According to the Company’s Form 10-K for the fiscal year ended September 30, 1997, during August 1997 and September 1997, the Federal Action was settled out of court in two separate settlement agreements for (1) the "distributor" class for all distributors who claimed economic loss, and (2) the "stockholder" class for all individuals who purchased common stock and warrants of the Company from July 11, 1995 through July 16, 1996. As part of the distributor settlement, the Company was required to set aside $1,500,000 in a reserve fund to pay any individuals who became instant executives from April 1995 to January 1996. As part of the stockholders agreement, the Company agreed to pay $2,000,000 in cash to individuals who purchased common stock and warrants from July 11, 1995 through July 16, 1996. In addition, the Company agreed to pay the plaintiffs attorney fees up to $600,000 and $300,000 of the stockholder class and distributor class, respectively.
On Aug. 23, 1996, a class action lawsuit was filed in the District Court of Harris County, Texas, on behalf of purchasers of the common stock and common stock purchase warrants of Nutrition for Life International, Inc. (NFLI) during the period July 11, 1995 through July 16, 1996, inclusive (the Class Period). The complaint charges NFLI, certain of its officers and directors, the lead underwriters of its July 11, 1995 offering of stock and warrants, and a major marketer/distributor Kevin Trudeau and the Trudeau Marketing Group Inc. (collectively Trudeau) with violations of Texas statutory and common law, by, among other things, misrepresenting and/or omitting material information concerning NFLI's business, marketing efforts, sales and earnings during the Class Period (07/11/1995 through 07/11/1996).