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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 1998
Nutrition For Life International, Inc.
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(Exact name of registrant as specified in its charter)
Texas 0-26362 76-0416176
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
9101 Jameel, Houston, Texas 77040
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 460-1976
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Item 5. Other Events. Effective October 30, 1998, the Company entered into an
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agreement with Nightingale-Conant Corporation and certain of its affiliates,
including Distributor Services, LLC. Among other things, the Administrative and
Consulting Services Agreement, dated July 29, 1996, between Distributor Services
and the Company has been terminated. The Administrative and Consulting Services
Agreement granted Distributor Services with the exclusive right to produce the
Company's recruiting and training materials and to sponsor distributor
recruiting events. The Company will now directly conduct these activities. The
Company expects, however, to continue to market certain Nightingale-Conant
products.
The Company has agreed to pay Nightingale-Conant and Distributor Services
$2,047,000 to satisfy all accounts payable and other amounts claimed by them for
materials previously delivered to the Company, as well as for the purchase of
all of Distributor Services' inventory of audiotapes and other materials used to
promote the Company, and for cancellation of the Administrative and Consulting
Services Agreement. Of this amount, $967,000 has been paid, and the balance of
$1,080,000 will be payable in equal monthly installments over a 30 month period.
The Company also issued to Nightingale-Conant a five year warrant entitling
Nightingale-Conant to purchase up to 290,000 shares of the Company's common
stock at $5.50 per share. Nightingale-Conant agreed that it would not seek to
acquire a controlling equity interest in the Company during the next five years
without approval of the Company's Board of Directors. In addition to offering
Nightingale-Conant products through its distributor network, the Company also
agreed to use exclusively Nightingale-Conant's services for 30 months to
reproduce tapes made by the Company for the Company's Business Training System
program.
Item 7. Financial Statements And Exhibits.
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(c) Exhibits.
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Exhibit Index
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Exhibit
Number Description
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10.24 Settlement and Release Agreement, dated October 30, 1998, among
the Registrant, Distributor Services, L.L.C., Tru-Vantage
International, L.L.C., Maximum Impact, L.L.C. and Nightingale-
Conant Corporation.
10.25 Agreement, dated October 30, 1998, between Distributor Services,
L.L.C. and the Registrant.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 13, 1998 NUTRITION FOR LIFE INTERNATIONAL, INC.
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By: /s/ David O. Rodrigue
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David O. Rodrigue
Vice President and
Chief Financial Officer
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EXHIBIT 10.24
SETTLEMENT AND MUTUAL RELEASE AGREEMENT
This Settlement and Release Agreement ("AGREEMENT") is made effective
October 30, 1998 (the "EFFECTIVE DATE") by and among Nutrition For Life
International, Inc. ("NFLI"), Distributor Services, L.L.C. ("DS"), Tru-Vantage
International, L.L.C. ("TRU-VANTAGE"), Maximum Impact, L.L.C. ("MAXIMUM"), and
Nightingale-Conant Corporation ("NIGHTINGALE-CONANT").
WHEREAS, each of DS, Tru-Vantage and Maximum is (a) an Illinois limited
liability company with its principal place of business in Niles, Illinois; and
(b) wholly-owned by Nightingale-Conant, a Delaware corporation located in Niles,
Illinois;
WHEREAS, NFLI is a publicly-held Texas corporation with its principal place
of business in Houston, Texas;
WHEREAS, DS and NFLI are parties to a certain "Administrative And
Consulting Services Agreement" dated July 29, 1996 (the "1996 AGREEMENT");
WHEREAS, disputes and disagreements have arisen between DS and NFLI
regarding, among other things, their rights and obligations under the 1996
Agreement, which disputes and disagreements may also affect indirectly each of
Tru-Vantage, Maximum and Nightingale-Conant;
WHEREAS, the parties hereto desire to fully and finally resolve all
disagreements and disputes and to terminate and cancel the 1996 Agreement.
