-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HAhfGY27nURKb0vw7flMHpRgPA4+GVszI1CuWfd7zll4hSGU9TJM/wyQfSjwCX7P VERpZAtbjmEbgDq6xo55/Q== 0001019687-08-003540.txt : 20080812 0001019687-08-003540.hdr.sgml : 20080812 20080811175649 ACCESSION NUMBER: 0001019687-08-003540 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20080812 DATE AS OF CHANGE: 20080811 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALLERGY RESEARCH GROUP INC CENTRAL INDEX KEY: 0001044119 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 133940486 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-78314 FILM NUMBER: 081007630 BUSINESS ADDRESS: STREET 1: 2300 NORTH LOOP ROAD, #300 CITY: ALAMEDA STATE: CA ZIP: 94502 BUSINESS PHONE: 510-263-2000 MAIL ADDRESS: STREET 1: 2300 NORTH LOOP ROAD, #300 CITY: ALAMEDA STATE: CA ZIP: 94502 FORMER COMPANY: FORMER CONFORMED NAME: SCOTTSDALE SCIENTIFIC INC DATE OF NAME CHANGE: 19990423 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEVINE STEPHEN A CENTRAL INDEX KEY: 0001136469 FILING VALUES: FORM TYPE: SC 13D/A MAIL ADDRESS: STREET 1: 30806 SANTANA STREET CITY: HAYWARD STATE: CA ZIP: 94544 FORMER COMPANY: FORMER CONFORMED NAME: LEVINE STEPHEN L DATE OF NAME CHANGE: 20010308 SC 13D/A 1 stephen_13da1-080808.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)* Allergy Research Group, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $0.001 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 01849R - -------------------------------------------------------------------------------- (CUSIP Number) Dr. Stephen A. Levine, 15 Bridge Road, Kentfield, CA 94904 (415) 925-1751 - -------------------------------------------------------------------------------- Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 8, 2008 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. |_| NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 01849R Page 1 of 4 - -------------------------------------------------------------------------------- 1. Name of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Dr. Stephen A. Levine, for himself and as Trustee of The Levine Family Trust (UTD March 21, 1990, as amended), a revocable trust, and Trustee of the Stephen and Susan Levine TR, the Levine Children's TR (UTD March 27,1998), a irrevocable trust - -------------------------------------------------------------------------------- 2. Check the Appropriate Box If a Member of a Group (See Instructions) (a) [_] (b) [_] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO - -------------------------------------------------------------------------------- 5. Check If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization USA - -------------------------------------------------------------------------------- 7. Sole Voting Power NUMBER OF None SHARES ----------------------------------------------------------------- BENEFICIALLY 8. Shared Voting Power OWNED BY 9,863,250 EACH ----------------------------------------------------------------- REPORTING 9. Sole Dispositive Power PERSON None WITH ----------------------------------------------------------------- 10. Shared Dispositive Power 9,863,250 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 9,863,250 - -------------------------------------------------------------------------------- 12. Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [_] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 67.3% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- CUSIP No. 01849R Page 2 of 4 ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D (this "Statement") relates to the common stock, par value $0.001 per share (the "Common Stock") of Allergy Research Group, Inc. ("ARG"). The principal executive office of ARG is located at 2300 North Loop Road, Alameda, California 94502. ITEM 2. IDENTITY AND BACKGROUND (a) Dr. Stephen A. Levine, for himself and as Trustee of The Levine Family Trust (UTD March 21, 1990, as amended), a revocable trust, and Trustee of the Stephen and Susan Levine TR, the Levine Children's TR (UTD March 27,1998), a irrevocable trust; (b) 15 Bridge Road, Kentfield, CA 94904; (c) Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors of Allergy Research Group, Inc. located at 2300 North Loop Road, Alameda, California, 94502; (d) and (e) During the last five years, Dr. Levine has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws; and (f) U.S. Citizen. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The Tender and Support Agreement (as defined below) was entered into by Dr. Levine to facilitate the transactions contemplated by the Merger Agreement described in Item 4. Dr. Levine did not receive additional consideration in connection with the execution and delivery of the Tender and Support Agreement. ITEM 4. PURPOSE OF TRANSACTION MERGER AGREEMENT On August 8, 2008, ARG, KI NutriCare, Inc., a New York corporation ("KI NutriCare") and Longhorn Acquisition Corp., a Florida corporation ("Longhorn") entered into an Agreement and Plan of Merger (the "MERGER AGREEMENT"). Pursuant to the Merger Agreement, (i) Longhorn will commence a tender offer (the "OFFER") to purchase all of the outstanding shares of Common Stock at a price of $1.33 per share, net to the seller in cash without interest (the "OFFER PRICE"), and (ii) following the consummation of the Offer, Longhorn will be merged with and into ARG (the "MERGER"), with ARG as the surviving corporation, all upon the terms and subject to the conditions set forth in the Merger Agreement. In the Merger, each remaining share of Common Stock will be converted into the right to receive an amount in cash equal to the Offer Price. Following the effective time of the Merger, it is contemplated that the shares of Common Stock will cease to be listed on the OTC Bulletin Board and will become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended. The description of the Merger Agreement in this Statement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which is filed as Exhibit 4.1 hereto and is incorporated herein by reference. TENDER AND SUPPORT AGREEMENT On August 8, 2008, as an essential condition and inducement to the willingness of KI NutriCare and Longhorn to enter into the Merger Agreement, Dr Levine, along with his spouse Susan, ARG's Vice President, Secretary and Director (collectively, the "SUPPORTING STOCKHOLDERS"), entered into a Tender and Support Agreement, dated as of August 8, 2008, with KI NutriCare (the "TENDER AND SUPPORT AGREEMENT"). Pursuant to the Tender and Support Agreement, each Supporting Stockholder has agreed, among other things, to tender all shares of Common Stock beneficially owned by such Stockholder, together with any other shares of capital stock of ARG acquired by such Stockholder during the term of the Tender and Support Agreement, whether beneficially or of record (collectively, the "SUBJECT SHARES"), in the Offer. There are 9,863,250 Subject Shares which are subject to the Tender and Support Agreement, constituting approximately 67% of the outstanding shares of the Common Stock. CUSIP No. 01849R Page 3 of 4 The following summary of certain provisions of the Tender and Support Agreement is qualified in its entirety by reference to the Tender and Support Agreement itself, which is filed as Exhibit 4.2 hereto and is incorporated herein by reference. Under the Tender and Support Agreement each of the Supporting Stockholders has agreed to tender all Subject Shares such Supporting Stockholder holds or acquires after the commencement of the Offer promptly following the commencement of the Offer, and in any event no later than the tenth business day prior to the initial expiration date of the Offer. Each of the Supporting Stockholders has also agreed not to withdraw such Supporting Stockholder's Subject Shares once tendered from the Offer at any time. Each Supporting Stockholder has agreed to vote all such Supporting Stockholder's Subject Shares in connection with any meeting of ARG's stockholders in favor of the Merger and/or against any alternative Takeover Proposal (as defined in the Merger Agreement) or any other action that is intended to, or could reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the Offer, the Merger or any other transaction contemplated by the Merger Agreement, and has agreed to appear at any such meeting of ARG's stockholders or otherwise cause the Subject Shares owned by such Supporting Stockholder to be counted as present at any such meeting for purposes of establishing a quorum. Each Supporting Stockholder has also agreed not to execute any appraisal rights in respect of such Supporting Stockholder's Subject Shares. During the term of the Tender and Support Agreement, except as otherwise provided therein, none of the Supporting Stockholders will do the following: o other than for estate planning or charitable purposes, assign or otherwise dispose of (whether by gift, merger, consolidation, reorganization or otherwise) any or all of such Supporting Stockholder's Subject Shares; o enter into any contract, option or other agreement providing for the sale, transfer, pledge, encumbrance, assignment or other disposition of, or limitation on the voting rights of, any of the Supporting Stockholder's Subject Shares with respect to any such transfer; o grant any proxy or power-of-attorney with respect to any of such Supporting Stockholder's Subject Shares; or o deposit any of such Supporting Stockholder's Subject Shares into a voting trust, or enter into a voting agreement or arrangement with respect to any of such Subject Shares. The Tender and Support Agreement does not limit the rights or duties of any Supporting Stockholder from acting in his or her capacity as an officer or director of ARG, fulfilling the obligations of such office or performing any obligations required by such Supporting Stockholder's fiduciary duties. In addition, the Tender and Support Agreement provides that the Supporting Stockholders will pay to KI NutriCare 35% of such Supporting Stockholder's profit above $1.33 per Subject Share generally in the event of the consummation of an alternative transaction within twelve months of such termination of the Merger. KI NutriCare shall also be entitled to 35% of such Supporting Stockholders' profit above $1.33 per Subject Share in the event the Offer Price is increased by KI NutriCare and the Purchaser as a result of, in connection with or related to the breach by ARG of its non-solicitation obligations under the Merger Agreement. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) Dr. Levine, together with his spouse, Susan Levine, owns 2,750,000 shares of Common Stock directly, 6,193,891 shares of Common Stock as Co-Trustees of The Levine Family Trust (UTD March 21, 1990, as amended), and 919,359 shares of Common Stock as Co-Trustee of the Stephen and Susan Levine TR, the Levine Children's TR (UTD March 27,1998) which, collectively, represent approximately 67.3% of ARG's total outstanding shares of Common Stock as of August 8, 2008. Susan Levine does not own any rights to acquire any additional shares of Common Stock in ARG. The calculation of the foregoing numbers of shares of Common Stock and percentages is based on (i) the number of issued and outstanding shares of Common Stock at the close of business on August 8, 2008, as stated by ARG in the Solicitation/Recommendation Statement on Schedule 14D-9 filed by ARG with the Securities and Exchange Commission (the "SEC") on the date hereof, and (ii) the number of shares of Common Stock beneficially owned by the Supporting Stockholders as of August 8, 2008, as represented and warranted by the Supporting Stockholders in the Tender and Support Agreement. CUSIP No. 01849R Page 4 of 4 (b) Dr. Levine and his spouse, Susan Levine, have shared power to vote and dispose (or direct the voting and disposition) of 2,750,000 shares of Common Stock held directly by them as community property, 6,193,891 shares of Common Stock held by them as Trustees of The Levine Family Trust (UTD March 21, 1990, as amended), and 919,359 shares of Common Stock held by them as Trustees of the Stephen and Susan Levine TR, the Levine Children's TR (UTD March 27,1998). Susan Levine is a U.S. citizen also residing at 15 Bridge Road, Kentfield, CA 94904 and is the Vice President, Secretary and a Director of ARG. During the last five years, Susan Levine has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. (c) Other than entering into the Tender and Support Agreement, neither Dr. Levine nor Susan Levine has effected any transactions in the Common Stock during the past sixty days or since the most recent filing of a Schedule 13D by either of them or on behalf . (d) Except as set forth in this Item 5, to the knowledge of Dr. Levine, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, shares of Common Stock beneficially owned by her. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER See Item 4 above. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 4.1 Agreement and Plan of Merger, dated as of August 8, 2008, by and among Allergy Research Group, Inc., a Florida corporation, Longhorn Acquisition Corp., a Florida corporation and wholly owned subsidiary of KI NutriCare, Inc. and KI NutriCare, Inc., a New York corporation and wholly-owned subsidiary of Kikkoman Corporation, a corporation organized under the laws of Japan (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 8, 2008). Exhibit 4.2 Tender and Support Agreement, dated August 8, 2008 among KI NutriCare, Inc., Dr. Stephen A. Levine and Susan Levine. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. August 11, 2008 - ----------------------- Date /s/ Stephen A. Levine - ----------------------- Dr. Stephen A. Levine, Ph.D. EX-4.2 2 allergy.txt Exhibit 4.2 TENDER AND SUPPORT AGREEMENT This TENDER AND SUPPORT AGREEMENT (this "AGREEMENT"), is dated as of August 8, 2008, by and between KI NutriCare, Inc., a New York corporation (the "PARENT"), and (the stockholders listed on the signature pages hereto (each a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"). W I T N E S S E T H: WHEREAS, Parent, Longhorn Acquisition Corp., a Florida corporation and wholly-owned subsidiary of Parent (the "MERGER SUB"), and Allergy Research Group, Inc., a Florida corporation (the "COMPANY"), are entering into an Agreement and Plan of Merger, dated as of the date hereof (as it may be amended from time to time in accordance with its terms, the "MERGER AGREEMENT"), providing for, among other things, Merger Sub to commence a cash tender offer (the "OFFER") to acquire all of the outstanding shares of common stock, par value $0.001 per share, of the Company (the "COMPANY COMMON STOCK") followed by the subsequent merger