Vitacost.com, Inc. (NASDAQ: VITC), a leading online retailer and
direct marketer of health and wellness products, announced today
that the Circuit Court of the Fifteenth Judicial District, Palm
Beach County, Florida (Hon. Thomas H. Barkdull, III) issued an
order preliminarily approving the settlement of the derivative
lawsuit as set forth in the Stipulation and Agreement of Settlement
dated April 19, 2011. The Court’s order provided that the notice
set forth below, summarizing the matter and the settlement, be
issued.
About Vitacost.com, Inc.
Vitacost.com, Inc. (NASDAQ: VITC) is a leading online retailer
and direct marketer of health and wellness products, including
dietary supplements such as vitamins, minerals, herbs or other
botanicals, amino acids and metabolites, as well as cosmetics,
organic body and personal care products, sports nutrition and
health foods. Vitacost.com, Inc. sells these products directly to
consumers through its website, www.vitacost.com, as well as through
its catalogs. Vitacost.com, Inc. strives to offer its customers the
broadest product selection of healthy living products, while
providing superior customer service and timely and accurate
delivery.
CIRCUIT COURT OF THE FIFTEENTH JUDICIAL
DISTRICT
PALM BEACH COUNTY, FLORIDA
JOSEPH KLOSS, derivatively on behalf of
VITACOST.COM, INC.,
CASE NO.: 502010CA018594XXXXMB
CIVIL DIVISION: AO
Plaintiff,
SUMMARY NOTICE OF STIPULATION AND
AGREEMENT OF SETTLEMENT
vs.
IRA P. KERKER, RICHARD P. SMITH, STEWART
GITLER, ALLEN S. JOSEPHS, DAVID N. ILFELD, LAWRENCE A. PABST, ERAN
EZRA and ROBERT G. TRAPP,
Defendants,
and
VITACOST.COM, INC.,
Nominal Defendant.
/
TO:
ALL CURRENT RECORD HOLDERS AND BENEFICIAL
OWNERS OF VITACOST.COM, INC. (“VITACOST” OR THE “COMPANY”) COMMON
STOCK.
IF YOU ARE A CURRENT OWNER OF VITACOST COMMON STOCK AND YOU
CONTINUE TO HOLD THOSE SHARES AS OF THE DATE OF THE SETTLEMENT
HEARING, YOUR RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THIS ACTION.
THE ACTION IS NOT A “CLASS ACTION.” THUS, THERE IS NO “COMMON FUND”
UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY PAYMENT.
PLEASE TAKE NOTICE that the above-captioned stockholder
derivative action (“Action”) pending in the Circuit Court of the
Fifteenth Judicial Circuit in and for Palm Beach County, Florida
(the “Court”), is being settled on the terms set forth in a
Stipulation and Agreement of Settlement dated April 19, 2011 (the
“Stipulation”). This Notice should be read in conjunction with, and
is qualified in its entirety by reference to, the text of the
Stipulation (and its exhibits), and the “complete” Notice, both of
which are on file with the Court, and on Vitacost’s website at
http://investor.vitacost.com. A copy of the complete Notice may
have also been mailed to you. For the full details of the Action,
the claims and defenses which have been asserted by the parties and
the terms and conditions of the Settlement, including a complete
copy of the Stipulation, you are referred to the Court files in the
Action. You or your attorney may examine the Court files during
regular business hours of each business day at the Office of the
Clerk of the Court, Circuit Court of the Fifteenth Judicial
Circuit, 205 N. Dixie Highway, West Palm Beach, Florida 33401. All
capitalized terms herein have the same meanings as set forth in the
Stipulation.
Generally, the Plaintiff in the Action and another stockholder
who wrote a letter (the “Demand Shareholder”) to the Company’s
board of directors (the “Board”) claimed that Defendants breached
their fiduciary duties in connection with their management and
oversight of the Company. Generally, the Plaintiff and the Demand
Shareholder claimed that Defendants: (1) caused, or allowed the
Company to issue a series of materially false and misleading
statements in connection with and after the Company’s IPO; and (2)
failed to observe certain technical corporate formalities under
Delaware law which had the effect of causing potential defects with
respect to the: (a) organization of the Company; (b) election of
directors to the Company’s Board; and (c) the issuance of stock and
stock options.
To resolve the Action, the Current Board has agreed to adopt and
implement a series of certain corporate governance “best practices”
which directly address the allegations in the Action, including,
but not limited to, creation and implementation of a new Insider
Trading Policy involving greater controls over the purchase and
sale of officers and directors’ personally-held stock, including
mandating entrance into a 10b5-1 trading plan, blind trust, or
similar arrangement for such persons, and formation of a Governance
and Corporate Compliance Committee to ensure Company compliance
with all requirements and obligations under Delaware General
Corporate Law (“DGCL”). In addition, the Settling Parties request
that the Court recognize and quiet title to all outstanding shares
of Vitacost stock on certain recognized dates. The Settling Parties
also request that the Court deem the certificate of incorporation
of Vitacost to be the valid and effective certificate of
incorporation of the Company until validly amended in accordance
with applicable DGCL and the corporation’s certificate of
incorporation and bylaws. The Current Board, Plaintiffs and the
Demand Shareholder have agreed that these measures will
“substantially benefit” the Company, and in fact, with respect to
some of the measures, may have the effect of preserving the current
equity interests of Vitacost stockholders.
