MDNU Medical Nutrition Usa (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

SCHEDULE 14C INFORMATION

 

INFORMATION STATEMENT PURSUANT TO

SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Check the appropriate box:

 

T	Preliminary Information Statement.
o	Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)).
o	Definitive Information Statement.

MEDICAL NUTRITION USA, INC.
(Name of Registrant As Specified In Its Charter)

 

Payment of Filing Fee (Check the Appropriate Box):

 

o	No fee required
T	Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11

 

 

MEDICAL NUTRITION USA, INC.

10 West Forest Avenue

Englewood, NJ 07631

 

NOTICE OF WRITTEN CONSENT AND APPRAISAL RIGHTS

AND

INFORMATION STATEMENT

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY

 

To our Stockholders:

 

This notice of wr itten consent and appraisal rights and information statement is being furnished to the holders of common stock of Medical Nutrition USA, Inc., which we refer to as “MNI,” the “Company,” “we” or “us.”

 

On June 10, 2010, MNI entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Danone North America, Inc., a Delaware corporation (“Parent”), and Parent’s wholly-owned subsidiary, Ristretto Acquisition Corp., a Delaware corporation (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into MNI, with MNI surviving the Merger as a wholly-owned subsidiary of Parent (the “Merger”). Upon completion of the Merger, each share of common stock of the Company (the “Common Stock”) issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”), except for shares (i) held by stockholders who are entitled to demand and who properly demand appraisal under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) for such shares and (ii) owned by the Company as treasury stock, will be cancelled and converted automatically into the right to receive $4.00 in cash, without interest and less any required withholding taxes (the “Merger Consideration”). A copy of the Merger Agreement is attached as Annex A to the accompanying information statement.

 

The Company’s board of directors (the “Board of Directors”) unanimously determined that the Merger Agreement and the transactions contemplated thereby (including the Merger) are fair to, and in the best interests of, the stockholders of the Company, approved and declared advisable the Merger Agreement and recommended that the Company’s stockholders adopt the Merger Agreement.

 

The adoption of the Merger Agreement by MNI stockholders required the affirmative vote or written consent of the holders of a majority of the outstanding shares of Common Stock. On June 10, 2010, stockholders who on such date owned shares of Common Stock representing approximately 56% of the outstanding shares of Common Stock entitled to vote on the adoption of the Merger Agreement delivered written consents to the Company adopting the Merger Agreement and authorizing the transactions contemplated by the Merger Agreement, including the Merger. As a result, no further action by any other MNI stockholder is required to adopt the Merger Agreement and MNI has not and will not be soliciting your authorization and adoption of the Merger Agreement and does not intend to call a stockholders’ meeting for purposes of voting on the adoption of the Merger Agreement. Accordingly, your vote in favor of the adoption of the Merger Agreement is not required and is not being requested.

 

This information statement constitutes notice to you of action by written consent contemplated by Section 228(e) of the Delaware General Corporation Law (the “DGCL”).

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

 

 

	By order of the Board of Directors,
	/s/ Francis A. Newman
	Francis A. Newman
	Chairman and Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

This information statement is dated [                         ] , 2010 and is being mailed to MNI stockholders on [                         ], 2010.

 

TABLE OF CONTENTS

 

			Page
SUMMARY TERM SHEET			1
	The Parties to the Merger		1
	The Merger		1
	Reasons for the Merger		2
	Required Approval of the Merger; Written Consents		2
	Opinion of MNI ’ s Financial Advisor		2
	Conditions to the Merger		2
	Termination of  the Merger Agreement		3
	Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders		3
	Interests of  Directors and Officers in the Merger		3
	Procedures for Receiving Merger Consideration		4
	Market Price of the Company Common Stock and Dividend Information		4
	Appraisal Rights		4
QUESTIONS AND ANSWERS ABOUT THE MERGER			5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			8
THE PARTIES TO THE MERGER			9
	Medical Nutrition USA, Inc.		9
	Parent and Merger Sub		9
THE MERGER			10
	Overview		10
	The Merger Consideration		10
	Required Approval of the Merger; Written Consent s		10
	Record Date		10
	Background of the Merger		10
	Recommendation of Our Board of Directors		15
	Reasons for the Merger		15
	Opinion of MNI’s Financial Advisor		17
	Financing Condition of the Merger		21
	Accounting Treatment of the Merger		21
	Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders		21
	Interests of Directors and Officers in the Merger		23
	Form of the Merger		26
	Conversion of Shares; Procedures for Exchange of Certificates		26
	Regulatory Approvals Required for the Merger		26
	Certain Effects of the Merger		26
	Past Contacts with Parent and Merger Sub		27
THE MERGER AGREEMENT			28
	Explanatory Note Regarding the Merger Agreement		28
	The Merger		28
	When the Merger Becomes Effective		28
	Consideration to be Received Pursuant to the Merger		29
	Procedures for Receiving Merger Consideration		29
	Representations and Warranties		30
	Conduct of Business Pending The Merger		30
	Stockholder Action by Written Consent		31
	Reasonable Best Efforts to Cause the Merger to Occur		31
	Indemnification and Insurance		31
	Conditions to the Merger		31
	Termination		32

	Amendment		33
APPRAISAL RIGHTS			34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS			37
MARKET PRICE OF THE COMPANY COMMON STOCK AND DIVIDEND INFORMATION			39
WHERE YOU CAN FIND MORE INFORMATION			40
INCORPORATION BY REFERENCE			40
HOUSEHOLDING OF MATERIALS			41
ANNEX A			A-1
ANNEX B			B-1
ANNEX C			C-1

 

 

 

 

 

 

QUESTIONS AND ANSWERS ABOUT THE MERGER

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the Merger. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the more detailed information contained elsewhere in this information statement, the annexes to this information statement and the documents referred to or incorporated by reference in this information statement.

 

Q.		WHY AM I NOT BEING ASKED TO VOTE ON THE MERGER?
A.		The Merger requires the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of our Common Stock voting (or consenting in writing in lieu of voting), as a single class. The requisite stockholder approval was obtained following the execution of the Merger Agreement on June 10, 2010, when written consents adopting the Merger Agreement were delivered to the Company by stockholders who collectively owned approximately 56% of our outstanding Common Stock on that date. Therefore, your vote is not required and is not being sought. We are not asking you for a proxy and you are requested not to send us a proxy.
Q.		WHAT IS THE RECOMMENDATION OF THE BOARD OF DIRECTORS REGARDING THE MERGER AGREEMENT?
A.		Our Board of Directors voted unanimously to approve and recommend the adoption of the Merger Agreement on June 9, 2010 and determined that the Merger and the Merger Agreement were advisable, fair to, and in the best interests of, the MNI stockholders. To review our board of director’s determinations, see “The Merger—Reasons for the Merger” beginning on page [●] of this information statement.
Q.		AM I ENTITLED TO APPRAISAL RIGHTS?
A.		Yes. You are entitled to appraisal rights in accordance with the procedures specified in the DGCL in connection with the Merger. See “Appraisal Rights” on page [●] of this information statement.
Q.		SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A.		No. After the Merger is completed, you will receive a letter of transmittal with detailed instructions for exchanging your stock certificates for the per share Merger Consideration. If your shares are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your “street name” shares in exchange for the per share Merger Consideration. Please do not send your certificates in now.
Q.		WILL I OWE TAXES AS A RESULT OF THE MERGER?
A.		The Merger will be a taxable transaction for all U.S. holders of our Common Stock. As a result, assuming you are a U.S. holder, the cash you receive in the Merger for your shares of our Common Stock will be subject to United States federal income tax and also may be taxed under applicable state, local, and other tax laws. In general, you will recognize gain or loss equal to the difference between (i) the amount of cash you receive and (ii) the adjusted tax basis of your shares surrendered. See “The Merger—Material U.S. Federal Income Tax Consequences of the Merger to Our Stockholders” on page [●] of this information statement for a more detailed explanation of the tax consequences of the Merger. We urge you to consult with your own tax advisor as to the particular tax consequences to you of the Merger.
Q.		WHAT HAPPENS IF I SELL MY SHARES BEFORE COMPLETION OF THE MERGER?
A.		If you transfer your shares of Common Stock, you will have transferred the right to receive the Merger Consideration to be received by our stockholders in the Merger. In order to receive the Merger Consideration, you must hold your shares through completion of the Merger.
Q.		WHERE CAN I FIND MORE INFORMATION ABOUT MNI?
A.		We file periodic reports and other information with the SEC. Such reports and other information are available for inspection at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information about these facilities. Copies of such information may be obtained by mail, upon payment of the SEC’s customary charges, by writing to the SEC at 100 F Street, N.E., Washington, D.C. 20549. The SEC also maintains a web site on the Internet at www.sec.gov that contains reports, proxy statements and other information about MNI that we file electronically with the SEC. For a more detailed description of the information available, please refer to the section entitled “Where You Can Find More Information” on page [●] of this information statement.

Q.		WHO CAN HELP ANSWER MY QUESTIONS?
A.		If you have questions about the Merger after reading this information statement, please contact MNI in writing at our principal executive offices at 10 West Forest Avenue, Englewood, New Jersey 07631, Attention: Chief Financial Officer, or by telephone at (201) 569-1188.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This information statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections or earnings, revenue or other financial items; any statements of plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

 

Forward-looking statements may include the words “may,” “can,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential,” “targets,” “goals,” “projects,” “outlook,” “continue,” “preliminary,” “guidance,” or variations of such words, similar expressions, or the negative of these terms or other comparable terminology. All statements included in this information statement concerning activities, events or developments that MNI expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements present our estimates and assumptions only as of the date of this information statement and actual results could differ materially from the results discussed in the forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and involve known and unknown risks, uncertainties and other factors that may cause actual results and performance to be materially different from any future results or performance expressed or implied by forward-looking statements, including the risk that the Merger will not close because of a failure to satisfy one or more of the closing conditions and that MNI’s business will have been adversely impacted during the pendency of the Merger.

 

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of our forward-looking statements. Our future financial conditions and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

 

You should read these forward-looking statements carefully because they discuss our expectations about our future performance, contain projections of our future operating results or our future financial condition, or state other “forward-looking” information.

 

In addition, the statements in this information statement are made as of [    ], 2010. Subsequent events or developments may cause our views to change. Except for our ongoing obligation to disclose material information as required by the federal securities laws, we undertake no obligation to update any of the forward-looking statements made herein, whether as a result of new information, future events, changes in expectations or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to [    ], 2010. For additional information please refer to the Company’s most recent Form 10-K, 10-Q and 8-K reports filed with the Securities and Exchange Commission.

 

THE PARTIES TO THE MERGER

 

MEDICAL NUTRITION USA, INC.

 

MNI, a Delaware corporation that was incorporated in 2003, develops and distributes products for the nutritionally at risk who are under medical supervision. MNI’s products are used primarily in long-term care facilities, hospitals, dialysis clinics and bariatric clinics. MNI’s product lines include Pro-Stat ® , Fiber-Stat ® , UTI-Stat ® and Diff-Stat ® as well as private label products. Our principal executive office is located at 10 West Forest Avenue, Englewood, New Jersey 07631, and our telephone number is (800) 221-0308.

 

For more information about the Company, please visit our website at www.mdnu.com . Our website address is provided as an inactive textual reference only. The information on our website is not incorporated into, and does not form a part of, this information statement. Detailed descriptions about the Company’s business and financial results are contained in our Annual Report on Form 10-K, which is incorporated in this information statement by reference. See “Where You Can Find More Information” beginning on page [●].