of Merger Sub with and into the Company with the Company surviving the merger as a wholly owned subsidiary of Parent, in each case, on the terms and subject to the conditions set forth therein (capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Merger Agreement); and WHEREAS, as of the date hereof, each Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the number of issued shares of Company Common Stock set forth on ATTACHMENT A hereto (the "OWNED SHARES"); and WHEREAS, as a condition to Parent and Merger Sub's willingness to enter into and perform its obligations under the Merger Agreement, Parent and Merger Sub have required that each Stockholder agree, and each Stockholder (only in the Stockholder's capacity as a Stockholder of the Company) has agreed, to tender in the Offer (and not withdraw) all of each Stockholder's Owned Shares as well as any shares of Company Common Stock acquired by each Stockholder after the execution of this Agreement (all of which, after so acquired, shall constitute "OWNED Shares"); and WHEREAS, each Stockholder desires to express its support for the Merger Agreement and the transactions contemplated thereby, including the Offer, by executing this Agreement; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: 1. AGREEMENT TO TENDER AND VOTE; IRREVOCABLE PROXY. 1.1 AGREEMENT TO TENDER. Each Stockholder hereby agrees that promptly after the commencement of the Offer, but in any event no later than 5:00 p.m. New York time on the day that is ten Business Days before the initially scheduled expiration of the Offer, such Stockholder shall tender into the Offer all of such Stockholder's Owned Shares. Each Stockholder shall not withdraw any of the Stockholder's Owned Shares previously tendered during the time this Agreement is in effect. 1 1.2 AGREEMENT TO VOTE. Each Stockholder hereby agrees that, during the time this Agreement is in effect, at any meeting of the stockholders of the Company, however called, or any adjournment or postponement thereof, each Stockholder shall be present (in person or by proxy) and vote (or cause to be voted) all of its Owned Shares (a) in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, and (b) against any alternative Takeover Proposal or any other action that is intended to, or could reasonably be expected to, impede, interfere with, delay, postpone, discourage or adversely affect the Offer, the Merger or any other transactions contemplated by the Merger Agreement. In the event that any meeting of the stockholders of the Company is held, such Stockholder shall, or shall cause the holder of record on any applicable record date to, appear at such meeting or otherwise cause their Owned Shares (to the extent that any of such Stockholder's Owned Shares are not purchased in the Offer) to be counted as present thereat for purposes of establishing a quorum. Each Stockholder agrees not to execute any appraisal rights (including without limitation under Section 607.1301 of the Florida Business Corporation Act ("FBCA")) in respect of Owned Shares. 1.3 IRREVOCABLE PROXY. Solely with respect to the matters described in Section 1.2, for so long as this Agreement is in effect, such Stockholder hereby irrevocably appoints Parent (or any nominee of Parent) as its attorney and proxy with full power of substitution and resubstitution, to the full extent of such Stockholder's voting rights with respect to such Stockholder's Owned Shares (which proxy is irrevocable and which appointment is coupled with an interest, including for purposes of Section 607.0722 of the FBCA) to vote all such Stockholder's Owned Shares solely on the matters described in Section 1.2, and in accordance therewith. Each Stockholder hereby revokes any proxies previously granted that would otherwise conflict with the proxy contemplated pursuant to this Section 1.3 and agrees to execute any further agreement or form reasonably necessary or appropriate to confirm and effectuate the grant of the proxy contained herein. Such proxy shall automatically terminate upon the valid termination of this Agreement in accordance with Section 4.1. 2. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder hereby represents and warrants to Parent as follows: 2.1 POWER; DUE AUTHORIZATION; BINDING AGREEMENT. Such Stockholder has full legal capacity, power and authority to execute and deliver this Agreement, to perform his, her or its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Stockholder and constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms, except to the extent that enforceability may be subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors rights generally and to general principles of equity. 