Vitacost.com, Inc. Reminds Investors Of Preliminary Settlement Of Derivative Lawsuit

Vitacost.com, Inc. (NASDAQ: VITC), a leading online retailer and direct marketer of health and wellness products, would like to remind investors of the preliminary settlement to the Stockholder Derivative lawsuit and Shareholder Demand previously announced on April 26, 2011. The Company encourages all shareholders to review the terms and conditions of the Stipulation and Agreement of Settlement dated April 19, 2011 and has again included the notice below. A complete set of documents referring to the settlement can be found on the Company’s investor relations’ website at http://investor.vitacost.com. Shareholders have until May 20, 2011 to file any opposition to the settlement with the court. The date of the final hearing is scheduled for May 27, 2011. 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.

“We are encouraged by these developments as this is a positive step forward in resolving our equity capitalization issue and becoming current on our SEC filings,” commented Jeffrey Horowitz, Vitacost.com’s Chief Executive Officer.

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.

Forward-Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements made herein, which include statements regarding the Company’s plan to regain compliance with NASDAQ’s listing requirements, involve known and unknown risks and uncertainties, which may cause the Company’s actual results in current or future periods to differ materially from future results. Those risks and uncertainties include, among other things, the current global economic downturn or recession; difficulty expanding its manufacturing and distribution facilities; significant competition in its industry; unfavorable publicity or consumer perception of its products on the Internet; the incurrence of material product liability and product recall costs; inability to defend intellectual property claims; costs of compliance and its failure to comply with government regulations; its failure to keep pace with the demands of customers for new products; disruptions in its manufacturing system, including information technology systems, or losses of manufacturing certifications; the lack of long-term experience with human consumption of some of its products with innovative ingredients; and costs associated with the internal review and stockholder litigation. Those and other risks are more fully described in the Company’s filings with the Securities and Exchange Commission, including the Registration Statement on Form S-1, as amended, filed in connection with the company’s initial public offering as well as the Company’s Form 10-K filed for the full year ended December 31, 2009.

CIRCUIT COURT OF THE FIFTEENTH JUDICIAL DISTRICT

PALM BEACH COUNTY, FLORIDA

JOSEPH KLOSS, derivatively on behalf of

CASE NO.: 502010CA018594XXXXMB

VITACOST.COM, INC.,

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 420 Boca 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

 

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, StewartGitler, Allen S. Josephs, David N. Ilfeld,Lawrence A. Pabst, Eran Ezra and Robert G. Trapp
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

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.

Copyright Business Wire 2010

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