 

PARENT AND MERGER SUB

 

Parent, a Delaware corporation that was incorporated in 2004, is an indirect, wholly-owned subsidiary of Danone. Danone is one of the world’s leading food companies. Danone enjoys leading positions on healthy food in four businesses: fresh dairy products, water, baby nutrition and medical nutrition. Parent’s principal executive office is located at 9900 Belward Campus, Rockville, Maryland 20850.

 

Merger Sub is a Delaware corporation formed for the sole purpose of completing the Merger with MNI. Merger Sub is a wholly-owned subsidiary of Parent. Merger Sub has not conducted any business operations except for activities incidental to its formation and as contemplated by the Merger Agreement. Upon consummation of the proposed Merger, Merger Sub will merge with and into MNI, and Merger Sub will cease to exist and MNI will continue as the surviving corporation, under the name “Medical Nutrition USA, Inc.” Merger Sub’s principal executive office is located at c/o Corporate Creations Network Inc., 3411 Silverside Road, Rodney Building #104, Wilmington, Delaware 19810.

 

THE MERGER

 

The following is a description of the material aspects of the Merger. While we believe that the following description covers the material terms of the Merger, the description may not contain all of the information that may be important to you. The discussion of the Merger in this information statement is qualified in its entirety by reference to the Merger Agreement, which is attached to this information statement as Annex A and incorporated by reference into this document. We encourage you to read carefully this entire information statement, including the Merger Agreement, for a more complete understanding of the Merger.

 

OVERVIEW

 

Pursuant to the Merger, at the Effective Time, Merger Sub will be merged with and into the Company with the Company continuing on as the surviving corporation and a wholly-owned subsidiary of Parent.

 

THE MERGER CONSIDERATION

 

REQUIRED APPROVAL OF THE MERGER; WRITTEN CONSENT S

 

RECORD DATE

 

BACKGROUND OF THE MERGER

 

On April 7, 2009, Mr. Francis A. Newman, MNI’s Chairman and CEO, received a letter from Mr. Robert Crim, Regional Vice President, Business Development & North America of Danone’s medical nutrition division. The letter expressed interest in exploring a potential collaboration between Danone and MNI.

 

On April 30, 2009, Mr. Newman and members of the MNI management team met with Mr. Crim at MNI’s offices in New Jersey to review each company’s business strategy and product lines. A preliminary conclusion was reached that the companies’ respective product lines and marketing strategies appeared to be complementary, that there was very little market overlap and that there appeared to be opportunities for each company’s respective product lines to be sold in the other company’s principal markets. Mr. Newman and Mr. Crim agreed that it would be worthwhile to continue to discuss potential areas of collaboration.

 

On June 3, 2009, during the regularly scheduled meeting of the MNI Board of Directors, Mr. Newman provided an update of the Company’s ongoing corporate development strategy, including a report on the initial meeting with Danone. Mr. Newman indicated that a collaboration with Danone was consistent with the Company’s strategy and that he intended to explore potential areas of collaboration with Danone.

 

On June 29, 2009, Danone and MNI entered into a mutual confidentiality and non-disclosure agreement.

 

During July and August, 2009, MNI provided additional information to Danone about MNI’s products, clinical data and marketing strategy.

 

Early in August, 2009, Mr. Crim telephoned Mr. Newman to suggest another meeting with the MNI team. During the call he also indicated that Danone was beginning to think that the best way to maximize the market opportunities for both companies might be for Danone to acquire MNI.

 

On August 26, 2009, Mr. Newman, Mr. Crim, members of the MNI management team and representatives of Danone’s medical nutrition division, including: Mr. Mathieu Lhomme, Director of Strategy and Corporate Development, Mr. Chris Pemantell, Director of New Channels and Business Solutions, and Mr. Ulrich Zihla, Global Category Director/Oral Nutrition, met at MNI’s offices in New Jersey. The meeting focused on a review of MNI’s operations, marketing strategy and products, and Danone products that might be sold through MNI’s sales and distribution network.

 

On September 9, 2009, during a regularly scheduled meeting of the MNI Board of Directors, Mr. Newman provided an update on the Company’s corporate development strategy, including the August meeting with representatives of Danone and Mr. Crim’s comment regarding Danone’s preliminary thinking about a possible acquisition of MNI. The Board of Directors concluded that the discussions with Danone were consistent with the Company’s strategy and asked that Mr. Newman continue to update the Board of Directors as discussions progressed.

 

During September and October, 2009, MNI staff responded by email and telephone to various requests from Danone for additional information about MNI’s operations and products.

 

On October 8, 2009, Mr. Newman, members of MNI’s management team and representatives of Danone’s scientific and regulatory staff participated in a teleconference to discuss scientific and regulatory questions relating to MNI’s products.

 

During late October, 2009, Mr. Newman called Mr. Lhomme for an update on Danone’s plans. Mr. Lhomme indicated that Danone remained very interested in acquiring MNI but that there was a significant amount of internal analysis yet to be completed. Mr. Lhomme asked for any guidance Mr. Newman could provide regarding valuation. Mr. Newman said that he could not speak for the Board of Directors, but in light of the Company’s rate of growth and strategic alternatives the then current market price of approximately $2.00 per share did not properly reflect MNI’s future value. Mr. Newman told Mr. Lhomme that, in his opinion, any successful offer would have to reflect at least the present value of what the Company expected to be worth at the end of its current three-year plan. Mr. Lhomme said that he expected to be able to provide a definitive response by December 1, 2009.

 

On December 2, 2009, during a regularly scheduled meeting of the MNI Board of Directors, Mr. Newman reported to the Board of Directors his discussion with Mr. Lhomme and that he had yet to receive a definitive acquisition proposal from Danone.

 

On December 22, 2009, Mr. Lhomme notified Mr. Newman that Danone continued to work through its internal analysis of a potential acquisition of MNI and requested verification of certain assumptions being used in Danone’s model.

 

On December 23, 2009, Mr. Newman called Mr. Lhomme to provide the information requested by Mr. Lhomme on December 22, 2009.

 

During the first week of January, 2010, Mr. Newman notified Mr. Lhomme that any proposal should be submitted prior to the next meeting of the MNI Board of Directors, which was tentatively scheduled for January 11, 2010.

 

On January 7, 2010, Mr. Lhomme emailed Mr. Newman to describe the advanced stage of Danone’s internal analysis and approval process, to detail the remaining steps that Danone needed to complete, to reiterate the seriousness of Danone’s interest in acquiring MNI, and to indicate that it was not possible for Danone to complete its internal approval process by January 11, 2010.

 

On January 8, 2010, during a special meeting of the MNI Board of Directors called for the purpose of reviewing the strategic alternatives available to the company, Mr. Newman reported on the status of the Danone discussions.

 

On February 19, 2010, Mr. Lhomme called Mr. Newman to indicate that Danone intended to submit a non-binding proposal to acquire 100% of the outstanding stock of MNI to Mr. Newman at a price of $4.00 per share. Mr. Lhomme indicated that the proposal was being made with the necessary corporate approval, subject to due diligence, and that a fully executed copy of the proposal would be sent by March 1, 2010. Mr. Lhomme also indicated that Danone had retained Shearman & Sterling LLP (“Shearman”) and Atlas Strategic Advisors, LLC (“Atlas”) to represent Danone in the transaction and that they were prepared to begin the due diligence process immediately.

 

On February 22, 2010, during a special meeting of the MNI Board of Directors, Mr. Newman reviewed the terms of the non-binding proposal the Company had received from Danone. The Board of Directors reviewed the rationale for the transaction, the implied valuation of the Company and the strategic alternatives available to the Company. The Board of Directors reviewed materials analyzing and comparing the present value of the prospective three-year share price that would likely result from each of the strategic alternatives open to the Company. The Board of Directors concluded that the Danone proposal provided not only a substantial premium over MNI’s current market value, but also at least equal and likely greater present value to stockholders than the three-year share price projections provided by the alternatives, especially when considering the execution and competitive risks inherent in the three-year projections. The Board of Directors then directed Mr. Newman to further investigate the Danone proposal, including whether the pricing of the proposal could be increased.

 

On February 23, 2010, Mr. Newman telephoned Mr. Lhomme to report that the Company was willing to further investigate the Danone proposal but was not sure that a transaction could be completed at the proposed price. Mr. Newman recommended that Danone consider increasing the effective price through a special dividend to MNI stockholders. Mr. Lhomme responded that Danone had “stretched” to arrive at the proposed price and was not prepared to alter the proposed economics at this time. Mr. Lhomme suggested that perhaps additional value could be revealed during the due diligence process. Mr. Newman and Mr. Lhomme agreed to begin the due diligence process and to address the pricing issue again when due diligence had been completed.

 

On February 24, 2010, MNI received a list of due diligence information from Atlas, on behalf of Danone.

 

On approximately March 1, 2010, a signed non-binding proposal from Danone was delivered to Mr. Newman’s office.

 

On March 3, 2010, during a regularly scheduled meeting of the MNI Board of Directors, Mr. Newman and the Board of Directors again reviewed the analysis   of the Company’s strategic alternatives including management’s current strategic plan, a potentially complementary acquisition and the proposal from Danone. Mr. Newman and Mr. Kimmerling, MNI’s Chief Financial Officer, reviewed the Company’s three - year business plan and projections outlining market opportunities, execution risks, new product development and competitive environment. Mr. Newman then reviewed the financing structure that would be required to complete a potential complementary acquisition. Mr. Newman then updated the Board of Directors on the status of the discussions with Danone. Mr. Kenneth D. Polin of Foley & Lardner LLP (“Foley”), the Company’s outside counsel, was present at the meeting and reviewed a number of items, including the applicable fiduciary duties of the directors of the Company and the likely legal structure and transaction mechanics for each of the alternatives. The Board of Directors discussed at length the opportunities, risks and potential impact on stockholder value of each alternative available to MNI. The Board of Directors again reviewed materials analyzing and comparing the present value of the prospective three-year share price that would likely result from each of the strategic alternatives open to the Company. The Board of Directors again concluded that the Danone proposal provided not only a substantial premium over MNI’s current market value, but also at least equal and likely greater present value to stockholders than the three-year share price projections provided by the alternatives available to MNI, especially when considering the execution and other risks inherent in the three-year projections and the historical volatility in the price of MNI stock. The Board of Directors also discussed the practicalities and likely outcome of finding other potential buyers for the Company, including the potential reaction of Danone , the risks of employee and business disruption and the lack of prospective acquirers for which MNI would be as good a strategic fit as Danone . After careful evaluation, the Board of Directors directed Mr. Newman to proceed with the negotiations with Danone

 

On March 5, 2010, Foley, on behalf of MNI, sent to Atlas, on behalf of Danone, a response to Danone’s non-binding proposal that had been submitted to MNI on approximately  March 1, 2010. Danone requested a meeting on March 17, 2010 to discuss process and due diligence issues.

 

On March 17, 2010, Mr. Newman, Mr. Crim, Mr. Lhomme, representatives of Atlas and Mr. Kimmerling, attended a meeting at the Crowne Plaza Hotel in Englewood , New Jersey to discuss process and due diligence issues.

 

On April 1, 2010, Mr. Newman and Mr. Kimmerling participated in a conference call with representatives from Foley, Shearman, and Atlas to discuss structural and legal issues.

 

On April 12, 2010, during a special meeting of the MNI Board of Directors, Mr. Newman provided a progress update on the due diligence process as well as timing and pricing issues.

 

On April 14, 2010, Mr. Didier Morisseau  of Danone visited MNI’s primary contract manufacturers accompanied by representatives of MNI as part of Danone’s due diligence.

