

  	
  Title:

  	
  Portfolio Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  GoldenTree Loan Opportunities
  II, Limited

  
	
   

  	
  By: GoldenTree Asset
  Management, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Frederick S. Haddad

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frederick S. Haddad

  
	
   

  	
   

  	
  Title:

  	
  Portfolio Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Hamilton CDO, LTD.

  
	
   

  	
  By:

  	
  Stanfield Capital Partners LLC

  As its Collateral Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Christopher E. Jansen

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Christopher E. Jansen

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Landmark CDO Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Alex Baldwin

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alex Baldwin

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
						

 

11

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Landmark II CDO Limited

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Alex Baldwin

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Alex Baldwin

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  MAPLEWOOD (CAYMAN) LIMITED

  
	
   

  	
  By:  David L. Babson & Company Inc. under

  delegated authority from Massachusetts

  Mutual Life Insurance Company as Investment

  Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Adrienne Musgnug

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Adrienne Musgnug

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  MASSACHUSETTS MUTUAL LIFE
  INSURANCE

  COMPANY

  
	
   

  	
  By:  David L. Babson & Company Inc. as

  Investment Adviser

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Adrienne Musgnug

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Adrienne Musgnug

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  

 

12

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  SIMSBURY CLO, LIMITED

  
	
   

  	
  By:  David L. Babson & Company Inc. under

  delegated authority from Massachusetts

  Mutual Life Insurance Company as Collateral

  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Adrienne Musgnug

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Adrienne Musgnug

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Stanfield Carrera CLO, Ltd.

  
	
   

  	
  By:

  	
  Stanfield Capital Partners LLC
  as its Asset

  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Christopher E. Jansen

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Christopher E. Jansen

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  SUFFIELD CLO, LIMITED

  
	
   

  	
  By:

  	
  David L. Babson & Company
  Inc. as

  Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Adrienne Musgnug

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Adrienne Musgnug

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  

 

13

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  SunAmerica Senior Floating
  Rage Fund Inc.

  
	
   

  	
  By:

  	
  Stanfield Capital Partners LLC
  as

  subadvisor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Christopher E. Jansen

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Christopher E. Jansen

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  UNION BANK OF CALIFORNIA, N.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  Richard J. Salmon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard J. Salmon

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Venture CDO 2002, Limited

  
	
   

  	
   

  
	
   

  	
  By its
  investment advisor MJX Asset

  Management LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael G. Regan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael G. Regan

  
	
   

  	
   

  	
  Title:

  	
  Director

  
						

 

14

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Venture II CDO, Limited

  
	
   

  	
   

  
	
   

  	
  By its investment
  advisor MJX Asset

  Management LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael G. Regan

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael G. Regan

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  Windsor Loan Funding, Limited

  
	
   

  	
  By:

  	
  Stanfield Capital Partners LLC
  as its

  Investment Manager

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher E. Jansen

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Christopher E. Jansen

  
	
   

  	
   

  	
  Title:

  	
  Managing Partner

  
							

 

15EXHIBIT
10.3

 

CREDIT AGREEMENT

 

 

 

 

Dated
as of June 16, 2004

 

between

 

USANA HEALTH SCIENCES, INC.,

 

as
Borrower,

 

BANK OF AMERICA, N.A.,

 

as
Bank

 

TABLE OF CONTENTS

 

 

 

 

 

 

SECTION

 

	
  ARTICLE 
  I DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.01

  	
  Defined Terms

  	
   

  
	
  1.02

  	
  Other Interpretive
  Provisions

  	
   

  
	
  1.03

  	
  Accounting Terms

  	
   

  
	
  1.04

  	
  Rounding

  	
   

  
	
  1.05

  	
  References to
  Agreements and Laws

  	
   

  
	
  1.06

  	
  Letter
  of Credit Amounts

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  II THE COMMITMENT AND CREDIT EXTENSIONS.

  	
   

  
	
   

  	
   

  	
   

  
	
  2.01

  	
  Loans

  	
   

  
	
  2.02

  	
  Borrowings, Conversions and Continuations of
  Loans.

  	
   

  
	
  2.03

  	
  Letters of Credit.

  	
   

  
	
  2.04

  	
  Prepayments.

  	
   

  
	
  2.05

  	
  Repayment
  of Loans

  	
   

  
	
  2.06

  	
  Interest.

  	
   

  
	
  2.07

  	
  Fees

  	
   

  
	
  2.08

  	
  Computation of
  Interest and Fees

  	
   

  
	
  2.09

  	
  Evidence of Debt

  	
   

  
	
  2.10

  	
  Payments
  Generally.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  III TAXES, YIELD PROTECTION AND ILLEGALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  3.01

  	
  Taxes.

  	
   

  
	
  3.02

  	
  Illegality

  	
   

  
	
  3.03

  	
  Inability to
  Determine Eurodollar Rates

  	
   

  
	
  3.04

  	
  Increased
  Cost and Reduced Return; Capital Adequacy.

  	
   

  
	
  3.05

  	
  Funding Losses

  	
   

  
	
  3.06

  	
  Requests for Compensation

  	
   

  
	
  3.07

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.01

  	
  Conditions
  of Initial Credit Extension

  	
   

  
	
  4.02

  	
  Conditions
  to all Credit Extensions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  V REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.01

  	
  Existence, Qualification and Power; Compliance
  with Laws

  	
   

  
	
  5.02

  	
  Authorization; No Contravention

  	
   

  
	
  5.03

  	
  Governmental
  Authorization; Other Consents

  	
   

  
	
  5.04

  	
  Binding Effect

  	
   

  
	
  5.05

  	
  Financial Statements; No Material
  Adverse Effect.

  	
   

  
	
  5.06

  	
  Litigation

  	
   

  
	
  5.07

  	
  No Default

  	
   

  
	
  5.08

  	
  Ownership
  of Property; Liens

  	
   

  
	
  5.09

  	
  Environmental
  Compliance

  	
   

  
	
  5.10

  	
  Insurance

  	
   

  
	
  5.11

  	
  Taxes

  	
   

  
	
  5.12

  	
  ERISA Compliance.

  	
   

  
	
  5.13

  	
  Subsidiaries

  	
   

  
	
  5.14

  	
  Margin Regulations;
  Investment Company Act; Public Utility Holding Company Act.

  	
   

  
	
  5.15

  	
  Disclosure

  	
   

  
	
  5.16

  	
  Compliance with Laws

  	
   

  
	
  5.17

  	
  Intellectual
  Property; Licenses, Etc.

  	
   

  

 

i

 

	
  5.18

  	
  Rights in Collateral;
  Priority of Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  VI AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.01

  	
  Financial Statements

  	
   

  
	
  6.02

  	
  Certificates;
  Other Information

  	
   

  
	
  6.03

  	
  Notices

  	
   

  
	
  6.04

  	
  Payment of Obligations

  	
   

  
	
  6.05

  	
  Preservation
  of Existence, Etc.

  	
   

  
	
  6.06

  	
  Maintenance
  of Properties

  	
   

  
	
  6.07

  	
  Maintenance
  of Insurance

  	
   

  
	
  6.08

  	
  Compliance
  with Laws

  	
   

  
	
  6.09

  	
  Books and Records

  	
   

  
	
  6.10

  	
  Inspection
  Rights

  	
   

  
	
  6.11

  	
  Use of Proceeds

  	
   

  
	
  6.12

  	
  Financial
  Covenants.

  	
   

  
	
  6.13

  	
  Additional
  Guarantors; Pledge of Capital Stock.

  	
   

  
	
  6.14

  	
  Security
  Interests

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  VII NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.01

  	
  Liens

  	
   

  
	
  7.02

  	
  Investments

  	
   

  
	
  7.03

  	
  Indebtedness

  	
   

  
	
  7.04

  	
  Fundamental
  Changes

  	
   

  
	
  7.05

  	
  Dispositions

  	
   

  
	
  7.06

  	
  Restricted
  Payments

  	
   

  
	
  7.07

  	
  Change in Nature of
  Business

  	
   

  
	
  7.08

  	
  Transactions with
  Affiliates

  	
   

  
	
  7.09

  	
  Burdensome
  Agreements

  	
   

  
	
  7.10

  	
  Use of Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  VIII EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  8.01

  	
  Events of Default

  	
   

  
	
  8.02

  	
  Remedies Upon Event of
  Default

  	
   

  
	
  8.03

  	
  Application
  of Funds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 
  IX MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.01

  	
  Amendments; Etc.

  	
   

  
	
  9.02

  	
  Notices
  and Other Communications; Facsimile Copies.

  	
   

  
	
  9.03

  	
  No Waiver; Cumulative
  Remedies

  	
   

  
	
  9.04

  	
  Attorney Costs, Expenses and Taxes

  	
   

  
	
  9.05

  	
  Indemnification by Borrower

  	
   

  
	
  9.06

  	
  Payments
  Set Aside

  	
   

  
	
  9.07

  	
  Successors
  and Assigns

  	
   

  
	
  9.08

  	
  Confidentiality

  	
   

  
	
  9.09

  	
  Set-off

  	
   

  
	
  9.10

  	
  Interest
  Rate Limitation

  	
   

  
	
  9.11

  	
  Counterparts

  	
   

  
	
  9.12

  	
  Integration

  	
   

  
	
  9.13

  	
  Survival of
  Representations and Warranties

  	
   

  
	
  9.14

  	
  Severability

  	
   

  
	
  9.15

  	
  Governing Law; Submission to
  Jurisdiction.

  	
   

  
	
  9.16

  	
  Waiver of Right to Trial by Jury

  	
   

  
	
  9.17

  	
  Mandatory
  Arbitration.

  	
   

  
	
  9.18

  	
  USA
  Patriot Act Notice

  	
   

  
	
  9.19

  	
  Time of
  the Essence

  	
   

  
	
  9.20

  	
  Oral Agreements

  	
   

  

 

ii

 

	
  SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.06

  	
  Litigation

  	
   

  
	
  5.09

  	
  Environmental Matters

  	
   

  
	
  5.13

  	
  Subsidiaries and Other Equity Investments

  	
   

  
	
  5.18

  	
  Intellectual Property Matters

  	
   

  
	
  7.01

  	
  Existing Liens

  	
   

  
	
  7.03

  	
  Existing Indebtedness

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Form of

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  A

  	
  Loan Notice

  	
   

  
	
  B

  	
  Note

  	
   

  
	
  C

  	
  Guaranty

  	
   

  
	
  D

  	
  Pledge Agreement

  	
   

  
	
  E

  	
  Compliance Certificate

  	
   

  

 

iii

 

CREDIT AGREEMENT

 

This
CREDIT AGREEMENT (“Agreement”) is entered into as of June 16, 2004,
between USANA HEALTH SCIENCES, INC., a Utah corporation (“Borrower”) and
BANK OF AMERICA, N.A., a national banking association (“Bank”).

 

Borrower
has requested that Bank provide a revolving credit facility, and Bank is
willing to do so on the terms and conditions set forth herein.

 

In
consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

 

ARTICLE  I
DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined Terms.  As used in this Agreement, the
following terms shall have the meanings set forth below:

 

“Affiliate”
means, with respect to any Person, another Person that directly, or indirectly
through one or more intermediaries, Controls, or is Controlled by or is under
common Control with, the Person specified. 
“Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.

 

“Agreement”
means this Credit Agreement.

 

“Applicable
Rate” means, from time to time, the following percentages per annum, based
upon the Consolidated Leverage Ratio set forth in Section 6.12(c) (the “Financial
Covenant”) as set forth in the most recent Compliance Certificate received
by Bank pursuant to Section 6.02(b):

 

Applicable
Rate

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Eurodollar

  Rate

  +

  	
   

  	
   

  	
   

  
	
  Pricing

  Level

  	
   

  	
  Consolidated

  Leverage Ratio

  	
   

  	
  Commitment fee

  	
   

  	
  Letters of

  Credit

  	
   

  	
  Base Rate +

  	
   

  
	
  1

  	
   

  	
  .75:1

  	
   

  	
  0.25

  	
  %

  	
  1.25

  	
  %

  	
  0.00

  	
  %

  
	
  2

  	
   

  	
  > .75:1 but < 1.0:1

  	
   

  	
  0.50

  	
  %

  	
  1.75

  	
  %

  	
  0.50

  	
  %

  

 

Any
increase or decrease in the Applicable Rate resulting from a change in the
Financial Covenant shall become effective as of the first Business Day of the
month immediately following the date a Compliance Certificate is delivered
pursuant to Section 6.02(b); provided, however, that
if no Compliance Certificate is delivered when due in accordance with such
Section, then Pricing Level 2 shall apply as of the first Business Day of the
month following the date such Compliance Certificate was required to have been
delivered.  The Applicable Rate in effect
from the Closing Date through the first Business Day of the month immediately
following the date a Compliance Certificate is delivered for Borrower’s fiscal
quarter ended July 2, 2004 shall be determined based upon Pricing Level 1.

 

“Attorney
Costs” means and includes all fees, expenses and disbursements of any law
firm or other external counsel and, without duplication, the allocated cost of
internal legal services and all expenses and disbursements of internal counsel.

 

“Attributable
Indebtedness” means, on any date, (a) in respect of any capital lease of
any Person, the capitalized amount thereof that would appear on a balance sheet
of such Person prepared as of such date in accordance with GAAP, and (b) in
respect of any Synthetic Lease Obligation, the capitalized

 

 

amount
of the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP
if such lease were accounted for as a capital lease.

 

“Audited
Financial Statements” means the audited consolidated balance sheet of
Borrower and its Subsidiaries for the fiscal year ended January 3, 2004, and
the related consolidated statements of income or operations, shareholders’
equity and cash flows for such fiscal year of Borrower and its Subsidiaries,
including the notes thereto.

 

“Availability
Period” means the period from and including the Closing Date to the
earliest of (a) the Maturity Date and (b) the date of termination of the
commitment of Bank to make Loans and of the obligation of Bank to make L/C
Credit Extensions pursuant to Section 8.02.

 

“Bank”
has the meaning specified in the introductory paragraph hereto.

 

“Base
Rate” means for any day a fluctuating rate per annum equal to the higher of
(a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest
in effect for such day as publicly announced from time to time by Bank as its
“prime rate.”  The “prime rate” is a rate
set by Bank based upon 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, which may be priced at, above, or below
such announced rate.  Any change in such
rate announced by Bank shall take effect at the opening of business on the day
specified in the public announcement of such change.

 

“Base
Rate Loan” means a Loan that bears interest based on the Base Rate.

 

“Borrower”
has the meaning specified in the introductory paragraph hereto.

 

“Borrower
Account” means account number 68504810 maintained by Borrower with Bank or
such other ordinary checking account maintained by Borrower with Bank
designated by Borrower in a written notice to Bank from time to time.

 

“Business
Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state of Washington and, if such day relates to any Eurodollar
Rate Loan, means any such day on which dealings in Dollar deposits are
conducted by and between banks in the London interbank eurodollar market.

 

“Capital
Expenditure” means, with respect to any Person, any liability incurred or
expenditure made (net of any casualty insurance proceeds or condemnation awards
used to replace fixed assets following a casualty event or condemnation with
respect thereto) by such Person in respect of the purchase or other acquisition
of any fixed or capital asset.

 

“Capital
Stock” means (a) in the case of a corporation, capital stock, (b) in the
case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (c) in the case of a partnership, partnership interests (whether general
or limited), (d) in the case of a limited liability company, membership
interests and (e) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.

 

“Cash
Collateralize” has the meaning specified in Section 2.03(d).

 

“Change
of Control” means an event or series of events by which (a) Myron W. Wentz,
his spouse, members of his immediate family, and/or any of the lineal descendants
of any thereof and/or (b) any trust of similar entity all of the beneficiaries
of which, or a corporation, partnership or limited liability company all of the
stockholders and other equity holders, limited and general partners or members
of which, are (i) solely the Persons in the foregoing clause (a) and/or (ii)
any entity described in this clause (b) all the beneficiaries of which, or all
the stockholders and other equity holders, limited and

 

2

 

general
partners of which, are solely the Persons identified in the foregoing clause
(a), ceases to own and control, directly and indirectly, at least thirty
percent (30%) of Borrower’s capital ownership.

 

“Change
of Management” means an event or series of events (including without
limitation, death, disability, resignation or termination) by which Myron W.
Wentz, David A. Wentz or an Approved Successor with respect to each, ceases to
direct or cause the direction of the management and policies of each Loan
Party.  “Approved Successor” means
a natural person elected by the board of directors of the applicable Loan Party
and reasonably acceptable to Bank not more than one hundred twenty (120) days
after the death, disability, resignation or termination of Myron W. Wentz,
David A. Wentz or an Approved Successor, as the case may be.

 

“Closing
Date” means the first date all the conditions precedent in Section 4.01
are satisfied or waived by Bank.

 

“Code”
means the Internal Revenue Code of 1986.

 

“Collateral”
shall mean any and all assets and rights and interests in or to property of
Borrower and each of the other Loan Parties, whether real or personal, tangible
or intangible, in which a Lien is granted or purported to be granted pursuant
to the Collateral Documents.

 

“Collateral
Documents” means, collectively, the Pledge Agreement and all other
agreements, instruments and documents now or hereafter executed and delivered
in connection with this Agreement pursuant to which Liens are granted or
purported to be granted to Bank in Collateral securing all or part of the
Obligations each in form and substance satisfactory to Bank.

 

“Commitment”
means the obligation of Bank to make Loans and L/C Credit Extensions hereunder
in an aggregate principal amount at any one time not to exceed $10,000,000, as
such amount may be adjusted from time to time in accordance with this
Agreement.

 

“Compliance
Certificate” means a certificate substantially in the form of Exhibit E.

 

“Consolidated
EBITDA” means, for any period, for Borrower and its Subsidiaries on a
consolidated basis, an amount equal to the net income of Borrower and its
Subsidiaries (excluding extraordinary gains but including extraordinary losses)
for such period (“Net Income”) plus (a) the following to the
extent deducted in calculating such Net Income: (i) the sum of (A) all
interest, premium payments, debt discount, fees (including commitment fees and
the amortization of upfront fees), charges and related expenses of Borrower and
its Subsidiaries in connection with borrowed money (excluding capitalized
interest) or in connection with the deferred purchase price of assets for such
period, in each case to the extent treated as interest in accordance with GAAP
and (B) the portion of rent expense of Borrower and its Subsidiaries for such
period under capital leases that is treated as interest in accordance with
GAAP, (ii) the provision for federal, state, local and foreign income taxes
payable by Borrower and its Subsidiaries for such period, (iii) the amount of
depreciation, depletion and amortization expense deducted in determining such
Net Income and (iv) other expenses of Borrower and its Subsidiaries reducing
such Net Income which do not represent a cash item in such period or any future
period and minus (b) all non-cash items increasing Net Income for such
period.

 

“Consolidated
Leverage Ratio” means, as of any date of determination, the ratio of (a)
Consolidated Total Liabilities as of such date to (b) Consolidated Tangible Net
Worth as of such date.

 

“Consolidated
Tangible Net Worth” means, as of any date of determination, for Borrower
and its Subsidiaries on a consolidated basis, the value of total assets
(including leaseholds and leasehold improvements and reserves against assets
but excluding goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, and other like intangibles, and
monies due from Affiliates, officers, directors, employees, shareholders,
members or managers) of Borrower and its Subsidiaries determined in accordance
with GAAP minus Consolidated Total Liabilities.

 

3

 

“Consolidated
Total Liabilities” means, as of any date of determination, for Borrower and
its Subsidiaries on a consolidated basis, the total liabilities of Borrower and
its Subsidiaries determined in accordance with GAAP.

 

“Contractual
Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its property is bound.

 

“Control”
has the meaning specified in the definition of “Affiliate.”

 

“Credit
Extension” means each of the following: (a) a borrowing of a Loan and (b)
an L/C Credit Extension.

 

“Debtor
Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Default”
means any event or condition that constitutes an Event of Default or that, with
the giving of any notice, the passage of time, or both, would be an Event of
Default.

 

“Default
Rate” means an interest rate equal to (a) the Base Rate plus (b) the
Applicable Rate, if any, applicable to Base Rate Loans plus (c) 4% per
annum; provided, however, that with respect to a Eurodollar Rate
Loan, the Default Rate shall be an interest rate equal to the interest rate
(including any Applicable Rate) otherwise applicable to such Loan plus
4% per annum, in each case to the fullest extent permitted by applicable Laws.

 

“Disposition”
or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person, including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

 

“Disregarded
Foreign Subsidiary” shall mean any Foreign Subsidiary the separate
existence of which is disregarded for United States Federal tax purposes under
Treas. Reg. Section 301.7701 3.

 

“Dollar”
and “$” mean lawful money of the United States.

 

“Domestic
Subsidiary” means any Subsidiary that is organized and existing under the
laws of the United States or any state or commonwealth thereof or under the
laws of the District of Columbia.

 

“Environmental
Laws” means any and all Federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

 

“Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of Borrower, any other Loan Party or any of their respective
Subsidiaries directly or indirectly resulting from or based upon (a) violation
of any Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974.

 

4

 

“ERISA
Affiliate” means any trade or business (whether or not incorporated) under
common control with Borrower within the meaning of Section 414(b) or (c) of the
Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).

 

“ERISA
Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that
is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete
or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
an event or condition which constitutes grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Pension
Plan or Multiemployer Plan; or (f) the imposition of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, upon Borrower or any ERISA Affiliate.

 

“Eurodollar
Base Rate” has the meaning specified in the definition of Eurodollar Rate.

 

“Eurodollar
Rate” means for any Interest Period with respect to any Eurodollar Rate
Loan, a rate per annum determined by Bank pursuant to the following formula:

 

	
  Eurodollar Rate  =

  	
   

  	
  Eurodollar Base Rate

  
	
   

  	
   

  	
  1.00 – Eurodollar Reserve Percentage

  

 

Where,

 

“Eurodollar
Base Rate” means, for such Interest Period:

 

(a)           the rate per annum equal to the rate
determined by Bank to be the offered rate that appears on the page of the
Telerate screen (or any successor thereto) that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period, determined as of approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period, or

 

(b)           if the rate referenced in the
preceding clause (a) does not appear on such page or service or such page or
service shall not  be available, the rate
per annum equal to the rate determined by Bank to be the offered rate on such
other page or other service that displays an average British Bankers
Association Interest Settlement Rate for deposits in Dollars (for delivery on the
first day of such Interest Period) with a term equivalent to such Interest
Period, determined as of approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period, or

 

(c)           if the rates referenced in the
preceding clauses (a) and (b) are not available, the rate per annum determined
by Bank as the rate of interest at which deposits in Dollars for delivery on
the first day of such Interest Period in same day funds in the approximate
amount of the Eurodollar Rate Loan being made, continued or converted and with
a term equivalent to such Interest Period would be offered by Bank’s London
Branch to major banks in the London interbank eurodollar market at their
request at approximately 4:00 p.m. (London time) two Business Days prior to the
first day of such Interest Period.

 

“Eurodollar
Reserve Percentage” means, for any day during any Interest Period, the
reserve percentage (expressed as a decimal, carried out to five decimal places)
in effect on such day applicable to Bank, under regulations issued from time to
time by the Board of Governors of the Federal Reserve System of the United
States for determining the maximum reserve requirement (including any
emergency,

 

5

 

supplemental
or other marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as “Eurocurrency liabilities”).  The Eurodollar Rate for each outstanding
Eurodollar Rate Loan shall be adjusted automatically as of the effective date
of any change in the Eurodollar Reserve Percentage.

 

“Eurodollar
Rate Loan” means a Loan that bears interest based on the Eurodollar Rate.

 

“Event
of Default” has the meaning specified in Section 8.01.

 

“Federal
Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided that (a) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Bank on such day on such transactions as determined by Bank.

 

“Financial
Transaction Contract” means any agreement (including all schedules thereto,
confirmations of transactions thereunder, and documents, definitions, and
agreements incorporated therein by reference or relating thereto) between
Borrower or any Subsidiary and Bank or an Affiliate of Bank, whether or not in
writing, pursuant to which Bank or an Affiliate of Bank has agreed to (i)
permit daylight overdrafts to occur on accounts maintained by Borrower or any
Subsidiary with Bank or an Affiliate of Bank, (ii) provide remote disbursement
services for Borrower or any Subsidiary, (iii) process automated clearing house
(ACH) transactions for the account of Borrower or any Subsidiary of Borrower or
(iv) extend credit to Borrower or any Subsidiary, in the form of credit card
accounts and merchant card accounts, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.

 

“Foreign
Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.

 

“GAAP”
means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession in the United
States, that are applicable to the circumstances as of the date of
determination, consistently applied.

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body,
court, administrative tribunal, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.

