MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("Memorandum") is entered into by
and among (i) Lawrence Peccatiello ("Plaintiff") and (ii) Rexall Sundown,
Inc. ("Rexall" or the "Company"), Nutricia Investment Corporation
("Nutricia") and the Rexall directors named as individual defendants (the
"Individual Defendants") (collectively, "Defendants") in the action captioned
LAWRENCE PECCATIELLO V. CARL DESANTIS, ET AL., Case No. CL 00-4284 AO,
pending before the Circuit Court of the 15th Judicial Circuit, in and for
Palm Beach County, Florida (respectively, the "Action" and the "Court").
WHEREAS:
A. Plaintiff is and has been the beneficial owner of shares of
common stock of the Company ("Common Stock") at all times as of and since the
date of the filing of the complaint in the Action.
B. On May 1, 2000, Rexall, Nutricia and Koninklijke Numico N.V.,
Nutricia's parent corporation ("Numico"), announced that they had entered
into an Agreement and Plan of Merger, dated as of April 30, 2000 (the "Merger
Agreement") regarding the acquisition of Rexall by Numico in an all-cash
transaction valued at approximately $1.7 billion. Pursuant to the Merger
Agreement, Nutricia has commenced a tender offer to acquire all of the
outstanding shares of Rexall for $24.00 per share in cash (the "Tender
Offer"). Following the Tender Offer, Numico will proceed with a second-step
merger (the "Merger") to complete the acquisition of Rexall, and any Rexall
shares not purchased in the Tender Offer will be acquired in the Merger for
$24.00 per share in cash.
C. The initial complaint in the Action was filed on May 1, 2000
and subsequently amended on May 22, 2000 (as amended, the "Complaint"). The
Action was filed on behalf of a putative class consisting of all holders of
the Company's Common Stock, other than Defendants and any person, firm,
trust, corporation or other entity related or affiliated with any of the
Defendants. The Complaint generally alleges that the Individual Defendants,
aided and abetted by Nutricia, engaged in breaches of fiduciary duties
purportedly owed to the Company's stockholders. The Action seeks to enjoin
the consummation of the Merger, and to compel the Individual Defendants to
carry out their fiduciary duties to Plaintiff and the Company's stockholders.
On May 22, 2000, Rexall and the Individual Defendants filed a motion to
dismiss the initial complaint.
D. On May 16, 2000, the Court denied without prejudice plaintiff's
motion to conduct expedited discovery in anticipation of seeking to enjoin
preliminarily consummation of the Merger. On May 19, 2000, plaintiff renewed
his motion for expedited discovery and filed a motion to enjoin preliminarily
the Company and the Company's directors from proceeding to consummate the
Merger. Plaintiff filed on May 22, 2000 an amended complaint adding Nutricia
as a defendant and alleging that Nutricia is aiding and abetting the alleged
breaches of fiduciary duties by the Company's directors. The Company and the
Company's directors served on May 22, 2000 a motion to dismiss the complaint
based on the legal insufficiency of plaintiff's allegations. On May 24, 2000,
the Company and the Company's directors served a motion to dismiss
plaintiff's amended complaint based on the legal insufficiency of plaintiff's
allegations.
E. On May 25, 2000, following extensive discussions and
negotiations, counsel for Plaintiff and Defendants reached an
agreement-in-principle concerning the proposed settlement of the Action which
would result in the public stockholders of the Company receiving a more
favorable transaction than that originally proposed.
F. Because counsel for Plaintiff and Defendants in this Action
have concluded that the terms contained in this Memorandum are fair and
adequate to both the Company and its stockholders and that it is reasonable
to pursue a settlement of the Action based upon the procedures outlined
herein and the substantial benefits and protections offered herein, the
parties wish to document their agreement-in-principle in this Memorandum.