 

On May 13, 2010, Mr. Lhomme called Mr. Newman to advise him that sufficient progress had been made on the due diligence and that Danone was prepared to move forward to a definitive merger agreement on essentially the same terms as previously proposed in Danone’s non-binding proposal. Mr. Newman pressed Mr. Lhomme on the issue of price. Mr. Lhomme reviewed the valuation methodology Danone had used and asserted that by any objective, market-based comparison the multiples of revenue, EBIT and earnings per share reflected in the Danone proposal were significantly above market and that Danone stretched beyond its internal valuation analysis to propose a transaction it hoped would be accepted. When Mr. Newman pressed again, Mr. Lhomme stated that $4.00 per share was the maximum Danone would be prepared to pay.

 

On May 14, 2010, Mr. Newman received an email confirmation of his discussion with Mr. Lhomme from Mr. Julian Steinberg, Managing Director of Atlas.

 

On May 17, 2010, during a special meeting of the MNI Board of Directors, Mr. Newman discussed Danone’s desire to move forward to negotiate a definitive agreement as soon as practicable. The Board again reviewed the alternatives available to the Company, including the advisability of attempting to identify other potential buyers, whether such action was likely to result in a higher offer given the lack of prospective acquirers for which MNI would be as good a strategic fit as Danone and what the impact of such a step would be on the negotiations with Danone, MNI employees, MNI’s customer relationships and competitive position. The Board also discussed the complementary nature of Danone’s and MNI’s respective businesses and the likelihood that such a combination would result in virtually no redundancies and the retention of substantially all of MNI’s employees. The Board of Directors authorized Mr. Newman to proceed with negotiating a definitive agreement in accordance with terms previously presented, subject to the Board of Directors’ final approval of any such agreement.

 

On May 18, 2010, Mr. Newman emailed Mr. Lhomme to advise him that the MNI Board of Directors was interested in proceeding with the transaction as discussed and as outlined in Atlas’ written confirmation.

 

On May 20, 2010, Mr. Newman and Mr. Kimmerling participated in a conference call with representatives of Foley, Shearman and Atlas to discuss the legal structural elements that needed to be resolved in order to prepare a draft definitive agreement.

 

On May 21, 2010, MNI contacted Rodman to discuss providing a fairness opinion in connection with the proposed transaction.

 

On May 26, 2010, Shearman delivered to MNI and Foley a draft definitive merger agreement.

 

On June 1, 2010, Mr. Newman and Mr. Kimmerling reviewed a draft of the proposed definitive merger agreement with Foley.

 

On June 2, 2010, during a regularly scheduled meeting of the MNI Board of Directors, Mr. Newman provided a progress update, reviewed the material terms of the proposed definitive merger agreement and expected timing and discussed the remaining actions to be taken by the Board of Directors.

 

On June 2, 2010, MNI formally engaged Rodman to prepare an analysis and deliver a fairness opinion to the Board of Directors with respect to the proposed transaction.

 

During early June, 2010, representatives of Atlas, on behalf of Danone, contacted certain MNI stockholders collectively holding a majority of MNI’s Common Stock and, under the terms of non-disclosure agreements executed by such stockholders, described the terms of the proposed transaction and discussed whether such stockholders would be prepared to approve the proposed transaction.

 

On June 9, 2010, a special meeting of the MNI Board of Directors convened to consider and approve the definitive merger agreement and related transactions. Also present at the meeting was a representative of Foley. The Board of Directors reviewed a draft of Rodman’s power point presentation as well as a draft of the written opinion to MNI’s Board of Directors, each of which indicated that, based on and subject to the assumptions made, matters considered, procedures followed and limitations on the review undertaken, the consideration to be received by holders of Common Stock pursuant to the Merger Agreement was fair, from a financial point of view, to the stockholders of MNI. Mr. Kimmerling then led the Board of Directors in a detailed discussion of  Rodman ’ s power point presentation which set forth the financial bases and calculations underlying Rodman’s opinion. A representative of Rodman was available via telephone to answer any questions of the Board of Directors with respect to Rodman’s draft opinion Rodman ’ s power point presentation  and the financial bases and calculations underlying Rodman’s opinion. A representative of Foley then reviewed in detail the material terms of the proposed Merger Agreement that had been negotiated with Danone, which terms were also set forth in a summary that had been provided to the members of the Board of Directors before the meeting along with the most recent draft of the Merger Agreement. A representative from Foley answered questions from members of MNI’s Board of Directors. Following questions by members of MNI’s Board of Directors and further discussion among members of MNI’s Board of Directors, MNI’s Board of Directors, by unanimous action of all members, resolved that Danone’s proposal was in the best interest of MNI’s stockholders and approved, authorized the execution, delivery and performance of, and declared advisable the Merger Agreement, the Merger and the other transactions contemplated by the Merger, and further resolved to recommend to MNI’s stockholders that they adopt the Merger Agreement.

 

On June 10, 2010, Rodman delivered its  final  written fairness opinion to the Board of Directors consistent with the presentation and draft fairness opinion delivered to MNI’s Board of Directors on June 9, 2010.

 

On June 10, 2010, following receipt of the final  written fairness opinion from Rodman, MNI, Parent and Merger Sub executed the Merger Agreement.

 

On June 10, 2010, following the execution by MNI, Parent and Merger Sub of the Merger Agreement, representatives of Atlas, on behalf of Parent, delivered to MNI written consents from stockholders of the Company holding approximately 56% of the outstanding shares of Common Stock of the Company as of such date  adopting the Merger Agreement.

 

RECOMMENDATION OF OUR BOARD OF DIRECTORS

 

At a meeting of our Board of Directors held on June 9, 2010, our Board of Directors unanimously:

 

	·	determined that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of MNI and its stockholders;
	·	approved the Merger Agreement and the transactions contemplated thereby, including the Merger;
	·	directed that the Merger Agreement be submitted to the stockholders of MNI for adoption; and
	·	recommended the adoption of the Merger Agreement by MNI ’ s stockholders.

 

REASONS FOR THE MERGER

 

MNI’s Board of Directors, in the course of reaching its decision to approve the Merger Agreement and the transactions contemplated thereby and to recommend that MNI’s stockholders adopt the Merger Agreement, consulted with MNI’s management and its financial and legal advisors and considered a number of factors, including the following:

 

	·	the $4.00 per share price to be paid in cash for each share of Common Stock, which represents a 44% premium over the closing price of shares of Common Stock on June 10, 2010, the last trading day before the Merger was announced, and a 49% and 66% premium over the average closing price of shares of Common Stock for the one month and six month periods, respectively, prior to announcement of the Merger;
	·	Rodman’s power point presentation and draft opinion, dated June 9, 2010, subsequently confirmed by delivery of its written opinion, dated June 10, 2010, to the MNI Board of Directors to the effect that, as of such date and based upon and subject to the assumptions made, matters considered, procedures followed and limitations on the review undertaken as set forth in its written opinion, the $4.00 per share consideration to be received by holders of shares of Common Stock pursuant to the Merger Agreement was fair, from a financial point of view, to the stockholders of MNI (the full text of the written opinion of Rodman dated June 10, 2010, is attached as Annex B to this information statement);
	·	the likelihood of completing the Merger given the strength of Parent’s financial condition and that there were no financing contingencies as well as the belief that MNI represented a complementary business for Parent;
	·	the likelihood of completing an alternative acquisition transaction, given the state of the capital markets, the need for a substantial amount of equity and debt financing to complete any such transaction and that the expected accretive value to the Company expected to result from any such alternative transaction was not projected to exceed the $4.00 per share price to be paid for each share of Common Stock in connection with the Merger;
	·	the Board of Director’s familiarity with the business, operations, prospects, business strategy, properties and assets of MNI, including the competitive environment, the risks inherent in planned new product development and the competitive situation;
	·	the form of consideration to be paid to holders of shares of Common Stock in the Merger and the certainty of the value of such cash consideration compared to stock or other consideration;
	·	the belief that the Merger creates the most beneficial combination available to MNI of immediate and assured benefit to stockholders, and continuity for customers and employees;
	·	the opportunity of MNI’s sales force to market Parent’s products and thereby strengthen their competitive position in the long-term care market;
	·	the enhanced research and product development capabilities that would be available to MNI as a result of the Merger;
	·	that substantially all of MNI’s employees would be expected to be retained as employees in connection with the Merger; and
	·	that MNI’s stockholders who meet certain conditions will be entitled to appraisal rights under the DGCL in connection with the Merger.

 

 

	·	that, although the Merger provides MNI stockholders with the opportunity to realize a substantial premium over the average price at which the shares of Common Stock have traded during the prior two years and notwithstanding the Company ’ s projections and underlying assumptions with respect to the present value of the Company ’ s Common Stock over the next three years which the Board of Directors determined were reasonable, there is no assurance that the present value of the Common Stock could not be in excess of $4.00 per share at some point during such three-year period;
	·	that, if the Merger is not completed, MNI will be required to pay its own expenses associated with the Merger as well as the other risks and costs to MNI if the Merger does not close, including the diversion of management and employee attention, potential employee attrition, and the potential disruptive effect on business and customer relationships;
	·	the restrictions on the conduct of MNI’s business prior to the completion of the Merger, which require MNI to conduct its business in the ordinary course, to use its commercially reasonable efforts to preserve intact its business organization, and to maintain its significant beneficial business relationships with suppliers, contractors, distributors, customers, licensors, licensees and others having material business relationships with it, subject to specific limitations and prohibitions, which may delay or prevent MNI from undertaking business opportunities that may arise pending completion of the Merger;
	·	that MNI’s executive officers and directors may have interests in the Merger that are different from, or in addition to, those of MNI’s other stockholders;
	·	that an all cash transaction would be a taxable transaction to MNI’s stockholders for U.S. federal income tax purposes; and
	·	the lack of a formal auction process or market check as well as the inability of MNI to terminate the Merger Agreement in the event a superior offer is received from a third party pending the completion of the Merger.

 

The foregoing discussion of the factors considered by MNI’s Board of Directors is not intended to be exhaustive, but does set forth the principal factors considered by MNI’s Board of Directors. MNI’s Board of Directors collectively reached the conclusion to approve the Merger Agreement and the related transactions in light of the various factors described above and other factors that the members of MNI’s Board of Directors believed were appropriate. In view of the wide variety of factors considered by MNI’s Board of Directors in connection with its evaluation of the Merger and the related transactions and the complexity of these matters, MNI’s Board of Directors did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of MNI’s Board of Directors. Rather, MNI’s Board of Directors made its recommendation based on the totality of information presented to and the investigation conducted by it. In considering the factors discussed above, individual directors may have given different weights to different factors.

 

 

OPINION OF MNI’S FINANCIAL ADVISOR

 

     Rodman was asked to render an opinion to MNI’s Board of Directors as to the fairness, from a financial point of view, to holders of the outstanding shares of Common Stock of MNI of the consideration to be received by MNI’s stockholders in connection with the Merger. On June 9, 2010, Rodman delivered its draft  opinion to MNI’s Board of Directors that, as of June 9, 2010, and subject to and based upon the assumptions made, matters considered, procedures followed and limitations on the review undertaken as set forth in its opinion, the consideration to be received by the holders of shares of Common Stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. On June 10, 2010, Rodman delivered to MNI’s Board of Directors its final  written opinion to the same effect.

 

     MNI’s Board of Directors selected Rodman as its financial advisor because it is a nationally recognized investment banking and advisory firm that has substantial experience in transactions similar to the Merger. Rodman, as part of its investment banking and financial advisory business, is continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the two years prior to the date of its opinion, Rodman and its affiliates have not provided financial advisory services to either MNI or Parent or any of their affiliates. Pursuant to a letter agreement, dated June 1, 2010, MNI engaged Rodman to act as a financial advisor in connection with the contemplated transaction. Pursuant to the terms of the engagement letter, MNI has agreed to pay Rodman a fee equal to approximately $200,000, of which $50,000 was paid upon execution of such letter agreement and $150,000 of which became payable on June 10, 2010, upon delivery to the Board of Directors of its final written opinion.