 

“Guarantee”
means, as to any Person, any (a) any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services
for the purpose of assuring the obligee in respect of such Indebtedness or
other obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (iv) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (b) any Lien
on any assets

 

6

 

of
such Person securing any Indebtedness or other obligation of any other Person,
whether or not such Indebtedness or other obligation is assumed by such
Person.  The amount of any Guarantee
shall be deemed to be an amount equal to the stated or determinable amount of
the related primary obligation, or portion thereof, in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the guaranteeing
Person in good faith.  The term
“Guarantee” as a verb has a corresponding meaning.

 

“Guarantors”
means, collectively, USANA Acquisition Corporation, a Utah corporation, Wasatch
Product Development, Inc., a Utah corporation, and each other Person becomes a
party to the Guaranty pursuant to Section 6.13(a).

 

“Guaranty”
means the Continuing Guaranty made by the Guarantors to and in favor of Bank,
substantially in the form of Exhibit C, as from time to time amended,
restated or otherwise modified.

 

“Hazardous
Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum
or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all
other substances or wastes of any nature regulated pursuant to any
Environmental Law.

 

“Honor
Date” has the meaning specified in Section 2.03(c)(i).

 

“Indebtedness”
means, as to any Person at a particular time, without duplication, all of the
following, whether or not included as indebtedness or liabilities in accordance
with GAAP:

 

(a)           all obligations of such Person for
borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes, loan agreements or other similar instruments;

 

(b)           all direct or contingent obligations
of such Person arising under letters of credit (including standby and
commercial), bankers’ acceptances, bank guaranties, surety bonds and similar
instruments;

 

(c)           net obligations of such Person under
any Swap Contract;

 

(d)           all obligations of such Person to pay
the deferred purchase price of property or services (other than trade accounts
payable in the ordinary course of business);

 

(e)           indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased by
such Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;

 

(f)            capital leases and Synthetic Lease
Obligations; and

 

(g)           all Guarantees of such Person in
respect of any of the foregoing.

 

For
all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person.  The
amount of any net obligation under any Swap Contract on any date shall be
deemed to be the Swap Termination Value thereof as of such date.  The amount of any capital lease or Synthetic
Lease Obligation as of any date shall be deemed to be the amount of
Attributable Indebtedness in respect thereof as of such date.

 

“Indemnified
Liabilities” has the meaning specified in Section  9.05.

 

“Indemnitees”
has the meaning specified in Section  9.05.

 

7

 

“Information”
has the meaning specified in Section 9.08.

 

“Interest
Payment Date” means, (a) as to any Loan other than a Base Rate Loan, the
last day of each Interest Period applicable to such Loan and the Maturity Date;
and (b) as to any Base Rate Loan, the first Business Day after the end of each
March, June, September and December and the Maturity Date.

 

“Interest
Period” means as to each Eurodollar Rate Loan, the period commencing on the
date such Eurodollar Rate Loan is disbursed or converted to or continued as a
Eurodollar Rate Loan and ending on the date one, two or three months
thereafter, as selected by Borrower in its Loan Notice; provided that:

 

(a)           any Interest Period that would
otherwise end on a day that is not a Business Day shall be extended to the next
succeeding Business Day unless, such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding Business
Day;

 

(b)           any Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and

 

(c)           no Interest Period shall extend
beyond the Maturity Date.

 

“Investment”
means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a loan, advance or
capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in, another
Person, including any partnership or joint venture interest in such other
Person, or (c) the purchase or other acquisition (in one transaction or a
series of transactions) of assets of another Person that constitute a business
unit.  For purposes of covenant
compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.

 

“IP
Rights” has the meaning specified in Section 5.17.

 

“IRS”
means the United States Internal Revenue Service.

 

“Laws”
means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

 

“L/C
Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the renewal or increase of
the amount thereof.

 

“L/C
Obligations” means, as at any date of determination, the aggregate undrawn
amount of all outstanding Letters of Credit plus the aggregate of all
unreimbursed drawings under all Letters of Credit.

 

“Lending
Office” means the office of Bank located at the address set forth in Section
9.02, or such other office or offices as Bank may from time to time notify
Borrower.

 

“Letter
of Credit” means any letter of credit issued hereunder.  A Letter of Credit may be a commercial letter
of credit or a standby letter of credit.

 

8

 

“Letter
of Credit Application” means an application and agreement for the issuance
or amendment of a Letter of Credit in the form from time to time in use by Bank.

 

“Letter
of Credit Expiration Date” means the day that is seven days prior to the
Maturity Date then in effect (or, if such day is not a Business Day, the next
preceding Business Day).

 

“Letter
of Credit Sublimit” means an amount equal to $500,000.  The Letter of Credit Sublimit is part of, and
not in addition to, the Commitment.

 

“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
and any financing lease having substantially the same economic effect as any of
the foregoing.

 

“Loan”
has the meaning specified in Section 2.01.

 

“Loan
Documents” means this Agreement, the Note, each Collateral Document and the
Guaranty.

 

“Loan
Notice” means a notice of (a) a borrowing of a Loan, (b) a conversion of a
Loan from one Type to the other, or (c) a continuation of a Eurodollar Rate
Loan as the same Type, pursuant to Section 2.02(a), which, if in
writing, shall be substantially in the form of Exhibit A.

 

“Loan
Parties” means, collectively, Borrower and each Person (other than Bank)
executing a Loan Document, including each Guarantor and each Person executing a
Collateral Document.

 

“Material
Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent), condition (financial or otherwise) or prospects of Borrower or
Borrower and its Subsidiaries taken as a whole or the Collateral; (b) a
material impairment of the ability of any Loan Party to perform its obligations
under any Loan Document to which it is a party; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability against
any Loan Party of any Loan Document to which it is a party.

 

“Material
Subsidiary” means any Subsidiary that during the then current fiscal year
of Borrower (on a pro forma basis) or either of the two most recently ended
fiscal years of Borrower, accounts or accounted for 10% or more of the
consolidated revenue of Borrower.

 

“Maturity
Date” means May 30, 2006.

 

“Minimum
Tangible Net Worth” means, as of any date of determination, the sum of (a)
Thirty-two Million Dollars ($32,000,000) plus (b) the sum of the
following for Borrower and its Subsidiaries on a consolidated basis:  (i) the sum of (A) 20% of net income after
income taxes (without subtracting losses) earned in each quarterly accounting
period commencing January 3, 2004 through January 7, 2005 and (B) 30% of net
income after taxes (without subtracting losses) earned in each quarterly
accounting period commencing after January 7, 2005; (ii) the net proceeds from
any equity securities issued after January 3, 2004; and (iii) any increase in
stockholders’ equity resulting from the conversion of debt securities to equity
securities after January 3, 2004.

 

“Multiemployer
Plan” means any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which Borrower or any ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

 

“Note”
means a promissory note made by Borrower in favor of Bank evidencing Loans made
by Bank, substantially in the form of Exhibit B.

 

9

 

“Obligations”
means all advances to, and debts, liabilities, obligations, covenants and duties
of, any Loan Party arising under any Loan Document or otherwise with respect to
any Loan or Letter of Credit, whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest and fees that accrue after
the commencement by or against any Loan Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest and fees are allowed
claims in such proceeding.

 

“Organization
Documents” means, (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws (or equivalent or comparable
constitutive documents with respect to any non-U.S. jurisdiction); (b) with
respect to any limited liability company, the certificate or articles of
formation or organization and operating agreement; and (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Outstanding
Amount” means (i) with respect to Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any borrowings and
prepayments or repayments of Loans occurring on such date; and (ii) with
respect to any L/C Obligations on any date, the amount of such L/C Obligations
on such date after giving effect to any L/C Credit Extension occurring on such
date and any other changes in the aggregate amount of the L/C Obligations as of
such date, including as a result of any reimbursements of outstanding unpaid
drawings under any Letters of Credit or any reductions in the maximum amount
available for drawing under Letters of Credit taking effect on such date.

 

“PBGC”
means the Pension Benefit Guaranty Corporation.

 

“Pension
Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to
Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA
Affiliate or to which Borrower or any ERISA Affiliate contributes or has an
obligation to contribute, or in the case of a multiple employer or other plan
described in Section 4064(a) of ERISA, has made contributions at any time
during the immediately preceding five plan years.

 

“Permitted
Acquisition” means any acquisition, whether by purchase, merger or
otherwise, of all or substantially all of the assets of, or more than 50% of
the voting Capital Stock of, or a business line or a division of, any Person; provided
that:

 

(a)           all Persons, assets, business lines
or divisions acquired shall be in the type of business permitted to be engaged
in by Borrower and its Subsidiaries pursuant to Section 7.07 or such
other lines of business as may be consented to by Bank;

 

(b)           no Default or Event of Default shall
then exist or would exist after giving effect to such acquisition;

 

(c)           as of the closing of any acquisition,
such acquisition shall have been approved by the board of directors or
equivalent governing body of the Person to be acquired or from which such
assets, business line or division is to be acquired;

 

(d)           not less than 15 Business Days prior
to the consummation of any acquisition for consideration (including assumed
liabilities, earnout payments and any other deferred payment) in excess of
$5,000,000, Borrower shall have delivered to Bank a written description of the
Person, assets, business line or division to be acquired and its operations;

 

10

 

(e)           Borrower shall demonstrate to the
reasonable satisfaction of Bank that, after giving effect to such acquisition,
Borrower will be in pro forma compliance with all of the terms and provisions
of the financial covenants set forth in Section 6.12; and

 

(f)            if such acquisition is structured as
a merger, Borrower (or if such merger is with any Subsidiary, then such
Subsidiary) shall be the surviving Person after giving effect to such merger.

 

“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other
entity.

 

“Plan”
means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by Borrower or, with respect to any such plan that is
subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.

 

“Pledge
Agreement” means the Pledge Agreement made by Borrower to and in favor of
Bank, substantially in the form of Exhibit D, as from time to time
amended, restated or otherwise modified.

 

“Pledged
Subsidiary” has the meaning specified in Section 6.13(b).

 

“Reportable
Event” means any of the events set forth in Section 4043(c) of ERISA, other
than events for which the 30 day notice period has been waived.

 

“Request
for Credit Extension” means (a) with respect to a borrowing, conversion or
continuation of a Loan, a Loan Notice, and (b) with respect to an L/C Credit
Extension, a Letter of Credit Application.

 

“Responsible
Officer” means the chief executive officer, president, chief financial
officer, or treasurer of a Loan Party. 
Any document delivered hereunder that is signed by a Responsible Officer
of a Loan Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Loan
Party and such Responsible Officer shall be conclusively presumed to have acted
on behalf of such Loan Party.

 

“Restricted
Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any capital stock or other equity
interest of Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such capital stock or other equity interest or of any
option, warrant or other right to acquire any such capital stock or other
equity interest.

 

“Subordinated
Liabilities” means liabilities subordinated to the Obligations in a manner
acceptable to Bank its sole discretion.

 

“Subsidiary”
of a Person means a corporation, partnership, joint venture, limited liability
company or other business entity of which a majority of the Capital Stock
having ordinary voting power for the election of directors or other governing
body (other than Capital Stock having such power only by reason of the
happening of a contingency) are at the time beneficially owned, or the
management of which is otherwise controlled, directly, or indirectly through
one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references
herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of Borrower.

 

“Swap
Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity
options, forward commodity contracts, equity or equity index swaps or options,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar

 

11

 

transactions
or any combination of any of the foregoing (including any options to enter into
any of the foregoing), whether or not any such transaction is governed by or
subject to any master agreement, and (b) any and all transactions of any kind,
and the related confirmations, which are subject to the terms and conditions
of, or governed by, any form of master agreement published by the International
Swaps and Derivatives Association, Inc., any International Foreign Exchange
Master Agreement, or any other master agreement (any such master agreement, together
with any related schedules, a “Master Agreement”), including any such
obligations or liabilities under any Master Agreement.

 

“Swap
Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the
date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as
the mark-to-market value(s) for such Swap Contracts, as determined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include Bank or any
Affiliate Bank).

 

“Synthetic
Lease Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do
not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of
such Person (without regard to accounting treatment).

 

“Threshold
Amount” means $500,000.

 

“Total
Outstandings” means the aggregate Outstanding Amount of all Loans and all
L/C Obligations.

 

“Type”
means, with respect to a Loan, its character as a Base Rate Loan or a
Eurodollar Rate Loan.

 

“Unfunded
Pension Liability” means the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.

 

“United
States” and “U.S.” mean the United States of America.

 

1.02        Other Interpretive Provisions.  With reference to this Agreement and each
other Loan Document, unless otherwise specified herein or in such other Loan
Document:

 

(a)           The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms.

 

(b)           (i)            The
words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import
when used in any Loan Document shall refer to such Loan Document as a whole and
not to any particular provision thereof; (ii) Article, Section, Exhibit and
Schedule references are to the Loan Document in which such reference appears;
(iii) the term “including” is by way of example and not limitation; and (iv)
the term “documents” includes any and all instruments, documents, agreements,
certificates, notices, reports, financial statements and other writings,
however evidenced, whether in physical or electronic form.

 

(c)           In the computation of periods of time
from a specified date to a later specified date, the word “from” means “from
and including;” the words “to” and “until” each mean “to but excluding;” and
the word “through” means “to and including.”

 

12

 

(d)           Section headings herein and in the
other Loan Documents are included for convenience of reference only and shall
not affect the interpretation of this Agreement or any other Loan Document.

 

1.03        Accounting Terms.             (a)           All
accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial
ratios and other financial calculations) required to be submitted pursuant to
this Agreement shall be prepared in conformity with, GAAP applied on a
consistent basis, as in effect from time to time, applied in a manner
consistent with that used in preparing the Audited Financial Statements, except
as otherwise specifically prescribed herein.

 

(b)           If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and either Borrower or Bank shall so request, Bank and Borrower
shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP (subject to the
approval of Bank); provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) Borrower shall provide to Bank financial statements and
other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

 

1.04        Rounding.  Any
financial ratios required to be maintained by Borrower pursuant to this
Agreement shall be calculated by dividing the appropriate component by the
other component, carrying the result to one place more than the number of
places by which such ratio is expressed herein and rounding the result up or
down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05        References to Agreements and Laws.  Unless otherwise expressly provided herein,
(a) references to Organization Documents, agreements (including the Loan
Documents) and other contractual instruments shall be deemed to include all
subsequent amendments, restatements, extensions, supplements and other
modifications thereto, but only to the extent that such amendments,
restatements, extensions, supplements and other modifications are not
prohibited by any Loan Document; and (b) references to any Law shall include
all statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such Law.

 

1.06        Letter of Credit Amounts.  Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean
the maximum face amount of such Letter of Credit after giving effect to all
increases thereof contemplated by such Letter of Credit or the Letter of Credit
Application therefor, whether or not such maximum face amount is in effect at
such time.

 

ARTICLE  II
THE COMMITMENT AND CREDIT EXTENSIONS.

 

2.01        Loans.  Subject to
the terms and conditions set forth herein, Bank agrees to make loans (each such
loan, a “Loan”) to Borrower from time to time, on any Business Day
during the Availability Period, in an aggregate amount not to exceed at any
time outstanding the amount of the Commitment; provided, however,
that after giving effect to any borrowing, the Total Outstandings shall not
exceed the Commitment.  Within the limits
of the Commitment, and subject to the other terms and conditions hereof,
Borrower may borrow under this Section 2.01, prepay under Section
2.04, and reborrow under this Section 2.01.  A Loan may be a Base Rate Loan or a
Eurodollar Rate Loan, as further provided herein.

 

2.02        Borrowings, Conversions and Continuations of Loans.

 

(a)           Each borrowing, each conversion of a
Loan from one Type to the other, and each continuation of a Eurodollar Rate
Loan shall be made upon Borrower’s irrevocable notice to Bank, which may be
given by telephone.  Each such notice
must be received by Bank not later than 1:00 p.m., Seattle time, (i) three
Business Days prior to the requested date of any borrowing of, conversion to or
continuation of a Eurodollar Rate Loan or of any conversion of a Eurodollar
Rate Loan to a Base Rate Loan, and (ii) on the requested date of any borrowing
of a Base Rate Loan.  Notwithstanding
anything to

 

13

 

the
contrary contained herein, but subject to the provisions of Section 9.02(d),
any such telephonic notice may be given by an individual who has been
authorized in writing to do so by a Responsible Officer of Borrower.  Each such telephonic notice must be confirmed
promptly by delivery to Bank of a written Loan Notice, appropriately completed
and signed by a Responsible Officer of Borrower.  Each borrowing of, conversion to or continuation
of a Eurodollar Rate Loan shall be in a principal amount of $100,000 or a whole
multiple of $50,000 in excess thereof. 
Except as provided in Section 2.03(c), each borrowing of or
conversion to a Base Rate Loan shall be in a principal amount of $50,000 or a
whole multiple of $10,000 in excess thereof. 
Each Loan Notice (whether telephonic or written) shall specify (i)
whether Borrower is requesting a borrowing, a conversion of a Loan from one
Type to the other, or a continuation of a Eurodollar Rate Loan, (ii) the
requested date of the borrowing, conversion or continuation, as the case may be
(which shall be a Business Day), (iii) the principal amount of the Loan to be
borrowed, converted or continued, (iv) the Type of Loan to be borrowed or to which
an existing Loan is to be converted, and (v) if applicable, the duration of the
Interest Period with respect thereto.  If
Borrower fails to specify a Type of Loan in a Loan Notice or if Borrower fails
to give a timely notice requesting a conversion or continuation, then the
applicable Loan shall be made as, or converted to, a Base Rate Loan.  Any such automatic conversion to a Base Rate
Loan shall be effective as of the last day of the Interest Period then in
effect with respect to the applicable Eurodollar Rate Loan.  If Borrower requests a borrowing of,
conversion to, or continuation of a Eurodollar Rate Loan in any such Loan
Notice, but fails to specify an Interest Period, it will be deemed to have
specified an Interest Period of one month.

 

(b)           Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if a borrowing is the initial
Credit Extension, Section 4.01), Bank shall make the proceeds of each
Loan available to Borrower either by (i) crediting the Borrower Account with
the amount of such proceeds or (ii) wire transfer of such proceeds, in each
case in accordance with instructions provided to (and reasonably acceptable to)
Bank by Borrower; provided, however, that if on the date of the Loan Notice
with respect to such borrowing is given, there are drawings under Letters of
Credit that have not been reimbursed by Borrower, then the proceeds of such
borrowing shall be applied, first, to the payment in full of any such
unreimbursed drawings, and second, to Borrower as provided above.

 

(c)           Except as otherwise provided herein,
a Eurodollar Rate Loan may be continued or converted only on the last day of an
Interest Period for such Eurodollar Rate Loan. 
During the existence of a Default, no Loan may be requested as,
converted to or continued as Eurodollar Rate Loans without the consent of Bank,
and Bank may demand that any or all of the then outstanding Eurodollar Rate
Loans be converted immediately to Base Rate Loans and Borrower agrees to pay
all amounts due under Section 3.05 in accordance with the terms thereof
due to any such conversion.

 

(d)           Bank shall promptly notify Borrower
of the interest rate applicable to any Interest Period for a Eurodollar Rate
Loan upon determination of such interest rate. 
The determination of the Eurodollar Rate by Bank shall be conclusive in
the absence of manifest error.  At any
time that a Base Rate Loan is outstanding, Bank shall notify Borrower of any
change in Bank’s prime rate used in determining the Base Rate promptly
following the public announcement of such change.

 

(e)           After giving effect to all
borrowings, all conversions of Loans from one Type to the other, and all
continuations of Loans as the same Type, there shall not be more than ten
Interest Periods in effect.

 

2.03        Letters of Credit.

 

(a)           The Letter of Credit Commitment.

 

(i)            Subject to the terms and conditions
set forth herein, Bank agrees (A) from time to time on any Business Day during
the period from the Closing Date until the Letter of Credit Expiration Date, to
issue Letters of Credit for the account of Borrower or certain Subsidiaries,
and to amend or renew Letters of Credit previously issued by it, in accordance
with subsection (b) below, and (B) to honor drafts under the Letters of Credit;
provided that Bank shall not be obligated to make any L/C Credit
Extension with respect to any Letter of Credit, if as of the date

 

14

 

of
such L/C Credit Extension, (y) the Total Outstandings would exceed the
Commitment, or (z) the Outstanding Amount of the L/C Obligations would exceed
the Letter of Credit Sublimit.  Within
the foregoing limits, and subject to the terms and conditions hereof,
Borrower’s ability to obtain Letters of Credit shall be fully revolving, and
accordingly Borrower may, during the foregoing period, obtain Letters of Credit
to replace Letters of Credit that have expired or that have been drawn upon and
reimbursed.

 

(ii)           Bank shall be under no obligation to
issue any Letter of Credit if:

 

(A)          any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms purport to enjoin or
restrain Bank from issuing such Letter of Credit, or any Law applicable to Bank
or any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over Bank shall prohibit, or request
that Bank refrain from, the issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon Bank with respect to such
Letter of Credit any restriction, reserve or capital requirement (for which
Bank is not otherwise compensated hereunder) not in effect on the Closing Date,
or shall impose upon Bank any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which Bank in good faith deems material to
it;

 

(B)           the expiry date of such requested
Letter of Credit would occur more than twelve months after the date of issuance
or last renewal;

 

(C)           the expiry date of such requested
Letter of Credit would occur after the Letter of Credit Expiration Date; or

 

(D)          the issuance of such Letter of Credit
would violate one or more policies of Bank.

 

(iii)          Bank shall be under no obligation to
amend any Letter of Credit if (A) Bank would have no obligation at such time to
issue such Letter of Credit in its amended form under the terms hereof, or (B)
the beneficiary of such Letter of Credit does not accept the proposed amendment
to such Letter of Credit.

 

(b)           Procedures for Issuance and
Amendment of Letters of Credit.

 

(i)            Each Letter of Credit shall be issued
or amended, as the case may be, upon the request of Borrower delivered to Bank
in the form of a Letter of Credit Application, appropriately completed and
signed by a Responsible Officer of Borrower. 
Such Letter of Credit Application must be received by Bank not later
than 1:00 p.m., Seattle time, at least two Business Days (or such later date
and time as Bank may agree in a particular instance in its sole discretion)
prior to the proposed issuance date or date of amendment, as the case may be.

 

(ii)           Upon Bank’s determination that the
requested issuance or amendment is permitted in accordance with the terms
hereof, then, subject to the terms and conditions hereof, Bank shall, on the
requested date, issue a Letter of Credit for the account of Borrower or enter
into the applicable amendment, as the case may be, in each case in accordance
with Bank’s usual and customary business practices.

 

(iii)          Promptly after its delivery of any
Letter of Credit or any amendment to a Letter of Credit to an advising bank with
respect thereto or to the beneficiary thereof, Bank will also deliver to
Borrower a true and complete copy of such Letter of Credit or amendment.

 

15

 

(c)           Drawings and Reimbursements.

 

(i)            Upon receipt from the beneficiary of
any Letter of Credit of any notice of a drawing under such Letter of Credit,
Bank shall notify Borrower thereof.  Not
later than 1:00 p.m., Seattle time, on the date of any payment by Bank under a
Letter of Credit (each such date, an “Honor Date”), Borrower shall
reimburse Bank in an amount equal to the amount of such drawing.  If Borrower fails to so reimburse Bank,
Borrower shall be deemed to have requested a borrowing of a Base Rate Loan to
be disbursed on the Honor Date in an amount equal to the amount of such
unreimbursed drawing, without regard to the minimum and multiples specified in Section
2.02 for the principal amount of Base Rate Loans, but subject to the amount
of the unutilized portion of the Commitment and the conditions set forth in Section
4.02 (other than the delivery of a Loan Notice).

 

(ii)           If Borrower fails to reimburse Bank
for any drawing under any Letter of Credit (whether by means of a borrowing or
otherwise), such unreimbursed amount shall be due and payable on demand
(together with interest) and shall bear interest at the Default Rate.

 

(d)           Cash Collateral.  Upon the request of Bank, (i) if Bank has
honored any full or partial drawing request under any Letter of Credit and such
drawing has not been reimbursed on the applicable Honor Date, or (ii) if, as of
the Letter of Credit Expiration Date, any Letter of Credit may for any reason
remain outstanding and partially or wholly undrawn, Borrower shall immediately
Cash Collateralize the then Outstanding Amount of all L/C Obligations (in an
amount equal to such Outstanding Amount determined as of the applicable Honor
Date or the Letter of Credit Expiration Date, as the case may be).  For purposes hereof, “Cash Collateralize”
means to pledge and deposit with or deliver to Bank, as collateral for the L/C
Obligations, cash or deposit account balances pursuant to documentation in form
and substance satisfactory to Bank. 
Derivatives of such term have corresponding meanings.  Borrower hereby grants to Bank a security
interest in all such cash, deposit accounts and all balances therein and all
proceeds of the foregoing.  Cash
collateral shall be maintained in blocked deposit accounts at Bank.