2.2 OWNERSHIP OF SHARES. On the date hereof, the Owned Shares set forth opposite such Stockholder's name on ATTACHMENT A hereto are owned of record or beneficially by such Stockholder in the manner reflected thereon and include all of the Owned Shares owned of record or beneficially by such Stockholder. The Owned Shares are owned free and clear of any pledge, lien, 2 security interest, mortgage, charge, claim, equity, option, proxy, voting restriction, voting trust or agreement, irrevocable proxy, understanding, arrangement, right of first refusal, limitation on disposition, adverse claim of ownership or use or encumbrance of any kind. 2.3 ABSENCE OF LITIGATION. With respect to the Stockholder, as of the date hereof, there is no action, suit, investigation or proceeding pending against, or, to the knowledge of the Stockholder, threatened against or affecting, the Stockholder or any of its properties or assets (including such Subject Shares) that could reasonably be expected to impair the ability of the Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis. 2.4 NO CONFLICTS. The execution and delivery of this Agreement by the Stockholder does not, and the performance of the terms of this Agreement by the Stockholder will not, (a) require such Stockholder to obtain the consent or approval of, or make any filing with or notification to, any Governmental Authority, (b) require the consent or approval of any other Person pursuant to any agreement, obligation or instrument binding on such Stockholder or his, her or its properties and assets or (c) conflict with or violate any organizational document or law, rule, regulation, order, judgment or decree applicable to such Stockholder or pursuant to which any of his, her or its properties or assets are bound. 2.5 NO CONSENTS. No consent, approval, order, authorization or permit of, or registration, declaration or filing with or notification to, any Governmental Authority or any other Person is required by or with respect to the Stockholder in connection with the execution and delivery of this Agreement by the Stockholder or the performance by the Stockholder of the Stockholder's obligations hereunder, except for the filing with the SEC of any Schedules 13D or 13G or amendments to Schedules 13D or 13G and filings under Section 16 of the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby. 2.6 OPPORTUNITY TO REVIEW; RELIANCE. The Stockholder has had the opportunity to review this Agreement and the Merger Agreement with counsel of its own choosing. The Stockholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the Stockholder's execution, delivery and performance of this Agreement. 3. CERTAIN COVENANTS OF THE STOCKHOLDERS. Each Stockholder hereby covenants and agrees with Parent as follows: 3.1 RESTRICTION ON TRANSFER. Each Stockholder hereby agrees, while this Agreement is in effect, at any time prior to the Acceptance Time, and otherwise as is contemplated by the Merger Agreement or the Offer, not to, other than as may be specifically required by a court order, (a) assign or otherwise dispose of (including, without limitation, by gift, merger, consolidation or reorganization), or enter into any contract, option or other agreement providing for the sale, transfer, pledge, encumbrance, assignment or other disposition of, or limitation on the voting rights of, any of the Owned Shares (any such action, a "TRANSFER") or (b) grant any proxies or powers of attorney, deposit any Owned Shares into a voting trust or enter into a voting agreement with respect to any 3 Owned Shares. The foregoing restrictions on Transfer shall not prohibit the exercise by such Stockholder of any options to purchase Owned Shares and shall not prohibit any Transfers for estate planning or charitable purposes provided the transferee and such Stockholder expressly agree to be bound by the provisions of this Agreement with respect to such transferred Owned Shares in a written instrument reasonably satisfactory to Parent. If any involuntary Transfer of any of the Owned Shares shall occur (including, but not limited to, a sale by a Stockholder's trustee in any bankruptcy, or a sale to a purchaser at any creditor's or court sale or any sale or transfer by operation of law, including, without limitation, by will or intestacy), the transferee (which term, as used herein, shall include any and all transferees and subsequent transferees of the initial transferee) shall take and hold such Owned Shares subject to all of the restrictions, liabilities and rights under this Agreement, which shall continue in full force and effect until valid termination of this Agreement. 3.2 ADDITIONAL SHARES. Each Stockholder hereby agrees, while this Agreement is in effect, that any shares of Company Common Stock acquired by such Stockholder after the date hereof shall be subject to the terms of this Agreement as though owned by such Stockholder on the date hereof. At all times prior to the termination of this Agreement, Stockholder shall promptly notify Parent of the number of any additional Shares and the number and type of any other voting securities of the Company acquired by Stockholder, if any, after the date hereof. 