NOW, THEREFORE, the parties to the Action have reached an agreement
providing for the settlement of the Action on the terms and subject to the
conditions set forth below (the "Settlement"):
1. The purpose of this Memorandum is to set forth the
agreement-in-principle of the parties to the Action with respect to the
matters addressed below. However, the obligations of the parties pursuant to
this Memorandum are subject to modifications, if necessary, to ensure that
the terms thereof will not generate any adverse tax, accounting, financing or
other consequences to the parties (including to enable the parties to obtain
any necessary third party consents). Any necessary adjustments will be made
on a mutually agreeable basis so as to preserve the economic, operational and
other objectives of the parties in reaching this agreement-in-principle.
2. Subject to compliance with all applicable securities laws and
other legal requirements, Numico, Nutricia and the Company will proceed with
the Tender Offer and the Merger pursuant to the terms of the Merger
Agreement, subject to the modifications described below. In consideration for
the full settlement and release of all Settled Claims (as defined below), and
subject in all respects to all terms and conditions of the Merger Agreement,
the parties agree that:
a. The Company, Numico and Nutricia shall cause Section 7.2
of the Merger Agreement to be amended to (i) reduce the termination fee set
forth in subparagraph (b)(A) of Section 7.2 from U.S. $65,000,000 to U.S.
$50,000,000; and (ii) reduce the expense reimbursement fee set forth in
subparagraph (b)(B) of Section 7.2 from U.S. $14,000,000 to U.S. $10,000,000.
b. The Company, Numico and Nutricia shall cause Section
2.9(h) of the Merger Agreement to be amended and restated in its entirety as
follows:
DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, and despite the fact that the FBCA may not provide
for such a right, shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time and which
are held by shareholders ("Dissenting Shareholders") who (i) have
not voted in favor of or consented to the Merger, (ii) to the
extent required by and in the manner provided in Section 607.1320
of the FBCA, shall have delivered a written notice of intent to
demand payment for such shares of Company Common Stock if the
Merger is effectuated in the time and manner provided in FBCA and
(iii) shall not have failed to perfect or shall not have effectively
withdrawn or lost their rights to appraisal and payment under the
FBCA shall not be converted into the right to receive the Merger
Consideration, but shall, in lieu thereof, be entitled to receive
the consideration as shall be determined pursuant to Sections
607.1301 through 607.1320 of the FBCA; provided, however, that any
such holder who shall have failed to perfect or shall have
effectively withdrawn or lost his, her or its right to appraisal
and payment under the FBCA, shall thereupon be deemed to have had
such person's shares of Company Common Stock converted, at the
Effective Time, into the right to receive the Merger Consideration
set forth herein, without any interest or dividends thereon.
Notwithstanding anything to the contrary contained in this Section
2.9(h), if (A) the Merger is rescinded or abandoned or (B) the
shareholders of the Company revoke the authority to effect the
Merger, then the right of any Dissenting Shareholder to be paid the
fair value of such Dissenting Shareholder's Shares shall cease. The
Company will give parent prompt notice of any demands received by
the Company for appraisals of Company Common Stock held by
Dissenting Shareholders. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to
any demands for appraisal or offer to settle or settle any such
demands.
c. As promptly as practicable, the Company shall issue a
supplemental disclosure statement which describes the following in a manner
reasonably acceptable to Plaintiff's counsel:
A. the amendments to the Merger Agreement set forth
in paragraphs 2.a and 2.b of this Memorandum;
B. the status of any inquiries by third parties to
the Company since the announcement of the Merger Agreement on
May 1, 2000 with respect to any expression of interest, offer
or proposal to acquire all or more than 15% of the Company's
businesses, assets or capital shares whether by merger,
consolidation, other business combination, purchase of assets,
reorganization, tender or exchange offer or otherwise;
2
C. the assumptions underlying the Company's financial
projections set forth in Section 8 of Exhibit (a)(1) to the
Schedule TO filed by Numico and Nutricia with the Securities
and Exchange Commission on May 5, 2000;