 

(e)           Letter of Credit Fees.  Borrower shall pay to Bank (i) a Letter of
Credit fee for each commercial Letter of Credit equal to one-half of 1% per
annum times the daily maximum amount available to be drawn under such Letter of
Credit (whether or not such maximum amount is then in effect under such Letter
of Credit), and (ii) a Letter of Credit fee for each standby Letter of Credit
equal to the Applicable Rate times the daily maximum amount available to be
drawn under such Letter of Credit (whether or not such maximum amount is then
in effect under such Letter of Credit). 
Such letter of credit fees shall be computed on a quarterly basis in
arrears.  Such letter of credit fees
shall be due and payable on the first Business Day after the end of each March,
June, September and December, commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration
Date and thereafter on demand.  If there
is any change in the Applicable Rate during any quarter, the daily maximum
amount of each standby Letter of Credit shall be computed and multiplied by the
Applicable Rate separately for each period during such quarter that such
Applicable Rate was in effect.

 

(f)            Documentary and Processing
Charges Payable to Bank.  Borrower
shall pay to Bank the customary issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of Bank relating to letters of
credit as from time to time in effect. 
Such customary fees and standard costs and charges are due and payable
on demand and are nonrefundable.

 

(g)           Conflict with Letter of Credit
Application.  In the event of any
conflict between the terms hereof and the terms of any Letter of Credit
Application, the terms hereof shall control.

 

2.04        Prepayments.

 

(a)           Borrower may, upon notice to Bank, at
any time or from time to time voluntarily prepay any Loan in whole or in part
without premium or penalty; provided that (i) such notice must be received by
Bank not later than 1:00 p.m., Seattle time, (A) three Business Days prior to
any date of prepayment of a Eurodollar Rate Loan, and (B) on the date of
prepayment of a Base Rate Loan; (ii) any prepayment of a Eurodollar Rate Loan
shall be in a principal amount of $100,000 or a whole multiple of $50,000 in
excess

 

16

 

thereof;
and (iii) any prepayment of a Base Rate Loan shall be in a principal amount of
$50,000 or a whole multiple of $10,000 in excess thereof or, in each case, if
less, the entire principal amount thereof then outstanding.  Each such notice shall specify (i) the date
and amount of such prepayment and (ii) the Type(s) of Loans to be prepaid.  If such notice is given by Borrower, Borrower
shall make such prepayment and the payment amount specified in such notice
shall be due and payable on the date specified therein.  Any prepayment of a Eurodollar Rate Loan
shall be accompanied by all accrued interest thereon, together with any
additional amounts required pursuant to Section 3.05.

 

(b)           If for any reason the Total
Outstandings at any time exceed the Commitment then in effect, Borrower shall
immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an
aggregate amount equal to such excess; provided, however, that Borrower shall
not be required to Cash Collateralize the L/C Obligations pursuant to this Section
2.04(b) unless after the prepayment in full of the Loans the Total
Outstandings exceed the Commitment then in effect.

 

2.05        Repayment of Loans.  Borrower shall repay to Bank on the Maturity
Date the aggregate principal amount of Loans outstanding on such date.

 

2.06        Interest.

 

(a)           Subject to the provisions of
subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the
outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the Eurodollar Rate for such Interest Period plus the Applicable
Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding
principal amount thereof from the applicable borrowing date at a rate per annum
equal to the Base Rate plus the Applicable Rate.

 

(b)           If any amount payable by Borrower
under any Loan Document is not paid when due (without regard to any applicable
grace periods), whether at stated maturity by acceleration or otherwise, such
amount shall thereafter bear interest at a fluctuating interest rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable Laws.  Furthermore, while any
Event of Default exists (or after acceleration), Borrower shall pay interest on
the principal amount of all outstanding Obligations at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.  Accrued
and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.

 

(c)           Interest on each Loan shall be due
and payable in arrears on each Interest Payment Date applicable thereto and at
such other times as may be specified herein. 
Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.

 

2.07        Fees.  In addition
to certain fees described in subsections (e) and (f) of Section 2.03,
Borrower shall pay to Bank a commitment fee equal to the Applicable Rate times
the actual daily amount by which the Commitment exceeds the Total
Outstandings.  The commitment fee shall
accrue at all times during the Availability Period, including at any time
during which one or more conditions in Article IV is not met, and shall
be due and payable quarterly in arrears on the first Business Day after the end
of each March, June, September and December, commencing with the first such
date to occur after the Closing Date, and on the Maturity Date.  The commitment fee shall be calculated
quarterly in arrears, and if there is any change in the Applicable Rate during
any quarter, the actual daily amount shall be computed and multiplied by the
Applicable Rate separately for each period during such quarter that such
Applicable Rate was in effect.

 

2.08        Computation of Interest and Fees.  All computations of interest for Base Rate
Loans when the Base Rate is determined by Bank’s “prime rate” shall be made on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed.  All other computations of fees
and interest shall be made on the basis of a 360-day year and actual days
elapsed (which results in more fees or interest, as applicable, being paid than
if computed on the basis of a 365-day year). 
Interest shall accrue on each Loan for the day on which the Loan is
made, and shall not accrue on a Loan, or any portion thereof, for

 

17

 

the
day on which the Loan or such portion is paid, provided that any Loan
that is repaid on the same day on which it is made shall, subject to Section
2.10(a), bear interest for one day.

 

2.09        Evidence of Debt.  The Credit Extensions made by Bank shall be
evidenced by one or more accounts or records maintained by Bank in the ordinary
course of business.  The accounts or
records maintained by Bank shall be conclusive absent manifest error of the
amount of the Credit Extensions made by Bank to Borrower and the interest and
payments thereon.  Any failure to so
record or any error in doing so shall not, however, limit or otherwise affect
the obligation of Borrower hereunder to pay any amount owing with respect to
the Obligations.  Borrower shall execute
and deliver to Bank a Note, which shall evidence the Loans, in addition to such
accounts or records.  Bank may attach
schedules to the Note and endorse thereon the date, Type, amount and maturity
of each Loan and payments with respect thereto.

 

2.10        Payments Generally.

 

(a)           (i) All payments to be made by
Borrower shall be made without condition or deduction for any counterclaim,
defense, recoupment or setoff.  Except as
otherwise expressly provided herein, all payments by Borrower hereunder shall
be made to Bank in Dollars and in immediately available funds not later than
3:00 p.m., Seattle time, on the date specified herein.  All payments received by Bank after 3:00
p.m., Seattle time, shall be deemed received on the next succeeding Business
Day and any applicable interest or fee shall continue to accrue.

 

(ii)
On each date when the payment of any principal, interest or fees are due
hereunder or under the Note, Borrower agrees to maintain on deposit in the
Borrower Account an amount sufficient to pay such principal, interest or fees
in full on such date.  Borrower hereby
authorizes Bank (A) to deduct automatically all principal, interest or fees
when due hereunder or under the Note from the Borrower Account, and (B) if and
to the extent any payment of principal, interest or fees under this Agreement
or the Note is not made when due to deduct any such amount from any or all of
the accounts of Borrower maintained at Bank. 
Bank agrees to provide written notice to Borrower of any automatic
deduction made pursuant to this Section 2.10(a)(ii) showing in
reasonable detail the amounts of such deduction.

 

(b)           If any payment to be made by Borrower
shall come due on a day other than a Business Day, payment shall be made on the
next following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be.

 

(c)           Nothing herein shall be deemed to
obligate Bank to obtain the funds for any Loan in any particular place or
manner or to constitute a representation by Bank that it has obtained or will
obtain the funds for any Loan in any particular place or manner.

 

ARTICLE  III
TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01        Taxes.

 

(a)           Any and all payments by Borrower to
or for the account of Bank under any Loan Document shall be made free and clear
of and without deduction for any and all present or future taxes, duties,
levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding taxes imposed on
or measured by its overall net income, and franchise taxes imposed on it (in
lieu of net income taxes), by the jurisdiction (or any political subdivision
thereof) under the Laws of which Bank is organized or maintains a lending
office (all such non-excluded taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings or similar charges, and liabilities being
hereinafter referred to as “Taxes”). 
If Borrower shall be required by any Laws to deduct any Taxes from or in
respect of any sum payable under any Loan Document to Bank, (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section), Bank receives an amount equal to the sum it would have received had
no such deductions been made, (ii) Borrower shall make such deductions, (iii)
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with

 

18

 

applicable
Laws, and (iv) within 30 days after the date of such payment, Borrower shall
furnish to Bank the original or a certified copy of a receipt evidencing
payment thereof.

 

(b)           In addition, Borrower agrees to pay
any and all present or future stamp, court or documentary taxes and any other
excise or property taxes or charges or similar levies which arise from any
payment made under any Loan Document or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, any
Loan Document (hereinafter referred to as “Other Taxes”).

 

(c)           If Borrower shall be required to
deduct or pay any Taxes or Other Taxes from or in respect of any sum payable
under any Loan Document to Bank, Borrower shall also pay to Bank, at the time
interest is paid, such additional amount that Bank specifies is necessary to
preserve the after-tax yield (after factoring in all taxes, including taxes
imposed on or measured by net income) that Bank would have received if such
Taxes or Other Taxes had not been imposed.

 

(d)           Borrower agrees to indemnify Bank for
(i) the full amount of Taxes and Other Taxes (including any Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this
Section) paid by Bank, (ii) amounts payable under Section 3.01(c) and
(iii) any liability (including additions to tax, penalties, interest and
expenses) arising therefrom or with respect thereto, in each case whether or
not such Taxes or Other Taxes were correctly or legally imposed or asserted by
the relevant Governmental Authority. 
Payment under this subsection (d) shall be made within 30 days after the
date Bank makes a demand therefor.

 

3.02        Illegality.  If
Bank determines that any Law has made it unlawful, or that any Governmental
Authority has asserted that it is unlawful, for Bank or its Lending Office to
make, maintain or fund Eurodollar Rate Loans, or to determine or charge
interest rates based upon the Eurodollar Rate, then, on notice thereof by Bank
to Borrower, any obligation of Bank to make or continue Eurodollar Rate Loans
or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended until
Bank notifies Borrower that the circumstances giving rise to such determination
no longer exist.  Upon receipt of such
notice, Borrower shall, upon demand from Bank, prepay or, if applicable, convert
all Eurodollar Rate Loans to Base Rate Loans, either on the last day of the
Interest Period therefor, if Bank may lawfully continue to maintain such
Eurodollar Rate Loans to such day, or immediately, if Bank may not lawfully
continue to maintain such Eurodollar Rate Loans.  Upon any such prepayment or conversion,
Borrower shall also pay accrued interest on the amount so prepaid or converted.

 

3.03        Inability to Determine Eurodollar
Rates.  If Bank determines that for any
reason adequate and reasonable means do not exist for determining the
Eurodollar Base Rate for any requested Interest Period with respect to a
proposed Eurodollar Rate Loan, or that the Eurodollar Base Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does
not adequately and fairly reflect the cost to Bank of funding such Loan, Bank
will promptly so notify Borrower. 
Thereafter, the obligation of Bank to make or maintain Eurodollar Rate
Loans shall be suspended until Bank revokes such notice.  Upon receipt of such notice, Borrower may revoke
any pending request for a borrowing of, conversion to or continuation of a
Eurodollar Rate Loan or, failing that, will be deemed to have converted such
request into a request for a borrowing of a Base Rate Loan in the amount
specified therein.

 

3.04        Increased Cost and Reduced Return;
Capital Adequacy.

 

(a)           If Bank determines that as a result
of the introduction of or any change in or in the interpretation of any Law, or
Bank’s compliance therewith, there shall be any increase in the cost to Bank of
agreeing to make or making, funding or maintaining Eurodollar Rate Loans or (as
the case may be) issuing Letters of Credit, or a reduction in the amount
received or receivable by Bank in connection with any of the foregoing
(excluding for purposes of this subsection (a) any such increased costs or
reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section
3.01 shall govern), (ii) changes in the basis of taxation of overall net
income or overall gross income by the United States or any foreign jurisdiction
or any political subdivision of either thereof under the Laws of which Bank is
organized or has its Lending Office, and (iii) reserve requirements utilized in
the determination of the Eurodollar Rate), then

 

19

 

from
time to time upon demand of Bank, Borrower shall pay to Bank such additional
amounts as will compensate Bank for such increased cost or reduction.

 

(b)           If Bank determines that the
introduction of any Law regarding capital adequacy or any change therein or in
the interpretation thereof, or compliance by Bank (or its Lending Office)
therewith, has the effect of reducing the rate of return on the capital of Bank
or any corporation controlling Bank as a consequence of Bank’s obligations
hereunder (taking into consideration its policies with respect to capital
adequacy and Bank’s desired return on capital), then from time to time upon
demand of Bank, Borrower shall pay to Bank such additional amounts as will
compensate Bank for such reduction.

 

3.05        Funding Losses.  Upon
demand of Bank from time to time, Borrower shall promptly compensate Bank for
and hold Bank harmless from any loss, cost or expense incurred by it as a
result of:

 

(a)           any continuation, conversion, payment
or prepayment of any Loan other than a Base Rate Loan on a day other than the
last day of the Interest Period for such Loan (whether voluntary, mandatory,
automatic, by reason of acceleration, or otherwise); or

 

(b)           any failure by Borrower (for a reason
other than the failure of Bank to make a Loan) to prepay, borrow, continue or
convert any Loan other than a Base Rate Loan on the date or in the amount
notified by Borrower,

 

including any loss of anticipated profits
and any loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained. 
Borrower shall also pay any customary administrative fees charged by Bank
in connection with the foregoing.

 

For
purposes of calculating amounts payable by Borrower to Bank under this Section
3.05, Bank shall be deemed to have funded each Eurodollar Rate Loan at the
Eurodollar Base Rate used in determining the Eurodollar Rate for such Loan by a
matching deposit or other borrowing in the London interbank eurodollar market
for a comparable amount and for a comparable period, whether or not such
Eurodollar Rate Loan was in fact so funded.

 

3.06        Requests for Compensation.  A certificate of Bank claiming compensation
under this Article III and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.  In determining such
amount, Bank may use any reasonable averaging and attribution methods.

 

3.07        Survival.  All
of Borrower’s obligations under this Article III shall survive
termination of the Commitment and repayment of all other Obligations hereunder.

 

ARTICLE  IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01        Conditions of Initial Credit Extension.  The obligation of Bank to make its initial
Credit Extension hereunder is subject to satisfaction of the following
conditions precedent:

 

(a)           Bank’s receipt of the following, each
of which shall be originals or facsimiles (followed promptly by originals) unless
otherwise specified, each properly executed by a Responsible Officer of the
signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date)
and each in form and substance satisfactory to Bank and its legal counsel:

 

(i)            executed counterparts of this
Agreement, sufficient in number for distribution to Bank and Borrower;

 

(ii)           a Note executed by Borrower in favor
of Bank;

 

20

 

(iii)          executed counterparts of the Guaranty,
sufficient in number for distribution to Bank and Borrower;

 

(iv)          such certificates of resolutions or
other action, incumbency certificates and/or other certificates of Responsible
Officers of each Loan Party as Bank may require evidencing the identity,
authority and capacity of each Responsible Officer thereof authorized to act as
a Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party;

 

(v)           such documents and certifications as
Bank may reasonably require to evidence that each Loan Party is duly organized
or formed and that Borrower and each Guarantor is, validly existing, in good
standing and qualified to engage in business in each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect;

 

(vi)          a certificate of a Responsible Officer
of each Loan Party either (A) attaching copies of all consents, licenses and
approvals required in connection with the execution, delivery and performance
by such Loan Party and the validity against such Loan Party of the Loan
Documents to which it is a party, and such consents, licenses and approvals
shall be in full force and effect, or (B) stating that no such consents,
licenses or approvals are so required;

 

(vii)         a certificate signed by a Responsible
Officer of Borrower certifying (A) that the conditions specified in Sections
4.02(a) and (b) have been satisfied, and (B) that there has been no
event or circumstance since the date of the Audited Financial Statements that
has had or could be reasonably be expected to have a Material Adverse Effect;

 

(viii)        evidence that all insurance required to
be maintained pursuant to the Loan Documents has been obtained and is in
effect; and

 

(ix)           such other assurances, certificates,
documents, consents, evidence of perfection of all Liens securing the Obligations
or opinions as Bank reasonably may require.

 

(b)           Bank’s receipt of the Collateral
Documents, each of which shall be originals or facsimiles (followed promptly by
originals) unless otherwise specified, each properly executed by a Responsible
Officer of the signing Loan Party, each dated the Closing Date (or, in the case
of certificates of governmental officials, a recent date before the Closing
Date) and each in form and substance satisfactory to Bank and its legal
counsel, together with:

 

(i)            acknowledgment copies of all Uniform
Commercial Code financing statements filed to perfect the security interests of
Bank, or other evidence satisfactory to Bank that there has been filed all
financing statements, registrations and other recordings necessary and advisable
to perfect the Liens of Bank in accordance with applicable law;

 

(ii)           all certificates and instruments
representing the Collateral (including the Capital Stock of each first tier
Material Subsidiary of the types and in the percentages described in Section
6.13(b) based on the organizational chart referred to in subsection (c)
below), stock transfer powers executed in blank with signatures guaranteed as
Bank may specify and, if relevant, a completed Federal Reserve Form U-1 for
Bank;

 

(iii)          evidence that all other actions
necessary or, in the opinion of Bank, desirable to perfect and protect the
first priority security interest created by the Collateral Documents and to
enhance the ability of Bank to preserve and protect its interests in the Collateral
have been taken.

 

21

 

(c)           Bank’s receipt of the following
information:

 

(i)            a financial projection for Borrower
and its Subsidiaries, prepared on a quarterly basis, for the fiscal year ending
January 1, 2005 setting forth the projected revenues, expenses, assets,
liabilities and equity and the underlying assumptions therefore, all in
reasonable detail and certified by a Responsible Officer of Borrower as having
been prepared and furnished to Bank in good faith and based on estimates and
assumptions that were believed by the management of Borrower to be reasonable
in light of the then current and foreseeable business conditions of Borrower
and its Subsidiaries; and

 

(ii)           an organizational chart for Borrower
and its Subsidiaries as of January 3, 2004, setting forth the identity,
ownership, location, revenues, assets and equity of each Person legally or
beneficially owned, directly, or indirectly through one or more intermediaries,
by Borrower, certified by a Responsible Officer of Borrower as being true and
correct in all material respects.

 

(d)           Any fees required to be paid on or
before the Closing Date shall have been paid.

 

(e)           Borrower shall have paid all Attorney
Costs of Bank to the extent invoiced prior to or on the Closing Date, plus
such additional amounts of Attorney Costs as shall constitute its reasonable
estimate of Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a
final settling of accounts between Borrower and Bank).

 

(f)            The Closing Date shall have occurred
on or before July 15, 2004.

 

4.02        Conditions to all Credit Extensions.  The obligation of Bank to make any Credit
Extension is subject to the following conditions precedent:

 

(a)           The representations and warranties of
Borrower and each other Loan Party contained in Article V or any other
Loan Document, or which are contained in any document furnished at any time
under or in connection herewith or therewith, shall be true and correct in all
material respects on and as of the date of such Credit Extension, except to the
extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct as of such earlier
date, and except that for purposes of this Section 4.02, the
representations and warranties contained in subsections (a) and (b) of Section
5.05 shall be deemed to refer to the most recent statements furnished
pursuant to clauses (a) and (b), respectively, of Section 6.01.

 

(b)           No Default shall exist, or would
result from such proposed Credit Extension.

 

(c)           Bank shall have received a Request
for Credit Extension in accordance with the requirements hereof.

 

(d)           Bank shall have received, in form and
substance satisfactory to it, such other assurances, certificates, documents or
consents related to the foregoing as Bank reasonably may require.

 

Each
Request for Credit Extension (other than a Loan Notice requesting only a
conversion of a Loan to the other Type or a continuation of a Eurodollar Rate
Loan) submitted by Borrower shall be deemed to be a representation and warranty
that the conditions specified in Sections 4.02(a) and (b) have
been satisfied on and as of the date of the applicable Credit Extension.

 

ARTICLE  V
REPRESENTATIONS AND WARRANTIES

 

Borrower
represents and warrants to Bank that:

 

5.01        Existence, Qualification and Power; Compliance with Laws.  Each Loan Party (a) is a corporation or
limited liability company duly organized or formed, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation or
organization, (b) has all requisite power and

 

22

 

authority
and all requisite governmental licenses, authorizations, consents and approvals
to (i) own its assets and carry on its business and (ii) execute, deliver and
perform its obligations under the Loan Documents to which it is a party, (c) is
duly qualified and is licensed and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license, and (d) is in
compliance with all Laws; except in each case referred to in clauses (b)(i),
(c) or (d), to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.

 

5.02        Authorization; No Contravention.  The execution, delivery and performance by
each Loan Party of each Loan Document to which such Person is party, have been
duly authorized by all necessary corporate or other organizational action, and
do not and will not (a) contravene the terms of any of such Person’s
Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, (i) any Contractual
Obligation to which such Person is a party or (ii) any order, injunction, writ
or decree of any Governmental Authority or any arbitral award to which such
Person or its property is subject; or (c) violate any Law.

 

5.03        Governmental Authorization; Other
Consents.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document.

 

5.04        Binding Effect.  This
Agreement has been, and each other Loan Document, when delivered hereunder,
will have been, duly executed and delivered by each Loan Party that is party
thereto.  This Agreement constitutes, and
each other Loan Document when so delivered will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable against each Loan Party that
is party thereto in accordance with its terms, except as may be limited by
equitable principles relating to enforceability.

 

5.05        Financial Statements; No Material Adverse Effect.

 

(a)           The Audited Financial Statements (i)
were prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein; (ii)
fairly present the financial condition of Borrower and its Subsidiaries as of
the date thereof and their results of operations for the period covered thereby
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; and (iii) show all
material indebtedness and other liabilities, direct or contingent, of Borrower
and its Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and Indebtedness.

 

(b)           The unaudited consolidated balance
sheet of Borrower and its Subsidiaries dated April 3, 2004, and the related
consolidated statements of income or operations, shareholders’ equity and cash
flows for the fiscal quarter ended on that date and for the portion of
Borrower’s fiscal year then ended (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and; (ii) fairly present the financial condition of
Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, subject in the case of clauses
(i) and (ii), to the absence of footnotes and to normal year-end audit
adjustments.  Schedule 5.05 sets
forth all material indebtedness and other liabilities, direct or contingent, of
Borrower and its consolidated Subsidiaries as of the date of such financial
statements, including liabilities for taxes, material commitments and
Indebtedness.

 

(c)           Since the date of the Audited
Financial Statements, there has been no event or circumstance, either
individually or in the aggregate, that has had or could reasonably be expected
to have a Material Adverse Effect.

 

5.06        Litigation. 
Except as specifically disclosed in Schedule 5.06, there are no
actions, suits, proceedings, claims or disputes pending or, to the knowledge of
Borrower after due and diligent

 

23

 

investigation,
threatened or contemplated, at law, in equity, in arbitration or before any
Governmental Authority, by or against Borrower or any of its Subsidiaries or against
any of their properties or revenues that (a) purport to affect or pertain to
this Agreement or any other Loan Document, or any of the transactions
contemplated hereby, or (b) either individually or in the aggregate, if
determined adversely, could reasonably be expected to have a Material Adverse
Effect.

 

5.07        No Default. 
Neither Borrower nor any Subsidiary is in default under or with respect
to any Contractual Obligation that could either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or
would result from the consummation of the transactions contemplated by this
Agreement or any other Loan Document.

 

5.08        Ownership of Property; Liens.  Each of Borrower and each Subsidiary has good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of its business,
except for such defects in title as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  The property of Borrower and its Subsidiaries
is subject to no Liens, other than Liens permitted by Section 7.01.

 

5.09        Environmental Compliance.  Borrower and its Subsidiaries conduct in the
ordinary course of business a review of the effect of existing Environmental
Laws and claims alleging potential liability or responsibility for violation of
any Environmental Law on their respective businesses, operations and
properties, and as a result thereof Borrower has reasonably concluded that,
except as specifically disclosed in Schedule 5.09, such Environmental
Laws and claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

5.10        Insurance.  The
properties of Borrower and its Subsidiaries are insured with financially sound
and reputable insurance companies not Affiliates of Borrower, in such amounts,
after giving effect to any self-insurance compatible with the following
standards, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where Borrower or the applicable Subsidiary operates.

 

5.11        Taxes.  Borrower
and its Subsidiaries have filed all Federal, state and other material tax
returns and reports required to be filed, and have paid all Federal, state and
other material taxes, assessments, fees and other governmental charges levied
or imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with GAAP.  To the
best knowledge of Borrower, there is no proposed tax assessment against
Borrower or any Subsidiary that would, if made, have a Material Adverse Effect.