 

     The full text of Rodman’s written opinion, dated June 10, 2010, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Rodman, is attached as Annex B to this information statement. We urge you to read this opinion carefully and in its entirety. Rodman’s opinion is directed to MNI’s Board of Directors and addresses only the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Common Stock pursuant to the Merger Agreement. The summary of the opinion of Rodman set forth in this information statement is qualified in its entirety by reference to the full text of the opinion.

 

     In connection with rendering the opinion described above and performing its related financial analyses, Rodman reviewed, among other things:

 

	●		a draft of the Merger Agreement;
	●		MNI’s Annual Report on Form 10-K for the fiscal year ended January 31, 2010;
	●		certain interim financial statements and reports to stockholders and Quarterly Reports on Form 10-Q of MNI; and
	●		certain internal financial analyses and forecasts of MNI prepared by MNI’s management and reviewed in discussions between MNI’s management and Rodman.

     Rodman also held discussions with members of the senior management of MNI regarding their assessment of the past and current business operations, financial condition and future prospects of MNI. In addition, Rodman compared the terms of the Merger with transactions completed for other similar companies, compared the current value of MNI’s publicly traded stock to that of other similar publicly traded companies, completed a discounted cash flow analysis of MNI’s future expected cash flows, and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

 

     Rodman relied upon the accuracy and completeness of all of the financial, accounting, legal tax and other information discussed with or reviewed by Rodman and assumed such accuracy and completeness for purposes of rendering the opinion described above. In addition, Rodman did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of MNI and was not furnished with any such evaluation or appraisal. Rodman’s opinion did not address the underlying business decision of MNI’s Board of Directors to approve the Merger Agreement and its opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, June 10, 2010. Events occurring after June 10, 2010 may affect the opinion and the assumptions used in preparing it, and Rodman did not assume any obligation to update, revise or reaffirm the opinion.

 

     The following is a summary of the material financial analyses performed by Rodman in connection with its powerpoint presentation and the preparation of its written opinion. In order to fully understand the financial analyses used by Rodman, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses.

 

     Publicly Traded Comparable Companies Analysis

 

     Using publicly available information, Rodman reviewed the current value of the publicly traded stock of certain comparable companies as a basis for comparison in assessing the current value of the Company’s publicly traded stock. The companies used in Rodman’s p ublicly traded comparable companies analysis were selected because of their market focus, products, growth potential, size, regulatory risk, and competitive risk, among other relevant factors. The publicly traded companies selected in the industry to which MNI was compared (the “Selected Companies”) consisted of:

 

●	Mannatech Inc.;
●	Medifast Inc.;
●	NutraCea;
●	Nutraceutical International Corp.;
●	Nutrition 21 Inc.;
●	Schiff Nutrition International Inc.; and
●	XELR8 Holdings, Inc.

 

     Rodman reviewed certain historical and projected operating performance characteristics and public market valuation metrics of MNI and compared them to those same metrics derived from publicly available information for each of the Selected Companies. In order to comparatively assess the fairness of the consideration to be received by MNI stockholders, the multiples used for MNI are based on the $4.00 in cash per share to be received by MNI stockholders in connection with the Merger. Such information included:

 

●	the ratio of total enterprise value (“TEV”) to revenues for the last twelve months (“LTM Revs”) (referred to as the “TEV/LTM Revs Multiple”); and
●	the ratio of total enterprise value (“TEV”) to earnings before interest, taxes, depreciation and amortization for the last twelve months (“LTM EBITDA”) (referred to as the “TEV/LTM EBITDA Multiple”).

 

     This analysis indicated the low, mean, median and high multiples for the Selected Companies, as compared to the corresponding transaction multiples implied by the Merger Consideration, as set forth below:

 

		TEV/LTM Revs		TEV/LTM EBITDA		Implied Per Share Equity Reference Ranges for MNI
High		2.5x		16.6x		$2.64-$3.35
Mean		0.9x		9.0x		$1.68-$1.78
Median		0.7x		7.1x		$1.48-$1.56
Low		0.2x		5.0x		$0.96-$1.32
MNI (based on $4.00 per share of Common Stock)		3.1x		28.5x		$4.00

 

 

     Comparable Transactions Analysis

 

     Using publicly available information, Rodman reviewed the terms of certain comparable acquisition transactions that have been announced and are pending or completed; its review focused on, among other precedent acquisition transactions:

 

Date Announced		Acquiror		Target
16-Mar-10		Chemo Iberica, S.A.		Everett Laboratories, Inc.
01-Mar-10		Hi Tech Pharmacal Co. Inc.		Blaine Company, Inc., Mag-Ox Line
21-Sep-09		Atrium Innovations Inc.		Garden of Life, Inc.
31-Dec-08		Atrium Innovations Inc.		Nutri-Health Supplements, L.L.C.
21-Nov-08		E.I.D Parry (India) Limited		Valensa International, LLC
08-Aug-08		KI NutriCare, Inc.		Allergy Research Group Inc.
30-May-08		NBTY, Inc.		Leiner Health Products Inc.
29-Oct-07		Nycomed US, Inc.		Bradley Pharmaceuticals Inc.
28-Dec-07		Hi Tech Pharmacal Co. Inc.		HWSM Pharmaceuticals, L.L.C.
20-Jun-07		Plethico Pharmaceuticals Ltd.		Natrol, Inc.
30-Nov-07		Eurand Pharmaceuticals Inc.		SourceCF, Inc.
01-Jun-07		Natrol, Inc.		Medical Research Institute
30-Mar-07		New Leaf Brands, Inc.		Nutritional Specialties, Inc.
08-Oct-06		GlaxoSmithKline Consumer Healthcare, L.P.		CNS Inc.
06-Sep-06		Glanbia plc		Seltzer Ingredients, Inc.
31-Mar-06		MM2 Group, Inc.		Genotec Nutritionals, Inc.
05-Dec-05		Natural Alternatives International Inc.		Disposition Company, Inc.
28-Apr-05		Swander Pace Capital		Genisoy Food Company, Inc.

     This analysis indicated the low, mean, median and high multiples for the Selected Transactions using data where available, as compared to the corresponding transaction multiples implied by the Merger Consideration, as set forth below:

 

		TEV/LTM Revs				TEV/LTM EBITDA				Implied per Share Equity Reference Ranges for MNI
High		3.9	x			17.1	x			$2.70-$4.80
Mean		1.5	x			13.0	x			$2.23-$2.31
Median		1.1	x			13.1	x			$1.89-$2.24
Low		0.4	x			8.6	x			$1.16-$1.73
MNI (based on $4.00 per share of Common Stock)		3.1	x			28.5	x			$4.00

 

     For each of the transactions above, Rodman reviewed the price paid for the acquired company and, when available, calculated the respective premiums to the acquired company’s unaffected stock price one day prior to announcement of the transaction.

 

●	Based on such review, Rodman observed that for these transactions, the highest one day premium paid was 66.3%, the lowest was 27.3%, the median was 30.5% and the average was 38.7%.

 

 

 

      No company or transaction utilized in precedent transactions analyses is identical to MNI or the Merger. In evaluating the transactions, Rodman made judgments and assumptions with regard to industry performance, business, economic, market and financial conditions and other matters, many of which are beyond the control of MNI, such as the impact of competition on the business of MNI or the industry in which it is principally engaged, the growth of this industry and the absence of any material adverse change in the financial condition and prospects of MNI or the industry in which it is principally engaged or in the financial markets in general which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared. Mathematical analysis, such as determining the mean or median, or the high or the low, is not in itself a meaningful method of using peer group data.

 

     Discounted Cash Flow Analysis

 

     Rodman performed discounted cash flow analyses to determine a range of present values for MNI based on financial projections prepared by MNI’s management. Rodman calculated the discounted cash flow values for MNI as the sum of the net present values of:

 

●	the estimated unlevered future free cash flows MNI would generate for the period from FY 2011 through FY 2020; and
●	the terminal value of MNI at the end of such period using a range of terminal value multipliers.

 

     The analyses indicated the following implied per share equity value reference range for MNI’s Common Stock, as compared to the $4.00 per share Merger Consideration to be received by the holders of Common Stock in the Merger:

 

Implied Per Share Equity Reference Range for MNI		Per Share Merger Consideration
$2.43 - $3.12		$4.00

 

     In connection with the review of the Merger by MNI’s Board of Directors, Rodman performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, Rodman considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. Furthermore, Rodman believes that the summary provided and the analyses described above must be considered as a whole and that selecting any portion of its analyses, without considering all analyses, would create an incomplete view of the process underlying its analyses and opinion. In addition, Rodman may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Rodman’s view of the actual value of MNI.

 

     In performing its analyses, Rodman made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of MNI. Any estimates contained in Rodman’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates. The analyses performed were prepared solely as part of Rodman’s analysis of the fairness, from a financial point of view, of the consideration to be received by holders of shares of Common Stock pursuant to the Merger Agreement and were conducted in connection with the delivery by Rodman of its opinion to MNI’s Board of Directors. The analyses do not purport to be appraisals or to reflect the prices at which shares of Common Stock might actually trade.

 

     Rodman prepared the financial analyses described above for the purpose of rendering its opinion to MNI’s Board of Directors as to the fairness, from a financial point of view, of the consideration to be received by the holders of shares of Common Stock pursuant to the Merger Agreement. The consideration to be received by the holders of shares of Common Stock pursuant to the Merger Agreement was determined through arm’s-length negotiations between MNI and Parent and was approved by MNI’s Board of Directors. Rodman did not recommend any specific merger consideration to MNI’s Board of Directors or that any given merger consideration constituted the only appropriate consideration for the Merger.

 

 

 

FINANCING CONDITION OF THE MERGER

 

     The Merger is not conditioned on any financing arrangements.

 

ACCOUNTING TREATMENT OF MERGER

 

     The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

 

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO OUR STOCKHOLDERS

 

     The following is a summary of the material U.S. federal income tax consequences of the Merger to U.S. Holders (as defined below) of our Common Stock. This summary is based on the Internal Revenue Code of 1986, as amended, referred to as the “Code” in this information statement, regulations promulgated under the Code, administrative rulings and pronouncements issued by the Internal Revenue Service (“IRS”) and court decisions now in effect. All of these authorities are subject to change, possibly with retroactive effect so as to result in tax consequences different from those described below. We have not sought any ruling from the IRS with respect to statements made and conclusions reached in this discussion, and the statements and conclusions in this information statement are not binding on the IRS or any court. We can provide no assurances that the tax consequences described below will not be challenged by the IRS or will be sustained by a court if so challenged.

 

     This summary does not address all of the U.S. federal income tax consequences that may be applicable to a particular holder of our Common Stock. In addition, this summary does not address the U.S. federal income tax consequences of the Merger to U.S. Holders of our Common Stock who are subject to special treatment under U.S. federal income tax laws, including, for example, banks and other financial institutions, insurance companies, tax-exempt investors, U.S. expatriates, dealers in securities, traders in securities who elect the mark-to-market method of accounting for their securities, regulated investment companies, mutual funds, real estate investment trusts, holders who hold their Common Stock as part of a hedge, straddle or conversion transaction, holders whose functional currency is not the U.S. dollar, holders who acquired our Common Stock through the exercise of employee stock options or other compensatory arrangements, holders who are subject to the alternative minimum tax provisions of the Code and holders who do not hold their shares of our Common Stock as “capital assets” within the meaning of Section 1221 of the Code.