NOW,THEREFORE, in consideration of the recitals and the mutual covenants
and promises set forth below and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties agree as follows:
1. The Tape Inventory.
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1.1 Purchase. DS sells, conveys and assigns pursuant to the Bill of
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Sale and Assignment in the form attached as Exhibit A to this Agreement and NFLI
purchases and accepts (a) good and marketable title to DS's entire inventory of
audiotapes that reference NFLI or that were produced for NFLI distributors (the
"TAPE INVENTORY"); and (b) all copyrights, trademarks, trade names, property
rights, and any registration or application for registration thereof, related to
the Tape Inventory and all goodwill associated therewith (the "INTELLECTUAL
PROPERTY"), all of which DS represents and warrants are free and clear of any
interests, liens or encumbrances whatsoever. The Tape Inventory does not include
tapes produced by affiliates of DS including, without limitation, Nightingale-
Conant, Tru-Vantage, and Maximum. With respect to the Tape Inventory, DS HEREBY
DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE. Upon delivery of the Consideration DS shall
cause the Tape Inventory to be shipped to NFLI by no later than November 10,
1998 in accordance with the
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existing course of dealing between DS and NFLI pertaining to the shipment of
tapes by DS to NFLI. Any sales or other transfer taxes payable in connection
with the transfer of the Tape Inventory or the Intellectual Property shall be
paid by Seller.
1.2 License. NFLI hereby grants DS a perpetual royalty free, fully
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paid and non-exclusive license for the use of the ideas, concepts, processes,
systems and information contained in the Tape Inventory (and constituting
Intellectual Property), provided that such use does not refer directly or
indirectly to NFLI.
2. The 1996 Agreement. The 1996 Agreement is hereby terminated and
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cancelled. All rights and obligations of all parties under the 1996 Agreement
are terminated and entirely extinguished.
3. Consideration. The consideration specified in subsections 3.1
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through 3.3 shall constitute the total consideration to be paid and delivered by
NFLI hereunder (the "CONSIDERATION").
3.1 Cash Payment. No later than two days after the Effective Date,
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NFLI shall pay DS the sum of $967,000 (the "CASH PORTION") in immediately
available funds by wire transfer to the account of Distributor Services, LLC,
Account No. 18102981, ABA routing number 071000770, at American National Bank &
Trust Company of Chicago.
3.2 Promissory Note. On the Effective Date, NFLI shall execute and
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deliver a promissory term note payable to DS in the form attached as Exhibit B
to this Agreement (the "NOTE"). The principal face amount of the Note shall be
$1,080,000 and the Note shall be interest free. The Note shall provide for 30
consecutive monthly payments of $36,000 payable on the first business day of
each month commencing with a first payment on November 1, 1998, and a last
payment on April 1, 2001. In the event of any conflict or inconsistency between
this Agreement and the terms of the Note, the Note shall govern.
3.2.1 Assignment and Negotiation. Notwithstanding any term
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contained in this Agreement to the contrary, DS may freely assign or otherwise
negotiate all or part of the Note, subject to the provisions of any applicable
securities laws.
3.2.2 Priority. The payment of the Note shall be subordinated
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only to (a) loans obtained by NFLI in the ordinary course of business from and
after the Effective Date provided such loans are for working capital only and
not for the purpose of capital expenditures, except for capital expenditures
permitted to be made by the applicable working capital lender(s), and any
obligations senior to such working capital loans (b) taxes and other
governmental charges or assessments, and (c) indebtedness or other obligations
incurred in the ordinary course of business for the obtaining of goods and
services from persons not insiders (as the term "person" and "insider" are
defined at 11 U.S.C. Section 101).
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3.3 Warrant. Concurrently with the execution of this Agreement, NFLI
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shall issue and deliver to Nightingale-Conant a warrant in the form of Exhibit C
(the "WARRANT") pursuant to which Nightingale-Conant may acquire from NFLI
290,000 shares of common stock of NFLI for $5.50 per share (the "SHARES"). In
the event of any conflict or inconsistency between this Agreement and the
Warrant, the Warrant shall govern.
3.4 No Further Acquisitions or Business Combination. For a period of
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five years commencing with the Effective Date, Nightingale-Conant shall not
directly or indirectly seek to acquire control of or a controlling interest in
NFLI, defined for purposes of this Agreement as a "beneficial ownership" of 5%
or more of the voting securities of NFLI (as defined under the rules and
regulation promulgated by the Securities and Exchange Commission) or engage in
any "Business Combination" (as defined in Section 13.02(4) of the Texas Business
Corporation Act where an "affiliate" would be any person having beneficial
ownership of 5% or more of the voting securities of NFLI), with NFLI unless it
first receives written consent of the Board of Directors of NFLI.