 

5.12        ERISA Compliance.

 

(a)           Each Plan is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Federal or state Laws.  Each Plan that is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the best knowledge
of Borrower, nothing has occurred which would prevent, or cause the loss of,
such qualification.  Borrower and each
ERISA Affiliate have made all required contributions to each Plan subject to
Section 412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.

 

(b)           There are no pending or, to the best
knowledge of Borrower, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan that could reasonably be
expected to have a Material Adverse Effect. 
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan that has resulted or could
reasonably be expected to result in a Material Adverse Effect.

 

24

 

(c)           (i) No ERISA Event has occurred or is
reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) neither Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13        Subsidiaries.  As
of the Closing Date, Borrower has no Subsidiaries other than those specifically
disclosed in Part (a) of Schedule 5.13 and has no equity
investments in any other corporation or entity other than those specifically
disclosed in Part (b) of Schedule 5.13.

 

5.14        Margin Regulations; Investment Company Act;
Public Utility Holding Company Act.

 

(a)           Borrower is not engaged and will not
engage, principally or as one of its important activities, in the business of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System of the United States),
or extending credit for the purpose of purchasing or carrying margin stock.

 

(b)           None of Borrower, any Person
Controlling Borrower, or any Subsidiary (i) is a “holding company,” or a
“subsidiary company” of a “holding company,” or an “affiliate” of a “holding
company” or of a “subsidiary company” of a “holding company,” within the
meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.

 

5.15        Disclosure. 
Borrower has disclosed to Bank all agreements, instruments and corporate
or other restrictions to which it or any of its Subsidiaries is subject, and
all other matters known to it, that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate
or other information furnished (whether in writing or orally) by or on behalf
of any Loan Party to Bank in connection with the transactions contemplated
hereby and the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected
financial information, Borrower represents only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.

 

5.16        Compliance with Laws.  Borrower, each Subsidiary and each other Loan
Party is in compliance in all material respects with the requirements of all
Laws and all orders, writs, injunctions and decrees applicable to it or to its
properties, except in such instances in which (a) such requirement of Law or
order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply
therewith, either individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

 

5.17        Intellectual Property; Licenses, Etc.  Borrower and its Subsidiaries own, or possess
the right to use, all of the trademarks, service marks, trade names,
copyrights, patents, patent rights, franchises, licenses and other intellectual
property rights (collectively, “IP Rights”) that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person.  To
the best knowledge of Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by Borrower or any Subsidiary infringes upon any
rights held by any other Person.  Except
as specifically disclosed in Schedule 5.18, no claim or litigation
regarding any of the foregoing is pending or, to the best knowledge of
Borrower, threatened, which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

25

 

5.18        Rights in Collateral; Priority of Liens.  Borrower and each other Loan Party own the
property granted by it as Collateral under the Collateral Documents, free and
clear of any and all Liens in favor of third parties.  Upon the proper filing of UCC financing
statements, and the taking of the other actions required by Bank, the Liens
granted pursuant to the Collateral Documents will constitute valid and enforceable
first, prior and perfected Liens on the Collateral in favor of Bank.

 

ARTICLE  VI
AFFIRMATIVE COVENANTS

 

So
long as the Commitment shall be in effect, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall
remain outstanding, Borrower shall, and shall (except in the case of the
covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11)
cause each Subsidiary to:

 

6.01        Financial Statements. 
Deliver to Bank, in form and detail satisfactory to Bank:

 

(a)           as soon as available, but in any
event within 90 days after the end of each fiscal year of Borrower, a
consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such fiscal year, and the related consolidated statements of income or operations,
shareholders’ equity and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and prepared in accordance with GAAP, audited and accompanied
by a report and opinion of an independent certified public accountant of
nationally recognized standing reasonably acceptable to Bank, which report and
opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to any “going concern” or like qualification
or exception or any qualification or exception as to the scope of such audit;
and

 

(b)           as soon as available, but in any
event within 45 days after the end of each of the first three fiscal quarters
of each fiscal year of Borrower, a consolidated balance sheet of Borrower and
its Subsidiaries as at the end of such fiscal quarter, and the related
consolidated statements of income or operations, shareholders’ equity and cash
flows for such fiscal quarter and for the portion of Borrower’s fiscal year
then ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, all in reasonable detail and certified by
a Responsible Officer of Borrower as fairly presenting the financial condition,
results of operations, shareholders equity and cash flows of Borrower and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.

 

As
to any information contained in materials furnished pursuant to Section
6.02(f), Borrower shall not be separately required to furnish such
information under clause (a) or (b) above, but the foregoing shall not be in
derogation of the obligation of Borrower to furnish the information and
materials described in subsections (a) and (b) above at the times specified
therein.

 

6.02        Certificates; Other Information.  Deliver to Bank, in form and detail
satisfactory to Bank:

 

(a)           concurrently with the delivery of the
financial statements referred to in Section 6.01(a), a certificate of its
independent certified public accountants certifying such financial statements;

 

(b)           concurrently with the delivery of the
financial statements referred to in Sections 6.01(a) and (b), a duly completed
Compliance Certificate signed by a Responsible Officer of Borrower;

 

(c)           promptly after any request by Bank,
copies of any detailed audit reports, management letters or recommendations
submitted to the board of directors (or the audit committee of the board of
directors) of Borrower by independent accountants in connection with the
accounts or books of Borrower or any Subsidiary, or any audit of any of them;

 

(d)           as soon as available, but in any
event within 90 days after the end of each fiscal year of Borrower (commencing
with the fiscal year ended January 1, 2005), a financial projection for
Borrower

 

26

 

and
its Subsidiaries, prepared on a quarterly basis, for the next succeeding fiscal
year setting forth the projected revenues, expenses, assets, liabilities and
equity and the underlying assumptions therefore, all in reasonable detail and
certified by a Responsible Officer of Borrower as having been prepared and
furnished to Bank in good faith and based on estimates and assumptions that
were believed by the management of Borrower to be reasonable in light of the
then current and foreseeable business conditions of Borrower and its
Subsidiaries;

 

(e)           as soon as available, but in any
event within 90 days after the end of each fiscal year of Borrower (commencing
with the fiscal year ended January 1, 2005), an organizational chart for
Borrower and its Subsidiaries as of such fiscal year end, setting forth the
identity, ownership, location, revenues, assets and equity of each Person
legally or beneficially owned, directly, or indirectly through one or more
intermediaries, by Borrower, certified by a Responsible Officer of Borrower as
being true and correct in all material respects.

 

(f)            promptly after the same are
available, copies of each annual report, proxy or financial statement or other
report or communication sent to the stockholders of Borrower, and copies of all
annual, regular, periodic and special reports and registration statements which
Borrower may file or be required to file with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934,
and not otherwise required to be delivered to Bank pursuant hereto; and

 

(g)           promptly, such additional information
regarding the business, financial or corporate affairs of Borrower or any
Subsidiary, or compliance with the terms of the Loan Documents, as Bank may
from time to time reasonably request.

 

6.03        Notices.  Promptly
notify Bank:

 

(a)           of the occurrence of any Default;

 

(b)           of any matter that has resulted or
could reasonably be expected to result in a Material Adverse Effect, including
(i) breach or non-performance of, or any default under, a Contractual
Obligation of Borrower or any Subsidiary; (ii) any dispute, litigation,
investigation, proceeding or suspension between Borrower or any Subsidiary and
any Governmental Authority; (iii) any material loss of, damage to or
destruction of the Collateral or any part thereof, or (iv) the commencement of,
or any material development in, any litigation or proceeding affecting Borrower
or any Subsidiary, including pursuant to any applicable Environmental Laws;

 

(c)           of the occurrence of any ERISA Event;
and

 

(d)           of any material change in accounting
policies or financial reporting practices by Borrower or any Subsidiary.

 

Each
notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of Borrower setting forth details of the occurrence
referred to therein and stating what action Borrower has taken and proposes to
take with respect thereto.  Each notice
pursuant to Section 6.03(a) shall describe with particularity any and
all provisions of this Agreement and any other Loan Document that have been
breached.

 

6.04        Payment of Obligations.  Pay and discharge as the same shall become
due and payable, all its obligations and liabilities, including (a) all tax
liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained by Borrower or such Subsidiary; (b)
all lawful claims which, if unpaid, would by law become a Lien upon its
property; and (c) all Indebtedness, as and when due and payable, but subject to
any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness.

 

27

 

6.05        Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full force
and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization, except in a transaction permitted by Section
7.04 or 7.05; (b) take all reasonable action to maintain all rights,
privileges, permits, licenses and franchises necessary or desirable in the
normal conduct of its business, except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect; and (c)
preserve or renew all of its registered patents, trademarks, trade names and
service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect.

 

6.06        Maintenance of Properties.  (a) Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in
good working order and condition, ordinary wear and tear excepted; (b) make all
necessary repairs thereto and renewals and replacements thereof except where the
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.

 

6.07        Maintenance of Insurance.  In addition to insurance requirements set
forth in the Collateral Documents, maintain with financially sound and
reputable insurance companies not Affiliates of Borrower, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts (after giving effect to any self-insurance
compatible with the following standards) as are customarily carried under
similar circumstances by such other Persons and providing for not less than 30
days’ prior notice to Bank of termination, lapse or cancellation of such
insurance.  All casualty insurance
maintained by Borrower in respect of the Collateral shall name Bank as loss payee
and all liability insurance shall name Bank as additional insured.  Upon request of Bank, furnish Bank, at
reasonable intervals (but not more than once per calendar year) a certificate
of a Responsible Officer of Borrower (and, if requested by Bank, any insurance
broker of Borrower) setting forth the nature and extent of all insurance
maintained by Borrower and its Subsidiaries in accordance with this Section
6.07 or any Collateral Documents (and which, in the case of a certificate
of a broker, were placed through such broker).

 

6.08        Compliance with Laws.  Comply in all material respects with the
requirements of all Laws, and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted; or (b)
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.

 

6.09        Books and Records.  (a)
Maintain proper books of record and account, in which full, true and correct
entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of
Borrower or such Subsidiary, as the case may be; and (b) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over Borrower or such
Subsidiary, as the case may be.  Borrower
shall maintain at all times books and records pertaining to the Collateral in
such detail, form and scope as Bank shall reasonably require.

 

6.10        Inspection Rights.  Permit representatives and independent
contractors of Bank to visit and inspect any of its properties, to examine its
corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and to discuss its affairs, finances and accounts with its
directors, officers, and independent public accountants, all at the expense of
Borrower and at such reasonable times during normal business hours and as often
as may be reasonably desired, upon reasonable advance notice to Borrower; provided,
however, that when a Default exists Bank (or any of its representatives
or independent contractors) may do any of the foregoing at the expense of
Borrower at any time during normal business hours and without advance notice.

 

6.11        Use of Proceeds.  Use
the proceeds of the Credit Extensions to fund Permitted Acquisitions and for
general corporate purposes not in contravention of any Law or of any Loan
Document.

 

28

6.12        Financial Covenants.

 

(a)           Consolidated EBITDA.  Maintain on a consolidated basis, for each
fiscal quarter of Borrower, Consolidated EBITDA equal to or greater than Five
Million Dollars ($5,000,000).

 

(b)           Consolidated Tangible Net Worth.  Maintain on a consolidated basis, as of the
end of each fiscal quarter of Borrower, Consolidated Tangible Net Worth equal
to or greater than the Minimum Tangible Net Worth.

 

(c)           Consolidated Leverage Ratio.  Maintain a Consolidated Leverage Ratio, as of
the end of each fiscal quarter of Borrower, equal to or less than 1.0 to 1.0.

 

6.13        Additional Guarantors; Pledge of
Capital Stock.

 

(a)           Additional Guarantors.  Promptly (and in any event within 30 days)
following the date an organizational chart is delivered pursuant to Section
6.02(e), cause each Material Subsidiary that is a Domestic Subsidiary and
is not then a Guarantor to (a) become a Guarantor by executing and delivering
to Bank a counterpart of the Guaranty or such other document as Bank shall deem
appropriate for such purpose and (b) deliver to Bank documents of the types
referred to in clauses (iv) and (v) of Section 4.01(a), all in form,
content and scope reasonably satisfactory to Bank.

 

(b)           Pledge of Capital Stock.  Promptly (and in any event within 30 days) following
the date an organizational chart is delivered pursuant to Section 6.02(e),
(i) grant a Lien in favor of Bank on (A) 100% of the Capital Stock of each
first tier Material Subsidiary that is a Domestic Subsidiary, (B) 100% of the
Capital Stock of each first tier Material Subsidiary that is a Disregarded
Foreign Subsidiary whose Capital Stock is not owned in any part by a Foreign
Subsidiary (other than a Disregarded Foreign Subsidiary), (C) 65% of the voting
Capital Stock and 100% of the non-voting Capital Stock of each first tier
(after ignoring all Disregarded Foreign Subsidiaries which may be a direct or
indirect stockholder) Material Subsidiary that is a Foreign Subsidiary, or (D)
the remaining Capital Stock of any first tier Material Subsidiary that was a
Foreign Subsidiary (other than a Disregarded Foreign Subsidiary) but that later
became a Disregarded Foreign Subsidiary, in each case to the extent Bank does
not already have a Lien on such Capital Stock pursuant to the Pledge Agreement,
to secure the Obligations by executing and delivering to Bank a supplement to
the Pledge Agreement or such other document as Bank shall deem appropriate for
such purpose and (ii) deliver to Bank all certificates and instruments
representing the Capital Stock described in clause (i) together with stock
transfer powers executed in blank with signatures guaranteed as Bank may
specify and, if relevant, a completed Federal Reserve Form U-1 for Bank and
(iii) take such action as may be necessary or otherwise requested by Bank to
ensure that the Lien described in clause (i) is a perfected Lien of first
priority.

 

6.14        Security Interests.  Defend, and to cause each other Loan Party
to, defend the Collateral against all claims and demands of all Persons at any
time claiming the same or any interest therein. 
Borrower shall, and shall cause each other Loan Party, to do whatever
Bank may reasonably request, from time to time, to effect the purposes of this
Agreement and the other Loan Documents.

 

ARTICLE VII
NEGATIVE COVENANTS

 

So
long as the Commitment shall be in effect, any Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall
remain outstanding, Borrower shall not, nor shall it permit any Subsidiary to,
directly or indirectly:

 

7.01        Liens.  Create,
incur, assume or suffer to exist, any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than the following:

 

(a)           Liens pursuant to any Loan Document;

 

29

 

(b)           Liens existing on the date hereof and
listed on Schedule 7.01 and any renewals or extensions thereof, provided
that the property covered thereby is not increased and any renewal or extension
of the obligations secured or benefited thereby is permitted by Section
7.03(b);

 

(c)           Liens for taxes not yet due or which
are being contested in good faith and by appropriate proceedings diligently
conducted, if (i) adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP, and (ii) in the case of
a Lien against any of the Collateral, such contest proceedings operate to stay
the sale of any portion of the Collateral to satisfy such taxes;

 

(d)           carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other like Liens arising in the
ordinary course of business which are not overdue for a period of more than 30
days or which are being contested in good faith and by appropriate proceedings
diligently conducted, if (i) adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP and
(ii) in the case of a Lien against any of the Collateral, such contest
proceedings operate to stay the sale of any portion of the Collateral to satisfy
such Liens;

 

(e)           pledges or deposits in the ordinary
course of business in connection with workers’ compensation, unemployment
insurance and other social security legislation, other than any Lien imposed by
ERISA;

 

(f)            deposits to secure the performance of
bids, trade contracts and leases (other than Indebtedness), statutory
obligations, surety bonds (other than bonds related to judgments or
litigation), performance bonds and other obligations of a like nature incurred
in the ordinary course of business;

 

(g)           easements, rights-of-way,
restrictions and other similar encumbrances affecting real property which, in
the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the applicable Person;

 

(h)           Liens securing judgments for the
payment of money not constituting an Event of Default under Section 8.01(h)
or securing appeal or other surety bonds related to such judgments; and

 

(i)            Liens securing Indebtedness
permitted under Section 7.03(f); provided that (i) such Liens do
not at any time encumber any property other than the property financed by such
Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost
or fair market value, whichever is lower, of the property being acquired on the
date of acquisition.

 

7.02        Investments.  Make
any Investments, except:

 

(a)           Investments held by Borrower or such
Subsidiary in the form of cash equivalents, short-term marketable debt
securities or investment grade marketable equity securities;

 

(b)           advances to officers, directors and
employees of Borrower and Subsidiaries in an aggregate amount not to exceed
$250,000 at any time outstanding, for travel, entertainment, relocation and
analogous ordinary business purposes;

 

(c)           Investments of Borrower in any
wholly-owned Subsidiary that, prior to making such Investment, was a Guarantor
and Investments of any Guarantor in Borrower or in another Guarantor;

 

(d)           Permitted Acquisitions made by
Borrower or any Subsidiary not exceeding $10,000,000 in aggregate consideration
(including assumed liabilities, earnout payments and any other deferred
payment) in any fiscal year of Borrower;

 

30

 

(e)           Investments of Borrower in any
Subsidiary that is not a Guarantor or a Pledged Subsidiary and Investments of
any Guarantor in any Subsidiary that is not a Guarantor not exceeding
$1,000,000 in the aggregate in any fiscal year of Borrower;

 

(f)            Investments consisting of extensions
of credit in the nature of accounts receivable or notes receivable arising from
the grant of trade credit in the ordinary course of business, and Investments
received in satisfaction or partial satisfaction thereof from financially
troubled account debtors to the extent reasonably necessary in order to prevent
or limit loss;

 

(g)           Guarantees permitted by Section
7.03; and

 

(h)           other Investments made in the
ordinary course of business not exceeding $500,000 in the aggregate in any
fiscal year of Borrower.

 

7.03        Indebtedness. 
Create, incur, assume or suffer to exist any Indebtedness, except:

 

(a)           Indebtedness under the Loan
Documents;

 

(b)           Indebtedness outstanding on the date
hereof and listed on Schedule 7.03 and any refinancings, refundings,
renewals or extensions thereof; provided that the amount of such
Indebtedness is not increased at the time of such refinancing, refunding,
renewal or extension except by an amount equal to a reasonable premium or other
reasonable amount paid, and fees and expenses reasonably incurred, in
connection with such refinancing and by an amount equal to any existing
commitments unutilized thereunder; provided, further, that if
such Indebtedness constitutes Subordinated Liabilities, such Indebtedness is
refinanced on subordination terms at least as favorable to Bank and no more
restrictive on Borrower than the Subordinated Liabilities being refinanced, and
in an amount not less than the amount outstanding at the time of refinancing;

 

(c)           obligations (contingent or otherwise)
of any Subsidiary existing or arising under bank guaranties issued by Bank in
an aggregate principal amount not to exceed $2,000,000 at any time outstanding.

 

(d)           Guarantees of Borrower or any
Guarantor in respect of Indebtedness otherwise permitted hereunder of Borrower
or any other Guarantor;

 

(e)           obligations (contingent or otherwise)
of Borrower or any Subsidiary existing or arising under any Swap Contract, provided
that (i) such obligations are (or were) entered into by such Person in the
ordinary course of business for the purpose of directly mitigating risks
associated with liabilities, commitments, investments, assets, or property held
or reasonably anticipated by such Person, or changes in the value of securities
issued by such Person and not for purposes of speculation or taking a “market
view;” and (ii) such Swap Contract does not contain any provision exonerating
the non-defaulting party from its obligation to make payments on outstanding
transactions to the defaulting party;

 

(f)            Indebtedness in respect of capital
leases, Synthetic Lease Obligations and purchase money obligations for fixed or
capital assets within the limitations set forth in Section 7.01(i); provided,
however, that the aggregate amount of all such Indebtedness at any one
time outstanding shall not exceed $500,000; and

 

(g)           unsecured Indebtedness in an
aggregate principal amount not to exceed $500,000 at any time outstanding.

 

7.04        Fundamental Changes.  Merge, dissolve, liquidate, consolidate with
or into, another Person, or Dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except that, so long
as no Default exists or would result therefrom:

 

31

 

(a)           any Subsidiary may merge with (i)
Borrower, provided that Borrower shall be the continuing or surviving
Person, or (ii) any one or more other Subsidiaries, provided that when
any wholly-owned Subsidiary is merging with another Subsidiary, the
wholly-owned Subsidiary shall be the continuing or surviving Person, and, provided
further that if a Guarantor is merging with another Subsidiary, the
Guarantor shall be the continuing or surviving Person; and

 

(b)           any Subsidiary may Dispose of all or
substantially all of its assets (upon voluntary liquidation or otherwise), to
Borrower or to another Subsidiary; provided that if the transferor in
such a transaction is a wholly-owned Subsidiary, then the transferee must also
be a wholly-owned Subsidiary, and, provided  further that if the
transferor of such assets is a Guarantor, the transferee thereof must either be
Borrower or a Guarantor.

 

7.05        Dispositions.  Make
any Disposition or enter into any agreement to make any Disposition, except:

 

(a)           Dispositions of obsolete or worn out
property, whether now owned or hereafter acquired, in the ordinary course of
business;

 

(b)           Dispositions of inventory in the
ordinary course of business;

 

(c)           Dispositions of equipment or real
property to the extent that (i) such property is exchanged for credit against
the purchase price of similar replacement property, or (ii) the proceeds of
such Disposition are reasonably promptly applied to the purchase price of such
replacement property;

 

(d)           Dispositions of property by any
Subsidiary to Borrower or to a wholly-owned Subsidiary, provided that if
the transferor of such property is a Guarantor, the transferee thereof must
either be Borrower or a Guarantor;

 

(e)           Dispositions permitted by Section
7.04;

 

(f)            non-exclusive licenses of IP Rights
in the ordinary course of business and substantially consistent with past
practice for terms not exceeding five years; and

 

(g)           Dispositions by Borrower and its
Subsidiaries not otherwise permitted under this Section 7.05; provided
that (i) at the time of such Disposition, no Default shall exist or would
result from such Disposition and (ii) the aggregate book value of all property
Disposed of in reliance on this clause (g) in any fiscal year shall not exceed
$500,000;

 

provided, however,
that any Disposition pursuant to clauses (a) through (g) shall be for fair
market value.

 

7.06        Restricted Payments.  Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that:

 

(a)           each Subsidiary may make Restricted
Payments to Borrower and to wholly-owned Subsidiaries (and, in the case of a
Restricted Payment by a non-wholly-owned Subsidiary, to Borrower and any Subsidiary
and to each other owner of capital stock or other equity interests of such
Subsidiary on a pro rata basis based on their relative ownership interests);

 

(b)           Borrower and each Subsidiary may
declare and make dividend payments or other distributions payable solely in the
common stock or other common equity interests of such Person;

 

(c)           Borrower and each Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or other
common equity interests or warrants or options to acquire any such shares with
the proceeds received from the substantially concurrent issue of new shares of
its common stock or other common equity interests; and

 

32

 

(d)           Borrower may declare or pay cash
dividends to its stockholders and purchase, redeem or otherwise acquire shares
of its capital stock or warrants, rights or options to acquire any such shares
for cash; provided that immediately after giving effect to such proposed
action, no Default would exist.

 

7.07        Change in Nature of Business.  Engage in any material line of business
substantially different from those lines of business conducted by Borrower and
its Subsidiaries on the date hereof or any business substantially related or
incidental thereto.

 

7.08        Transactions with Affiliates.  Enter into any transaction of any kind with
any Affiliate of Borrower, whether or not in the ordinary course of business,
other than on fair and reasonable terms substantially as favorable to Borrower
or such Subsidiary as would be obtainable by Borrower or such Subsidiary at the
time in a comparable arm’s length transaction with a Person other than an
Affiliate, provided that the foregoing restriction shall not apply to
transactions between or among Borrower and any of its wholly-owned Subsidiaries
or between and among any wholly-owned Subsidiaries.

 

7.09        Burdensome Agreements.  Enter into any Contractual Obligation (other
than this Agreement or any other Loan Document) that (a) limits the ability (i)
of any Subsidiary to make Restricted Payments to Borrower or any Guarantor or
to otherwise transfer property to Borrower or any Guarantor, (ii) of any
Subsidiary to Guarantee the Indebtedness of Borrower or (iii) of Borrower or
any Subsidiary to create, incur, assume or suffer to exist Liens on property of
such Person; provided, however, that this clause (iii) shall not
prohibit any negative pledge incurred or provided in favor of any holder of
Indebtedness permitted under Section 7.03(f) solely to the extent any
such negative pledge relates to the property financed by or the subject of such
Indebtedness; or (b) requires the grant of a Lien to secure an obligation of
such Person if a Lien is granted to secure another obligation of such Person.