 

     For purposes of this summary, a “U.S. Holder” means a beneficial owner of Common Stock that is, for U.S. federal income tax purposes: (a) an individual who is a citizen or resident of the United States; (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any state thereof or the District of Columbia; (c) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (d) a trust if (i) a court within the United States is able to exercise primary supervision over its administration and (ii) one or more U.S. persons has the authority to control all of the substantial decisions of the trust. Accordingly, this discussion does not address the U.S. federal income tax consequences to any holder of our Common Stock who or which, for U.S. federal income tax purposes, is not a U.S. Holder, such as a nonresident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust. In addition, this discussion does not address U.S. federal estate or gift tax consequences of the Merger, or the tax consequences of the Merger under state, local or foreign tax laws.

 

     If a partnership or other pass-through entity (including any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A beneficial owner that is a partnership and partners in such a partnership should consult their tax advisors about the U.S. federal income tax consequences of the Merger.

 

 

     This summary is provided for general information purposes only and is not intended as a substitute for individual tax advice. Each holder of our Common Stock should consult the holder’s tax advisor as to the particular tax consequences of the Merger to such holder, including the application and effect of any state, local, foreign or other tax laws and the possible effect of changes to such laws.

 

     Exchange of Common Stock for Cash

 

     Generally, the Merger will be taxable to U.S. Holders of our Common Stock for U.S. federal income tax purposes. A U.S. Holder of our Common Stock receiving cash pursuant to the Merger generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash received and the U.S. Holder’s adjusted tax basis in our Common Stock surrendered. Any such gain or loss generally will be capital gain or loss if our Common Stock is held as a capital asset at the Effective Time of the Merger. Any capital gain or loss will be taxed as long-term capital gain or loss if the U.S. Holder has held our Common Stock for more than one year prior to the Effective Time of the Merger. If the U.S. Holder has held our Common Stock for one year or less prior to the Effective Time of the Merger, any capital gain or loss will be taxed as short-term capital gain or loss. Currently, most long-term capital gains for non-corporate taxpayers are taxed at a maximum federal tax rate of 15%. This 15% rate is scheduled to expire at the end of 2010, at which time, unless the law is changed, the rate generally will increase to 20% for non-corporate taxpayers. The deductibility of capital losses is subject to certain limitations. If a U.S. Holder acquired different blocks of our Common Stock at different times and different prices, such holder must determine the adjusted tax basis and holding period separately with respect to each such block of our Common Stock.

 

     Information Reporting and Backup Withholding

 

     Generally, U.S. Holders of our Common Stock will be subject to information reporting on the cash received pursuant to the Merger unless such a holder is a corporation or other exempt recipient. In addition, under the U.S. federal backup withholding tax rules, the paying agent will be required to withhold 28% of all cash payments to which a holder of Common Stock is entitled in connection with the Merger unless such holder provides under penalties of perjury on a Form W-9 (or appropriate substitute form) a tax identification number, certifies that such holder is a U.S. person and that the tax identification number is correct and that no backup withholding is otherwise required, and otherwise complies with such backup withholding rules. Each U.S. Holder of our Common Stock should complete and sign the Form W-9 (or appropriate substitute form) included as part of the letter of transmittal and return it to the paying agent, in order to certify that the U.S. Holder is exempt from backup withholding or to provide the necessary information to avoid backup withholding. Backup withholding is not an additional tax. Any amount withheld from a payment to a U.S. Holder of Common Stock under these rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished timely to the IRS.

 

Non-U.S. Holders

 

●	The gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder);
●	The non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or
●	The non-U.S. holder owned (actually or constructively) more than 5% of our Common Stock at any time during the five years preceding the Merger, and we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes, which we do not expect to be the case.

 

 

Information reporting and, depending on the circumstances, backup withholding will apply to the cash received in the Merger, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code) or such owner otherwise establishes an exemption. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner.

 

HOLDERS OF OUR COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.

 

INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER

 

     Members of our Board of Directors and our officers since the beginning of the last fiscal year had various interests in the Merger described in this section that are different from, or in addition to, the interests of MNI and our stockholders generally.

 

     Treatment of Options

 

     The Merger Agreement provides that each Company stock option to purchase our Common Stock granted under any Company equity compensation plan (“Options”), whether or not vested and exercisable, that is outstanding and unexercised immediately prior to the Effective Time of the Merger will be cancelled and exchanged for a cash payment equal to the product of (i) the excess (if any) of the Merger Consideration over the exercise price of the Option and (ii) the number of shares of Common Stock subject to such Option, whether vested or not.

 

The table below provides information as of June 10, 2010 for each of our directors and executive officer s of the Company: (a) the aggregate number of shares of Common Stock subject to vested Options; (b) the value of such vested Options on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the Merger Consideration over the respective per share exercise prices of those Options by (ii) the number of shares of Common Stock subject to those Options; (c) the aggregate number of unvested Options that will vest on the Effective Time of the Merger; (d) the value of those unvested Options on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the Merger Consideration over the respective per share exercise prices of those Options by (ii) the number of shares of Common Stock subject to those Options; (e) the aggregate number of shares of Common Stock subject to vested Options and unvested Options that will vest on the Effective Time of the Merger; and (f) the aggregate value of all such vested Options and unvested Options that will vest on the Effective Time of the Merger on a pre-tax basis, calculated by multiplying (i) the excess, if any, of the Merger Consideration over the respective per share exercise prices of those Options by (ii) the number of shares of Common Stock subject to those Options. The information in the table assumes that all currently outstanding Options will remain outstanding immediately prior to the Effective Time of the Merger.

		Vested Options						Options that Will Vest as a result of the Merger						Totals
Names		Shares				Value ($)		Shares				Value ($)		Shares				Value ($)
Executive Officers:
Arnold Gans		520,500			$	915,875		0			$	0		520,500			$	915,875
Myra Gans		420,500			$	744,375		0			$	0		420,500			$	744,375
Jeff Janco		300,000			$	576,000		0			$	0		300,000			$	576,000
Frank Newman		612,000			$	1,071,000		0			$	0		612,000			$	1,071,000
Frank Kimmerling		0			$	0		0			$	0		0			$	0
Robert Mathias		0			$	0		0			$	0		0			$	0
Directors:
Andrew Horowitz		104,000			$	119,800		20,000			$	43,800		124,000			$	163,600
Bernard Korman		92,000			$	92,200		20,000			$	43,800		112,000			$	136,000
Mark Rosenberg		97,000			$	99,000		20,000			$	43,800		117,000			$	142,800

 

 

     Treatment of Restricted Stock

 

The Merger Agreement provides that each share of Common Stock that is subject to vesting or other restrictions under a Company equity incentive plan or an applicable restricted stock agreements or other agreement with the Company (“Restricted Stock”) shall become fully vested, all other restrictions shall lapse and the holder thereof shall be entitled to receive an amount in cash, without interest, equal to the Merger Consideration, less any amounts as are required to be withheld.

 

The table below provides, for each of our directors and executive officer s of the Company, the aggregate number of shares of Common Stock that are unvested as of June 10, 2010 and the Merger Consideration to be received in connection with such restricted shares of Common Stock.

Name		Number of Shares of Restricted Stock				Value of Unvested Restricted Stock ($) (1)
Executive Officers:
Arnold Gans		35,000			$	140,000
Myra Gans		35,000			$	140,000
Jeff Janco		35,000			$	140,000
Frank Newman		50,000			$	200,000
Robert Mathias		50,833			$	203,332
Frank Kimmerling		50,833			$	203,332
Directors:
Andrew Horowitz		N/A				N/A
Bernard Korman		N/A				N/A
Mark Rosenberg		N/A				N/A

(1)	The value of each share of Restricted Stock shown in the table above is equal to the product of (i) the Merger Consideration and (ii) the number of shares of Common Stock subject to such restrictions.

 

     Retention Agreements

 

     In connection with the signing of the Merger Agreement, Parent entered into retention letter agreements (each a “Letter Agreement”) with Mr. Newman and ten other key executives and employees, including executive officers Frank Kimmerling, Arnold Gans, Myra Gans, Jeff Janco, and Robert Mathias. Mr. Newman’s Letter Agreement provides that if he remains in continuous employment and provides transition services to MNI until the six-month anniversary of the closing of the Merger, he will be entitled to a retention bonus, which bonus shall consist of the following: (a) a fixed amount of $79,954; (b) a payment in lieu of severance in the amount of $213,210; and (c) a variable lump sum payment up to a maximum of $79,954, to be determined based on MNI’s achievement of performance targets. In addition, under Mr. Newman’s Letter Agreement, he agrees to waive his right to any severance or change in control payments under his current employment agreement and to the unvested portion of his cash retention bonus granted under MNI’s Cash Retention Grant program. If the Merger Agreement is terminated, his Letter Agreement will also be automatically terminated.

   

 

     The other executive officers also entered into Letter Agreements with Danone providing that such executive officers will be entitled to retention bonuses if they remain continuously employed until at least the eighteen-month anniversary of the closing of the Merger. These retention bonuses are comprised of a fixed amount and a variable amount to be determined based on MNI’s achievement of performance targets, as described below. Under these Letter Agreements, the key executives and employees agree to waive their rights (if any) under their respective employment agreements and offer letters to any change in control payments in the event of their resignation with or without good reason. In addition, they agree to waive their rights to the unvested portion of any cash retention bonus granted under MNI’s Cash Retention Grant program. If the Merger Agreement is terminated, these Letter Agreements will also be automatically terminated. The retention bonus amounts under the Letter Agreements for the executive officers other than Mr. Newman are as follows:

 

	●	Mr. Kimmerling: a fixed amount of $149,673 and a variable amount of up to $149,673;
	●	Mr. Gans: a fixed amount of $203,769 and a variable amount of up to $203,769;
	●	Ms. Gans: a fixed amount of $140,015 and a variable amount of up to $140,015;
	●	Mr. Janco: a fixed amount of $149,672 and a variable amount of up to $149,672; and
	●	Mr. Mathias: a fixed amount of $189,337 and a variable amount of up to $189,337.

 

    For the remaining employees, the aggregate amount of the fixed and maximum variable retention bonuses is $ 1,167,216 .

 

     Director and Officer Exculpation, Indemnification and Insurance

 

     MNI’s certificate of incorporation contains certain provisions permitted under the DGCL relating to the liability of MNI’s directors. These provisions eliminate a director’s personal liability to MNI or MNI’s stockholders for monetary damages resulting from a breach of fiduciary duty, except in circumstances involving certain wrongful acts, including:

 

	●	for any breach of the director’s duty of loyalty to MNI or its stockholders;
	●	for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
	●	for any liability under Section 174 of the DGCL (unlawful payment of dividends or unlawful stock purchases or redemptions); and
	●	for any transaction in which the director derives an improper personal benefit.

 

     MNI’s bylaws also contain provisions that require MNI to indemnify its directors and officers to the fullest extent permitted by law.

 

     MNI has not entered into separate indemnification agreements with any of its officers or directors.

 

     Under the Merger Agreement, Parent and Merger Sub have agreed that all rights to indemnification by MNI in favor of its current and former officers and directors, as provided in the certificate of incorporation or bylaws of MNI, shall survive and remain in full force and effect after the Effective Time of the Merger.

 

     Under the Merger Agreement, Parent and the surviving corporation have agreed to honor and fulfill in all respects the obligations of the Company relating to indemnification of officers and directors and advancement of expenses under the certificate of incorporation and bylaws of the Company with respect to any matter arising out of or relating to, or in connection with, any acts or omissions occurring or alleged to have occurred prior to the Effective Time, including in connection with the approval of the Merger Agreement and the Merger.