3.3 NO LIMITATIONS ON ACTIONS. Each Stockholder signs this Agreement solely in his or her capacity as the owner of the Owned Shares; this Agreement shall not limit or otherwise affect the actions of the Stockholder or any affiliate, employee or designee of such Stockholder or any of his or her affiliates in any other capacity, including such person's capacity, if any, as an officer of the Company or a member of the board of directors of the Company; and nothing herein shall limit or affect the Company's rights in connection with the Merger Agreement. 3.4 FURTHER ASSURANCES. The Stockholder will, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further transfers, assignments, endorsements, consents and other instruments as Parent or Merger Sub may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and to vest the power to vote the Owned Shares as contemplated by this Agreement. 4. TERMINATION. 4.1 TERMINATION OF THIS AGREEMENT. This Agreement shall terminate upon the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, (ii) any amendment to the Merger Agreement or the Offer effected without such Stockholder's consent that decreases the Offer Price or materially and adversely affects such Stockholder and (iii) the Acceptance Time. 4.2 EFFECT OF TERMINATION. In the event of a termination of this Agreement pursuant to Section 4.1, this Agreement shall become void and of no effect with no liability on the part of any party hereto; provided, however, that the provisions of Section 4 and Section 5 shall survive the termination of this Agreement, and no such termination shall relieve any party hereto from any liability for any breach of this Agreement occurring prior to such termination; 4 and provided, further, that upon payment of the Termination Fee no Stockholder shall have further liability with respect to this Agreement or the transactions contemplated hereby. 4.3 TAKEOVER PROPOSAL PAYMENT. (a) If (i) the Merger Agreement shall have been terminated (A) by the Company pursuant to Section 8.1(d) thereof or Parent pursuant to Section 8.1(c), (e) or (f) thereof or (B) by the Company or Parent pursuant to Section 8.1(b)(i) thereof, and, in either case, a proposal for a Takeover Proposal shall have been made public and not been withdrawn prior to the time of the Acceptance Time, and (ii) the Company enters into a definitive agreement with respect to a Takeover Proposal within twelve (12) months after the termination of the Merger Agreement or a Takeover Proposal is consummated within twelve (12) months after the date of such termination, then Stockholder shall pay to Parent, within five business days after receipt, an amount equal to 35% of the Profit (as defined in Section 4.3(d) below), if any, (x) received by Stockholder or (y) that would have been received by Stockholder as a result of Shares held by Stockholder on the date hereof in connection with consummation of such Takeover Proposal. Any payment to Parent hereunder shall be made in the same form as the consideration received from such transaction (and, if the consideration so received was in more than one form, then in the same proportion as the forms of consideration so received). (b) If Parent shall have increased the Offer Price to an amount per share greater than $1.33 in response to a Takeover Proposal received by the Company resulting from, in connection with, or related to, a breach by the Company of Section 6.8 of the Merger Agreement, and the Merger shall have been consummated, then each Stockholder shall pay to Parent, within five business days after receipt, an amount equal to 35% of the Profit received by such Stockholder in connection with consummation of the Merger. Any payment to Parent hereunder shall be made in the same form as the consideration received from the Merger (and, if the consideration so received was in more than one form, then in the same proportion as the forms of consideration so received). (c) Any payment to be made hereunder on account of Profit (i) received in cash, shall be paid by wire transfer of same day funds to an account designated by Parent and (ii) received in the form of securities or other property, shall be paid through delivery to Parent of the securities or property, suitably endorsed for transfer free and clear of all liens, charges, encumbrances, voting agreements, and commitments of every kind (other than those imposed by, through or under the Takeover Proposal or as required by law). (d) (i) For purposes of this Section 4.3, "Profit" of a Stockholder in connection with the consummation of a Takeover Proposal (or, in the case of Section 4.3(b) above, the Merger) shall equal the aggregate consideration that such Stockholder received or would have received as a result of the Shares held by such Stockholder on the date hereof, directly