 

7.10        Use of Proceeds.  Use the proceeds of any Credit Extension,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase or carry margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System of the United States)
or to extend credit to others for the purpose of purchasing or carrying margin
stock or to refund indebtedness originally incurred for such purpose.

 

ARTICLE VIII EVENTS
OF DEFAULT AND REMEDIES

 

8.01        Events of Default.  Any of the following shall constitute an
Event of Default:

 

(a)           Non-Payment.  Borrower or any other Loan Party fails to pay
(i) when and as required to be paid herein, any amount of principal of any
Loan, or any L/C Obligation, or (ii) within three days after the same becomes
due, any interest on any Loan or on any L/C Obligation, or any commitment or
other fee due hereunder, or (iii) within five days after the same becomes due,
any other amount payable hereunder or under any other Loan Document; or

 

(b)           Specific Covenants.  Borrower fails to perform or observe any
term, covenant or agreement contained in any of Sections 6.01, 6.02,
6.03, 6.05, 6.10, 6.11 or 6.12 or Article
VII; or

 

(c)           Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days or any default or event of default occurs under
any other Loan Document; or

 

(d)           Representations and Warranties.  Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of Borrower or any
other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall be incorrect or misleading
in any material respect when made or deemed made; or

 

33

 

(e)           Cross-Default.  (i) Borrower or any Subsidiary (A) fails to
make any payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee
(other than Indebtedness hereunder and Indebtedness under Swap Contracts)
having an aggregate principal amount (including undrawn committed or available
amounts and including amounts owing to all creditors under any combined or
syndicated credit arrangement) of more than the Threshold Amount, or (B) fails
to observe or perform any other agreement or condition relating to any such
Indebtedness or Guarantee or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event occurs, the effect
of which default or other event is to cause, or to permit the holder or holders
of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or
a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which Borrower or any
Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (B) any
Termination Event (as so defined) under such Swap Contract as to which Borrower
or any Subsidiary is an Affected Party (as so defined) and, in either event,
the Swap Termination Value owed by Borrower or such Subsidiary as a result
thereof is greater than the Threshold Amount; or

 

(f)            Insolvency Proceedings, Etc.  Any Loan Party or any of its Subsidiaries
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer for it or for all or
any material part of its property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed without
the application or consent of such Person and the appointment continues
undischarged or unstayed for 60 calendar days; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any material part of
its property is instituted without the consent of such Person and continues
undismissed or unstayed for 60 calendar days, or an order for relief is entered
in any such proceeding; or

 

(g)           Inability to Pay Debts; Attachment.  (i) Borrower or any Subsidiary becomes unable
or admits in writing its inability or fails generally to pay its debts as they
become due, or (ii) any writ or warrant of attachment or execution or similar
process is issued or levied against all or any material part of the property of
any such Person and is not released, vacated or fully bonded within 30 days
after its issue or levy; or

 

(h)           Judgments.  There is entered against Borrower or any
Subsidiary (i) a final judgment or order for the payment of money in an
aggregate amount exceeding the Threshold Amount (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage), or (ii) any one or more non-monetary final judgments that have, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and, in either case, (A) enforcement proceedings are
commenced by any creditor upon such judgment or order, or (B) there is a period
of 10 consecutive days during which a stay of enforcement of such judgment, by
reason of a pending appeal or otherwise, is not in effect; or

 

(i)            ERISA.  (i) An ERISA Event occurs with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of Borrower under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess
of the Threshold Amount, or (ii) Borrower or any ERISA Affiliate fails to pay
when due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of ERISA
under a Multiemployer Plan in an aggregate amount in excess of the Threshold
Amount; or

 

(j)            Change of Control.  There occurs any Change of Control or Change
of Management; or

 

34

 

(k)           Material Adverse Effect.  There occurs any event or circumstance that
has a Material Adverse Effect; or

 

(l)            Invalidity of Loan Documents.  Any Loan Document, at any time after its
execution and delivery and for any reason other than as expressly permitted
hereunder or satisfaction in full of all the Obligations, ceases to be in full
force and effect; or any Loan Party or any other Person contests in any manner
the validity or enforceability of any Loan Document; or any Loan Party denies
that it has any or further liability or obligation under any Loan Document, or
purports to revoke, terminate or rescind any Loan Document, or any Lien with
respect to any material portion of the Collateral intended to be secured
thereby ceases to be, or, subject to Section 7.01, is not, valid,
perfected and prior to all other Liens or is terminated, revoked or declared
void.

 

8.02        Remedies Upon Event of Default.  If any Event of Default occurs and is
continuing, Bank may take any or all of the following actions:

 

(a)           declare the Commitment to be
terminated, whereupon the Commitment shall be terminated;

 

(b)           declare the unpaid principal amount
of all outstanding Loans, all interest accrued and unpaid thereon, and all
other amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by Borrower;

 

(c)           require that Borrower Cash
Collateralize the L/C Obligations (in an amount equal to the then Outstanding
Amount thereof); and

 

(d)           exercise all rights and remedies
available to it under the Loan Documents or applicable law;

 

provided, however,
that upon the occurrence of an actual or deemed entry of an order for relief
with respect to Borrower under the Bankruptcy Code of the United States, the
Commitment shall automatically terminate, the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and the obligation of Borrower to Cash
Collateralize the L/C Obligations as aforesaid shall automatically become
effective, in each case without further act of Bank.

 

8.03        Application of Funds.  After the exercise of remedies provided for
in Section 8.02 (or after the Loans have automatically become
immediately due and payable and the L/C Obligations have automatically been
required to be Cash Collateralized as set forth in the proviso to Section
8.02), any amounts received (a) on account of the Obligations, (b) on
account of any debt, liability, obligation, covenant or duty of Borrower or any
Subsidiary owing to Bank or any Affiliate of Bank arising under any Swap
Contract or Financial Transaction Contract (collectively, the “Contract
Obligations”) and/or (c) in respect of the Collateral, shall be applied by
Bank to the Obligations and the Contract Obligations in such order as it elects
in its sole discretion.

 

ARTICLE IX
MISCELLANEOUS

 

9.01        Amendments; Etc.  No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
Borrower or any other Loan Party therefrom, shall be effective unless in
writing signed by Bank and Borrower or the applicable Loan Party, as the case
may be, and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

35

 

9.02        Notices and Other Communications; Facsimile
Copies.

 

(a)           General .  Unless otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). 
All such written notices shall be mailed, faxed or delivered, to the
applicable address, facsimile number or (subject to subsection (c) below)
electronic mail address, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, specified for such Person below or to such other address,
facsimile number, electronic mail address or telephone number as shall be
designated by such party in a notice to the other parties.

 

	
  Bank:

  	
   

  	
  Bank of America, N.A.

  
	
   

  	
   

  	
  WA1-501-35-01

  
	
   

  	
   

  	
  800 Fifth Avenue, Floor 35

  
	
   

  	
   

  	
  Seattle, WA  98104

  
	
   

  	
   

  	
  Attention: 
  Mark N. Crawford

  
	
   

  	
   

  	
  Telephone: 
  (206) 358-8945

  
	
   

  	
   

  	
  Facsimile: 
  (206) 585-8638

  
	
   

  	
   

  	
  Electronic Mail:
  mark.n.crawford@bankofamerica.com

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  USANA Health Sciences, Inc

  
	
   

  	
   

  	
  3838 West Parkway Boulevard

  
	
   

  	
   

  	
  Salt Lake City, Utah  84120

  
	
   

  	
   

  	
  Attention: 
  Gilbert A. Fuller

  
	
   

  	
   

  	
  Telephone: 
  (801) 954-7951

  
	
   

  	
   

  	
  Facsimile: 
  (801) 956-9486

  
	
   

  	
   

  	
  Electronic Mail: gil.fuller@us.usana.com

  

 

All such notices and other communications
shall be deemed to be given or made upon the earlier to occur of (i) actual
receipt by the relevant party hereto and (ii) (A) if delivered by hand or by
courier, when signed for by or on behalf of the relevant party hereto; (B) if
delivered by mail, four Business Days after deposit in the mails, postage prepaid;
(C) if delivered by facsimile, when sent and receipt has been confirmed by
telephone; and (D) if delivered by electronic mail (which form of delivery is
subject to the provisions of subsection (c) below), when delivered; provided,
however, that notices and other communications to Bank pursuant to Article
II shall not be effective until actually received by Bank.  In no event shall a voicemail message be
effective as a notice, communication or confirmation hereunder.

 

(b)           Effectiveness of Facsimile Documents
and Signatures.  Loan Documents may
be transmitted and/or signed by facsimile. 
The effectiveness of any such documents and signatures shall, subject to
applicable Law, have the same force and effect as manually-signed originals and
shall be binding on all Loan Parties and Bank. 
Bank may also require that any such documents and signatures be
confirmed by a manually-signed original thereof; provided, however,
that the failure to request or deliver the same shall not limit the
effectiveness of any facsimile document or signature.

 

(c)           Limited Use of Electronic Mail.  Electronic mail and internet and intranet
websites may be used only to distribute routine communications, such as
financial statements, and to distribute Loan Documents for execution by the
parties thereto, and may not be used for any other purpose.

 

(d)           Reliance by Bank.  Bank shall be entitled to rely and act upon
any notices (including telephonic Loan Notices) purportedly given by or on
behalf of Borrower even if (i) such notices were not made in a manner specified
herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof.  Borrower shall indemnify Bank its Affiliates,
and their respective officers, directors, employees, agents and
attorneys-in-fact from all losses, costs, expenses and liabilities resulting
from the reliance by such Person on each notice purportedly given by or on
behalf of Borrower.  All telephonic
notices to and other communications with Bank may be recorded by Bank, and
Borrower hereby consents to such recording.

 

36

 

9.03        No Waiver; Cumulative Remedies.  No failure by Bank to exercise, and no delay
by Bank in exercising, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.

 

9.04        Attorney Costs, Expenses and Taxes.  Borrower agrees (a) to pay or reimburse Bank
for all costs and expenses incurred in connection with the development,
preparation, negotiation and execution of this Agreement and the other Loan
Documents and any amendment, waiver, consent or other modification of the
provisions hereof and thereof (whether or not the transactions contemplated
hereby or thereby are consummated), and the consummation and administration of
the transactions contemplated hereby and thereby, including all Attorney Costs,
and (b) to pay or reimburse Bank for all costs and expenses incurred in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement or the other Loan Documents (including
all such costs and expenses incurred during any “workout” or restructuring in
respect of the Obligations and during any legal proceeding, including any
proceeding under any Debtor Relief Law), including all Attorney Costs.  The foregoing costs and expenses shall
include all search, filing, recording, title insurance and appraisal charges
and fees and taxes related thereto, and other out-of-pocket expenses incurred
by Bank and the cost of independent public accountants and other outside
experts retained by Bank.  All amounts due
under this Section 9.04 shall be payable within ten Business Days after
demand therefor.  The agreements in this
Section shall survive the termination of the Commitment and repayment,
satisfaction or discharge of all other Obligations.

 

9.05        Indemnification by Borrower.  Whether or not the transactions contemplated
hereby are consummated, Borrower shall indemnify and hold harmless Bank, its
Affiliates, and their respective directors, officers, employees, counsel,
agents and attorneys-in-fact (collectively the “Indemnitees”) from and
against any and all liabilities, obligations, losses, damages, penalties,
claims, demands, actions, judgments, suits, costs, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time be imposed on, incurred by or asserted against any such Indemnitee in any
way relating to or arising out of or in connection with (a) the execution,
delivery, enforcement, performance or administration of any Loan Document or
any other agreement, letter or instrument delivered in connection with the
transactions contemplated thereby or the consummation of the transactions
contemplated thereby, (b) the Commitment, any Loan or Letter of Credit or the
use or proposed use of the proceeds therefrom (including any refusal by Bank to
honor a demand for payment under a Letter of Credit if the documents presented
in connection with such demand do not strictly comply with the terms of such
Letter of Credit), (c) any actual or alleged presence or release of Hazardous
Materials on or from any property currently or formerly owned or operated by
Borrower, any Subsidiary or any other Loan Party, or any Environmental
Liability related in any way to Borrower, any Subsidiary or any other Loan
Party, or (d) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory (including any investigation of, preparation for, or defense
of any pending or threatened claim, investigation, litigation or proceeding)
and regardless of whether Indemnitee is a party thereto (all the foregoing,
collectively, the “Indemnified Liabilities”), in all cases, whether or
not caused by or arising, in whole or in part, out of the negligence of the
Indemnitee; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments, suits, costs,
expenses or disbursements are determined by a court of competent jurisdiction
by final and nonappealable judgment to have resulted from the gross negligence
or willful misconduct of such Indemnitee. 
No Indemnitee shall have any liability for any indirect or consequential
damages relating to this Agreement or any other Loan Document or arising out of
its activities in connection herewith or therewith (whether before or after the
Closing Date).  All amounts due under
this Section 9.05 shall be payable within ten Business Days after demand
therefor.  The agreements in this Section
shall survive the termination of the Commitment and the repayment, satisfaction
or discharge of all the other Obligations.

 

37

 

9.06        Payments Set Aside.  To the extent that any payment by or on
behalf of Borrower is made to Bank, or Bank exercises its right of set-off, and
such payment or the proceeds of such set-off or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by Bank in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then
to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such set-off had not occurred.

 

9.07        Successors and Assigns.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of Bank. 
Without limiting the foregoing, Bank may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under the Note) to secure obligations of Bank, including any pledge
or assignment to secure obligations to a Federal Reserve Bank.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

9.08        Confidentiality.  Bank agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party hereto, (e) in connection with
the exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (i)
any assignee of or participant in, or any prospective assignee of or
participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to Borrower and its obligations, (g) with the
consent of Borrower or (h) to the extent such Information (x) becomes publicly
available other than as a result of a breach of this Section or (y) becomes
available to Bank on a nonconfidential basis from a source other than
Borrower.  For purposes of this Section,
“Information” means all information received from any Loan Party relating to
any Loan Party or any of their respective businesses, other than any such
information that is available to Bank on a nonconfidential basis prior to
disclosure by any Loan Party, provided that, in the case of information
received from a Loan Party after the date hereof, such information is clearly
identified at the time of delivery as confidential.  Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

 

Notwithstanding
anything herein to the contrary, “Information” shall not include, and Borrower,
the other Loan Parties, Bank and the respective Affiliates of each of the
foregoing (and the respective partners, directors, officers, employees, agents,
advisors and other representatives of each of the foregoing and their
Affiliates) may disclose to any and all Persons, without limitation of any kind
(a) any information with respect to the U.S. federal and state income tax
treatment of the transactions contemplated hereby and any facts that may be
relevant to understanding such tax treatment, which facts shall not include for
this purpose the names of the parties or any other Person named herein, or
information that would permit identification of the parties or such other Persons,
or any pricing terms or other nonpublic business or financial information that
is unrelated to such tax treatment or facts, and (b) all materials of any kind
(including opinions or other tax analyses) relating to such tax treatment or
facts that are provided to any of the Persons referred to above.

 

9.09        Set-off.  In addition
to any rights and remedies of Bank provided by law, upon the occurrence and
during the continuance of any Event of Default, Bank is authorized at any time
and from

 

38

 

time to time, without prior notice to
Borrower or any other Loan Party, any such notice being waived by Borrower (on
its own behalf and on behalf of each Loan Party) to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, Bank to or for the credit or the account of
the respective Loan Parties against any and all Obligations owing to Bank
hereunder or under any other Loan Document, now or hereafter existing,
irrespective of whether or not Bank shall have made demand under this Agreement
or any other Loan Document and although such Obligations may be contingent or
unmatured or denominated in a currency different from that of the applicable
deposit or indebtedness.  Bank agrees
promptly to notify Borrower after any such set-off and application; provided,
however, that the failure to give such notice shall not affect the validity
of such set-off and application.

 

9.10        Interest Rate Limitation.  Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under
the Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”).  If Bank shall receive interest in an amount
that exceeds the Maximum Rate, the excess interest shall be applied to the
principal of the Loans or, if it exceeds such unpaid principal, refunded to
Borrower.  In determining whether the
interest contracted for, charged, or received by Bank exceeds the Maximum Rate,
Bank may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations
hereunder.

 

9.11        Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

9.12        Integration.  This
Agreement, together with the other Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and thereof
and supersedes all prior agreements, written or oral, on such subject
matter.  In the event of any conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control; provided that the
inclusion of supplemental rights or remedies in favor of Bank in any other Loan
Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint
participation of the respective parties thereto and shall be construed neither
against nor in favor of any party, but rather in accordance with the fair
meaning thereof.

 

9.13        Survival of Representations and Warranties.  All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof. 
Such representations and warranties have been or will be relied upon by
Bank, regardless of any investigation made by Bank or on its behalf and
notwithstanding that Bank may have had notice or knowledge of any Default at
the time of any Credit Extension, and shall continue in full force and effect
as long as any Loan or any other Obligation hereunder shall remain unpaid or
unsatisfied or any Letter of Credit shall remain outstanding.

 

9.14        Severability.  If
any provision of this Agreement or the other Loan Documents is held to be
illegal, invalid or unenforceable, (a) the legality, validity and
enforceability of the remaining provisions of this Agreement and the other Loan
Documents shall not be affected or impaired thereby and (b) the parties shall
endeavor in good faith negotiations to replace the illegal, invalid or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable
provisions.  The invalidity of a
provision in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

9.15        Governing Law; Submission to Jurisdiction.

 

(a)           THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF WASHINGTON
APPLICABLE TO AGREEMENTS MADE AND

 

39

 

TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED
THAT BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF WASHINGTON SITTING IN SEATTLE, KING COUNTY, WASHINGTON
OR OF THE UNITED STATES FOR THE WESTERN DISTRICT OF SUCH STATE, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER AND BANK EACH CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS.  BORROWER AND BANK EACH
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT
OR OTHER DOCUMENT RELATED THERETO. 
BORROWER AND BANK EACH WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT
OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF
SUCH STATE.

 

9.16        Waiver of Right to Trial by Jury.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT, SUBJECT TO SECTION
9.17, ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.

 

9.17        Mandatory Arbitration.

 

(a)           This Section concerns the resolution
of any controversies or claims between Borrower and Bank, whether arising in
contract, tort or by statute, that arise out of or relate to this Agreement and
the other Loan Documents (collectively a “Claim”).  At the request of Borrower or Bank, any Claim
shall be resolved by arbitration in accordance with the Federal Arbitration Act
(Title 9, United States Code) (the “Arbitration Act”).  The Arbitration Act will apply even though
this Agreement provides that it is governed by the Laws of the state of
Washington.  Nothing contained in this Section
9.17 shall override any contrary provision contained in any Swap Contract.

 

(b)           Arbitration proceedings will be
determined in accordance with the Arbitration Act, the rules and procedures for
the arbitration of financial services disputes of JAMS/ENDISPUTE, LLC, a
Delaware limited liability company or any successor thereof (“JAMS”),
and the terms of this Section 9.17. 
In the event of any inconsistency, the terms of this Section 9.17
shall control.  The arbitration shall be
administered by JAMS and conducted in Seattle, Washington.  All Claims shall be determined by one
arbitrator; provided, however, that if Claims exceed $5,000,000,
upon the request of any party, the Claims shall be decided by three
arbitrators.  All arbitration hearings
shall commence within 90 days of the demand for arbitration and close within 90
days of commencement and the award of the arbitrator(s) shall be issued within
30 days of the close of the hearing; provided, however, that the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional 60 days. 
The arbitrator(s) shall provide a concise written statement of reasons
for the award.  The arbitration award may
be submitted to any court having jurisdiction to be confirmed and
enforced.  The arbitrator(s) will have
the authority to decide whether any Claim is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis.  For purposes of the application of the
statute of limitations, the service on JAMS under applicable JAMS rules of a
notice of Claim is the equivalent of the filing of a lawsuit.  Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the

 

40

 

arbitrator(s).  The arbitrator(s) shall have the power to
award legal fees pursuant to the terms of this Agreement.

 

(c)           This Section 9.17 does not
limit the right of Borrower or Bank to: (i) exercise self-help remedies, such
as but not limited to, setoff; (ii) initiate judicial or nonjudicial
foreclosure against any real or personal property collateral; (iii) exercise
any judicial or power of sale rights; or (iv) act in a court of law to obtain
an interim remedy, such as but not limited to, injunctive relief, writ of
possession or appointment of a receiver, or additional or supplementary
remedies.  The filing of a court action
is not intended to constitute a waiver of the right of Borrower or Bank,
including the suing party, thereafter to require submittal of the Claim to
arbitration.

 

9.18        USA Patriot Act Notice.  Bank hereby notifies Borrower that pursuant
to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (the “Patriot Act”), it is required to
obtain, verify and record information that identifies Borrower, which
information includes the name and address of Borrower and other information
that will allow Bank to identify Borrower in accordance with the Patriot Act.

 

9.19        Time of the Essence.  Time is of the essence of the Loan Documents.

 

9.20        Oral Agreements.  ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.

 

	
   

  	
  USANA HEALTH SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Sr. Vice Pres. and CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark N. Crawford

  	
   

  
	
   

  	
  Name:

  	
  Mark N. Crawford

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
							

 

 

SCHEDULE
5.06

 

LITIGATION

 

Creagri Inc., a California corporation (“Creagri”),
has initiated a lawsuit claiming that Borrower’s use of Borrower’s “Olivol”
trademark has infringed upon Creagri’s use of “Olivenol” which is the name of a
stand-alone olive by-product supplement. 
Borrower was granted a trademark for “Olivol” and the stylized trademark
for “Olivol” by the United States Patent and Trademark office.

 

At this time Borrower believes that there is
no merit to this case, that we shall prevail in this matter and that it does
not pose any Material Adverse Effect.

 

 

SCHEDULE
5.09

 

ENVIRONMENTAL MATTERS

 

On November 19, 1997 a traffic accident
occurred in the intersection of Parkway Blvd and Bangeter Highway.  As a result of the accident a Tractor-Trailer
came to rest on the lawn in front of our building.  The Tractor-Trailer diesel tank was leaking.

 

Borrower estimates that 5 to 10 gallons of
diesel fuel spilled on the lawn. 
Borrower hired Glover Nursery to remove the contaminated grass and
soil.  Glover Nursery removed and replaced
approximately 4,000 cubic feet of topsoil.

 

Borrower believes that it took all of the
reasonable necessary to remove the diesel fuel spilled on its property.

 

 

SCHEDULE
5.13

 

SUBSIDIARIES

AND OTHER EQUITY INVESTMENTS

 

Part
(a).          Subsidiaries.

 

	
  Name of Owner

  	
   

  	
  Name of

  Subsidiary

  	
   

  	
  Jurisdiction of

  Formation

  	
   

  	
  Percentage

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Canada Holding, Inc

  	
   

  	
  Delaware

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Health Sciences New Zealand, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Australia Pty Ltd

  	
   

  	
  New South Wales

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Hong Kong Limited

  	
   

  	
  Hong Kong

  	
   

  	
  99.9

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Health Sciences Singapore Pte. Ltd.

  	
   

  	
  Singapore

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Health Sciences Korea

  	
   

  	
  Korea

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA México, S.A. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  99.8

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  FMG Productions, Inc.

  	
   

  	
  Utah

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Japan, Inc.

  	
   

  	
  Japan

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  International Holdings, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences, Inc.

  	
   

  	
  USANA Acquisition Corp.

  	
   

  	
  Utah

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Canada Holding, Inc

  	
   

  	
  USANA Canada Company

  	
   

  	
  Nova Scotia

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences New Zealand, Inc.

  	
   

  	
  USANA Health Sciences (NZ) Corporation

  	
   

  	
  New Zealand

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  International Holdings, Inc.

  	
   

  	
  Mercadotecnia Nutricional S de R.L. de C.v.

  	
   

  	
  Mexico

  	
   

  	
  99.9

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Acquisition Corp.

  	
   

  	
  Wasatch Product Development, Inc.

  	
   

  	
  Utah

  	
   

  	
  100

  	
  %

  

 

Part
(b).          Other Equity Investments.

 

	
  Name of Owner

  	
   

  	
  Name of Investment

  	
   

  	
  Jurisdiction of Formation

  	
   

  	
  Percentage

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE
5.18

 

INTELLECTUAL PROPERTY MATTERS

 

Creagri Inc., a California corporation (“Creagri”),
has initiated a lawsuit claiming that Borrower’s use of Borrower’s “Olivol”
trademark has infringed upon Creagri’s use of “Olivenol” which is the name of a
stand-alone olive by-product supplement. 
Borrower was granted a trademark for “Olivol” and the stylized trademark
for “Olivol” by the United States Patent and Trademark office.

 

At this time Borrower believes that there is
no merit to this case, that Borrower shall prevail in this matter and that it
does not pose any Material Adverse Effect.