4. Releases
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4.1 By NFLI. NFLI hereby releases DS, Tru-Vantage, Maximum, and
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Nightingale-Conant, and their respective officers, directors, shareholders,
employees, affiliates, agents, representatives and attorneys and their
respective successors and assigns, from any and all demands, claims, causes of
action, liabilities, accounts, obligations and debts, known or unknown, of every
kind whatsoever, that it has or may have at the Effective Date.
4.2 By DS, Tru-Vantage, Maximum and Nightingale-Conant. DS, Tru-
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Vantage, Maximum, and Nightingale-Conant hereby release NFLI and its officers,
directors, shareholders, employees, affiliates, agents, representatives and
attorneys and their respective successors and assigns, from any and all demands,
claims causes of action, liabilities, accounts, obligations and debts, known or
unknown, of every kind whatsoever, that it has or may have at the Effective
Date.
4.3 Of Jenner & Block and David Bradford. NFLI, DS, Tru-Vantage,
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Maximum, and Nightingale-Conant hereby release and waive any claims or causes of
action they have or may have against the law firm of Jenner & Block or against
David Bradford arising out of or related to their role in mediating and
facilitating this Agreement.
4.4 Exceptions to Releases. The releases contained in this Section 4
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are not intended, and shall not be construed (a) to release or abrogate
obligations arising solely from this Agreement, or (b) to release or inure to
the benefit of Kevin Trudeau, who is a party to a separate agreement dated
August 19, 1998 with NFLI (the "KT SEPARATION AGREEMENT").
5. Best Efforts. DS shall use its reasonable best efforts to promote
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Kevin Trudeau's cooperation in discharging his obligations under the KT
Separation Agreement.
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6. Representations and Warranties.
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6.1 Each of the parties hereto represents and warrants as to itself
it (a) is authorized to execute and deliver this Agreement and to take all
actions and to execute and deliver all further agreements and instruments
required or contemplated by this Agreement to be executed by it, and (b) is not
prohibited by agreement, operation of law or order of court from executing and
delivering this Agreement or from taking all actions and executing and
delivering all further agreements and instruments required or contemplated by
this Agreement to be executed or performed by it, (c) has consulted with and has
been advised by independent counsel prior to executing this Agreement and has
not relied on advice of Jenner & Block or David Bradford in deciding whether to
enter into this Agreement;
6.2 Each of DS and Nightingale-Conant represents and warrants to NFLI
that (a) it has received and had the opportunity to review NFLI's Report on Form
10-K for the fiscal year ended September 30, 1997, and NFLI's Reports on Form
10-Q for the quarters ended December 31, 1997, March 31, 1998 and June 30, 1998,
and has been given access to full and complete information regarding NFLI and
has utilized such access to its satisfaction for the purpose of obtaining such
information regarding NFLI as it has reasonably requested, and, particularly, it
has been given reasonable opportunity to ask questions of, and receive answers
from, representatives of NFLI concerning the terms of the Note, Warrant and the
underlying common stock (the "SECURITIES") and the business, financial condition
and management of NFLI and to obtain any additional information, to the extent
reasonably available, from NFLI; (b) it, in reaching a decision to acquire the
Securities, has such knowledge and experience in financial and business matters
that it is capable of reading and interpreting financial statements and
evaluating the merits and risks of an investment in the Securities and has the
financial wherewithal to acquire investments which are not readily marketable
and to incur a loss in such investments; (c) it recognizes that the Securities
as an investment involve a high degree of risk and must be considered extremely
speculative; (d) the Securities are being acquired by it for its own account and
for investment purposes only, and without the intention of reselling or
redistributing the Securities, and it understands that, in order to comply with
applicable securities laws, appropriate restricted legends must be placed on
certificates evidencing the Securities, and appropriate stop transfer
instructions provided to NFLI's transfer agent.
7. Assignment; Third Party Beneficiaries. This Agreement is intended to
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bind and inure to the benefit of successors and assigns of each of the parties
hereto; no party hereto may assign its rights hereunder (a) without the written
consent of the other parties, and (b) without the proposed assignee expressly
agreeing in writing to assume the obligations and duties of the party proposing
the assignment. No person other than the parties hereto and their lawful
successors or assigns is intended to benefit from the execution and performance
of this Agreement.
8. Amendments. This Agreement may not be amended or modified except in a
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writing signed by all the parties hereto.
