In August 2003, based upon information it received that caused it to believe that the Kutscheras had materially breached their distributorship agreement with USANA, USANA terminated the distributorship of Praise Enterprises Ltd. (“Praise”), a former USANA distributorship owned by Chris and Elizabeth Kutschera.

In December 2008, after an evidentiary hearing, an arbitrator in the State of Utah determined (1) that the Kutscheras had not breached their agreement with USANA, (2) that even if there had been a breach by the Kutscheras it was not material; and (3) that the parties had reached a reconciliation agreement prior to the termination, which USANA breached.

Based upon this determination, the arbitrator awarded approximately $7 million (USD) in damages to Praise, which he determined was an appropriate amount to compensate Praise for the income it had lost as a result of the improper termination.

USANA disagrees with the findings of the arbitrator and is disappointed by the ruling. USANA believes that neither the decision rendered nor the amount awarded is supported by the facts of the case.

The parties had previously agreed that they would be bound by the arbitrator’s award. Therefore, the parties have agreed to a confidential settlement of all claims. Pursuant to the terms of the settlement, the parties have agreed that no further statement will be made concerning their dispute.