Even though they are entering into the Settlement, the Settling
Defendants expressly state that they continue to deny that they
breached any fiduciary duties to the Company, and that no Vitacost
Purchaser was harmed or damaged in any way as a result of the
conduct alleged in the Action, or by the Demand Shareholder. If the
Court approves the Settlement, the Settling Parties shall be
released from all claims relating to, or stemming from the Action.
The releases the Settling Parties will receive upon final
Settlement approval are explained in detail in the Stipulation.
On May 27, 2011 at 10:30 a.m., a hearing (the “Settlement
Hearing”) will be held before Judge Thomas H. Barkdull, III at Main
Judicial Center, 205 N. Dixie Highway, West Palm Beach, Florida
33401, to determine: (1) whether the terms of the Stipulation
should be approved as fair, reasonable, and adequate; (2) whether
the manner and form of notice fully satisfied the requirements of
Florida Revised Statute Section 607.07401(4) and due process; (3)
whether the Court should enter final judgment dismissing the claims
asserted in the Action with prejudice; (4) whether all Released
Claims against the Released Persons should be fully and finally
released; (5) whether the Court should recognize and quiet title to
all outstanding shares and options of Vitacost stock on certain
recognized dates; (6) whether to recognize and deem valid the
Company’s certificate of incorporation; (7) whether the payment of
Counsels’ attorneys’ fees and expenses in the amount of $3.5
million should be approved (“Fee Amount”); (8) whether the
Plaintiff and Demand Shareholder should receive a Special Award of
$5,000 each, payable out of the Fee Amount; and (9) such other
matters as the Court may deem appropriate.
If you are a current Vitacost stockholder (and will continue to
own your stock as of the date of the Settlement Hearing) who
objects to the Settlement, the Order and Final Judgment to be
entered in the Action, the Fee Amount and/or the Special Awards, or
who otherwise wishes to be heard, you may appear in person or by
attorney at the Settlement Hearing and present evidence or argument
that may be proper and relevant; provided, however, that, except
for good cause shown, no Person shall be heard and no papers,
briefs, pleadings or other documents submitted by any Person shall
be considered by the Court unless not later than seven (7) days
prior to the Settlement Hearing such Person files with the Court
and serves upon counsel listed below: (a) a written notice of
intention to appear; (b) a statement of such Person’s objections to
any matters before the Court; (c) the grounds for such objections
and the reasons that such Person desires to appear and be heard, as
well as all documents or writings such Person desires the Court to
consider; (d) the name[s] of any witness(es) the Person plans on
calling at the Settlement Hearing and the likely subject(s) of
their testimony; and (e) proof of current ownership of Vitacost
stock and/or options as well as documentary evidence of when such
ownership was acquired. Such filings shall be served upon the
following counsel:
Robert B. Weiser
Brett D. Stecker
Jeffrey J. Ciarlanto
THE WEISER LAW FIRM, P.C.
121 N. Wayne Ave., Suite 100
Wayne, PA 19087
Telephone: (610) 225-2677
Facsimile: (610) 225-2678
Settlement Counsel and Attorneys for
Plaintiff
Jonathan M. Stein
THE LAW OFFICE OF JONATHAN M. STEIN
120 E. Palmetto Park Road, Suite 420Boca
Raton, FL 33432
Telephone: (561) 961-2244
Facsimile: (561) 750-5964
Attorneys for Plaintiff
Douglas J. Clark
L. David Nefouse
WILSON SONSINI GOODRICH & ROSATI,
P.C.
650 Page Mill Road
Palo Alto, CA 94304
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
Attorneys for Vitacost and the Current
Board
Sigrid S. McCawley, Esq.
401 East Las Olas Blvd, Suite 1200
Fort Lauderdale, Fl 33301
Telephone: (954) 356-0011
Facsimile: (954) 356-0022
Attorneys for Defendant Ira P. Kerker
Paul R. Bessette
Michael J. Biles
GREENBERG TRAURIG, LLP
300 West 6th Street, Suite 2050
Austin, TX 78701
Telephone: (512) 320-7200
Facsimile: (512) 320-7210
Counsel for Vitacost, Richard P. Smith,
Stewart Gitler, Allen S. Josephs, David N. Ilfeld, Lawrence A.
Pabst, Eran Ezra and Robert G. Trapp
and then filed with the Clerk of the Court, Circuit Court of the
Fifteenth Judicial Circuit, 205 N. Dixie Highway, West Palm Beach,
FL 33401. Any Person (including, but not limited to any Vitacost
Purchaser) who does not make an objection in the manner provided
herein shall be deemed to have waived his, her or its objection and
shall forever be barred from making any such objection in this
Action or contesting the terms of this Settlement in any way in any
other action or proceeding.
For more information about the Action or the Settlement, please
contact Robert Weiser, The Weiser Law Firm, P.C., 121 N. Wayne
Ave., Suite 100, Wayne, PA 19087, Telephone: (866) 934-7372.
DO NOT CALL THE COURT OR VITACOST REGARDING THIS NOTICE.
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