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
▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation ("▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇").
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 ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇;
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 ▇▇▇▇ 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, ▇▇▇▇▇▇▇▇▇▇▇-
▇▇▇▇▇▇, 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
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. ▇▇▇▇▇▇▇▇, ABA routing number ▇▇▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ a warrant in the form of Exhibit C
(the "WARRANT") pursuant to which ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ 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, ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ 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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▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇. DS, Tru-
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Vantage, Maximum, and ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. NFLI, DS, Tru-Vantage,
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Maximum, and ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ hereby release and waive any claims or causes of
action they have or may have against the law firm of Jenner & Block or against
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇, 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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▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in deciding whether to
enter into this Agreement;
6.2 Each of DS and ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ 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, ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇'▇ 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:__________________________
▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation
By:__________________________________
Title:_______________________________
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