Item 5. OTHER EVENTS from 8k filed 7/9
As reported previously, a civil judgment (the "Judgment") in the amount
of $2,744,000 was entered in March, 1999 against Naturade, Inc. ("Naturade") by
the United States Bankruptcy Court for the Northern District of Texas following
a bench trial in a proceeding styled Jeffrey H. Mims, Chapter 7 Trustee v.
Kennedy Capital, et al. The proceeding arose out of the bankruptcy case of
Performance Nutrition, Inc. ("PNI"), on whose behalf the Trustee was acting (the
"PNI Trustee").
Naturade and the PNI Trustee have entered into a settlement agreement,
which is subject to approval by the Bankruptcy Court. On July 7, 1999, the PNI
Trustee filed an application seeking Bankruptcy Court approval of the settlement
agreement. If approved, the settlement agreement will provide Naturade with a
full release of the Judgment and the costs and interest thereon, as well as any
and all other claims which the PNI Trustee has or might have against Naturade
(including a preference claim for approximately $130,000 filed in January 1999
by the PNI Trustee against Naturade). The settlement agreement requires Naturade
to deliver to the PNI Trustee (1) a cash payment of $1,350,000, (2) a promissory
note in the amount of $424,000 amortized over 12 months at 5% interest, and (3)
a contingent promissory note in the amount of $226,000, which will become
payable only to the extent that Naturade's sales for the second, third and
fourth quarters of 1999 exceed specified targets. The total cost to Naturade of
the settlement is expected to range between $1,774,000 and $2,000,000, exclusive
of interest on the promissory notes.
The Bankruptcy Court has scheduled a hearing on the PNI Trustee's
application to approve the settlement agreement for August 5, 1999. If the
settlement agreement is approved, it is anticipated that the parties will
consummate the terms of the settlement agreement before the end of August, 1999.
Naturade has preserved its right to appeal the Judgment in the event that the
Bankruptcy Court does not approve the settlement agreement. |