D. the terms and conditions on which Morgan Stanley is
entitled to be paid a transaction fee upon consummation of the
Merger and not in consideration for its issuance of a fairness
opinion regarding the Merger; and
E. the terms and conditions of the Settlement.
3. Subject to such reasonable and appropriate confirmatory
discovery as Plaintiff and Defendants agree, Plaintiff agrees to enter into a
settlement stipulation (and such other related documentation as may be
necessary) which will provide for the settlement of the Action (the
"Settlement Agreement"). Among other things, the Settlement Agreement
expressly will provide as follows:
a. for the conditional certification of the Action, for
settlement purposes only, as a class action pursuant to Rule 1.220(b)(1) and
(b)(2) of the Florida Rules of Civil Procedure on behalf a class consisting
of all record and beneficial holders of Common Stock of the Company (other
than the Defendants and any person, firm, trust, corporation or other entity
related or affiliated with any of the Defendants) for the period from and
including April 30, 2000 through and including the effective date of the
Merger, including any and all of their respective successors in interest,
predecessors, representatives, trustees, executors, administrators, heirs,
assigns or transferees, immediate and remote, and any person or entity acting
for or on behalf of, or claiming under any of them, and each of them (the
"Class");
b. for the complete discharge, dismissal with prejudice,
settlement and release of, and an injunction barring, all claims, demands,
rights, actions or causes of action, rights, liabilities, damages, losses,
obligations, judgments, suits, matters and issues of any kind or nature
whatsoever, whether known or unknown, contingent or absolute, suspected or
unsuspected, disclosed or undisclosed, hidden or concealed, matured or
unmatured, that have been, could have been, or in the future can or might be
asserted in the Action or in any court, tribunal or proceeding (including,
but not limited to, any claims arising under federal or state law relating to
alleged fraud, breach of any duty, negligence, violations of the federal
securities laws or otherwise) by or on behalf of any member of the Class,
whether individual, class, derivative, representative, legal, equitable or
any other type or in any other capacity against Defendants in the Action, or
any of their families, parent entities, associates, affiliates or
subsidiaries and each and all of their respective past, present or future
officers, directors, stockholders, representatives, employees, attorneys,
financial or investment advisors, consultants, accountants, investment
bankers, commercial bankers, engineers, advisors or agents, heirs, executors,
trustees, general or limited partners or partnerships, personal
representatives, estates, administrators, predecessors, successors and
assigns (collectively, the "Released Persons") which have arisen, could have
arisen, arise now or hereafter arise out of, or relate in any manner to, the
allegations, facts, events, transactions, acts, occurrences, statements,
representations,
3
misrepresentations, omissions or any other matter, thing or cause whatsoever,
or any series thereof, embraced, involved, set forth or otherwise related,
directly or indirectly, to the complaint in the Action, the Merger Agreement,
the Tender Offer, the Merger, and any Tender Offer or proxy material, public
filings or statements (including, but not limited to, public statements) by
any of the Defendants in the Action or any other Released Persons in
connection with the Tender Offer, the Merger Agreement or the Merger
(collectively, the "Settled Claims"); provided, however, that the Settled
Claims shall not include (x) any properly perfected appraisal rights in
connection with the Merger, and (y) any of the claims asserted in the
following pending litigation; (i) IN RE REXALL SUNDOWN, INC. SECURITIES
LITIGATION Case No. 98-8798-CIV-DIMITROULEAS, in the United States District
Court for the Southern District of Florida; (ii) FOLBAUM ET AL. V. REXALL
SUNDOWN INC., ET AL., No. L-8625-98, in the Superior Court of New Jersey,
Camden County; and (iii) HUTSON V. REXALL SUNDOWN, INC., Case No. 98-10769AI,
in the Circuit Court of the Fifteen Judicial Circuit in and for Palm Beach
County, Florida.
c. that Defendants have denied, and continue to deny, that
any of them have committed or have threatened to commit any violations of law
or breaches of duty to Plaintiff, the Class or anyone;
d. that Defendants are entering into the Settlement Agreement
solely because the proposed Settlement would eliminate the distraction,
burden and expense of further litigation; and
e. subject to the Order of the Court, pending final
determination of whether the Settlement provided for in the Settlement
Agreement should be approved, that Plaintiff and all members of the Class, or
any of them, are barred and enjoined from commencing, prosecuting,
instigating or in any way participating in the commencement or prosecution of
any action asserting any Settled Claims against any of the Released Persons.