or indirectly, as a result of such consummation, valuing any non-cash consideration (including any residual interest in the Company or any successor whether represented by shares of the Company Common Stock or other securities of the Company or any successor to the extent that the Company has engaged in a spin-off, recapitalization or similar transaction) at its fair market value as 5 of the date of consummation less the amount of the aggregate consideration such Stockholder received or would have received as a result of consummation of the Merger (assuming the Offer Price is equal to $1.33 in cash). Each Stockholder expressly agrees that such Stockholder's obligations to Parent under this Section 4.3 are personal obligations of such Stockholder and that such Stockholder's obligation to pay Profit to Parent under this Section 4.3 shall not be affected as a result of any transfer of the Shares following the termination, except for any transfers made pursuant to Rule 144 of the Securities Act of 1933, as amended. Stockholder waives any right to any cross-claim against a future holder of the Shares in response to a claim by Parent for Profit pursuant to this Section 4.3. (ii) The fair market value of any non-cash consideration consisting of (A) securities listed on a national securities exchange or traded on the Nasdaq National Market of The Nasdaq Stock Market, Inc. ("NASDAQ NATIONAL MARKET") shall be equal to the average of the closing price per share of such security as reported on such exchange or Nasdaq National Market for each of the five (5) trading days prior to the date of determination, provided that such securities are not subject by law or agreement with Merger Sub to any transfer restrictions and such securities do not represent in the aggregate 10% or more of the outstanding securities of the same class of securities of which such securities are a part; and (B) consideration which is other than cash or securities of the type specified in subclause (A) above shall be the amount a reasonable, willing seller would pay a reasonable, willing buyer, taking into account the nature and terms of such property. In the event of a dispute as to the fair market value of such property, such disputed amounts shall be determined, which determination shall be binding on all parties to this Agreement and shall be made by a nationally recognized independent banking firm mutually agreed upon by the parties, within ten (10) business days of the event requiring selection of such investment banking firm; PROVIDED, HOWEVER, that if Parent and the Stockholder are unable to agree within two (2) business days after the date of such event as to the investment banking firm, then Parent, on the one hand, and the Stockholder, on the other hand, shall each select one firm, and those firms shall select a third investment banking firm, which third firm shall make a determination; PROVIDED FURTHER, that the fees and expenses of such investment banking firm shall be borne by the Stockholder. The determination of the investment banking firm shall be binding upon the parties hereto. (iii) In the event that the Company shall declare and pay a stock or extraordinary dividend or other distribution, or effect a stock split, reverse stock split, reclassification, reorganization, recapitalization, combination or other like changes with respect to the shares of the Company Common Stock, the calculations set forth in this Section 4.3 shall be adjusted to reflect fully such dividend, distribution, stock split, reverse stock split, reclassification, reorganization, recapitalization or combination (including any residual interest in the Company or any successor whether represented by the shares of the Company Common Stock or other securities of the Company or any successor to the extent that the Company has engaged in a spin-off, recapitalization or similar transaction) and shall be considered in determining the Profit as provided in this Section 4.3. (e) For the avoidance of doubt, a Stockholder shall not be required by this Agreement to pay any Profit to Parent for any subsequent disposition of Shares other than as required pursuant to this Section 4.3. 6 5. MISCELLANEOUS. 5.1 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person or entity any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. This Agreement shall not be assigned by operation of law or otherwise and shall be binding upon and inure solely to the benefit of each party hereto. 5.2 AMENDMENTS. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by each of the parties hereto. 