Nellson settles corporate governance, equity distribution issues with Fremont, second-lien agent

By Caroline Salls

Pittsburgh, Jan. 25 - Nellson Nutraceutical Inc. requested court approval of a settlement with shareholder Fremont Investors VII, LLC and second-lien agent UBS AG that addresses corporate governance, plan support and equity issuance disputes, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

Under the agreement, Fremont and UBS agreed to support a plan that includes a new capital structure agreeable to UBS, including amount of total debt, tranches and interest rate.

In addition, the supported plan must extinguish all existing equity interests; provide that any new equity issued by the reorganized company on account of pre-bankruptcy claims or equity interests will consist of a single class of new common stock, and result in Fremont receiving 2% of any new equity.

Fremont's equity distribution will be made from any new equity that otherwise would have been distributed to second-lien lenders.

Also under the agreement, all current members of Nellson's board of directors will resign, and Fremont will be allowed to appoint F. Duffield Meyercord as the sole director.

A hearing is scheduled for Feb. 12.

Nellson, an Irwindale, Calif., nutrition bar and powder manufacturer, filed for bankruptcy on Jan. 28, 2006. Its Chapter 11 case number is 06-10072.

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