4. The parties to the Action will use their best efforts to
complete the discovery contemplated by this Memorandum and to agree upon,
execute and present to the Court, as soon as practicable, a formal Settlement
Agreement and such other documents as may be necessary and appropriate in
order to obtain the prompt approval by the Court of the Settlement and the
dismissal with prejudice of the Action in the manner contemplated herein and
by the Settlement Agreement. Pending the negotiation and execution of the
Settlement Agreement, all proceedings in the Action, except for
Settlement-related proceedings pursuant to this Memorandum, shall be
suspended.
5. Plaintiff will cooperate with Defendants in all reasonable
respects in connection with implementation of the Merger Agreement and the
other understandings set forth herein. The parties to the Action, through
their counsel, (i) agree to use their best efforts to pursue the Settlement
in as expeditious and comprehensive a manner as possible and acknowledge that
time is of the essence; and (ii) agree to cooperate in preparing any and all
necessary papers to define, pursue and effectuate the Settlement.
6. Pending negotiation, execution and Court approval of the
Settlement Agreement and Settlement, the Plaintiff in the Action agrees to
stay any discovery and to stay and not to initiate any proceedings other than
those incident to the Settlement itself. The parties also agree to use their
best efforts to prevent, stay or seek dismissal of or oppose entry of any
interim or final relief in favor of any member of the Class in any other
litigation against any of the parties to this Memorandum which challenges the
Settlement, the Merger Agreement, the Tender Offer or the Merger or otherwise
involves a Settled Claim (other than an action involving solely dissenters'
appraisal rights in connection with the Merger).
4
7. The Settlement contemplated by this Memorandum will not be
binding upon any party until, and is otherwise subject to:
a. the completion by Plaintiff in the Action of such
documentary discovery and/or oral depositions or interviews as reasonably are
requested by him and agreed to by the respective party from whom discovery is
requested (the scope of such discovery having been discussed by the parties
prior to the execution of this Memorandum);
b. the execution of a formal Settlement Agreement (and such
other documentation as may be required to obtain final approval by the Court
of the Settlement) by counsel for the parties to the Action, which Settlement
Agreement shall include a provision permitting Defendants to terminate the
Settlement if, prior to the Effective Date of the Settlement (as defined
below), any action is pending in any state or federal court which raises any
Settled Claims against any of the Released Persons;
c. the consummation of the Tender Offer;
d. final approval by the Court of the Settlement (and the
exhaustion of possible appeals, if any) and the dismissal of the Action by
the Court with prejudice and without awarding costs to any party (except as
provided herein) having been obtained, and entry by the Court of a final
order and judgment containing such release language as is contained in the
Settlement Agreement; and
e. the determination by Defendants in the Action that the
dismissal of the Action in accordance with the Settlement Agreement will
result in the release with prejudice of the Settled Claims.
8. This Memorandum shall be null and void and of no force and
effect should any of the conditions set forth herein not be met or should
Plaintiff's counsel in the Action determine in good faith that, based upon
the discovery contemplated by this Memorandum, the proposed Settlement is not
fair, reasonable and adequate; in such event, this Memorandum shall not be
deemed to prejudice in any way the positions of the parties with respect to
the Action nor to entitle any party to the recovery of costs and expenses
incurred to implement this Memorandum (except as provided in paragraph 10
hereof for the costs of notice of the Settlement).
9. The Effective Date of the Settlement shall be the date on which
the order of the Court approving the Settlement becomes final and no longer
subject to further appeal or review, whether by exhaustion of any possible
appeal, lapse of time or otherwise.