 

 

SCHEDULE
7.01

 

EXISTING LIENS

 

 

	
  Secured
  Party

  	
   

  	
  UCC Filing

  Number

  	
   

  	
  Expiration

  Date

  	
   

  	
  Amount

  	
   

  	
  Collateral

  
	
  Revco

  	
   

  	
  34991200134

  	
   

  	
  01/08/2006

  	
   

  	
   

  	
   

  	
  Sharp Copier, Sharp Paper Desk Sharp
  Cassette Module, Sharp Large Tray, Sharp Finisher

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EMC Corporation

  	
   

  	
  49748200137

  	
   

  	
  06/20/2006

  	
   

  	
   

  	
   

  	
  Computer Disk arrays

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  De Lage Landen Financial Services, Inc

  	
   

  	
  211691200330

  	
   

  	
  03/11/2008

  	
   

  	
   

  	
   

  	
  Symmetrix 8530-73 (12) 8030-181M1 (1) and
  other various Computer Disk arrays

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Henriksen/Butler Design Group

  	
   

  	
  243341200434

  	
   

  	
  4/26/2009

  	
   

  	
  $17,977

  	
   

  	
  Office Furniture

  

 

 

SCHEDULE
7.03

 

EXISTING INDEBTEDNESS

 

None.

 

 

EXHIBIT A

 

FORM OF LOAN
NOTICE

 

Date: 
                        ,
              

 

To:          Bank
of America, N.A.

 

Ladies and Gentlemen:

 

Reference
is made to that certain Credit Agreement, dated as of June 16, 2004 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the “Credit Agreement;” the terms defined therein being
used herein as therein defined), between USANA Health Sciences, Inc., a Utah
corporation (“Borrower”), and Bank of America, N.A., a national banking
association.

 

The
undersigned hereby requests (select one):

 

•              A
Borrowing of Loans        •              A
conversion or continuation of Loans

 

1.             On                                                                         
(a Business Day).

 

2.             In
the amount of
$                                           .

 

3.             Comprised
of
                                       .

 

[Type
of Loan requested]

 

4.             For
a Eurodollar Rate Loan:  with an Interest
Period of
              months.

 

[The
borrowing requested herein complies with the proviso to the first sentence of Section
2.01 of the Credit Agreement.]

 

 

	
   

  	
  USANA HEALTH SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Sr. Vice Pres. and CFO

  	
   

  
							

 

 

EXHIBIT B

 

NOTE

 

$10,000,000            June
16, 2004

 

FOR
VALUE RECEIVED, the undersigned (the “Borrower”) hereby promises to pay
to the order of BANK OF AMERICA, N.A. (the “Bank”), on the Maturity Date
(as defined in the Credit Agreement referred to below) the principal amount of
Ten Million Dollars ($10,000,000), or such lesser principal amount of Loans (as
defined in such Credit Agreement) due and payable by Borrower to Bank on the
Maturity Date under that certain Credit Agreement, dated as of June 16, 2004 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the “Credit Agreement;” the terms defined therein being
used herein as therein defined), between Borrower and Bank.

 

Borrower
promises to pay interest on the unpaid principal amount of each Loan from the
date of such Loan until such principal amount is paid in full, at such interest
rates and at such times as are specified in the Credit Agreement.  All payments of principal and interest shall
be made to Bank in Dollars in immediately available funds at Bank’s Lending
Office.  If any amount is not paid in
full when due hereunder, such unpaid amount shall bear interest, to be paid
upon demand, from the due date thereof until the date of actual payment (and
before as well as after judgment) computed at the per annum rate set forth in
the Credit Agreement.

 

This
Note is the Note referred to in the Credit Agreement, is entitled to the
benefits thereof and is subject to optional prepayment in whole or in part as
provided therein.  This Note is also
entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one
or more of the Events of Default specified in the Credit Agreement, all amounts
then remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable all as provided in the Credit Agreement.  Loans made by Bank shall be evidenced by one
or more loan accounts or records maintained by Bank in the ordinary course of
business.  Bank may also attach schedules
to this Note and endorse thereon the date, amount and maturity of the Loans and
payments with respect thereto.

 

Borrower,
for itself, its successors and assigns, hereby waives diligence, presentment,
protest and demand and notice of protest, demand, dishonor and non-payment of
this Note.

 

THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF WASHINGTON.

 

	
   

  	
  USANA HEALTH SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Sr. Vice Pres. and CFO

  	
   

  
							

 

 

REVOLVING LOANS AND PAYMENTS WITH RESPECT THERETO

 

 

	
  Date

  	
   

  	
  Type of

  Loan Made

  	
   

  	
  Amount of

  Loan Made

  	
   

  	
  End of

  Interest

  Period

  	
   

  	
  Amount of

  Principal or

  Interest

  Paid This

  Date

  	
   

  	
  Outstanding

  Principal

  Balance

  This Date

  	
   

  	
  Notation

  Made By

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT C

 

CONTINUING GUARANTY

 

This
CONTINUING GUARANTY (“Guaranty”) is entered into as of June 16, 2004, by
USANA ACQUISITION CORP., a Utah corporation (“USANA Acquisition”),
WASATCH PRODUCT DEVELOPMENT, INC., a Utah corporation (“Wasatch”), USANA
HEALTH SCIENCES NEW ZEALAND, INC., a Delaware corporation (“USANA New
Zealand”), USANA CANADA HOLDING, INC., a Delaware corporation (“USANA
Canada”), FMG PRODUCTIONS, INC., a Utah corporation (“FMG”),
INTERNATIONAL HOLDINGS, INC., a Delaware corporation (“Holdings” and
together with USANA Acquisition, Wasatch, USANA New Zealand, USANA Canada, FMG
and any additional guarantors becoming a party hereto as provided in Section
18 hereof and their respective successors, collectively, the “Guarantors”
and individually, a “Guarantor”), in favor of BANK OF AMERICA, N.A., a
national banking association (together with its successors and assigns, “Bank”),
and any Affiliate of Bank a party to a Swap Contract (as defined in the Credit
Agreement referred to below).

 

RECITALS

 

A.            USANA Health Sciences, Inc., a Utah
corporation (“Borrower”) is a party to that certain Credit Agreement
dated as of June 16, 2004 by and between Borrower and Bank (as amended,
restated, modified, renewed, supplemented or extended from time to time, the “Credit
Agreement”).

 

B.            It is a condition precedent to
Bank’s obligation to make its initial Credit Extension under the Credit
Agreement that the Guarantors enter into this Guaranty.

 

C.            Each Guarantor, as a direct or
indirect wholly-owned Subsidiary of Borrower, will derive substantial and
direct benefits (which benefits are hereby acknowledged by each Guarantor) from
the Loans and the Letters of Credit and other benefits to be provided to
Borrower under the Credit Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and in
order to induce Bank to make Credit Extensions under the Credit Agreement, each
Guarantor hereby agrees as follows:

 

1.             Definitions;
Interpretation.  All capitalized
terms used in this Guaranty and not otherwise defined herein have the meanings
specified in the Credit Agreement.  The
rules of construction and interpretation specified in Sections 1.02 and 1.05
of the Credit Agreement also apply to this Guaranty and are incorporated herein
by this reference.

 

2.             Guaranty.  Each Guarantor hereby irrevocably,
absolutely and unconditionally guarantees, jointly with the other Guarantors
and severally, as a primary obligor and not merely as a surety, the full and
punctual payment or performance when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise, and at all
times thereafter, all of the following debts, liabilities and obligations
(collectively, the “Guaranteed Obligations”): (a) all advances to, and
debts, liabilities, obligations, covenants and duties of, Borrower owing to
Bank arising under the Credit Agreement and each other Loan Document or
otherwise with respect to any Loan or Letter of Credit; (b) all debts,
liabilities, obligations, covenants and duties of, Borrower or any of its
Subsidiaries owing to Bank or any Affiliate of Bank and arising under any Swap
Contract made or entered into at any time, or in effect at any time, whether
directly or indirectly, and whether as a result of assignment or transfer or
otherwise, between Bank or any Affiliate of Bank and Borrower or any Subsidiary
of Borrower, including liabilities and obligations arising in connection with
or as a result of early termination of any such Swap Contract; and (c) any and
all fees, costs or out-of-pocket expenses (including Attorney Costs) incurred
by Bank in enforcing any rights under this Guaranty and the other Loan
Documents, in each case whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after the
commencement by or against any Loan Party or any Affiliate thereof of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest

 

 

and fees are allowed claims in such
proceeding.  The Bank’s books and records
showing the amount of the Guaranteed Obligations shall be admissible in
evidence in any action or proceeding, and shall be binding upon the Guarantor
and conclusive for the purpose of establishing the amount of the Guaranteed
Obligations in the absence of manifest error. 
This Guaranty shall not be affected by the genuineness, validity,
regularity or enforceability of the Guaranteed Obligations or any instrument or
agreement evidencing any Guaranteed Obligations, or by the existence, validity,
enforceability, perfection, or extent of any collateral therefor, or by any
fact or circumstance relating to the Guaranteed Obligations which might
otherwise constitute a defense to the obligations of the Guarantor under this
Guaranty.

 

3.             Limitation
of Liability.  Notwithstanding
anything in this Guaranty to the contrary, the obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the Bankruptcy Code (Title 11, United States Code) or any
comparable provisions of any applicable state law.

 

4.             No Setoff
or Deductions; Taxes.  Each Guarantor
represents and warrants that it is incorporated and resident in the United
States of America.  All payments by each
Guarantor hereunder shall be paid in full, without setoff or counterclaim or
any deduction or withholding whatsoever, including for any and all present and
future taxes.  If one or more Guarantors
must make a payment under this Guaranty (each, a “Paying Guarantor”),
each such Paying Guarantor represents and warrants that it will make the
payment from one of its U.S. resident offices to Bank so that no withholding
tax is imposed on the payment.  If notwithstanding
the foregoing, a Paying Guarantor makes a payment under this Guaranty to which
withholding tax applies, or any taxes (other than taxes on net income (a)
imposed by the country or any subdivision of the country in which Bank’s
Lending Office is located and (b) measured by the United States taxable income
Bank would have received if all payments under or in respect of this Guaranty
were exempt from taxes levied by such Paying Guarantor’s country) are at any
time imposed on any payments under or in respect of this Guaranty including
payments made pursuant to this Section 4, such Paying Guarantor shall
pay all such taxes to the relevant authority in accordance with applicable Law
such that Bank receives the sum it would have received had no such deduction or
withholding been made and shall also pay to Bank, on demand, all additional
amounts which Bank specifies as necessary to preserve the after-tax yield Bank
would have received if such taxes had not been imposed.  Each Paying Guarantor that makes a payment
under this Guaranty to which withholding tax applies or to which any taxes are
imposed on such payment, such Paying Guarantor shall promptly provide Bank with
an original receipt or certified copy issued by the relevant authority
evidencing the payment of any such amount required to be deducted or withheld.

 

5.             No
Termination.  This Guaranty is a
continuing and irrevocable guaranty of all Guaranteed Obligations now or
hereafter existing and shall remain in full force and effect until all
Guaranteed Obligations and any other amounts payable under this Guaranty are
indefeasibly paid and performed in full and any commitments of Bank (including
the Commitment) or facilities provided by Bank with respect to the Guaranteed
Obligations are terminated.  At Bank’s
option, all payments under this Guaranty shall be made to an office of Bank
located in the United States and in U.S. Dollars.

 

6.             Waiver of
Notices.  Each Guarantor
waives notice of the acceptance of this Guaranty and of the extension or
continuation of the Guaranteed Obligations or any part thereof.  Each Guarantor further waives presentment,
protest, notice, dishonor or default, demand for payment and any other notices
to which such Guarantor might otherwise be entitled.

 

7.             Subrogation.  No Guarantor shall exercise any right of
subrogation, contribution or similar rights with respect to any payments it
makes under this Guaranty until all of the Guaranteed Obligations and any
amounts payable under this Guaranty are indefeasibly paid and performed in full
and any commitments of the Bank (including the Commitment) or facilities
provided by Bank with respect to the Guaranteed Obligations are
terminated.  If any amounts are paid to
any Guarantor in violation of the foregoing limitation, then such amounts shall
be held in trust for the benefit of Bank and shall forthwith be paid to Bank to
reduce the amount of the Guaranteed Obligations, whether matured or unmatured.

 

2

 

8.             Waiver of
Suretyship Defenses.  Each Guarantor
agrees that Bank may, at any time and from time to time, and without notice to
any Guarantor, make any agreement with Borrower or with any other Person liable
on any of the Guaranteed Obligations or providing collateral as security for
the Guaranteed Obligations, for the extension, renewal, payment, compromise,
discharge or release of the Guaranteed Obligations or any collateral (in whole
or in part), or for any modification or amendment of the terms thereof or of
any instrument or agreement evidencing the Guaranteed Obligations or the
provision of collateral, all without in any way impairing, releasing,
discharging or otherwise affecting the obligations of any Guarantor under this
Guaranty.  Each Guarantor waives any
defense arising by reason of any disability or other defense of Borrower or any
other guarantor (including any Guarantor), or the cessation from any cause
whatsoever of the liability of Borrower, or any claim that such Guarantor’s
obligations exceed or are more burdensome than those of Borrower and waives the
benefit of any statute of limitations affecting the liability of such Guarantor
hereunder.  Each Guarantor waives any
right to enforce any remedy which Bank now has or may hereafter have against
Borrower and waives any benefit of and any right to participate in any security
now or hereafter held by Bank.  Further,
each Guarantor consents to the taking of, or failure to take, any action which
might in any manner or to any extent vary the risks of such Guarantor under
this Guaranty or which, but for this provision, might operate as a discharge of
such Guarantor.

 

9.             Exhaustion
of Other Remedies Not Required.  The obligations of
each Guarantor hereunder are those of primary obligor, and not merely as
surety, and are independent of the Guaranteed Obligations.  Each Guarantor waives diligence by Bank and
action on delinquency in respect of the Guaranteed Obligations or any part
thereof, including any provisions of Law requiring Bank to exhaust any right or
remedy or to take any action against Borrower, any other guarantor (including
any Guarantor) or any other Person or property before enforcing this Guaranty
against such Guarantor.

 

10.          Reinstatement.  Notwithstanding anything in this Guaranty to
the contrary, this Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any portion of the Guaranteed
Obligations is revoked, terminated, rescinded or reduced or must otherwise be
restored or returned upon the insolvency, bankruptcy or reorganization of
Borrower, any guarantor (including any Guarantor) or any other Person, or
otherwise, as if such payment had not been made and whether or not Bank is in
possession of or has released this Guaranty and regardless of any prior
revocation, rescission, termination or reduction.

 

11.          Subordination.  Each Guarantor hereby subordinates the
payment of all obligations and indebtedness of Borrower owing to such
Guarantor, whether now existing or hereafter arising, including any obligation
of Borrower to such Guarantor as subrogee of Bank or resulting from such
Guarantor’s performance under this Guaranty, to the indefeasible payment in
full of all Guaranteed Obligations.  If
Bank so requests, any such obligation or indebtedness of Borrower to such
Guarantor shall be enforced and performance received by such Guarantor as
trustee for Bank and the proceeds thereof shall be paid over to Bank on account
of the Guaranteed Obligations, but without reducing or affecting in any manner
the liability of such Guarantor under this Guaranty.

 

12.          Information.  Each Guarantor agrees to furnish promptly to
Bank any and all financial or other information regarding such Guarantor or its
property as Bank may reasonably request in writing.

 

13.          Stay of
Acceleration.  In the event that
acceleration of the time for payment of any of the Guaranteed Obligations is
stayed, upon the insolvency, bankruptcy or reorganization of Borrower or any
other Person, or otherwise, all such amounts shall nonetheless be payable by
Guarantors immediately upon demand by Bank.

 

14.          Expenses.  Each Guarantor shall pay on demand any and
all fees, costs or out-of-pocket expenses (including Attorney Costs) incurred
by Bank in enforcing or protecting any of Bank’s rights under this Guaranty,
including any incurred in the preservation, protection or enforcement of any
rights of Bank in any case commenced by or against any Guarantor under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute.  The obligations of each
Guarantor under the preceding sentence shall survive termination of this
Guaranty.

 

3

 

15.          Counterparts.  This Guaranty may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

16.          Integration.  This Guaranty, together with the other Loan
Documents to which any Guarantor is a party, comprises the complete and
integrated agreement of the parties on the subject matter hereof and thereof
and supersedes all prior agreements, written or oral, on such subject
matter.  Each Guarantor acknowledges that
this Guaranty and the other Loan Documents may contain covenants and other
terms and provisions variously stated regarding the same or similar matters,
and agrees that all such covenants, terms and provisions are cumulative and all
shall be performed and satisfied in accordance with their respective
terms.  The are no unwritten oral agreements
between any Guarantor and Bank or any of them.

 

17.          Amendments.  No provision of this Guaranty may be waived,
amended, supplemented or modified, except by a written instrument executed by
Bank and each Guarantor.

 

18.          Additional
Guarantors.  Pursuant to Section
6.13(a) of the Credit Agreement, each Material Subsidiary that is a
Domestic Subsidiary that was not in existence or was not a Guarantor on the
date of the Credit Agreement is required to enter into this Guaranty as a
Guarantor upon becoming a Material Subsidiary. 
Upon the execution and delivery by such Domestic Subsidiary of an
instrument in the form of Annex 1 hereto and acceptance thereof by Bank,
such Domestic Subsidiary shall become a Guarantor hereunder with the same force
and effect as if originally named as a Guarantor herein.  The execution and delivery of any such
instrument shall not require the consent of any other Guarantor hereunder.  The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Guaranty.

 

19.          Notices.  Unless otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). 
All such written notices shall be mailed, faxed or delivered, to the
address or facsimile number specified for such Person below or to such other
address, facsimile number, electronic mail address or telephone number as shall
be designated by such party in a notice to the other parties.

 

	
  Bank:

  	
   

  	
  Bank of America, N.A.

  
	
   

  	
   

  	
  WA1-501-35-01

  
	
   

  	
   

  	
  800 Fifth Avenue, Floor 35

  
	
   

  	
   

  	
  Seattle, WA  98104

  
	
   

  	
   

  	
  Attention: 
  Mark N. Crawford

  
	
   

  	
   

  	
  Facsimile: 
  (206) 585-8638

  
	
   

  	
   

  	
   

  
	
  Guarantors:

  	
   

  	
  c/o USANA Health Sciences, Inc

  
	
   

  	
   

  	
  3838 West Parkway Boulevard

  
	
   

  	
   

  	
  Salt Lake City, Utah  84120

  
	
   

  	
   

  	
  Attention: 
  Gilbert A. Fuller

  
	
   

  	
   

  	
  Facsimile: 
  (801) 956-9486

  

 

All such notices and other communications
shall be deemed to be given or made upon the earlier to occur of (a) actual
receipt by the relevant party hereto and (b) (i) if delivered by hand or by
courier, when signed for by or on behalf of the relevant party hereto; (ii) if
delivered by mail, four Business Days after deposit in the mails, postage
prepaid; and (iii) if delivered by facsimile, when sent and receipt has been
confirmed by telephone.  In no event
shall a voicemail message be effective as a notice, communication or
confirmation hereunder.

 

20.          No Waiver;
Enforceability.  No failure by Bank
to exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy or power hereunder preclude any other or further exercise
thereof or the exercise of any other right. 
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law or in equity.  The
unenforceability or invalidity of any provision of this Guaranty

 

4

 

shall not affect the enforceability or
validity of any other provision herein. 
The obligations hereunder shall not be affected, limited or impaired by
any acts of any legislative body or governmental authority affecting Borrower,
including any restrictions on or regarding the conversion of currency or
repatriation or control of funds or any total or partial expropriation of
Borrower’s property, or by any economic, political, regulatory or other events
in the countries where Borrower is located.

 

21.          Assignment.  This Guaranty shall (a) bind each Guarantor
and their respective successors and assigns, provided that no Guarantor
may assign its rights or obligations under this Guaranty without the prior
written consent of Bank (and any attempted assignment without such consent
shall be void) and (b) inure to the benefit of Bank and any Affiliate of Bank a
party to a Swap Contract and their respective successors and assigns and Bank
and any Affiliate of Bank a party to a Swap Contract may, without notice to any
Guarantor and without affecting any Guarantor’s obligations hereunder, assign
or sell participations in the Guaranteed Obligations and this Guaranty, in
whole or in part.  Each Guarantor agrees
that Bank and any Affiliate of Bank a party to a Swap Contract may disclose to
any prospective purchaser and any purchaser of all or part of the Guaranteed
Obligations any and all information in Bank’s possession concerning any
Guarantor, this Guaranty and any security for this Guaranty.

 

22.          Governing
Law; Submission to Jurisdiction.

 

(a)           THIS GUARANTY SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF WASHINGTON
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED
THAT BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF WASHINGTON SITTING IN SEATTLE, KING COUNTY, WASHINGTON
OR OF THE UNITED STATES FOR THE WESTERN DISTRICT OF SUCH STATE, AND BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS.  EACH GUARANTOR IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR
OTHER DOCUMENT RELATED THERETO.  EACH
GUARANTOR WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

 

23.          Waiver of
Right to Trial by Jury.  EACH GUARANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF ANY
GUARANTOR AND BANK OR ANY OF THEM WITH RESPECT TO THIS GUARANTY, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND
EACH GUARANTOR HEREBY AGREES AND CONSENTS THAT, SUBJECT TO SECTION 24,
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS GUARANTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.

 

5

 

24.          Mandatory
Arbitration.

 

(a)           This Section concerns the resolution
of any controversies or claims between any Guarantor and Bank or any of them,
whether arising in contract, tort or by statute, that arise out of or relate to
this Guaranty and the other Loan Documents (collectively a “Claim”).  At the request of any Guarantor or Bank, any
Claim shall be resolved by arbitration in accordance with the Federal
Arbitration Act (Title 9, United States Code) (the “Arbitration Act”).  The Arbitration Act will apply even though
this Guaranty provides that it is governed by the Laws of the state of
Washington.  Nothing contained in this Section
24 shall override any contrary provision contained in any Swap Contract.

 

(b)           Arbitration proceedings will be determined
in accordance with the Arbitration Act, the rules and procedures for the
arbitration of financial services disputes of JAMS/ENDISPUTE, LLC, a Delaware
limited liability company or any successor thereof (“JAMS”), and the
terms of this Section 24.  In the
event of any inconsistency, the terms of this Section 24 shall
control.  The arbitration shall be
administered by JAMS and conducted in Seattle, Washington.  All Claims shall be determined by one
arbitrator; provided, however, that if Claims exceed $5,000,000,
upon the request of any party, the Claims shall be decided by three
arbitrators.  All arbitration hearings
shall commence within 90 days of the demand for arbitration and close within 90
days of commencement and the award of the arbitrator(s) shall be issued within
30 days of the close of the hearing; provided, however, that the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional 60 days. 
The arbitrator(s) shall provide a concise written statement of reasons
for the award.  The arbitration award may
be submitted to any court having jurisdiction to be confirmed and
enforced.  The arbitrator(s) will have
the authority to decide whether any Claim is barred by the statute of
limitations and, if so, to dismiss the arbitration on that basis.  For purposes of the application of the
statute of limitations, the service on JAMS under applicable JAMS rules of a
notice of Claim is the equivalent of the filing of a lawsuit.  Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the
arbitrator(s).  The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this Guaranty.

 

(c)           This Section 24 does not limit
the right of any Guarantor or Bank to: (i) exercise self-help remedies, such as
but not limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure
against any real or personal property collateral; (iii) exercise any judicial
or power of sale rights; or (iv) act in a court of law to obtain an interim
remedy, such as but not limited to, injunctive relief, writ of possession or
appointment of a receiver, or additional or supplementary remedies.  The filing of a court action is not intended
to constitute a waiver of the right of any Guarantor or Bank, including the
suing party, thereafter to require submittal of the Claim to arbitration.

 

25.          Condition
of the Borrower.  Each Guarantor
acknowledges and agrees that it has the sole responsibility for, and has
adequate means of, obtaining from Borrower such information concerning the
financial condition, business and operations of Borrower as such Guarantor
requires, and that Bank has no duty, and such Guarantor is not relying on Bank
at any time, to disclose to Guarantor any information relating to the business,
operations or financial condition of Borrower.

 

26.          Setoff.  If and to the extent any payment is not made
when due hereunder, Bank may setoff and charge from time to time any amount so
due against any or all of any Guarantor’s accounts or deposits with Bank.

 

27.          Other
Guarantees.  Unless otherwise
agreed by Bank and the applicable Guarantor in writing, this Guaranty is not
intended to supersede or otherwise affect any other guaranty now or hereafter
given by such Guarantor for the benefit of Bank or any term or provision
thereof.