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9. Legal Actions. In the event of any legal action to enforce this
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Agreement, payment of the Cash Portion of the Consideration, the Note, the
Warrants, Nightingale-Conant's rights with respect to the Shares or any
obligation under this Agreement, (a) the prevailing party will be entitled, in
addition to any other relief granted, to recover from the other party the costs
and expenses of enforcement, including reasonable attorneys' fees and related
costs, and (b) each party waives its right, if any, to request a jury trial and
seek a change of venue for any reason. The parties hereby consent to personal
jurisdiction and venue in the state and federal courts located in the City of
Chicago, Illinois for the purpose of enforcing this Agreement. The parties
further agree that such courts shall exclusively constitute the permitted forums
for resolving disputes arising out of, or related to, this Agreement. The laws
of the State of Illinois, excluding the State's choice of law rules, shall
govern the construction and interpretation of this Agreement.
10. Severability. If any provision of this Agreement or portion of such
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provision is held invalid or unenforceable as written by a court of competent
jurisdiction, such provision or portion thereof affected by such holding will be
modified, to the extent possible, the affected provision or portion thereof
shall be stricken, and all remaining provisions of this Agreement will continue
in full force and effect.
11. Independent Contractors. The parties hereto are independent
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contractors. Nothing in this Agreement shall be deemed to create between the
parties a relationship of employer-employee, principal-agent, partners or joint
ventures.
12. Counterparts. This Agreement may be executed, including by facsimile,
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in counterparts. which together shall constitute one and the same original.
13. Headings. Paragraph headings, titles and assignations used herein are
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intended for convenience of the parties and are not intended, and should not be
construed, as relevant or material in the interpretation of this Agreement.
14. Entire Agreement. This Agreement, including the Exhibits hereto, each
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of which is hereby incorporated in and made a part of this Agreement,
constitutes the entire agreement and understanding among the parties with
respect to the subject matter and supersedes all prior agreements,
understandings, proposals and communications regarding the subject matter.
15. No Admissions of Liability. This Agreement constitutes a compromise
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and settlement of disputes and disagreements which is not to be treated as an
admission or a concession of any liability by any party for any purpose.
16. Further Assurances. Each of the parties shall execute and deliver
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such agreements, instruments, items, certificates, bills of sale, assignments
and documents and undertake such acts as may be reasonably requested by any of
the other parties as may be required or contemplated by this Agreement or the
transaction it represents.
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17. Survival. The representations, warranties and agreements of each
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party set forth in this Agreement shall survive the execution and delivery of
and the closing of the transactions contemplated by this Agreement.
AGREED this 30th day of October, 1998.
Nutrition For Life International, Inc. Tru-Vantage International, L.L.C.
By:__________________________________ By:_____________________________
Title:_______________________________ Title:__________________________
Distributor Services, L.L.C. Maximum Impact, L.L.C.
By:__________________________________ By:_____________________________
Title:_______________________________ Title:__________________________
Nightingale-Conant Corporation
By:__________________________________
Title:_______________________________
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EXHIBIT 10.25
AGREEMENT
This Agreement is made to be effective as of the 30th day of October, 1998
by and between Distributor Services, L.L.C., an Illinois limited liability
company ("DS"), having its chief executive offices at 5940 West Touhy Avenue,
Niles, Illinois 60714, and Nutrition For Life International, Inc., a Texas
corporation ("NFLI"), having its chief executive offices at 9101 Jameel, Suite
180, Houston, Texas 77040 (DS and NFLI are sometimes referred to collectively
herein as the "PARTIES").
RECITALS
A. DS is in the business of, among other things, manufacturing and
packaging various audiotapes.
B. NFLI is a network marketing company that sells nutritional supplements
and other consumer products, through independent distributors (the
"DISTRIBUTORS").
C. From time to time, NFLI has offered various motivational and other
audiotapes, for sale to its Distributors as part of certain training or other
programs.
D. DS has previously produced master tapes and also reproduced audiotapes
from master tapes (the "REPRODUCED TAPES") for NFLI for its Master Developer
Series Program.
E. DS desires to continue to produce Reproduced Tapes for NFLI and, NFLI
desires DS to do so, all on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the Recitals and the agreements
hereinafter set forth, the Parties agree as follows:
1. Term. The term of this Agreement (the "TERM") shall be for a 30 month
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period beginning November 1, 1998 and ending April 30, 2001. The Term of this
Agreement may be terminated earlier in accordance with the provisions of this
Agreement.