 

     Pursuant to the Merger Agreement, for a period of six years following the Effective Time, Parent has agreed to cause to be maintained in effect policies of directors’ and officers’ liability insurance or a six-year tail insurance policy covering the persons who are covered by MNI’s existing directors’ and officers’ liability insurance policies for events that occur prior to the Effective Time and providing coverage at least as favorable, in the aggregate, as such existing policies. However, Parent will not be required to pay an annual premium in excess of two hundred percent (200%) of the aggregate annual amounts currently paid by MNI to maintain such existing.

 

 

FORM OF THE MERGER

 

     Subject to the terms and conditions of the Merger Agreement and in accordance with the DGCL, at the time of the Merger, Merger Sub will merge with and into MNI, with MNI continuing as the surviving corporation, wholly-owned by Parent. The time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware will be the Effective Time.

 

CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES

 

     The conversion of our Common Stock into the right to receive the per share Merger Consideration in cash, without interest, will occur automatically at the Effective Time. Promptly after the Effective Time, the paying agent will send a letter of transmittal to each holder of record of a certificate or certificates of MNI Common Stock. The letter of transmittal will contain instructions for obtaining the Merger Consideration in exchange for shares of Common Stock. Stockholders should not return stock certificates before receiving the letter of transmittal.

 

     In the event of a transfer of ownership of our Common Stock that is not registered in the records of our transfer agent, the Merger Consideration for shares of Common Stock may be paid to a person other than the person in whose name the certificate so surrendered is registered if:

 

	●	the certificate is properly endorsed or otherwise is in proper form for transfer; and
	●	the person requesting such payment (a) pays any transfer or other taxes resulting from the payment to a person other than the registered holder of the certificate or (b) establishes that the tax has been paid or is not applicable.

 

     The Merger Consideration paid upon conversion of the shares of Common Stock will be issued in full satisfaction of all rights relating to the shares of Common Stock.

 

     If your shares of Common Stock are held in “street name” by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your “street name” shares of Common Stock in exchange for the per share Merger Consideration.

 

REGULATORY APPROVALS REQUIRED FOR THE MERGER

 

     Other than the expiration of 20 days from the mailing of this information statement to MNI’s stockholders and the filing of a Certificate of Merger with the Secretary of State of the State of Delaware, there are no material federal, state or foreign regulatory requirements, approvals or filings required for the completion of the Merger that have not been obtained.

 

CERTAIN EFFECTS OF THE MERGER

 

     If the Merger is completed, MNI will become a wholly-owned subsidiary of Parent and the MNI Common Stock will cease to be listed on the NASDAQ Capital Market and will not be publicly traded. In addition, upon consummation of the Merger, the registration of our Common Stock and our reporting obligations with respect to our Common Stock under the Exchange Act will be terminated upon application to the SEC.

 

 

     MNI’s Common Stock is currently registered under the Exchange Act. Such registration may be terminated upon application of MNI to the SEC if the shares of Common Stock are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Common Stock under the Exchange Act would substantially reduce the information required to be furnished by MNI to its stockholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to MNI, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders’ meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to “going private” transactions. Furthermore, the ability of “affiliates” of MNI and persons holding “restricted securities” of MNI to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act may be impaired or eliminated. If registration of the Common Stock under the Exchange Act is terminated, the Common Stock will no longer be “margin securities” or be eligible for listing on NASDAQ. In addition, if the registration of MNI’s Common Stock is terminated, MNI will no longer be subject to certain provisions of the Sarbanes-Oxley Act of 2002 or the liability provisions of the Exchange Act with respect to MNI’s Common Stock. We intend and will cause MNI to terminate the registration of the Common Stock under the Exchange Act as soon after consummation of the Merger as the requirements for termination of registration are met.

 

     Upon consummation of the Merger, you will cease to have rights as a stockholder, other than your right to either receive the per share Merger Consideration or to exercise your appraisal rights, and you will no longer have any interest in any of our future earnings or growth, if any.

 

PAST CONTACTS WITH PARENT AND MERGER SUB

 

     Other than with respect to negotiations related to the Merger as described in “The Merger—Background of the Merger” on page [●] of this information statement, there have not been any other negotiations, transactions or material contacts with Parent or Merger Sub during the last two (2) years.

 

 

THE MERGER AGREEMENT

 

     This section of this information statement describes the material terms of the Merger Agreement but does not purport to describe all of the terms of the Merger Agreement. The following summary is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached as Annex A to this information statement and is incorporated into this information statement by reference. We urge you to read the full text of the Merger Agreement because it is the legal document that governs the Merger. We have included this description of the Merger Agreement to provide you with information regarding its terms. We have not provided this description to provide you with any other factual information about us. You can find such factual information elsewhere in this information statement and in the public filings we make with the SEC, as described in the section entitled “Where You Can Find More Information” below. Capitalized terms not herein defined have the meanings ascribed to them in the Merger Agreement.

 

EXPLANATORY NOTE REGARDING THE MERGER AGREEMENT

 

     The Merger Agreement has been included to provide investors and our stockholders with information regarding its terms. It is not intended to provide to any person not a party thereto any other factual information about the Company. The Merger Agreement contains representations and warranties of the Company, Merger Sub and Parent, negotiated between the parties and made as of specific dates solely for purposes of the Merger Agreement, including setting forth the respective rights of the parties with respect to their obligations to complete the Merger. This description of the representations and warranties is not intended to provide any other factual information about the Company. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. As a result, no person should rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent or Merger Sub or any of their respective subsidiaries or affiliates.

 

THE MERGER

 

     At the Effective Time of the Merger, upon the terms and subject to the satisfaction or waiver of the conditions of the Merger Agreement and in accordance with the DGCL, Merger Sub will merge with and into MNI, the separate corporate existence of Merger Sub shall cease and MNI shall be the surviving corporation of the Merger. As of the Effective Time of the Merger, the certificate of incorporation of the surviving corporation shall be amended to read the same as the certificate of incorporation of Merger Sub; provided that Article I thereof shall be amended to provide that the name of the corporation is Medical Nutrition USA, Inc. Additionally, unless otherwise determined by Parent, the bylaws of the Company shall be amended to read the same as the bylaws of Merger Sub. The directors of Merger Sub immediately prior to the Effective Time of the Merger will, from and after the Effective Time of the Merger, be the directors of the surviving corporation until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. Our officers immediately prior to the Effective Time of the Merger will, from and after the Effective Time of the Merger, be the officers of the surviving corporation until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal.

 

WHEN THE MERGER BECOMES EFFECTIVE

 

     The Company and Merger Sub will file a certificate of merger (“Certificate of Merger”) with the Secretary of State of the State of Delaware as soon as practicable following the date on which the last of the conditions to the closing of the Merger described under “The Merger Agreement—Conditions to the Merger” beginning on page [●] have been satisfied or waived (other than the conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the fulfillment or waiver of those conditions). The Merger will become effective at the time the Certificate of Merger is duly filed with the Secretary of State or at some later date agreed upon by Parent and the Company and specified in the Certificate of Merger.

 

 

CONSIDERATION TO BE RECEIVED PURSUANT TO THE MERGER

 

     Conversion of our Common Stock

 

     The Merger Agreement provides that each share of our Common Stock issued and outstanding immediately prior to the Effective Time of the Merger, except those shares owned by the Company as treasury stock, or shares held by stockholders who are entitled to and who properly exercise, and do not withdraw or lose, appraisal rights under Section 262 of the DGCL, will be cancelled and converted automatically into the right to receive the Merger Consideration, without interest. After the Effective Time of the Merger, each holder of a certificate representing any shares of our Common Stock (other than shares for which appraisal rights have been properly demanded and perfected under Section 262 of the DGCL) will no longer have any rights with respect to the shares, except for the right to receive the Merger Consideration. All shares of Common Stock that have been converted into the right to receive the Merger Consideration, and all shares of Common Stock owned by the Company as treasury stock, will be automatically cancelled and cease to exist.

 

     Treatment of Options; Restricted Stock

 

     The Merger Agreement provides that prior to the Effective Time, MNI will take all actions necessary to provide that each Option to purchase shares of Common Stock pursuant to the Company’s existing stock incentive plans (the “Stock Plans”) outstanding immediately prior to the Effective Time (whether or not then vested or exercisable) will be cancelled and terminated and converted at the Effective Time into the right to receive a cash amount equal to the Option Consideration for each share of Common Stock then subject to the Option (without interest and less applicable withholding taxes) or, if the Option Consideration is a negative number, no such cash payment will be due and owing. Pursuant to the terms of each outstanding Option agreement, the vesting of all such Options shall automatically accelerate such that all such Options are fully vested immediate, prior to the Effective Time. Option Consideration means, with respect to each share of Common Stock under a particular Option, an amount equal to (i) the per share Merger Consideration, less (ii) the exercise price payable in respect of each share of Common Stock under such Option. MNI agreed to take all actions necessary prior to the Effective Time to terminate all of the Stock Plans, effective at or before the Effective Time.

 

     The Merger Agreement further provides that as soon as practicable following the date of the Merger Agreement, MNI will take all action necessary to provide that any Restricted Stock outstanding immediately prior to the Effective Time that is subject to vesting or other restrictions under a Stock Plan or any restricted stock agreement shall become fully vested and all other restrictions shall lapse. In connection therewith, each holder of Restricted Stock shall be entitled to receive a cash amount per share of Restricted Stock equal to the Merger Consideration. Restricted Stock means restricted shares of Common Stock outstanding immediately prior to the Effective Time with respect to which restrictions have not lapsed, and which award shall not have expired or terminated, to a current or former employee, director or independent contractor of MNI or one of its subsidiaries or any predecessor thereof pursuant to any applicable Stock Plan or any other contract or agreement entered into by MNI or any of its subsidiaries.

 

PROCEDURES FOR RECEIVING MERGER CONSIDERATION

 

     At the Effective Time of the Merger, Parent will deposit, or cause to be deposited, with a bank or trust company chosen to act as paying agent for the transaction cash sufficient to pay our stockholders (except those shares held by any of our stockholders who are entitled to and who properly exercise, and do not withdraw or lose, appraisal rights under Section 262 of the DGCL and shares owned by the Company as treasury stock or by Parent or Merger Sub) the aggregate Merger Consideration to which they are entitled under the Merger Agreement. The Merger Consideration will be payable upon the due surrender of the certificates (“Certificates”) that represented our Common Stock as promptly as reasonably practicable after the Effective Time of the Merger, or non-certificated shares of Common Stock (“Uncertificated Shares”). The cash deposited pursuant to the foregoing is referred to as the “Payment Fund.”

 

     As soon as reasonably practicable after the Effective Time of the Merger, the surviving corporation will cause the paying agent to mail to each record holder of our Common Stock a letter of transmittal and instructions for use in effecting the surrender of Certificates or Uncertificated Shares in exchange for the Merger Consideration. Each stockholder will be entitled to receive the appropriate Merger Consideration upon surrendering to the paying agent such stockholder’s Certificates or Uncertificated Shares, together with a properly executed letter of transmittal and any other documents required by the paying agent. The Merger Consideration and any other consideration paid under the Merger Agreement may be reduced by any applicable withholding taxes as required by law. You should not return your Certificates to the paying agent without a letter of transmittal, and you should not return your Certificates to the Company.

 

 

     If a payment is to be made to a person other than the person in whose name the surrendered Certificate is registered, it will be a condition of payment that the Certificate so surrendered will be endorsed properly or otherwise be in proper form for transfer and that the person requesting the payment will have paid all applicable taxes relating to the payment of Merger Consideration to a person other than the registered holder of the Certificate surrendered or will have to establish that such taxes either have been paid or are not applicable.