 

28.          Representations
and Warranties.  Each Guarantor
represents and warrants that (a) such Guarantor is duly organized and in good
standing under the laws of the jurisdiction of its organization and has full
capacity and right to make and perform this Guaranty, and all necessary
authority has been obtained; (b) this Guaranty constitutes such Guarantor’s
legal, valid and binding obligation enforceable in accordance with its terms;
(c) the making and performance of this Guaranty

 

6

 

does not and will not violate the provisions
of any applicable Laws, and does not and will not result in the breach of, or
constitute a default or require any consent under, any material agreement,
instrument, or document to which such Guarantor a party or by which it or any
of its property may be bound or affected; (d) all consents, approvals, licenses
and authorizations of, and filings and registrations with, any Governmental
Authority required under applicable Laws for the making and performance of this
Guaranty have been obtained or made and are in full force and effect; (e) by
virtue of such Guarantor’s relationship with Borrower, the execution, delivery
and performance of this Guaranty is for the direct benefit of such Guarantor
and it has received adequate consideration for this Guaranty; and (f) the
financial information, that has been delivered to Bank by or on behalf of such
Guarantor, is complete and correct in all respects and accurately presents the
financial condition and the operational results of such Guarantor and since the
date of the most recent financial statements delivered to Bank, there has been
no material adverse change in the financial condition or operational results of
such Guarantor.

 

29.          Oral
Agreements.  ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS WHEREOF, each Guarantor has executed this Guaranty
by its duly authorized officer as of the day and year first above written.

 

	
   

  	
  USANA ACQUISITION CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Treasurer

  	
   

  
							

 

 

	
   

  	
  WASATCH PRODUCT
  DEVELOPMENT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Treasurer

  	
   

  
							

 

	
   

  	
  USANA HEALTH SCIENCES NEW
  ZEALAND, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Treasurer

  	
   

  
							

 

7

 

	
   

  	
  USANA CANADA HOLDING,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  Secretary

  	
   

  
							

 

	
   

  	
  FMG PRODUCTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
  V.P. and Treasurer

  	
   

  
							

 

	
   

  	
  INTERNATIONAL HOLDINGS,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mitchell Walkington

  	
   

  
	
   

  	
  Name:

  	
    Mitchell
  Walkington

  	
   

  
	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  
							

 

8

 

ANNEX 1

 

SUPPLEMENT

 

SUPPLEMENT
NO.           dated as of
                            ,
to the Continuing Guaranty dated as of June 16, 2004 (the “Guaranty”)
made by USANA ACQUISITION CORP., a Utah corporation (“USANA Acquisition”),
WASATCH PRODUCT DEVELOPMENT, INC., a Utah corporation (“Wasatch”), USANA
HEALTH SCIENCES NEW ZEALAND, INC., a Delaware corporation (“USANA New
Zealand”), USANA CANADA HOLDING, INC., a Delaware corporation (“USANA
Canada”), FMG PRODUCTIONS, INC., a Utah corporation (“FMG”),
INTERNATIONAL HOLDINGS, INC., a Delaware corporation (“Holdings” and
together with USANA Acquisition, Wasatch, USANA New Zealand, USANA Canada, FMG
and any additional guarantors becoming a party thereto as provided in Section
18 thereof and their respective successors, collectively, the “Guarantors”
and individually, a “Guarantor”), in favor of BANK OF AMERICA, N.A., a
national banking association (together with its successors and assigns, “Bank”),
and any Affiliate of Bank a party to a Swap Contract (as defined in the Credit
Agreement referred to below).

 

RECITALS

 

A.            USANA Health Sciences, Inc., a Utah
corporation (“Borrower”) is a party to that certain Credit Agreement
dated as of June 16, 2004 by and between Borrower and Bank (as amended,
restated, modified, renewed, supplemented or extended from time to time, the “Credit
Agreement”).

 

B.            Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Guaranty.

 

C.            Guarantors have entered into the
Guaranty in order to induce Bank to make Credit Extensions under the Credit
Agreement, and pursuant to Section 6.13(a) of the Credit Agreement, each
Material Subsidiary that is a Domestic Subsidiary that was not in existence or
was not a Guarantor on the date of the Credit Agreement is required to enter
into the Guaranty as a Guarantor upon becoming a Material Subsidiary.

 

D.            The undersigned Subsidiary (“New
Guarantor”) is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the Guaranty
in consideration for Bank to make Credit Extensions under the Credit Agreement.

 

Accordingly,
New Guarantor agrees as follows:

 

1.             In accordance with Section 18
of the Guaranty, New Guarantor by its signature below becomes a Guarantor under
the Guaranty with the same force and effect as if originally named therein as a
Guarantor and New Guarantor hereby (a) agrees to all the terms and provisions
of the Guaranty applicable to it as a Guarantor thereunder and (b) represents
and warrants that the representations and warranties made by it as a Guarantor thereunder
are true and correct on and as of the date hereof.  Each reference to a “Guarantor” in the
Guaranty shall be deemed to include New Guarantor.  The Guaranty is hereby incorporated herein by
reference.

 

2.             New Guarantor represents and
warrants to Bank that this Supplement has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.

 

3.             This Supplement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.  This Supplement shall become effective when
Bank shall have received counterparts of this Supplement that, when taken
together, bear the signatures of New Guarantor and Bank.  Delivery of an executed signature page to
this Supplement by facsimile transmission shall, subject to applicable Law, be
as effective as delivery of a manually-signed original thereof.

 

 

4.             Except as expressly supplemented
hereby, the Guaranty shall remain in full force and effect.

 

5.             THIS SUPPLEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF WASHINGTON
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

 

6.             The unenforceability or invalidity
of any provision of this Supplement shall not affect the enforceability or
validity of any other provision herein.

 

7.             All communications and notices
hereunder shall be in writing and given as provided in Section 19 of the
Guaranty.  All communications and notices
hereunder to New Guarantor shall be given to it at the address set forth under
its signature below.

 

8.             New Guarantor agrees to reimburse
Bank for its out-of-pocket expenses (including Attorney Costs) incurred in
connection with this Supplement.

 

9.             ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

 

IN WITNESS WHEREOF, New Guarantor has executed this Supplement
by its duly authorized officer as of the day and year first above written.

 

	
   

  	
  [NEW GUARANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

2

 

EXHIBIT D

 

PLEDGE AGREEMENT

 

This
PLEDGE AGREEMENT (“Agreement”) is entered into as of June 16, 2004, by
USANA HEALTH SCIENCES, INC., a Utah corporation (together with its successors,
“Pledgor”) in favor of BANK OF AMERICA, N.A., a national banking
association (together with its successors and assigns, “Pledgee”).

 

RECITALS

 

A.            Pledgor is a party to that certain
Credit Agreement dated as of June 16, 2004 by and between Pledgor and Pledgee
(as amended, restated, modified, renewed, supplemented or extended from time to
time, the “Credit Agreement”).

 

B.            It is a condition precedent to
Pledgee’s obligation to make its initial Credit Extension under the Credit
Agreement that Pledgor enter into this Agreement and grant to Pledgee the
security interests hereinafter provided to secure the obligations of Pledgor
described below.

 

NOW, THEREFORE, in consideration of the foregoing, the
mutual covenants and agreements herein contained, and for other good and
valuable consideration receipt of which is hereby acknowledged, Pledgor hereby
agrees as follows:

 

1.             Definitions;
Interpretation.

 

(a)           Terms Defined in Credit Agreement.  All capitalized terms used in this Agreement
and not otherwise defined herein have the meanings specified in the Credit
Agreement.

 

(b)           Certain Defined Terms.  As used in this Agreement, the following
terms have the following meanings:

 

“Capital
Stock” means (i) in the case of a corporation, capital stock, (ii) in the
case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of capital
stock, (iii) in the case of a partnership, partnership interests (whether
general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.

 

“Credit
Agreement” has the meaning set forth in the preamble hereto.

 

“Default
Rate” has the meaning specified in Section 9.

 

“Domestic
Subsidiary” means any Subsidiary that is organized and existing under the
laws of the United States or any state or commonwealth thereof or under the
laws of the District of Columbia.

 

“Foreign
Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

 

“Pledged
Collateral” has the meaning specified in Section 2.

 

“Pledged
Capital Stock” means all of the Capital Stock referred to in Sections
2(a) and (b).

 

“Pledged
Domestic Subsidiary” has the meaning specified in Section 2(a).

 

“Pledged
Foreign Subsidiary” has the meaning specified in Section 2(a).

 

“Pledged
Subsidiary” means any Pledged Domestic Subsidiary or any Pledged Foreign
Subsidiary.

 

 

“Secured
Obligations” means, collectively (i) all advances to, and debts,
liabilities, obligations, covenants and duties of Pledgor arising under the
Credit Agreement and each other Loan Document, including with respect to any
Loan or Letter of Credit; (ii) all debts, liabilities, obligations, covenants
and duties of Pledgor owing to Pledgee or any Affiliate of Pledgee and arising under
any Swap Contract, including liabilities and obligations arising in connection
with or as a result of early termination of any such Swap Contract; (iii) all
debts, liabilities, obligations, covenants and duties of Pledgor or any of its
Subsidiaries owing to Pledgee or any Affiliate of Pledgee and arising under any
Financial Transaction Contract; and (iv) all debts, liabilities, obligations,
covenants and duties of Pledgor arising under this Agreement, in each case
whether direct or indirect (including those acquired by assumption), absolute
or contingent, due or to become due, now existing or hereafter arising and
including interest and fees that accrue after the commencement by or against
any Loan Party or any Affiliate thereof of any proceeding under Debtor Relief
Laws naming such Person as the debtor in such proceeding, regardless of whether
such interest and fees are allowed claims in such proceeding.

 

“SEC”
means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.

 

“Securities
Act” has the meaning specified in Section 11(d).

 

“UCC”
means the Uniform Commercial Code as the same may, from time to time, be in
effect in the State of Washington; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the security interest in any Pledged
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Washington, the term “UCC” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and
for purposes of definitions related to such provisions.

 

(c)           Terms Defined in UCC.  Terms used in this Agreement that are defined
in the UCC have the meanings given to them in the UCC.

 

(d)           Interpretation.  The rules of construction and interpretation
specified in Sections 1.02 and 1.05 of the Credit Agreement also
apply to this Agreement and are incorporated herein by this reference.

 

2.             Pledge.  As security for the payment or performance,
as the case may be, in full of the Secured Obligations, Pledgor hereby pledges,
assigns, transfers, hypothecates and sets over to Pledgee, its successors and
assigns, and grants to Pledgee, its successors and assigns, a security interest
in all of Pledgor’s right, title and interest in, to and under the following,
whether now existing or owned or hereafter acquired or arising (collectively,
the “Pledged Collateral”):

 

(a)           Pledged Capital Stock.  (i) All of the Capital Stock of each Domestic
Subsidiary forth in Part (a) of Schedule 1 hereto (each, a “Pledged
Domestic Subsidiary”) owned by Pledgor and (ii) all of the Capital Stock of
each Foreign Subsidiary forth in Part (b) of Schedule 1 hereto (each, a
“Pledged Foreign Subsidiary”) owned by Pledgor; provided that such
Capital Stock shall not include more than 65% of all of the voting Capital
Stock (within the meaning of Treas. Reg. Section 1.956 2(c)(2)) of any Foreign
Subsidiary;

 

(b)           Additional Capital Stock.  (i) All of the Capital Stock of any Pledged
Domestic Subsidiary and, subject to the percentage restrictions described in
subsection (a) above, all of the Capital Stock of any Pledged Foreign Subsidiary
hereafter acquired, received or owned by Pledgor (whether in connection with
any recapitalization, reclassification or reorganization of the capital of a
Pledged Subsidiary or otherwise); and (ii) subject to the percentage
restrictions described in subsection (a) above, all of the Capital Stock
hereafter acquired, received or owned by Pledgor of any Person who, after the
date hereof, becomes, as a result of any occurrence, a Pledged Subsidiary;

 

(c)           Additional Interests, Etc.  (i) All certificates, instruments or other
writings representing or evidencing the Pledged Capital Stock; (ii) all
warrants, options and other rights entitling Pledgor to acquire

 

2

 

any interest in any Pledged Capital Stock,
subject to the percentage restrictions described in subsection (a) above; and
(iii) all dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed or distributable in respect of or
in exchange for any or all of the Pledged Capital Stock; and

 

(d)           Proceeds.  All cash and non cash Proceeds of the
foregoing, however and whenever acquired and in whatever form.

 

3.             Delivery
of the Pledged Collateral; Continuing Security Interest.  Pledgor hereby agrees that:

 

(a)           Delivery of Certificates.  Pledgor shall deliver to Pledgee (i)
simultaneously with or prior to the execution and delivery of this Agreement,
all certificates, instruments or other writings representing or evidencing
Pledged Capital Stock and (ii) promptly upon the receipt thereof by or on
behalf of Pledgor, all other certificates, instruments or other writings
representing or evidencing Pledged Capital Stock together with a duly executed
instrument in the form of Annex 1 hereto (a “Supplement”) identifying
such additional Pledged Capital Stock; provided that the failure to
deliver any such Supplement shall not affect the validity of such pledge of
such Pledged Capital Stock.  Prior to
delivery to Pledgee, all such certificates and instruments constituting Pledged
Collateral shall be held in trust by Pledgor for the benefit of Pledgee
pursuant hereto.  All such certificates
shall be delivered in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment satisfactory
to Pledgee.  Pledgor hereby authorizes
Pledgee to attach each Supplement to this Agreement and agrees that all Capital
Stock listed thereon shall for all purposes hereunder constitute Pledged Collateral.

 

(b)           Additional Pledged Collateral.  Subject to the percentage restrictions
described in Section 2(a) above, if Pledgor shall receive by virtue of
its being or having been the owner of any Pledged Collateral, any (i)
certificate, including any certificate representing a dividend or distribution
in connection with any increase or reduction of capital, reclassification,
merger, consolidation, sale of assets, combination of shares or membership or
equity interests, stock splits, spin-off or split-off, promissory notes or
other instrument; (ii) warrant, option or other right, whether as an addition
to, substitution for, or an exchange for, any Pledged Collateral or otherwise;
(iii) dividends payable in securities; or (iv) distributions of securities or
other equity interests in connection with a partial or total liquidation,
dissolution or reduction of capital, capital surplus or paid in surplus, then
Pledgor shall forthwith deliver all of the foregoing to Pledgee to hold as
Pledged Collateral and shall, if received by Pledgor, be received in trust for
the benefit of Pledgee, be segregated from the other property or funds of
Pledgor, and be forthwith delivered to Pledgee as Pledged Collateral in the
same form as so received, together with duly executed instruments of transfer
or assignment satisfactory to Pledgee, as further collateral security for the
Secured Obligations.

 

(c)           Financing Statements.  Pledgor hereby irrevocably authorizes Pledgee
at any time and from time to time to file in any relevant jurisdiction any
initial financing statements and amendments thereto that contain the
information required by Article 9 of the UCC of each applicable jurisdiction
for the filing of any financing statement or amendment in order to perfect and
protect the security interest of Pledgee in the Pledged Collateral.

 

(d)           Continuing Security Interest.  Pledgor acknowledges and agrees that the
security interest of Pledgee in the Pledged Collateral constitutes continuing
collateral security for all of the Secured Obligations.

 

4.             Representations
and Warranties.  In addition to the
representations and warranties of Pledgor set forth in the Credit Agreement,
which are incorporated herein by this reference, Pledgor represents and
warrants to Pledgee that:

 

(a)           Ownership and Authority.  Pledgor is the sole legal and beneficial
owner of the Pledged Collateral and has the right, power and authority to
pledge, assign, transfer, hypothecate and set over to

 

3

 

Pledgee and grant to Pledgee a security
interest in such Pledged Collateral pursuant hereto and to execute, deliver and
perform its obligations in accordance with the terms of this Agreement.

 

(b)           Authorization of Pledged Capital
Stock.  All of the Pledged Capital
Stock is duly authorized and validly issued, is fully paid and nonassessable
and is not subject to the preemptive first-refusal or other similar rights of
any Person.  All Capital Stock hereafter
constituting Pledged Collateral will be duly authorized and validly issued,
fully paid and nonassessable and not subject to the preemptive first-refusal or
other similar rights of any Person.

 

(c)           Validity of Security Interest.  This Agreement creates a valid security
interest in favor of Pledgee, its successors and assigns, in all of the Pledged
Collateral.  Upon the taking possession
by Pledgee of the certificates (if any) representing the Pledged Capital Stock
and all other certificates and instruments constituting Pledged Collateral,
Pledgee will have a first priority perfected security interest in all certificated
Pledged Capital Stock and such certificates and instruments.  Upon the filing of UCC financing statements
in the appropriate filing office in the jurisdiction of the incorporation or
organization of Pledgor, Pledgee shall have a first priority perfected security
interest in all uncertificated Pledged Capital Stock consisting of partnership
or limited liability company interests that do not constitute a “security”
pursuant to Section 8-103(c) of the UCC. 
Except as set forth in this subsection (c), no action is necessary to
perfect or otherwise protect such security interest.

 

(d)           Absence of Liens and Claims.  Except for the security interest of Pledgee
created hereby, the Pledged Collateral is free and clear of any Liens.  There exists no “adverse claim” within the
meaning of Section 8-102 of the UCC with respect to any of the Pledged Capital
Stock.

 

(e)           No Transfer Restrictions.  Except for restrictions imposed by the Loan
Documents, the Pledged Collateral is free of contractual restrictions that
might prohibit, impair, delay or otherwise affect the pledge of any Pledged
Collateral hereunder or the sale or disposition thereof pursuant hereto.

 

(f)            No Other Capital Stock.  Except as set forth in Schedule 1
hereto, Pledgor owns no Capital Stock of any Pledged Subsidiary.  The Pledged Capital Stock represents that
percentage as set forth on Schedule 1 hereto of all of the Capital Stock
of each Pledged Subsidiary and sets forth all Capital Stock required to be
pledged under this Agreement.

 

(g)           Delivery of Capital Stock.  Pledgor has delivered or otherwise caused the
transfer to Pledgee, pursuant to Sections 3(a) or (b), as
applicable, of all certificates, instruments or other writings representing,
evidencing or constituting Pledged Collateral. 
The Pledged Collateral is not and shall not be represented or evidenced
by any certificates, instruments or other writings other than those delivered
hereunder.

 

(h)           Margin Regulations.  The pledge of the Pledged Capital Stock
pursuant to this Agreement does not violate the provisions of Regulation T, U
or X of the Board of Governors of the Federal Reserve System as now and from
time to time hereafter in effect.  None
of the Pledged Capital Stock constitutes “margin stock” within the meaning of
such term under Regulation U.

 

(i)            Partnership and Limited Liability
Company Interests.  Except as
previously disclosed in writing to Pledgee, none of the Pledged Capital Stock
consisting of partnership or limited liability company interests (i) is dealt
in or traded on a securities exchange or in a securities market, (ii) by its
terms expressly provides that it is a security governed by Article 8 of the
UCC, (iii) is an investment company security, (iv) is held in a securities
account or (v) constitutes a security or a financial asset.

 

(j)            Consents.  No consent or authorization of, filing with,
or other act by or in respect of, any arbitrator or Governmental Authority and
no consent of any other Person (including any stockholder, member or creditor
of Pledgor), is required (i) for the pledge made by Pledgor or for the granting
of the security interest by Pledgor pursuant to this Agreement or for the
execution, delivery or performance of this Agreement by Pledgor or (ii) or the
exercise by Pledgee of the rights and remedies provided for in this Agreement,
except as may be required by Laws affecting the offering and sale of
securities.

 

4

 

The
foregoing representations and warranties shall survive the execution and
delivery of this Agreement and shall be deemed restated automatically at each
such time as any additional Pledged Collateral is delivered hereunder to
Pledgee.

 

5.             Covenants.  In addition to the covenants of Pledgor set
forth in the Credit Agreement, which are incorporated herein by this reference,
so long as the Commitment or any Swap Contract between any Loan Party and
Pledgee or any Affiliate of Pledgee shall be in effect or any Secured
Obligation shall remain unpaid or unsatisfied, Pledgor shall:

 

(a)           Defense of Pledged Collateral.  At its own cost and expense, take any and all
actions necessary to defend title to the Pledged Collateral against all Persons
and to defend the security interest of Pledgee in the Pledged Collateral and
the priority thereof against any Lien.

 

(b)           Disposition of Pledged Collateral.  Not make or permit to be made any sale,
transfer or other disposition of any of the Pledged Collateral or grant any
option, warrant or other right or interest with respect to, any of the Pledged
Collateral.

 

(c)           Change of Name, Identity or
Structure.  Promptly notify Pledgee
in writing of any change:  (i) in its
corporate or organization name; (ii) in the location of its chief executive
office, its principal place of business, any office in which it maintains books
or records relating to the Pledged Collateral; (iii) in its identity, type of
organization, corporate structure or jurisdiction of incorporation or
organization; or (iv) in its Federal Taxpayer Identification Number or other
identification number given by its jurisdiction of incorporation or
organization, and not to effect or permit any change referred to in clauses (i)
through (iv) unless all filings have been made under the UCC or otherwise that
are required in order for Pledgee to continue at all times following such
change to have a valid, legal and perfected first priority security interest in
all the Pledged Collateral.

 

(d)           No Liens.  Not make or permit to be made an assignment,
pledge or hypothecation of any of the Pledged Collateral or create or permit to
exist any Lien upon or with respect to any of the Pledged Collateral other than
the security interest of Pledgee created hereby.

 

(e)           Shareholder Agreements.  Not enter into any shareholder agreement,
voting agreement, voting trust, irrevocable proxies or any other similar
agreement or instrument with respect to any Pledged Collateral.

 

(f)            Additional Capital Stock.  Immediately upon its acquisition, receipt or
ownership, directly or indirectly, of any Pledged Capital Stock hereafter,
pledge such Capital Stock pursuant to Section 3(b) and deliver or
otherwise cause the transfer of all certificates, instruments or other writings
representing, or evidencing such Pledged Capital Stock to Pledgee pursuant to Sections
3(a) or (b), as applicable.

 

(g)           Compliance with Securities Laws.  File all reports and other information now or
hereafter required to be filed by Pledgor with the SEC and any other state,
federal or foreign agency in connection with Pledgor’s ownership of the Pledged
Collateral.

 

(h)           Partnership and Limited Liability
Company Interests.  Not take any
action or permit any action to be taken that would cause any membership
interest in a limited liability company or partnership interest constituting
Pledged Collateral to become a “security” as defined in Article 8 of the UCC,
unless such membership interest or partnership interest has been certificated
and pledged to Pledgee pursuant to this Agreement.

 

6.             Further
Assurances.  Pledgor agrees, at
its own expense, to execute, acknowledge, deliver and cause to be duly filed
all such further instruments and documents and take all such actions as Pledgee
may from time to time request to better assure, preserve, protect and perfect
the Lien of Pledgee in the Pledged Collateral and the rights and remedies of Pledgee
hereunder, including the payment of any fees and taxes required in connection
with the execution and delivery of this Agreement, the granting of the security
interest hereunder and the filing of any financing statements or other
documents in

 

5

 

connection herewith or therewith.  Without limiting the generality of the
foregoing, Pledgor further agrees that it shall, concurrently with the
execution of this Agreement and at any time and from time to time thereafter
(a) procure, execute and deliver to Pledgee all stock powers, endorsements,
financing statements, assignments and other instruments of transfer requested
by Pledgee and (b) deliver to Pledgee immediately upon receipt the originals of
all Pledged Capital Stock and all certificates, instruments or other writings
representing, evidencing or constituting Pledged Collateral.  Pledgor hereby authorizes Pledgee, with
prompt notice thereof to Pledgor, to supplement this Agreement by supplementing
Schedule 1 hereto or adding additional schedules hereto to specifically
identify any certificate, instrument or other writing that may represent or
evidence Pledged Capital Stock; provided, however, that Pledgor
shall have the right, exercisable within ten days after it has been notified by
Pledgee of the specific identification of such Pledged Capital Stock, to advise
Pledgee in writing of any inaccuracy of the representations and warranties made
by Pledgor hereunder with respect to such Pledged Capital Stock.  Pledgor agrees that it will use its
reasonable best efforts to take such action as shall be necessary in order that
all representations and warranties hereunder shall be true and correct with
respect to such Pledged Capital Stock within 30 days after the date it has been
notified by Pledgee of the specific identification of such Pledged Capital
Stock.

 

7.             Registration
in Nominee Name; Denominations.  Pledgee shall have
the right (in its sole and absolute discretion) to hold the Pledged Capital
Stock in its own name as pledgee, the name of its nominee (as pledgee or as sub
agent) or the name of Pledgor, endorsed or assigned in blank or in favor of
Pledgee.  Pledgor will promptly give to
Pledgee copies of any material notices or other communications received by it
with respect to Pledged Capital Stock registered in the name of Pledgor.  Pledgee shall at all times have the right to
exchange the certificates representing Pledged Capital Stock for certificates
of smaller or larger denominations for any purpose consistent with this
Agreement.