10. The Company shall be responsible for providing notice of the
Settlement to the members of the Class. The Company shall pay, on behalf of
and for the benefit of the Individual Defendants in the Action, all
reasonable costs and expenses incurred in providing notice of the Settlement
to the members of the Class and shall cooperate with Plaintiff's counsel in
providing such information as is reasonably available to it and reasonably
identifies potential Class members.
5
11. With the exception of any fees and expenses which may be
awarded or approved by the Court to counsel for Plaintiff in the Action,
which shall be the sole responsibility of the Company and/or its successors
in interest acting on behalf of and for the benefit of the Individual
Defendants, the parties in the Action shall bear no other expenses, costs,
damages or fees alleged or incurred by any other party or, by any member of
the Class, or by any of their attorneys, experts, advisors, agents or
representatives (except for the costs of notice set forth in paragraph 10 of
this Memorandum).
12. The provisions contained in this Memorandum shall not be deemed
a presumption, concession or an admission by any Defendant in the Action of
any fault, liability or wrongdoing as to any facts or claims alleged or
asserted in the Action, or any other actions or proceedings, and shall not be
interpreted, construed, deemed, invoked, offered, or received in evidence or
otherwise used by any person in the Action, or in any other action or
proceeding, whether civil, criminal or administrative.
13. This Memorandum constitutes the entire agreement among the
parties with respect to the subject matter hereof, and may not be amended nor
any of its provisions waived except by a writing signed by all of the parties
hereto.
14. This Memorandum and the Settlement contemplated by it shall be
governed by, and construed in accordance with, the laws of the State of
Florida, without regard to conflict of laws principles.
15. This Memorandum will be executed by counsel for the parties to
the Action, each of whom represent and warrant that they have the authority
from their client(s) to enter into this Memorandum. This Memorandum may be
executed in any number of counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
16. Plaintiff and his counsel in the Action represent and warrant
that none of Plaintiff's claims or causes of action referred to in any
complaint in the Action or this Memorandum have been assigned, encumbered or
in any manner transferred in whole or in part.
17. This Memorandum shall be binding upon and shall inure to the
benefit of the parties and their respective agents, successors, executors,
heirs and assigns.
IN WITNESS WHEREOF, the parties have executed this Memorandum
effective as of the date set forth below.
6
/s/ Gerry S. Gibson
-----------------------------------
Gerry S. Gibson
Janet B. Teebagy
Greenberg Traurig, P.A.
777 South Flagler Drive
West Palm Beach, Florida 33401
(561) 650-7900
Attorneys for Rexall Sundown, Inc. and
the Individual Defendants
7
/s/ Stanley H. Wakshlag
-----------------------------------
Of Counsel: Stanley H. Wakshlag
Akerman, Senterfitt & Eidson, P.A.
David E. Bennett One Southeast Third Avenue
Vedder, Price, Kaufman & Kammholz 28th Floor, SunTrust International Center
222 North LaSalle Street Miami, Florida 33131
Chicago, Illinois 60601-5005 Attorneys for Nutricia Investment Corporation
(312) 609-7600
Kevin G. Abrams
Raymond J. DiCamillo
Christine M. Morabito
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
/s/ Paul J. Geller
-----------------------------------
Of Counsel: Paul J. Geller
Jonathan M. Stein
Marc A. Topaz Cauley & Geller, LLP
Gregory M. Castaldo 7200 West Camino Real
Schiffrin & Barroway, LLP Suite 203
Three Bala Plaza East Boca Raton, Florida 33433
Suite 400 (561) 750-3000
Bala Cynwyd, Pennsylvania 19004 Attorneys for Plaintiff Lawrence Peccatiello
(610) 667-7706
William S. Lerach
David J. Robbins
Milberg Weiss Bershad Hynes & Lerach
600 West Broadway
1800 One America Plaza
San Diego, California 92101-5050
(619) 231-1058
Alfred G. Yates, Jr.
Law Offices of Alfred G. Yates, Jr.
519 Allegheny Building
429 Forbes Avenue
Pittsburgh, Pennsylvania 15219
(412) 391-5163
Dated: May 25, 2000
8