 

     At the close of business on the day of the Effective Time of the Merger, the stock transfer books of the Company will be closed and there will be no further registration of transfers of our Common Stock in the stock transfer books of the surviving corporation. From and after the Effective Time of the Merger, the holders of Certificates or Uncertificated Shares shall cease to have any rights as a stockholder of MNI except as provided under the Merger Agreement or applicable law.

 

     Lost, Stolen or Destroyed Certificates

 

If any stockholder is unable to surrender such holder’s Certificate because such Certificates have been lost, mutilated or destroyed, such holder may deliver in lieu thereof an affidavit and indemnity bond in form and substance reasonably satisfactory to the surviving corporation.

 

REPRESENTATIONS AND WARRANTIES

 

     In the Merger Agreement, MNI has made customary representations and warranties to Parent and Merger Sub, including representations relating to: organization and authorization of MNI; MNI’s capitalization; no conflicts with or consents required in connection with the Merger; MNI’s financial statements; no material adverse effect; legal proceedings; material contracts; taxes; commissions and fees; employee benefit plans and employment matters; regulatory compliance; intellectual property; insurance; real property; environmental matters; opinion of financial advisor; this information statement; no rights agreement; and state takeover statutes.

 

     In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to MNI, including representations relating to: organization and authorization of Parent and Merger Sub; no conflicts with or consents required in connection with the Merger; commissions and fees; information supplied in this information statement; and availability of funds.

 

CONDUCT OF BUSINESS PENDING THE MERGER

 

     Under the Merger Agreement, from the date of the Merger Agreement until the Effective Time, except as contemplated by the Merger Agreement, and unless Parent otherwise consents in writing, MNI has agreed to certain restrictions on the operation of the business of the Company. In general, MNI has agreed to conduct its business in the ordinary course of business and to use its reasonable best efforts to (i) preserve substantially intact, the business organization of the Company; (ii) keep available the services of the current officers, employees and consultants of the Company; and (iii) preserve the current relationships of the Company with customers, suppliers and other persons with which the Company has significant business relations.

 

     Additionally, under the Merger Agreement, MNI has agreed, from the date of the Merger Agreement until the Effective Time, to be subject to customary operating covenants and restrictions, including restrictions relating to (i) the amendment of its organizational documents; (ii) the issuance, sale or pledge of its stock; (iii) the declaration, setting aside or payment of dividends or other distributions; (iv) the recapitalization, reclassification, combination, split, subdivision or redemption or purchase of outstanding stock or other securities of the Company; (v) the sale or encumbrance of material property or material assets; (vi) acquisitions, mergers, consolidations and asset purchases; (vii) the hiring of additional employees and the compensation of Company employees; (viii) acceleration of the vesting of Options; (ix) actions with respect to accounting policies or procedures; (x) making or changing of any material tax election, settling or compromising any material tax liability of the Company and other tax issues; (xi) entering into, amending, modifying in any material respects, assigning and other matters relating to material contracts of the Company; (xii) settling any litigation or other action, including any action relating to the Merger or the Merger Agreement; (xiii) taking certain actions with respect to Company intellectual property; (xiv) exercising any options with respect to leased real property (other than rights of renewal); (xv) the making of timely filings with the SEC; (xvi) the maintenance of insurance; and (xvii) announcing, entering into or otherwise making a commitment to do any of the above.

 

 

STOCKHOLDER ACTION BY WRITTEN CONSENT

 

     We are required pursuant to the terms of the Merger Agreement to prepare and deliver to the Company’s stockholders this information statement and give prompt notice of the adoption of the Merger Agreement by stockholder written consent in accordance with Section 228 of the DGCL to all holders of Common Stock not executing the written consents, together with any additional information required by the DGCL, including a description of the appraisal rights of holders of Common Stock available under Section 262 of the DGCL.

 

     On June 10, 2010, following execution of the Merger Agreement, Stockholders who collectively owned shares of Common Stock representing approximately 56% of the outstanding shares of Common Stock entitled to vote on the adoption of the Merger Agreement, delivered to the Company written consents adopting the Merger Agreement.

 

REASONABLE BEST EFFORTS TO CAUSE THE MERGER TO OCCUR

 

     Each of the parties to the Merger Agreement has agreed to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable law to consummate and make effective the Merger, including obtaining all permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company necessary for the consummation of the Merger and to fulfill the conditions to the Merger.

 

INDEMNIFICATION AND INSURANCE

 

     The Merger Agreement provides that Parent and the surviving corporation will honor and fulfill in all respects the obligations of the Company relating to indemnification of directors and officers and advancement of expenses under the Company’s existing organizational documents with respect to any matter arising out of, relating to, or in connection with any actions occurring or alleged to have occurred prior to the Effective Time, including in connection with the approval of the Merger Agreement. Additionally, Parent and the surviving corporation have agreed that the Company’s certificate of incorporation and bylaws will not be amended, repealed or otherwise modified in any manner that would affect adversely the rights of the Company’s directors and officers thereunder relating to indemnification, exculpation and the advancement of expenses.

 

     The Merger Agreement also provides that for a period of six years after the Effective Time, the current policies of directors’ and officers’ (D&O) liability insurance maintained by MNI with respect to claims arising from facts or events which occurred before the Effective Time (or comparable substitute policies) will be maintained in effect; provided, however, that the cost of such coverage shall not exceed 200% of the amount of the aggregate annual premiums currently paid by the Company for such insurance. In satisfaction of the foregoing, Parent may purchase six year “tail” coverage under the existing D&O policies from insurance carriers with financial strength ratings equal to or greater than the financial strength ratings of the Company’s existing D&O liability insurance carriers.

 

CONDITIONS TO THE MERGER

 

     Conditions to Each Party’s Obligations

 

     The respective obligations of each of Parent, Merger Sub and the Company to consummate the Merger are subject to the satisfaction or waiver at or before the Effective Time of the Merger of the following conditions:

 

	●	the adoption of the Merger Agreement by our stockholders, which occurred when stockholders collectively holding a majority of the outstanding shares of Common Stock executed and delivered written consents on June 10, 2010;
	●	the distribution of this information statement to the Company’s stockholders and the passage of at least 20 days following such distribution; and
	●	absence of any court or governmental authority having taken any action enjoining, restraining or otherwise prohibiting the consummation of the Merger.

 

 

     Conditions to Parent’s and Merger Sub’s Obligations

 

     The obligations of Parent and Merger Sub to complete the Merger are subject to the satisfaction or waiver at or before the Effective Time of the Merger of the following additional conditions:

 

	●	the representations and warranties of the Company being true and correct as of the Effective Time of the Merger (subject to customary materiality qualifiers);
	●	the Company having performed in all material respects all covenants required to be performed by it;
	●	the Company having delivered to Parent a certificate, dated as of the date of the closing and signed by a duly authorized officer of the Company, certifying as to the satisfaction of the above conditions with respect to the representations and warranties and performance of the Company’s obligations; and
	●	the absence of any Material Adverse Effect (as defined in the Merger Agreement) since June 10, 2010.

 

     Conditions to the Company’s Obligation

 

     The obligation of the Company to complete the Merger is subject to the satisfaction or waiver at or before the Effective Time of the Merger of the following additional conditions:

 

	●	the representations and warranties of Parent and Merger Sub being true and correct as of the Effective Time of the Merger (subject to customary materiality qualifiers);
	●	Each of Parent and Merger Sub having performed in all material respects all covenants required to be performed by it; and
	●	Parent having delivered to the Company a certificate, dated as of the date of the closing and signed by a duly authorized officer of Parent, certifying as to the satisfaction of the above conditions with respect to the representations and warranties and performance of Parent’s and Merger Sub’s obligations.

 

TERMINATION

 

     The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Merger Agreement has been adopted by MNI’s stockholders:

 

AMENDMENT

 

     The Merger Agreement may be amended by the parties to the Merger Agreement at any time before or after adoption of the Merger Agreement by the holders of the shares of Common Stock; provided, however, after adoption of the Merger Agreement by the stockholders of MNI, there may not be made any amendment that by law requires further approval by such stockholders without the further approval of such stockholders being obtained. The Merger Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

 

 

APPRAISAL RIGHTS

 

     The discussion of the provisions set forth below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the text of the relevant provisions of the DGCL, which are attached as Annex C to this information statement and incorporated herein by reference. Stockholders intending to exercise appraisal rights should carefully review Annex C . Failure to follow any of these statutory procedures set forth in Annex C may result in a termination or waiver of your appraisal rights under applicable law. Therefore, this summary and Annex C should be reviewed carefully by any stockholder who wishes to exercise statutory appraisal rights or who wishes to reserve the right to do so.

 

     Under the DGCL, stockholders of MNI are entitled to appraisal rights for any or all of the shares of Common Stock held by them at the Effective Time provided that they comply with the conditions established by Section 262 of the DGCL (“Section 262”). Annexed as Annex C to this information statement is a copy of Section 262 which sets forth your statutory rights of appraisal and the procedures for effecting these rights.

 

     Section 262 sets forth the procedures a stockholder must follow to have his, her or its shares appraised by the Delaware Court of Chancery (the “Court”) and to receive payment of the “fair value” of such shares of Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Court. The statutory rights of appraisal granted by Section 262 are subject to strict compliance with the procedures set forth in Section 262.

 

     Under Section 262, where a merger is adopted by stockholders by written consent in lieu of a meeting of stockholders, either a constituent corporation before the Effective Time of the merger or the surviving or resulting corporation, within 10 days after the Effective Time of the merger, must notify each stockholder of each constituent corporation entitled to appraisal rights of the merger and that appraisal rights are available to such stockholders. This information statement constitutes notice to holders of MNI’s Common Stock concerning the availability of appraisal rights under Section 262.

 

     A stockholder electing to exercise appraisal rights must demand in writing from MNI the appraisal of his, her or its shares of Common Stock within 20 days after the date of mailing of this information statement. Accordingly, this 20 day period will terminate on [             ], 2010 . Such demand will be sufficient if it reasonably informs MNI of the identity of the stockholder of record and that the stockholder intends to demand appraisal of his, her or its shares of Common Stock. The address for delivery of demand is: Medical Nutrition USA Inc., 10 West Forest Avenue, Englewood, New Jersey 07631, Attention: Corporate Secretary.

 

     Only a stockholder of record on the Effective Time of the Merger is entitled to assert appraisal rights for the shares of Common Stock registered in her, his or its name. The demand should be executed by or for the stockholder of record, fully and correctly, as the stockholder’s name appears on the stockholder’s stock certificates. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the shares are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. A person having a beneficial interest in shares held of record in the name of another person must act promptly to cause the record holder to follow the steps summarized herein properly and in a timely manner to perfect appraisal rights. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner. If a stockholder holds shares of Common Stock through a broker who in turn holds the shares through a central securities depositary nominee, such as The Depository Trust Company, a demand for appraisal of such shares must be made by or on behalf of the depositary nominee and must identify the depositary nominee as the holder of record. A stockholder of record who holds shares of Common Stock as nominee for a beneficial owner may exercise appraisal rights with respect to the securities held for one or more beneficial owners while not exercising such rights for other beneficial owners. In addition, any stockholder of record who holds shares of Common Stock for her, his or its own account or for one beneficial owner, may demand appraisal for less than all of such shares. In such case, the written demand must set forth the number of shares of Common Stock as to which demand for appraisal is made. Where no number of shares is expressly mentioned, the demand will be presumed to cover all shares of Common Stock standing in the name of the record owner. MNI must send a notice of the Effective Time of the Merger either prior to the Effective Time of the Merger or within 10 days thereafter. If the notice is sent more than 20 days following the sending of this notice, the notice of the Effective Time of the Merger need only be sent to stockholders who have demanded appraisal rights.