5.3 NOTICES. Any notice required to be given hereunder shall be sufficient if in writing, and sent by facsimile transmission (provided that any notice received by facsimile transmission or otherwise at the addressee's location on any Business Day after 5:00 p.m. (addressee's local time) shall be deemed to have been received at 9:00 a.m. (addressee's local time) on the next Business Day), by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows: If to the Stockholder: To the address and fax number shown on the signature page for the Stockholder If to Parent: KI NutriCare, Inc. 180 Vanderbilt Motor Parkway Hauppauge, NY 11788 Attention: Toshiyuki Onozuka Facsimile: 631-232-5034 with copies to: O'Melveny & Myers LLP 275 Battery Street San Francisco, CA 94114 Attention: Michael Kennedy, Esq. Eric Sibbitt, Esq. Facsimile: 415-984-8701 or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or received. Any party to this Agreement may notify any other party of any changes to the address or any of the other details specified in this paragraph; provided, however, that such notification shall only be effective on the date specified in such notice or two 7 Business Days after the notice is given, whichever is later. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver. 5.4 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York, without giving effect to conflicts of laws principles that would result in the application of the Law of any other state. Each of the parties to this Agreement (i) consents to submit itself to the exclusive personal jurisdiction of a federal court sitting in the Northern District of California, in any action or proceeding arising out of or relating to this Agreement or any of the Transactions, (ii) agrees that all claims in respect of such action or proceeding shall be heard and determined in any such court, (iii) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (iv) agrees not to bring any action or proceeding arising out of or relating to this Agreement or any of the Transactions in any other court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Any party hereto may make service on another party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in SECTION 5.3. Nothing in this SECTION 5.4, however, shall affect the right of any party to serve legal process in any other manner permitted by law. 5.5 SPECIFIC PERFORMANCE. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with its specific terms or were otherwise breached. The Stockholder agrees that, in the event of any breach or threatened breach by the Stockholder of any covenant or obligation contained in this Agreement, Parent shall be entitled (in addition to any other remedy that may be available to it, including monetary damages) to seek (a) a decree or order of specific performance to enforce the observance and performance of such covenant or obligation, and (b) an injunction restraining such breach or threatened breach. The Stockholder further agrees that neither Parent nor any other person or entity shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 5.5, and the Stockholder irrevocably waives any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. 5.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties hereto and delivered to the other parties, it being understood that all parties need not sign the same counterpart. This Agreement may be executed and delivered by facsimile transmission. 5.7 DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8 5.8 SEVERABILITY. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term. [REMAINDER OF PAGE INTENTIONALLY BLANK] 9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. KI NUTRICARE, INC By: /s/ Kenichi Saito --------------------- Name: Kenichi Saito Title: President [Signatures continued on next page.] 10 /s/ Stephen A. Levine --------------------------------------- Stephen A. Levine, Ph.D. Address: 15 Bridge Road Kentfield, CA 94904 Fax: (415) 925-1356 /s/ Susan Levine --------------------------------------- Susan Levine Address: 15 Bridge Road Kentfield, CA 94904 Fax: (415) 925-1356 Stephen Levine and Susan Levine Trustees of the Levine Family Trust (UTD March 21, 1990, as amended) By: /s/ STEPHEN A. LEVINE ------------------------------------------ Dr. Stephen A. Levine, as trustee By: /s/ SUSAN LEVINE ------------------------------------------ Susan Levine, as trustee Address: 15 Bridge Road Kentfield, CA 94904 Fax: (415) 925-1356 Stephen and Susan Levine TR, the Levine Children's TR (UTD March 27, 1998) By: /s/ STEPHEN A. LEVINE ------------------------------------------ Dr. Stephen A. Levine, as trustee By: /s/ SUSAN LEVINE ------------------------------------------ Susan Levine, as trustee Address: 15 Bridge Road Kentfield, CA 94904 Fax: (415) 925-1356 11 ATTACHMENT A Details of Ownership SHARES ENTITY OR INDIVIDUAL NAME ------ ------------------------- 2,750,000(1) Stephen A. Levine and Susan Levine 6,193,891 The Levine Family Trust (UTD March 21, 1990, as amended) 919,359 Stephen and Susan Levine TR, the Levine Children's TR (UTD March 27,1998) - --------------- (1) Held jointly by Susan D. Levine and Stephen A. Levine as community property. -----END PRIVACY-ENHANCED MESSAGE-----