 

8.             Voting
Rights; Dividends.

 

(a)           Prior to the Occurrence of a
Default.  So long as no Default or
Event of Default shall exist or result therefrom (and, in the case of
subparagraph (i) below, so long as written notice has not been given by Pledgee
to Pledgor):

 

(i)            Voting Rights.  Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Capital Stock
or any part thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement; provided, however, that Pledgor shall
not exercise or shall refrain from exercising any such right if, in the
judgment of Pledgee, such action would have a material adverse effect on the
value of the Pledged Collateral or any part thereof or the interest of Pledgee
therein, and, provided, further, that Pledgor shall give Pledgee
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.

 

(ii)           Dividends.  Pledgor shall be entitled to receive and
retain any and all dividends or distributions paid in respect of the Pledged
Capital Stock, in compliance with the terms of the Credit Agreement, except the
following: (A) dividends 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 Capital Stock; (B) dividends and
other distributions paid or payable in cash in respect of any Pledged Capital
Stock in connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in redemption of, or in
exchange for, any Pledged Capital Stock; all of which shall be forthwith
delivered to Pledgee to hold as, Pledged Collateral and shall, if received by
Pledgor, be received in trust for the benefit of Pledgee, be segregated from
the other property or funds of Pledgor, and be forthwith paid over or otherwise
delivered to Pledgee as Pledged Collateral in the same form as so received,
together with duly executed instruments of transfer or assignment satisfactory
to Pledgee, as further collateral security for the Secured Obligations.

 

6

 

(iii)          Proxies, Etc.  Pledgee shall execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies and other instruments
as Pledgor may request for the purpose of enabling Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to
subparagraph (i) above and to receive the dividends or distributions which it
is authorized to receive and retain pursuant to subparagraph (ii) above.

 

(b)           Upon the Occurrence of a Default.  Upon the occurrence and during the
continuance of a Default or an Event of Default:

 

(i)            Voting Rights.  All rights of Pledgor to exercise the voting
and other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 8(a)(i) above shall cease upon written notice
thereof from Pledgee, and all such rights shall thereupon become vested in
Pledgee who shall thereupon have the sole right to exercise such voting and
other consensual rights.

 

(ii)           Dividends.  All rights of Pledgor to receive the
dividends or distributions which it would otherwise be authorized to receive
and retain pursuant to Section 8(a)(ii) above shall cease, and all such
rights shall thereupon become vested in Pledgee who shall thereupon have the
sole right to receive and hold as Pledged Collateral such dividends.  All dividends or distributions which are
received by Pledgor contrary to the provisions of this subparagraph (ii) shall
be received in trust for the benefit of Pledgee, shall be segregated from other
funds of Pledgor and shall be forthwith paid over or otherwise delivered to
Pledgee as Pledged Collateral in the same form as so received, together with
duly executed instruments of transfer or assignment satisfactory to Pledgee, as
further collateral security for the Secured Obligations.

 

(iii)          Proxies, Etc.  In order to permit Pledgee to exercise the
voting and other rights which it may be entitled to exercise pursuant to
subparagraph (i) above, and to receive all dividends and distributions which it
may be entitled to receive under subparagraph (ii) above, Pledgor shall, if
necessary, upon written notice of Pledgee, from time to time execute and
deliver to Pledgee appropriate proxies, dividend payment orders and other
instruments as Pledgee may request.

 

9.             Appointment
of Pledgee.  So long as the
Commitment or any Swap Contract between Pledgor and Pledgee or any Affiliate of
Pledgee shall be in effect or any Secured Obligation shall remain unpaid or
unsatisfied, Pledgor does hereby designate and appoint Pledgee its true and
lawful attorney coupled with an interest and with power irrevocable, upon the
occurrence and during the continuation of any Event of Default, for the purpose
of carrying out the provisions of this Agreement and taking any action and
executing any instrument that Pledgee may deem necessary or advisable to
accomplish the purposes hereof, including all of the following: (i) receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, interest payment or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same; (ii)
perfect or continue perfected, maintain the priority of or provide notice of
Pledgee’s security interest in the Pledged Collateral; (iii) exercise dominion
and control over, and refuse to permit further withdrawals from any securities
account constituting part of the Pledged Collateral; (iv) execute any and all
endorsements, assignments or other documents and instruments necessary to sell,
lease, assign, convey or otherwise transfer title in or dispose of the Pledged
Collateral; and (v) execute any and all such other documents and instruments,
and do any and all acts and things for and on behalf of Pledgor, which Pledgee
may deem necessary or advisable to maintain, protect, realize upon and preserve
the Pledged Collateral and Pledgee’s security interest therein and to
accomplish the purposes of this Agreement. 
The acceptance of this appointment by Pledgee shall not obligate it to
perform any duty, covenant or obligation required to be performed by the
Pledgor under or by virtue of the Pledged Collateral or to take any action in
connection therewith.  All expenses
incurred by Pledgee in connection with exercising any of its rights under this
Section shall bear interest at a per annum rate equal to the Base Rate
(changing as the Base Rate changes) plus 4% per annum (the “Default
Rate”) from the date incurred until repaid by Pledgor; provided, however,
that interest shall not accrue at a rate in excess of the maximum rate
permitted by applicable Law.  All amounts
described in this Section shall be repayable by Pledgor on demand and Pledgor’s
obligation to make such

 

7

 

repayment shall constitute an additional
Secured Obligation.  The amount and
nature of any expense by Pledgee hereunder and the time when paid shall be
fully established by the certificate of Pledgee or any of Pledgee’s officers,
employees, counsel, agents or attorneys-in-fact.

 

10.          Events of
Default.  The occurrence of
any of the following events shall constitute an “Event of Default:”

 

(a)           an Event of Default as defined in the
Credit Agreement shall have occurred and be continuing;

 

(b)           any representation or warranty made
or deemed made by Pledgor under or in connection with this Agreement shall
prove to have been incorrect in any material respect when made or deemed made;
or

 

(c)           Pledgor shall fail to perform or
observe any other covenant, obligation or term of this Agreement and such
failure shall continue unremedied for a period of 30 days after the earlier of
(i) the date upon which written notice thereof shall have been given to Pledgor
by Pledgee or (ii) the date upon which a Responsible Officer of Pledgor knew or
reasonably should have known of such failure.

 

11.          Remedies.

 

(a)           General Remedies.  If an Event of Default shall occur, Pledgee
shall have, in addition to all other rights and remedies granted to it in this
Agreement, the Credit Agreement, the other Loan Documents and the Environmental
Agreement, all rights and remedies of a secured party under the UCC and other
applicable Laws.  Without limiting the
generality of the foregoing, Pledgor agrees that Pledgee may:

 

(i)            require Pledgor to assemble all or
any part of the Pledged Collateral and make it available to Pledgee at any
place and time designated by Pledgee;

 

(ii)           exercise dominion and control over,
and refuse to permit further withdrawals (whether of money, securities, instruments,
investment property or other property) from any securities account constituting
part of the Pledged Collateral; and

 

(iii)          subject to the requirements of Laws
affecting the offering and sale of securities, sell, resell, assign, transfer
or otherwise dispose of any or all of the Pledged Collateral at public or
private sale or at any broker’s board or on any securities exchange, by one or
more contracts, in one or more parcels, at the same or different times, for
cash or credit, or for future delivery without assumption of any credit risk,
all as Pledgee deems advisable.

 

(b)           Sale of Pledged Collateral.  Each purchaser at any sale pursuant to this
Agreement shall hold the property sold absolutely, free from any claim or right
on the part of Pledgor, and Pledgor hereby waives, to the fullest extent
permitted by applicable Laws, all rights of redemption, stay and appraisal
which Pledgor now has or may at any time in the future have under any
applicable Law now existing or hereafter enacted.  Neither Pledgee’s compliance with the UCC or
any other applicable Law, in the conduct of any sale made pursuant to this
Agreement, nor its disclaimer of any warranties relating to the Pledged
Collateral, shall be considered to adversely affect the commercial reasonableness
of such sale.  Pledgee shall give Pledgor
10 days’ written notice (which Pledgor agrees is reasonable notice within the
meaning of Section 9-612 of the UCC) of Pledgee’s intention to make any sale of
Pledged Collateral.  Pledgee shall not be
obligated to make any sale of any Pledged Collateral if it shall determine not
to do so, regardless of the fact that notice of sale of such Pledged Collateral
shall have been given.  Pledgee may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. 
To the fullest extent permitted by applicable Laws, Pledgee may bid for
or purchase the Pledged Collateral or any part thereof offered for sale and may
make payment on account thereof by using any claim then due and payable to

 

8

 

Pledgee from Pledgor as a credit against the
purchase price and Pledgee may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to Pledgor
therefor.  Pledgor agrees to pay any
deficiency remaining after collection or realization by Pledgee on the Pledged
Collateral.

 

(c)           Waiver of Rights to Purchase.  Pledgor, for itself and its successors and
assigns, does hereby irrevocably waive and release all preemptive,
first-refusal and other similar rights of Pledgor to purchase any or all of the
Pledged Capital Stock upon any sale thereof by Pledgee under this Agreement,
whether such right to purchase arises under any of the Pledged Subsidiary’s
Organization Documents, by agreement, by operation of law or otherwise.

 

(d)           Exempt Sales Transactions.  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,
Pledgee may be compelled, with respect to any sale of all or any part of the
Pledged Capital Stock, to limit purchasers to those who will agree, among other
things, to acquire such securities for their own account, for investment, and
not with a view to the distribution or resale thereof.  Pledgor acknowledges and agrees that any such
sale may result in prices and other terms less favorable to the seller than if
such sale were a public sale without such restrictions and notwithstanding such
circumstances, agrees that any such sale shall be deemed to have been made in a
commercially reasonable manner.  Pledgee
shall be under no obligation to delay the sale of any of the Pledged Capital
Stock for the period of time necessary to permit Pledgor to register such securities
for public sale under the Securities Act, or under applicable state securities
laws, even if Pledgor would agree to do so. 
If Pledgee determines to exercise its right to sell any or all of the
Pledged Capital Stock, upon written request, Pledgor shall and shall cause each
of the Pledged Subsidiaries to, from time to time, furnish to Pledgee all such
information as Pledgee may request in order to determine the number of shares
and other instruments included in the Pledged Capital Stock which may be sold
by Pledgee as exempt transactions under the Securities Act and rules of the SEC
thereunder, as the same are from time to time in effect.

 

(e)           Retention of Pledged Collateral.  Pledgee may, after providing the notices
required by Section 9-620(a) of the UCC or otherwise complying with any requirement
of applicable Law, accept or retain the Pledged Collateral or any part thereof
in satisfaction of the Secured Obligations. 
Unless and until Pledgee shall have provided such notices, however,
Pledgee shall not be deemed to have retained any Pledged Collateral in
satisfaction of any Secured Obligations for any reason.

 

(f)            Duty of Care.  Except for the exercise of reasonable care in
the custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Pledgee shall have no duty as to any
Pledged Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Pledged
Collateral.  Pledgee 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 Pledgee accords its own property.  Neither Pledgee nor any of its Affiliates,
directors, officers, employees, counsel, agents and attorneys-in-fact shall be
liable for failure to demand, collect or realize upon all or any part of the
Pledged Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Pledged Collateral upon the
request of a Pledgor or otherwise.

 

(g)           Application of Proceeds.  Except as otherwise required by the UCC or
other applicable Laws, the cash proceeds actually received from the sale or
other disposition or collection of the Pledged Collateral, and any other
amounts received in respect of the Pledged Collateral the application of which
is not otherwise provided for herein, shall be applied by Pledgee in accordance
with the terms of the Credit Agreement. 
Pledgor shall remain liable to Pledgee and the other Secured Parties for
any deficiency which exists after any sale or other disposition or collection
of the Pledged Collateral.

 

12.          Certain
Waivers.  Pledgor waives, to
the fullest extent permitted by applicable Laws, (a) any right of redemption
with respect to the Pledged Collateral, whether before or after sale hereunder,
and all rights, if any, of marshalling of the Pledged Collateral or other
collateral or security for the Secured

 

9

 

Obligations; (b) any right to require
Pledgee (i) to proceed against any Person, (ii) to exhaust any other collateral
or security for any of the Secured Obligations, (iii) to pursue any remedy in
Pledgee’s power, or (iv) to make or give any presentments, demands for
performance, notices of nonperformance, protests, notices of protests or
notices of dishonor in connection with any of the Pledged Collateral; and (c)
all claims, damages, and demands against Pledgee arising out of the
repossession, retention, sale or application of the proceeds of any sale of the
Pledged Collateral.

 

13.          No Waiver;
Cumulative Remedies.  No failure by
Pledgee to exercise, and no delay in exercising, any right, power or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power, or
remedy.  The exercise of any right,
power, or remedy shall in no event constitute a cure or waiver of any Event of
Default or prejudice the rights of Pledgee in the exercise of any right
hereunder.  The rights and remedies
provided herein are cumulative and not exclusive of any right or remedy
provided by applicable Law.

 

14.          Expenses
Incurred.  Pledgee is not
required to, but may, at its option, pay any tax, insurance premium, filing or
recording fees, or other charges payable by Pledgor hereunder and any such
amount shall bear interest at the Default Rate from the date of payment until
repaid.  Pledgor agrees to pay or
reimburse Pledgee on demand for all fees, costs or out-of-pocket expenses
(including Attorney Costs) incurred by Pledgee in connection with (i) the
custody or preservation of, or the sale of, collection from or other
realization upon any of the Pledged Collateral (including all expenses of sales
and collections of the Pledged Collateral), (ii) the preservation, protection
or enforcement of any of the rights of Pledgee under this Agreement (including
any fees, costs and out-of-pocket expenses incurred in the preservation,
protection or enforcement of any rights of Pledgee in any case commenced by or
against Pledgor under the Bankruptcy Code (Title 11, United States Code) or any
similar or successor statute) or (iii) the failure of Pledgor to perform or
observe any its obligations under this Agreement, and any such amount shall
bear interest at the Default Rate from the date such expenditures are made by
Pledgee until repaid.  All amounts
described in this Section shall be repayable by Pledgor on demand and Pledgor’s
obligation to make such repayment shall constitute an additional Secured
Obligation.

 

15.          Integration.  This Agreement, together with the other Loan
Documents to which Pledgor is a party and the Environmental Indemnity
Agreement, comprises the complete and integrated agreement of the parties on
the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter. 
Pledgor acknowledges that this Agreement, the other Loan Documents and
the Environmental Indemnity Agreement may contain covenants and other terms and
provisions variously stated regarding the same or similar matters, and agrees
that all such covenants, terms and provisions are cumulative and all shall be
performed and satisfied in accordance with their respective terms.

 

16.          Amendments.  No provision of this Agreement may be
waived, amended, supplemented or modified, except by a written instrument
executed by Pledgee and Pledgor.

 

17.          Notices.  All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 9.02 of the Credit Agreement.

 

18.          Governing
Law.  THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF WASHINGTON APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE (EXCEPT TO THE EXTENT THE VALIDITY OR PERFECTION OF THE SECURITY
INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN RESPECT OF ANY PLEDGED COLLATERAL
ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF WASHINGTON); PROVIDED
THAT SECURED PARTY SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

19.          Assignment.  This Agreement shall (a) bind Pledgor and
their respective successors and assigns; provided that Pledgor may not
assign its rights or obligations under this Agreement without the prior written
consent of Pledgee (and any attempted assignment without such consent shall be
void) and

 

10

 

(b) inure to the benefit of Pledgee and any
Affiliate of Pledgee and their respective successors and assigns a party to a
Swap Contract and/or Financial Transaction Contract with Pledgor and Pledgee
and any Affiliate of Pledgee a party to a Swap Contract and/or Financial
Transaction Contract with Pledgor may, without notice to Pledgor and without
affecting Pledgor’s obligations hereunder, assign or sell participations in the
Secured Obligations and this Agreement, in whole or in part.  Pledgor agrees that Pledgee and any Affiliate
of Pledgee a party to a Swap Contract and/or Financial Transaction Contract
with Pledgor may disclose to any prospective purchaser and any purchaser of all
or part of the Secured Obligations any and all information in Pledgee’s
possession concerning Pledgor, this Agreement and/or the Pledged Collateral.

 

20.          No Waiver;
Enforceability.  No failure by
Pledgee to exercise, and no delay in exercising, any right, remedy or power
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy or power hereunder preclude any other or further
exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative
and not exclusive of any remedies provided by applicable Law or in equity.  The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision herein.

 

IN WITNESS WHEREOF, Pledgor has caused this Agreement to be
duly executed as of the date first above written.

 

	
   

  	
  USANA HEALTH SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
    Sr. Vice Pres. and CFO

  	
   

  
							

 

11

 

SCHEDULE 1

 

PLEDGED CAPITAL STOCK

 

Part
(a).          Pledged Domestic
Subsidiaries.

 

	
  Name
  of Subsidiary

  	
   

  	
  Number of

  Shares

  	
   

  	
  Certificate

  Number

  	
   

  	
  Percentage

  Ownership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Canada Holding, Inc.

  	
   

  	
  1,000

  	
   

  	
  01

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New Zealand, Inc.

  	
   

  	
  1,000

  	
   

  	
  1

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FMG Productions, Inc.

  	
   

  	
  2,300

  	
   

  	
  2

  	
   

  	
  76.67%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FMG Productions, Inc.

  	
   

  	
  700

  	
   

  	
  3

  	
   

  	
  23.33%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  International Holdings, Inc.

  	
   

  	
  1,000

  	
   

  	
  000001

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Acquisition Corp.

  	
   

  	
  1,000

  	
   

  	
  1

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Part (b).          Pledged
Foreign Subsidiaries.

 

	
  Name
  of Subsidiary

  	
   

  	
  Number of

  Shares

  	
   

  	
  Certificate

  Number

  	
   

  	
  Percentage

  Ownership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Australia Pty Ltd

  	
   

  	
  3,025,085

  	
   

  	
  4

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Hong Kong Limited

  	
   

  	
  6,990,499

  	
   

  	
  3

  	
   

  	
  99.9%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Health Sciences

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Singapore Pte. Ltd.

  	
   

  	
  2

  	
   

  	
  3

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA México, S.A. de C.V.

  	
   

  	
  499

  	
   

  	
  1

  	
   

  	
  99.8%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USANA Japan, Inc.

  	
   

  	
  170

  	
   

  	
  1

  	
   

  	
  100%

  

 

 

ANNEX 1

 

SUPPLEMENT

 

SUPPLEMENT
NO.           dated as of
                             ,
to the Pledge Agreement dated as of June 16, 2004 (the “Pledge Agreement”)
made by USANA HEALTH SCIENCES, INC., a Utah corporation (together with its
successors, “Pledgor”) in favor of BANK OF AMERICA, N.A., a national
banking association (together with its successors and assigns, “Pledgee”).

 

RECITALS

 

A.            Pledgor is a party to that certain
Credit Agreement dated as of June 16, 2004 by and between Pledgor and Pledgee
(as amended, restated, modified, renewed, supplemented or extended from time to
time, the “Credit Agreement”).

 

B.            Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned to such terms in
the Pledge Agreement.

 

C.            Pledgor has entered into the Pledge
Agreement in order to induce Pledgee to make Credit Extensions under the Credit
Agreement, and pursuant to Section 3(a) of the Pledge Agreement Pledgor
is required to deliver to Pledgee all certificates, instruments or other
writings representing or evidencing Pledged Capital Stock received by Pledgor
after the date of the Pledge Agreement together with a duly executed Supplement
substantially the form hereof.

 

D.            Pledgor is executing this Supplement
in accordance with the requirements of the Pledge Agreement in consideration
for Pledgee to make Credit Extensions under the Credit Agreement.

 

Accordingly,
Pledgor agrees as follows:

 

1.             Pledgor agrees that this Supplement
may be attached to the Pledge Agreement and that the shares of capital stock or
other equity securities listed on this Supplement shall be and become part of
the Pledged Collateral referred to in the Pledge Agreement and shall secure all
Secured Obligations.

 

2.             Pledgor agrees that the shares of
capital stock and other equity securities listed below shall for all purposes
constitute Pledged Collateral and shall be subject to the security interest
created by the Pledge Agreement.

 

	
  Name
  of Subsidiary

  	
   

  	
  Number of

  Shares

  	
   

  	
  Certificate

  Number

  	
   

  	
  Percentage

  Ownership

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

3.             Pledgor certifies that the
representations and warranties set forth in Section 4 of the Pledge
Agreement are true and correct with respect to the shares of capital stock or
other equity securities listed on this Supplement on and as of the date hereof.

 

4.             Except as expressly supplemented
hereby, the Pledge Agreement shall remain in full force and effect.

 

5.             THIS SUPPLEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF WASHINGTON
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

 

6.             Pledgor agrees to reimburse Pledgee
for its out-of-pocket expenses (including Attorney Costs) incurred in connection
with this Supplement.

 

 

IN WITNESS WHEREOF, Pledgor has executed this Supplement by
its duly authorized officer as of the day and year first above written.

 

	
   

  	
  USANA HEALTH SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
    Sr. Vice Pres. and CFO

  	
   

  
							

 

Accepted:

 

	
  BANK OF AMERICA, N.A.

  
	
   

  
	
  By:

  	
  /s/ Mark N. Crawford

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Mark N. Crawford

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  	 

										

 

2

 

EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

Financial
Statement Date:
                        ,
             

 

To:          Bank
of America, N.A.

 

Ladies and Gentlemen:

 

Reference
is made to that certain Credit Agreement, dated as of June 16, 2004 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the “Credit Agreement;” the terms defined therein being
used herein as therein defined), between USANA Health Sciences, Inc., a Utah
corporation (“Borrower”), and Bank of America, N.A., a national banking
association.

 

The
undersigned Responsible Officer hereby certifies as of the date hereof that
he/she is the
                                 
of Borrower, and that, as such, he/she is authorized to execute and deliver
this Certificate to Bank on behalf of Borrower, and that:

 

[Use following for fiscal year-end
financial statements]

 

1.             Attached hereto as Schedule 1
are the year-end audited financial statements required by Section 6.01(a)
of the Credit Agreement for the fiscal year of Borrower ended as of the above
date, together with the report and opinion of an independent certified public
accountant required by such section.

 

[Use following for fiscal quarter-end
financial statements]

 

1.             Attached hereto as Schedule 1
are the unaudited financial statements required by Section 6.01(b) of
the Credit Agreement for the fiscal quarter of Borrower ended as of the above
date.  Such financial statements fairly
present the financial condition, results of operations and cash flows of
Borrower and its Subsidiaries in accordance with GAAP as at such date and for
such period, subject only to normal year-end audit adjustments and the absence
of footnotes.

 

2.             The undersigned has reviewed and is
familiar with the terms of the Credit Agreement and has made, or has caused to
be made under his/her supervision, a detailed review of the transactions and
condition (financial or otherwise) of Borrower during the accounting period
covered by the attached financial statements.

 

3.             A review of the activities of
Borrower during such fiscal period has been made under the supervision of the
undersigned with a view to determining whether during such fiscal period
Borrower performed and observed all its Obligations under the Loan Documents,
and

 

[select one:]

 

[to
the best knowledge of the undersigned during such fiscal period, Borrower
performed and observed each covenant and condition of the Loan Documents
applicable to it.]

 

—or—

 

[the
following covenants or conditions have not been performed or observed and the
following is a list of each such Default or Event of Default and its nature and
status:]

 

4.             The representations and warranties
of Borrower contained in Article V of the Credit Agreement, or which are
contained in any document furnished at any time under or in connection with the
Loan Documents, are true and correct on and as of the date hereof, except to
the extent that such

 

 

representations and warranties specifically
refer to an earlier date, in which case they are true and correct as of such
earlier date, and except that for purposes of this Compliance Certificate, the
representations and warranties contained in subsections (a) and (b) of Section
5.05 of the Credit Agreement shall be deemed to refer to the most recent
statements furnished pursuant to clauses (a) and (b), respectively, of Section
6.01 of the Credit Agreement, including the statements in connection with
which this Compliance Certificate is delivered.

 

5.             The financial covenant analyses and
information set forth on Schedule 2 attached hereto are true and
accurate on and as of the date of this Certificate.

 

IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of
                     ,
             .

 

 

	
   

  	
  USANA HEALTH SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Name:

  	
    Gilbert
  A. Fuller

  	
   

  
	
   

  	
  Title:

  	
    Sr. Vice Pres. and CFO

  	
   

  
							

 

2

 

For
the Quarter/Year ended
                               
(“Statement Date”)

 

 

SCHEDULE 2

to
the Compliance Certificate

($
in 000’s)

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