 

 

     Within 120 days after the Effective Time of the Merger, MNI or any stockholder who has satisfied the provisions of Section 262 may commence an appraisal proceeding by filing a petition with the Court, with a copy served on MNI in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by such stockholders entitled to appraisal rights. Stockholders seeking to exercise appraisal rights should not assume that MNI will file a petition with respect to the appraisal of the value of their shares or that MNI will initiate any negotiations with respect to the “fair value” of such shares. Accordingly, it is the obligation of each stockholder to initiate all necessary action to perfect such stockholder’s appraisal rights within the time periods prescribed by Section 262.

 

     Within 120 days after the Effective Time of the Merger, any stockholder who has complied with the requirements for exercise of appraisal rights, as discussed above, will be entitled, upon written request, to receive from MNI a statement setting forth the aggregate number of shares with respect to which demands for appraisal have been made and the aggregate number of holders of such shares. Such statement must be mailed within 10 days after the written request therefor has been received by MNI or, if later, within 10 days after the expiration of the period for delivery to MNI of appraisal demands. A person who is the beneficial owner of shares of Common Stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, request such a statement from MNI and may also file a petition for appraisal.

 

     If a petition for an appraisal is timely filed, after a hearing on such petition, the Court will determine the stockholders entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold shares represented by certificates to submit their certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. Where proceedings are not dismissed, the appraisal proceeding shall be conducted, as to the shares owned by such stockholders, in accordance with the rules of the Court, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court shall determine the fair value of such shares of Common Stock exclusive of any element of value arising from the accomplishment or expectation of the Merger with interest thereon to be paid in accordance with Section 262 as the Court so determines.

 

     In determining such “fair value,” the Court will take into account all relevant factors. In Weinberger v. UOP, Inc. , decided February 1, 1983, the Delaware Supreme Court set forth the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company . . . .” The Delaware Supreme Court stated that in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts which could be ascertained as of the date of the merger which throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc ., dated October 14, 1996, the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation.” In Weinberger, the Delaware Supreme Court held that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” Stockholders considering seeking appraisal should bear in mind that the fair value of their shares determined under Section 262 could be more, the same, or less than the per share Merger Consideration if they do not seek appraisal of their shares and that investment banking opinions as to fairness from a financial point of view are not necessarily opinions as to fair value under Section 262. Although MNI believes the Merger Consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Court. Moreover, MNI does not anticipate offering more than the per share Merger Consideration to any stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262, the “fair value” of a share of Common Stock is less than the per share Merger Consideration.

   

 

     When the fair value is so determined, the Court shall direct the payment of the fair value of the shares, with interest thereon to be paid in accordance with Section 262 and as the Court so determines, to the dissenting stockholders entitled thereto, upon the surrender to MNI by such dissenting stockholders of the certificates formerly representing such shares. Unless the Court, in its discretion, sets a different interest rate for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time of the Merger through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time of the Merger and the date of payment of the judgment. The cost of the appraisal proceeding may be determined by the Court and taxed against the parties as the Court deems equitable under the circumstances. Upon application of a dissenting stockholder, the Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, be charged pro rata against the value of all shares entitled to appraisal. In the absence of such a determination or assessment, each party bears her, his or its own expenses.

 

     Any stockholder who has duly demanded an appraisal in compliance with Section 262 will not, after the Effective Time of the Merger, be entitled to vote the shares subject to such demand for any purpose or be entitled to receive the payment of dividends or other distributions in respect of those shares (other than those payable to stockholders of record as of a date prior to the Effective Time of the Merger).

 

     If any stockholder who demands appraisal of their shares under Section 262 fails to perfect or effectively withdraws or loses the right to appraisal, the shares of such stockholder will be converted into the right to receive the per share Merger Consideration in accordance with the Merger Agreement. A stockholder will fail to perfect or effectively lose a right to appraisal if no petition for appraisal is filed within 120 days after the Effective Time of the Merger, or if the stockholder delivers to MNI a written withdrawal of such stockholder’s demand for an appraisal and an acceptance of the Merger, except that (i) any such attempt to withdraw made more than 60 days after the Effective Time of the Merger requires the written approval of MNI, and (ii) no appraisal proceeding in the Court shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just, provided, however, that this provision shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered upon the Merger within 60 days. Since MNI has no obligation or intention to file such a petition, any stockholder who desires a petition to be filed is advised to file it on a timely basis.

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,

DIRECTORS AND EXECUTIVE OFFICERS

 

     The following table presents information regarding the beneficial ownership of our Common Stock as of June 10, 2010 by (i) each person or entity known by MNI to be a beneficial owner of five percent or more of our Common Stock, (ii) each of our current directors and named executive officers, (iii) each individual who is a former director and who voted to approve the Merger Agreement on June 10, 2010, (iv) former directors and named executive officers serving during our last fiscal year, and (iv) all current directors and officers as a group.

 

     In general, “beneficial ownership” includes the shares of Common Stock that an individual has the power to vote or the power to dispose of and stock options that are exercisable currently or become exercisable or redeemable within 60 days and restricted stock units that could vest within 60 days. Except as otherwise noted, the persons named in the table below have sole voting and investment power with respect to all securities shown as beneficially owned by them. The percentage of outstanding shares of Common Stock beneficially owned is based on the number of shares of Common Stock outstanding as of June 10, 2010 of 14,416,808 shares of Common Stock.

 

     Unless indicated below, the address of each individual listed below is c/o Medical Nutrition USA Inc., 10 West Forest Avenue, Englewood, New Jersey 07631.

 

 

*	Less than 1%
(1)	Except as otherwise noted, the address for each person is c/o Medical Nutrition USA, Inc., 10 West Forest Avenue, Englewood, New Jersey 07631.
(2)	Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock listed as beneficially owned by them. A person is deemed to be the beneficial holder of securities that can be acquired by such person within sixty (60) days of June 10, 2010. Each beneficial holder’s percentage ownership is determined by including shares underlying options, warrants or convertible securities which are exercisable or convertible by such person currently or within sixty (60) days of June 10, 2010, and excluding shares underlying options, warrants or convertible securities held by any other person.
(3)	Consists of (a) 1,858,799 shares of Common Stock, and (b) 612,000 shares of Common Stock issuable upon the exercise of options that are exercisable within sixty (60) days of June 10, 2010 held by Mr. Newman.

 

 

MARKET PRICE OF THE COMPANY COMMON STOCK

AND DIVIDEND INFORMATION

 

     Our Common Stock currently trades on the NASDAQ Capital Market under the symbol “MDNU.” On the record date, June 10, 2010, there were 14,416,808 shares of Common Stock issued and outstanding. As of [                 ] , 2010, there were [__________] shares of Common Stock issued and outstanding , held by approximately  [                          ] stockholders of record. The following table sets forth, for the periods indicated, the high and low sales price per share of Common Stock, as reported by NASDAQ based on published financial sources. We have never paid dividends on our shares of Common Stock. Stockholders are urged to obtain a current market quotation for the shares of Common Stock.

		High			Low
Fiscal Year Ended January 31, 2009
First Quarter		$	3.65		$	2.72
Second Quarter			3.34			1.77
Third Quarter			2.45			1.65
Fourth Quarter			1.90			1.12
Fiscal Year Ended January 31, 2010
First Quarter		$	1.75		$	1.14
Second Quarter			2.40			1.38
Third Quarter			2.44			1.52
Fourth Quarter			2.80			1.78
Fiscal Year Ending January 31, 2011
First Quarter		$	3.00		$	2.00
Second Quarter (through [                       ] , 2010)			[     ]			[     ]

 

     On June 10, 2010, the last full day of trading before the public announcement of the execution of the Merger Agreement, the reported closing sales price of the shares of Common Stock on NASDAQ was $2.78 per share. On June 9, 2010, the last full day of trading before the execution of the Merger Agreement, the reported closing sales price of the Common Stock on NASDAQ was $2.55 per share. The per share Merger Consideration represents a premium of 52% over MNI’s volume weighted average share price for the 20 trading days immediately preceding the public announcement of the execution of the Merger Agreement and a premium of 44% over the closing price of the Common Stock on the last full day of trading before the public announcement of the execution of the Merger Agreement.

 

     On [                     ] , 2010, the most recent practicable date prior to the date of this information statement, the reported closing sales price of the Common Stock on NASDAQ was  [           ] per share.

 

 

WHERE YOU CAN FIND MORE INFORMATION

 

     We file annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act relating to our business, financial condition and other matters. Such reports and other information (including this information statement, proxy statements filed by MNI with the SEC and distributed to MNI stockholders, its Annual Report on Form 10-K, as amended, and its recently filed Quarterly Report on Form 10-Q), may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain more information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Copies of such information may be obtained by mail, upon payment of the SEC’s customary charges, by writing to the SEC’s principal office at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains an internet website located at www.sec.gov, which contains reports, proxy statements and other information that we file with the SEC electronically via the EDGAR system. You may also obtain free copies of documents that we file with the SEC by accessing the MNI’s website at www.mdnu.com , under the heading “Investor Relations / Financial Information” or by directing a request to Medical Nutrition USA, Inc., 10 West Forest Avenue, Englewood, New Jersey 07631, Attention: Investor Relations.

 

INCORPORATION BY REFERENCE

 

     Statements contained in this information statement, or in any document incorporated in this information statement by reference regarding the contents of other documents, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to “incorporate by reference” into this information statement certain documents we file with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this information statement, and later information that we file with the SEC, prior to the closing of the Merger, will automatically update and supersede that information. We incorporate by reference the documents listed below and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this information statement and prior to the Effective Time of the Merger. These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as information or proxy statements (except for information furnished to the SEC that is not deemed to be “filed” for purposes of the Exchange Act). Notwithstanding the foregoing, information furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by reference into this information statement.

 

MNI Filings:		Periods:
Annual Report on Form 10-K		Fiscal Year Ended January 31, 2010
Quarterly Report on Form 10-Q		Quarterly Period Ended April 30, 2010
Current Reports on Form 8-K		Filed on June 14, 2010

     Any person, including any beneficial owner, to whom this information statement is delivered may request copies of reports, proxy statements or other information concerning us, without charge, as described above in “Where You Can Find More Information.”

 

     You should rely only on information contained in or incorporated by reference in this information statement. No persons have been authorized to give any information or to make any representations other than those contained in this information statement and, if given or made, such information or representations must not be relied upon as having been authorized by us or any other person.

 

     THIS INFORMATION STATEMENT IS DATED [                     ] , 2010. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS INFORMATION STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.

 

 

HOUSEHOLDING OF MATERIALS

 

     Pursuant to the rules of the SEC, services that deliver MNI’s communications to stockholders that hold their stock through a bank, broker or other holder of record may deliver to multiple stockholders sharing the same address a single copy of MNI’s information statement, unless MNI has received contrary instructions from one or more of the stockholders. Upon written or oral request, MNI will promptly deliver a separate copy of the information statement to any stockholder at a shared address to which a single copy of the information statement was delivered. Multiple stockholders sharing the same address may also notify MNI if they wish to receive separate copies of MNI’s communications to stockholders in the future or if they are currently receiving multiple copies of such communications and they would prefer to receive a single copy in the future. Stockholders may notify MNI of their requests by writing Medical Nutrition USA, Inc., Attn: Chief Financial Officer, 10 West Forest Avenue, Englewood, New Jersey 07631, or by calling (201) 569-1188.

 

 

ANNEX A