2. Reproduced Tapes. DS shall use its best efforts to produce the
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quantities and kinds of Reproduced Tapes which NFLI may require in a timely
manner. So long as the Agreement is in effect and NFLI maintains a Business
Training System Program or any successor tape program, NFLI shall satisfy its
requirements for Reproduced Tapes exclusively through purchases of Reproduced
Tapes from DS hereunder. DS acknowledges and agrees that (a) NFLI in its sole
discretion may discontinue any and all of its tape programs and (b) there are no
minimum requirements for the purchase by NFLI of Reproduced Tapes hereunder.
All purchases by NFLI from DS will be made using the form of purchase order
attached to and made a part of this Agreement as Exhibit A (the "PURCHASE
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ORDER"). NFLI shall only be required to purchase Reproduced Tapes from DS for
which it actually places a Purchase Order. In the event of any conflict between
a Purchase Order and the Agreement, this Agreement shall control.
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3. Prices. NFLI shall pay DS $0.60 for each Reproduced Tape.
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4. Termination. If DS fails to timely deliver Reproduced Tapes pursuant
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to any Purchase Order more than one time in any six month period during the
Term, then NFLI may, on 10 days prior notice to DS, terminate this Agreement and
NFLI's obligations to purchase Reproduced Tapes hereunder, except that such
termination shall not terminate any Purchase Orders delivered prior to the date
of termination. Notwithstanding any provision of this Agreement to the
contrary, any Purchase Order may be terminated as provided therein.
5. Confidentiality. DS shall not make available to any other person or
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entity any information obtained by it from NFLI, which is either not public
knowledge or public knowledge due to the fault of DS, and will use such
information only for the purpose of fulfilling its obligations hereunder.
6. Cooperation. DS and NFLI shall each deliver and cause to be delivered
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to the other at such time and from time to time such additional instruments as
the other may reasonably require for the purpose of carrying out this Agreement.
7. Entire Agreement. This Agreement and the attachments hereto constitute
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the entire Agreement and understanding between the Parties and supercede any
prior agreements and understandings related to the subject matter hereof.
8. Successors and Assigns. This Agreement and the rights to the Parties
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may not be assigned and shall be binding upon and shall inure to the benefit of
the Parties and their respective successors and assigns. Notwithstanding the
foregoing, neither Party may assign this Agreement or any interest therein or
any rights or obligations hereunder without the express written consent of the
other Party; provided, however, that the foregoing shall not be construed to
include a transfer by operation of law upon the merger of NFLI or an assignment
of this Agreement by DS to Nightingale-Conant Corporation, a Delaware
corporation ("N-C"), which is accepted by N-C pursuant to an assignment in form
and substance reasonably acceptable to NFLI.
9. Notices. All notices of communication required or permitted hereunder
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shall be writing and may be given (a) by depositing the same in the United
States mail, addressed to the Party to be notified, postage pre-paid and
registered with return receipt requested, or (b) by delivering the same by
overnight courier to an officer or agent of such Party. Notices to the Parties
shall be addressed to them at their respective addresses set forth in the first
paragraph of this Agreement; provided, however, either Party may change the
address for the receipt of notices by it in accordance with the provisions of
this Section. All notices sent pursuant to this Section shall be given and
received (i) if sent by registered mail, on the date of actual receipt; or (ii)
if delivered by overnight courier, on the date delivered if a business day, or
if not, on the next business day.
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10. Governing Law; Jurisdiction. The governing law of this Agreement
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shall be construed in accordance with the laws of the State of Illinois. Each
of the Parties hereby agrees that any actions or proceedings relating directly
or indirectly to this Agreement shall be litigated in courts located in
Illinois.
11. Amendments and Waivers. Any term of this Agreement may be amended and
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the observance of any term of this Agreement may be waived only with the written
consent of the Parties.
12. Counterparts. This Agreement may be executed, including by facsimile,
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in counterparts, which together shall constitute one and the same original.
IN WITNESS WHEREOF, the Parties have executed this Agreement as the day and
year first above written.
DISTRIBUTOR SERVICES, L.L.C. NUTRITION FOR LIFE
INTERNATIONAL, INC.
By:________________________ By:________________________
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